UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]

For the fiscal year ended December 31, 1996
                          -----------------
                                       or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]

For the transition period from           to
                              ----------    --------------

Commission File Number 0-11981
                       -------

                              PS PARTNERS II, LTD.
             -------------------------------------------------------
             (Exact name of registrant as specified in its charter)

     
      California                                               95-3878680
-------------------------------                    -----------------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                           Identification Number)

   701 Western Avenue
  Glendale, California                                          91201-2394
-------------------------------                    -----------------------------
(Address of principal executive offices)                       (Zip Code)




Registrant's telephone number, including area code:  (818) 244-8080
                                                     --------------

Securities registered pursuant to Section 12(b) of the Act:

                                      NONE
Securities registered pursuant to Section 12(g) of the Act:

                      Units of Limited Partnership Interest
                      -------------------------------------
                                (Title of class)

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. [X]

--------------------------------------------------------------------------------
                       DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE

<PAGE>
                                     PART I

ITEM 1.  BUSINESS.
         ---------
General
-------
     PS  Partners  II,  Ltd.  (the  "Partnership")  is a publicly  held  limited
partnership  formed under the  California  Uniform  Limited  Partnership  Act in
August 1983.  Commencing in November 1983, 128,000 units of limited  partnership
interest (the "Units") were offered to the public in an interstate offering. The
offering was completed in June 1984.

     The Partnership was formed to invest in and operate  existing  self-service
facilities   offering   storage   space  for  personal  and  business  use  (the
"mini-warehouses")  and to invest up to 30% of the net  proceeds of the offering
in and operate  existing  office and industrial  properties.  The  Partnership's
investments were made through general partnerships with Storage Equities,  Inc.,
now known as Public  Storage,  Inc.  ("PSI"),  a real  estate  investment  trust
("REIT")  organized  as a  corporation  under  the laws of  California.  For tax
administrative  efficiency,  the  original  general  partnerships  with PSI were
consolidated into a single general partnership effective December 31, 1990.

     In 1995,  there was a series of mergers  among Public  Storage  Management,
Inc. (which was the Partnership's mini-warehouse operator), Public Storage, Inc.
and their  affiliates  (collectively,  "PSMI"),  culminating in the November 16,
1995 merger (the "PSMI Merger") of PSMI into Storage Equities,  Inc. In the PSMI
Merger, Storage Equities,  Inc. was renamed Public Storage, Inc. and it acquired
substantially  all of PSMI's United States real estate operations and became the
operator of the Partnership's mini-warehouse properties.

     The Partnership's  general partners (the "General Partners") are PSI and B.
Wayne Hughes ("Hughes"). PSI became a co-general partner in September 1993, when
PSI acquired the interest of PSI Associates, Inc. ("PSA"), an affiliate of PSMI,
relating to PSA's  general  partner  capital  contribution  in the  Partnership.
Hughes has been a general partner of the Partnership since its inception. Hughes
is the chairman of the board and chief executive  officer of PSI, and Hughes and
members of his family (the "Hughes  Family") are the major  shareholders of PSI.
The Partnership is managed,  and its investment decisions are made by Hughes and
the  executive  officers  and  directors  of PSI.  The  limited  partners of the
Partnership  have no right to  participate  in the  management or conduct of its
business affairs.

     The Partnership's  mini-warehouse properties are managed by PSI pursuant to
a  Management  Agreement.  PSI  believes  that  it is the  largest  operator  of
mini-warehouse facilities in the United States.

     Through  1996,  the  Partnership's  commercial  properties  were managed by
Public  Storage  Commercial  Properties  Group,  Inc.  ("PSCPG")  pursuant  to a
Management Agreement. In January 1997, the Partnership and PSI and other related
partnerships  transferred a total of 35 business  parks to American  Office Park
Properties,  L.P. ("AOPPLP"), an operating partnership formed to own and operate
business parks in which PSI has approximately an 85% economic interest. Included
among the properties transferred were the Partnership's transfer of its business
parks to AOPPLP in exchange for a 8.6% interest in AOPPLP.  The general  partner
of AOPPLP is PSCPG, now known as American Office Park Properties, Inc. Ronald L.
Havner, Jr., formerly Senior  Vice-President and Chief Financial Officer of PSI,
is the Chief Executive Officer of American Office Park Properties, Inc. See Item
13.

     PSI's  current  relationship  with the  Partnership  includes (i) the joint
ownership  of  27  of  the  Partnership's  33  properties  (which  excludes  the
properties  transferred  to AOPPLP in January  1997),  (ii) PSI is a  co-general
partner  along with  Hughes,  who is chairman  of the board and chief  executive
officer of PSI, (iii) as of February 19, 1997, PSI owned approximately 73.57% of
the Partnership's  limited partnership units and (iv) PSI is the operator of the
Partnership's mini-warehouse facilities.

Investments in Facilities
-------------------------
     The  Partnership  owns  interests  in  33  properties  (which  exclude  the
properties  transferred  to AOPPLP in January 1997);  27 of such  properties are
held  in a  general  partnership  comprised  of the  Partnership  and  PSI . One
property is a leasehold interest in a mini-warehouse  property in Raleigh, North

                                       2

<PAGE>
Carolina.  The Partnership  purchased its last property in July, 1984. Reference
is  made  to the  table  in  Item  2 for a  summary  of  information  about  the
Partnership's properties.

     The  Partnership  believes that its operating  results have  benefited from
favorable   industry   trends  and  conditions.   Notably,   the  level  of  new
mini-warehouse  construction  has decreased since 1988 while consumer demand has
increased.  In  addition,  in recent  years  consolidation  has  occurred in the
fragmented mini-warehouse industry.

Mini-warehouses
---------------
     Mini-warehouses,   which   comprise  the  majority  of  the   Partnership's
investments,  are designed to offer  accessible  storage  space for personal and
business use at a relatively low cost. A user rents a fully enclosed space which
is for the  user's  exclusive  use and to which  only the user has  access on an
unrestricted   basis   during   business   hours.   On-site   operation  is  the
responsibility  of resident  managers who are supervised by area managers.  Some
mini-warehouses  also  include  rentable  uncovered  parking  areas for  vehicle
storage.  Leases for  mini-warehouse  space may be on a long-term or  short-term
basis,  although typically spaces are rented on a month-to-month  basis.  Rental
rates vary according to the location of the property and the size of the storage
space.

     Users of space in  mini-warehouses  include both  individuals and large and
small  businesses.  Individuals  usually employ this space for storage of, among
other  things,  furniture,  household  appliances,  personal  belongings,  motor
vehicles,  boats,  campers,  motorcycles and other household  goods.  Businesses
normally employ this space for storage of excess  inventory,  business  records,
seasonal goods, equipment and fixtures.

     Mini-warehouses  in which the Partnership has invested generally consist of
three to seven buildings containing an aggregate of between 258 to 1,178 storage
spaces, most of which have between 25 and 400 square feet and an interior height
of approximately 8 to 12 feet.

     The Partnership  experiences  minor seasonal  fluctuations in the occupancy
levels of  mini-warehouses  with occupancies higher in the summer months than in
the winter months. The Partnership  believes that these  fluctuations  result in
part from increased moving activity during the summer.

     The Partnership's  mini-warehouses  are geographically  diversified and are
generally  located in heavily  populated  areas and close to  concentrations  of
apartment  complexes,  single family  residences  and  commercial  developments.
However,  there may be  circumstances  in which it may be  appropriate  to own a
property  in a less  populated  area,  for  example,  in an area  that is highly
visible  from a major  thoroughfare  and  close to,  although  not in, a heavily
populated area. Moreover,  in certain population centers,  land costs and zoning
restrictions may create a demand for space in nearby less populated areas.

     As with most other types of real estate,  the conversion of mini-warehouses
to  alternative  uses in  connection  with a sale or otherwise  would  generally
require  substantial  capital  expenditures.  However,  the Partnership does not
intend to convert its mini-warehouses to other uses.

Commercial Properties
---------------------
     Through  1996,  the  Partnership  owned and operated an office  building in
Lakewood, California and a retail office warehouse center in Austin, Texas which
were  transferred  to AOPPLP in January 1997 in exchange for a 8.6%  interest in
AOPPLP.

Investment Objectives and Polices;  Sale or Financing of Investments
--------------------------------------------------------------------
     The  Partnership's  objectives  are to (i)  preserve  and protect  invested
capital,   (ii)  maximize  the  potential  for  appreciation  in  value  of  its
properties, (iii) provide Federal income tax deductions so that during the early
years of property operations a portion of cash distributions may be treated as a
return of capital for tax purposes,  and  therefore,  may not represent  taxable
income  to the  limited  partners,  (iv)  provide  for cash  distributions  from
operations  and (v) build up equity  through the reduction of mortgage  loans on
the Partnership's properties.
                                       3
<PAGE>
         The  Partnership  will terminate on December 31, 2020 unless  dissolved
earlier.  Under the terms of the general  partnership  agreement with PSI, as of
December  31,  1996,  PSI has the right to require the  Partnership  to sell all
their  properties  held in joint venture with PSI (see Item 12(c)).  The General
Partners have no present  intention to seek the  liquidation of the  Partnership
because they believe that it is not an opportune  time to sell  mini-warehouses.
Although  the General  Partners  originally  anticipated  a  liquidation  of the
Partnership in 1990-1993,  since the completion of the Partnership's offering in
1983,  significant  changes  have taken place in the  financial  and real estate
markets  that  must be taken  into  account  in  considering  the  timing of any
proposed  sale or  financing,  including:  (i)  the  increased  construction  of
mini-warehouses  from 1984 to 1988,  which has increased  competition,  (ii) the
general  deterioration  of the real estate market  (resulting  from a variety of
factors,  including  changes  in tax  laws),  which has  significantly  affected
property values and decreased sales  activities and (iii) the reduced sources of
real estate financing.

     The Partnership  engaged  Lawrence R. Nicholson,  MAI, a principal with the
firm of Nicholson-Douglas Realty Consultants, Inc. ("NDRC") to perform a limited
investigation and appraisal of the Partnership's property portfolio. In a letter
appraisal  report  dated  May  13,  1996,  NDRC  indicated  that,  based  on the
assumptions  contained  in  the  report,  the  aggregate  market  value  of  the
Partnership's 35 properties  (consisting not only of the Partnership's  interest
but also including  PSI's  interest),  as of January 31, 1996,  was  $91,400,000
($80,100,000  for the 33  mini-warehouses,  $8,200,000  for a business  park and
$3,100,000 for a low-rise office building).  (In January 1997, after the date of
the  appraisal,  the  Partnership  transferred  its business  parks to AOPPLP in
exchange for a 8.6%  interest in AOPPLP.)  NDRC's report is limited in that NDRC
did  not  inspect  the   properties   and  relied   primarily  upon  the  income
capitalization  approach in  arriving at its  opinion.  NDRC's  aggregate  value
conclusion  represents  the 100%  property  interests,  and  although not valued
separately,  includes both the interest of the Partnership in the properties, as
well as the interest of PSI, which owns a joint venture  interest  (ranging from
about 10% to 64%) in 28 of the 35 properties.  The  analytical  process that was
undertaken  in the  appraisal  included  a review of the  properties'  unit mix,
rental rates and historical  financial  statements.  Following these reviews,  a
stabilized  level of net operating  income was projected for the  properties (an
aggregate of $8,274,000  for the 33  mini-warehouses,  $819,000 for the business
park  and  $331,000  for  the  low-rise  office  building).  In the  case of the
mini-warehouses and the low-rise office building, value estimates were then made
using both a direct capitalization analysis ($82,900,000 for the mini-warehouses
and  $3,200,000  for the low-rise  office  building) and a discounted  cash flow
analysis  ($79,000,000 for the  mini-warehouses  and $3,100,000 for the low-rise
office  building).  In  applying  the  discounted  cash  flow  analysis  to  the
mini-warehouses and the low-rise office building,  projections of cash flow from
each  property  were  developed  for an 11-year  period ending in the year 2007.
Growth rates for income and expenses were assumed to be 3.5% per year. NDRC then
used a terminal  capitalization rate of 10.5% to capitalize each property's 11th
year net  operating  income  into a  residual  value  at the end of the  holding
period. The 10 yearly cash flows plus the residual or reversionary  proceeds net
of sales costs were then  discounted  to present  worth using a discount rate of
13.25% in the case of the mini-warehouses and the business park and 12.5% in the
case of the low-rise office  building.  In the direct  capitalization  analysis,
NDRC applied a 10.0%  capitalization rate to the stabilized net operating income
of the  mini-warehouses.  The overall  capitalization rate used for the low-rise
office building was 10.5%; from this estimate,  a $50,000 deduction was made for
stabilization  costs and an additional  $60,000  adjustment  was made to reflect
above market income. In the case of the  mini-warehouses,  these value estimates
were then  compared  to an  estimated  value  ($78,300,000)  using a  regression
analysis applied to approximately 300 sales of  mini-warehouses  to evaluate the
reasonableness of the estimates using the direct  capitalization  and discounted
cash flow analysis.

     The  business  park was valued  using a direct  capitalization  analysis by
applying a 10.0%  capitalization  rate to the  business  park's  stabilized  net
operating  income.  NDRC has prepared other  appraisals for the General Partners
and their  affiliates and is expected to continue to prepare  appraisals for the
General  Partners and their  affiliates.  No environmental  investigations  were
conducted  with  respect  to the  limited  investigation  of  the  Partnership's
properties.  Accordingly,  NDRC's  appraisal  did  not  take  into  account  any
environmental cleanup or other costs that might be incurred in connection with a
disposition  of the  properties.  Although  there can be no assurance,  based on
recently completed environmental investigations (see Item 2), the Partnership is
not aware of any environmental  contamination of its facilities  material to its
overall business or financial condition. In addition to assuming compliance with
applicable  environmental laws, the appraisal also assumed,  among other things,
compliance  with  applicable  zoning and use  regulations  and the  existence of
required licenses.
                                       4
<PAGE>

     Limited  Partners  should  recognize that appraisals are opinions as of the
date  specified,  are subject to certain  assumptions and the appraised value of
the  Partnership's  properties may not represent  their true worth or realizable
value. There can be no assurance that, if these properties were sold, they would
be sold at the appraised  values;  the sales price might be higher or lower than
the appraised values.

     Based on  NDRC's  limited  appraisal  (as of  January  1996),  the  General
Partners have estimated a liquidation  value per Unit of $520. This  liquidation
value was calculated  assuming (i) the properties  owned by the  Partnership and
PSI were sold at the values reflected in NDRC's report,  (ii) costs of 5% of the
sales price of the properties were incurred in the sale of the properties, (iii)
the proceeds from the properties  held jointly by the  Partnership  and PSI were
allocated  between them in accordance with the joint venture  agreement and (iv)
the  Partnership's  other net assets were liquidated at their book value at June
30, 1996.

     In October 1996, PSI completed a cash tender offer,  which had commenced in
August 1996,  pursuant to which PSI acquired a total of 9,013 additional limited
partnership units at $520 per Unit.

Operating Strategies
--------------------
     The  Partnership's  mini-warehouses  are  operated by PSI under the "Public
Storage" name, which the Partnership believes is the most recognized name in the
mini-warehouse  industry.  The major  elements  of the  Partnership's  operating
strategies are as follows:

     * Capitalize on Public Storage's name  recognition.  PSI, together with its
       predecessor,  has  more  than 20  years of  operating  experience  in the
       mini-warehouse  business. PSI has informed the Partnership that it is the
       largest mini-warehouse facility operator in the United States in terms of
       both number of facilities and rentable space operated.  PSI believes that
       its marketing and advertising  programs improve its competitive  position
       in the market.  PSI's  in-house  Yellow  Pages  staff  designs and places
       advertisements  in  approximately  700  directories.  Commencing in early
       1996,  PSI  began  to  experiment  with a  telephone  reservation  system
       designed to provide added  customer  service.  Customers  calling  either
       PSI's toll-free  referral  system,  (800) 44-STORE,  or a  mini-warehouse
       facility  are  directed  to  PSI's  reservation  system  where a  trained
       representative discusses with the customer space requirements,  price and
       location  preferences and also informs the customer of other products and
       services  provided  by  PSI.  As of  December  31,  1996,  the  telephone
       reservation   system  was  supporting  rental  activity  at  all  of  the
       Partnership's  properties.  PSI's  toll-free  telephone  referral  system
       services  approximately  120,000 calls per month from potential customers
       inquiring as to the nearest Public Storage mini-warehouse.

     * Maintain high occupancy  levels and increase  realized rents.  Subject to
       market  conditions,  the  Partnership  generally seeks to achieve average
       occupancy  levels in excess of 90% and to eliminate  promotions  prior to
       increasing  rental rates.  The monthly  average  realized rent per square
       foot for the mini-warehouse  facilities was $.61 in 1996 compared to $.59
       in 1995.  The weighted  average  occupancy  levels at the  mini-warehouse
       facilities  were 91% in 1996 compared to 90% in 1995. The Partnership has
       increased  rental  rates  in many  markets  where  it has  achieved  high
       occupancy levels and eliminated or minimized promotions.

     * Systems and controls. PSI has an organizational  structure and a property
       operation system,  "CHAMP"  (Computerized  Help and Management  Program),
       which links its corporate office with each  mini-warehouse.  This enables
       PSI to obtain daily information from each  mini-warehouse  and to achieve
       efficiencies in operations and maintain control over its space inventory,
       rental rates, promotional discounts and delinquencies. Expense management
       is achieved through  centralized payroll and accounts payable systems and
       a comprehensive property tax appeals department, and PSI has an extensive
       internal  audit  program  designed  to  ensure  proper  handling  of cash
       collections.

     * Professional  property  operation.  In addition to the  approximately 120
       support  personnel at the Public  Storage  corporate  offices,  there are
       approximately   2,700  on-site   personnel  who  manage  the   day-to-day

                                       5
<PAGE>
       operations of the  mini-warehouse  in the Public  Storage  system.  These
       on-site  personnel are supervised by 110 district  managers,  15 regional
       managers  and three  divisional  managers  (with an  average  of 13 years
       experience in the mini-warehouse industry) who report to the president of
       the mini-warehouse property operator (who has 13 years of experience with
       the Public Storage  organization).  PSI carefully selects and extensively
       trains  the  operational   and  support   personnel  and  offers  them  a
       progressive career path. See "Mini-warehouse Property Operator."

Mini-warehouse Property Operator
--------------------------------
     The Partnership's  mini-warehouse properties are managed by PSI pursuant to
a Management Agreement.

     Under the supervision of the Partnership,  PSI coordinates the operation of
the  facilities,  establishes  rental  policies  and  rates,  directs  marketing
activity  and  directs the  purchase  of  equipment  and  supplies,  maintenance
activity,  and  the  selection  and  engagement  of all  vendors,  supplies  and
independent contractors.

     PSI engages, at the expense of the Partnership, employees for the operation
of  the  Partnership's  facilities,   including  resident  managers,   assistant
managers, relief managers, and billing and maintenance personnel. Some or all of
these employees may be employed on a part-time basis and may also be employed by
other persons, partnerships,  REITs or other entities owning facilities operated
by PSI.

     In the  purchasing of services  such as  advertising  (including  broadcast
media advertising) and insurance, PSI attempts to achieve economies by combining
the resources of the various facilities that it operates. Facilities operated by
PSI  have  historically  carried   comprehensive   insurance,   including  fire,
earthquake, liability and extended coverage.

     PSI has  developed  systems for space  inventory,  accounting  and handling
delinquent  accounts,  including a  computerized  network  linking PSI  operated
facilities. Each project manager is furnished with detailed operating procedures
and typically  receives  facilities  management  training from PSI. Form letters
covering a variety of circumstances are also supplied to the project managers. A
record of actions  taken by the project  managers  when  delinquencies  occur is
maintained.

     The Partnership's  facilities are typically advertised via signage,  yellow
pages,  flyers  and  broadcast  media  advertising  (television  and  radio)  in
geographic  areas in which many of the  Partnership's  facilities  are  located.
Broadcast  media and other  advertising  costs are charged to the  Partnership's
facilities located in geographic areas affected by the advertising. From time to
time, PSI adopts  promotional  programs,  such as temporary rent reductions,  in
selected areas or for individual facilities.

     For as long as the Management  Agreement is in effect,  PSI has granted the
Partnership  a  non-exclusive  license to use two PSI service  marks and related
designs,  including the "Public  Storage" name, in  conjunction  with rental and
operation of  facilities  managed  pursuant to the  Management  Agreement.  Upon
termination of the Management  Agreement,  the Partnership  would no longer have
the right to use the service  marks and related  designs.  The General  Partners
believe that the loss of the right to use the service marks and related  designs
could have a material adverse effect on the Partnership's business.

     The Management  Agreement between the Partnership and PSI provides that the
Management Agreement may be terminated without cause upon 60 days written notice
by either party.

Commercial Property Operator
----------------------------
     Through  1996,  the  Partnership's  commercial  properties  were managed by
PSCPG,  now known as  American  Office  Park  Properties,  Inc.,  pursuant  to a
Management  Agreement.   In  January  1997,  the  Partnership   transferred  its
commercial properties to AOPPLP.

Competition
-----------
     Competition  in the  market  areas in which  the  Partnership  operates  is
significant  and  affects  the  occupancy  levels,  rental  rates and  operating
expenses  of  certain  of  the  Partnership   facilities.   Competition  may  be
 
                                      6
<PAGE>
accelerated  by any increase in  availability  of funds for  investment  in real
estate. Recent increases in plans for development of mini-warehouses is expected
to further  intensify  competition  among  mini-warehouse  operators  in certain
market areas. In addition to competition from  mini-warehouses  operated by PSI,
there are three other national firms and numerous  regional and local operators.
The Partnership believes that the significant operating and financial experience
of PSI's executive  officers and directors and the "Public Storage" name, should
enable the Partnership to continue to compete effectively with other entities.

Other Business Activities
-------------------------
     A corporation owned by the Hughes Family reinsures  policies against losses
to goods stored by tenants in the Partnership's mini-warehouses. The Partnership
believes that the availability of insurance  reduces the potential  liability of
the  Partnership to tenants for losses to their goods from theft or destruction.
This  corporation  receives the premiums and bears the risks associated with the
insurance.

     A  corporation,  in which PSI has a 95%  economic  interest  and the Hughes
Family has a 5% economic interest,  sells locks, boxes and tape to tenants to be
used in securing  their  spaces and moving their  goods.  PSI believes  that the
availability of locks, boxes and tape for sale promotes the rental of spaces.

Employees
---------
     There are 114  persons who render  services  on behalf of the  Partnership.
These persons include resident managers,  assistant  managers,  relief managers,
area managers,  and  administrative  personnel.  Some of these  employees may be
employed  on a  part-time  basis  and may also be  employed  by  other  persons,
partnerships,  REITs or other  entities  owning  facilities  operated  by PSI or
AOPPLP.

ITEM 2.  PROPERTIES.
         -----------
     The following table sets forth  information as of December 31, 1996,  about
properties  owned by the  Partnership.  Twenty  eight of these  properties  were
acquired jointly with PSI and were contributed to general partnerships comprised
of the Partnership and PSI.
<TABLE>
<CAPTION>

                                        Net                Number
                                      Rentable               of                Date of                Ownership
Location                            Square Feet            Spaces            Acquisition             Percentage
--------------------------         -------------        ------------        -------------           -------------
CALIFORNIA
<S>                                     <C>                  <C>              <C>                     <C>  
Fremont                                 60,700               604              01/13/84                  70.0%
   Albrae Street
Lakewood (1) (3)                        56,700                31              12/29/83                  90.0
   Watson Plaza Drive
Pico                                    47,400               398              03/01/84                  50.0
   Bermudez Street

GEORGIA
Augusta                                 40,300               395              12/09/83                  81.5
   Crescent Drive
Marietta                                29,700               258              03/30/84                  75.0
   S. Cobb Drive

KANSAS
Olathe                                  41,800               287              01/19/84                  74.4
   E. Spruce
Shawnee                                 64,100               432              01/19/84                  74.4
   W. 63rd St.
Topeka                                  50,000               376              01/19/84                  74.4
   SW 41st St.
Merriam                                 59,000               458              01/19/84                  74.4
   W. Frontage
</TABLE>
 
                                      7
<PAGE>
<TABLE>
<CAPTION>

                                        Net                Number
                                      Rentable               of                Date of                Ownership
Location                            Square Feet            Spaces            Acquisition             Percentage
--------------------------         -------------        ------------        -------------           -------------
MARYLAND
<S>                                     <C>                  <C>              <C>                     <C>  
Baltimore                               77,200               807              06/27/84                 100.0%
   Shannon Road
Baltimore                               49,000               600              06/27/84                 100.0
   Laurel Bowie Road
Belton                                  42,900               366              01/19/84                  74.4
   S. 71 Fwy.
Gladstone                               74,900               590              01/19/84                  74.4
   N. Oak Trafficway
Independence                            78,300               554              01/19/84                  74.4
   E. 31st St.
Kansas City                             74,100               534              01/19/84                  74.4
   E. 112th Terrace
Kansas City                             52,300               465              01/19/84                  74.4
   Holmes

NORTH CAROLINA
Charlotte                               53,900               435              12/09/83                  81.5
   South Blvd.
Greensboro                              41,900               406              12/09/83                  81.5
   Electra Drive
Greensboro                              62,200               651              12/09/83                  81.5
   W. Market St.
Raleigh                                105,100               567              05/16/84                  53.0
   Departure Dr.
Raleigh                                 52,300               439              12/09/83                 100.0
   Yonkers Rd

OREGON
Milwaukee                               34,400               384              04/18/84                 100.0
   SE McLoughlin Blvd.

PENNSYLVANIA
Philadelphia                           110,300             1,178              05/21/84                  36.1
   Grant Ave.
Trevose                                 62,500               787              07/03/84                  67.8
   Old Lincoln Highway

RHODE ISLAND
Cranston                                28,700               302              01/24/85                  64.6
   Pontiac - 71
   Freeway Dr.
N. Providence                           35,600               386              04/19/84                  90.0
   Mineral Springs Ave.

SOUTH CAROLINA
Columbia                                67,300               596              12/09/83                  81.5
   Broad River Rd
</TABLE>
                                       8
<PAGE>
<TABLE>
<CAPTION>

                                        Net                Number
                                      Rentable               of                Date of                Ownership
Location                            Square Feet            Spaces            Acquisition             Percentage
--------------------------         -------------        ------------        -------------           -------------
TENNESSEE
<S>                                     <C>                  <C>              <C>                     <C>  
Knoxville                               62,100               578              02/16/84                  81.9%
   E. Central
   Ave. Pike
Knoxville                               97,400               801              02/16/84                  81.9
   Unicorn Drive

TEXAS
Austin (2) (3)                         214,100                99              03/27/84                 100.0
   Lamar Blvd.

VIRGINIA
Lorton                                  55,500               576              06/27/84                 100.0
   Richmond Hwy
Manassas Balls                          44,000               435              03/26/84                  41.6
   Ford Rd.
Richmond                                65,700               518              12/09/83                  81.5
   Jefferson Davis
Virginia Beach                          99,400               762              05/18/84                 100.0
   Independence

WASHINGTON
Tacoma                                  52,300               666              01/03/84                  90.0
   24th St. W.
</TABLE>

---------------
(1) Office Building
(2) Business Park Facility
(3) In January 1997, the  Partnership contributed  its business park facilities
    to AOPPLP in exchange for a 8.6% interest in AOPPLP.  See Item 1.

     Weighted  average  occupancy  levels for the  mini-warehouse  and  business
park/office building properties were 91% and 95%, respectively, in 1996 compared
to 90% and 97%,  respectively,  in 1995. In 1996, the monthly  realized rent per
square foot for the mini-warehouse and business  park/office building properties
averaged $.61 and $.81,  respectively,  compared to $.59 and $.81, respectively,
in 1995.

     Substantially  all of the  Partnership's  facilities were acquired prior to
the time that it was customary to conduct extensive environmental investigations
in connection with the property acquisitions. During the fourth quarter of 1995,
an independent environmental consulting firm completed environmental assessments
on the Partnership's  properties to evaluate the environmental condition of, and
potential   environmental   liabilities  of  such   properties.   Based  on  the
assessments,  the  Partnership  expensed in 1995 an estimated  $80,000 for known
environmental remediation requirements.  Although there can be no assurance, the
Partnership  is not aware of any unaccrued  environmental  contamination  of its
facilities  which  individually  or in the  aggregate  would be  material to the
Partnership's overall business, financial condition, or results of operations.

ITEM 3.  LEGAL PROCEEDINGS.
         -----------------
     No material legal proceeding is pending against the Partnership.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
         ---------------------------------------------------
     No matters were  submitted to a vote of security  holders during the fourth
quarter of 1996.

                                       9
<PAGE>
                                     PART II

ITEM 5.  MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED STOCKHOLDER 
         MATTERS.
         ------------------------------------------------------------------
     The Partnership has no common stock.

     The Units are not listed on any national  securities  exchange or quoted on
the NASDAQ  System,  and there is no  established  public trading market for the
Units. Secondary sales activity for the Units has been limited and sporadic. The
General Partners monitor transfers of the Units (a) because the admission of the
transferee as a substitute  limited partner  requires the consent of the General
Partners  under the  Partnership's  Amended and  Restated  Agreement  of Limited
Partnership,  (b) in order to ensure  compliance with safe harbor  provisions to
avoid  treatment  as a "publicly  traded  partnership"  for tax purposes and (c)
because PSI has  purchased  Units.  However,  the  General  Partners do not have
information regarding the prices at which all secondary sale transactions in the
Units have been effectuated.  Various  organizations  offer to purchase and sell
limited  partnership  interests  (including  securities  of the type such as the
Units) in secondary sales transactions. Various publications such as The Stanger
Report  summarize  and  report  information  (on a  monthly,  bimonthly  or less
frequent basis) regarding  secondary sales  transactions in limited  partnership
interests  (including  the Units),  including the prices at which such secondary
sales transactions are effectuated.

     Exclusive  of the  General  Partners'  interest in the  Partnership,  as of
December 31, 1996, there were approximately 1,659 record holders of Units.

     In October 1996, PSI completed a cash tender offer,  which had commenced in
August 1996,  pursuant to which PSI acquired a total of 9,013 additional limited
partnership units at $520 per Unit.

     The Partnership  makes quarterly  distributions  of all "Cash Available for
Distribution"  and will make  distributions of "Cash from Sales or Refinancing".
Cash  Available  for  Distribution  is cash  flow  from all  sources  less  cash
necessary for any obligations, capital improvements, or reserves.

     Reference is made to Items 6 and 7 hereof for  information on the amount of
such distributions.

                                       10
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA.
         -----------------------
<TABLE>
<CAPTION>

                                                                 For the Year Ended December 31,
                                             -------------------------------------------------------------------------
                                                1996           1995            1994            1993           1992
                                             ----------   -------------   -------------   ------------   -------------
                                                               (In thousands, except per Unit data)

<S>                                          <C>             <C>            <C>             <C>              <C>    
Revenues                                     $ 15,456        $ 15,088       $ 14,881        $ 13,827         $12,464

Depreciation and amortization                   3,502           3,293          3,419           3,688           3,241

Interest expense                                   14             177            285             698           1,331

Income before gain on -                         4,114           4,185          3,498           2,106           1,365
   disposition of real estate facility
   and early extinguishment of debt

Net income                                      4,114           4,185          3,722           3,053           1,365

    Limited partners' share                     3,597           3,262          3,528           2,866           1,194

    General partners' share                       517             923            194             187             171

Limited partners' per unit data(a)

    Net income                                 $ 28.10         $ 25.48        $ 27.56         $ 22.39          $ 9.33

    Cash distributions (b)                     $ 33.44         $ 61.97        $ 11.00         $ 11.00         $ 11.00

As of December 31,
------------------

Cash and cash equivalents                      $ 1,239           $ 904        $ 3,258         $ 1,083         $ 2,391

Total assets                                  $ 54,558        $ 56,371       $ 61,149        $ 63,334        $ 67,042

Mortgage notes payable                             $ -         $ 2,260        $ 2,326         $ 7,285        $ 12,771
</TABLE>
---------------
(a)  Limited  partners' per Unit data is based on the number of units  (128,000)
     outstanding during the year.
(b)  The General Partners distributed, concurrent with the distributions for the
     second and third  quarters of 1995, a portion of the  operating  reserve of
     the  Partnership and the proceeds from the Weymouth  property  condemnation
     estimated to be $13.92 and $17.40, respectively.


                                       11
<PAGE>


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

Results of Operations
---------------------

         YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995:

     The Partnership's net income in 1996 was $4,114,000  compared to $4,185,000
in 1995,  representing a decrease of $71,000,  or 2%. The decrease was primarily
due to an increase in depreciation  expense, an increase in minority interest in
income for those  properties  held  jointly with PSI, and a decrease in interest
income,  partially offset by improved  property  operations at the Partnership's
real estate facilities combined with a reduction in environmental costs.

     Property net operating  income  (rental  income less cost of operations and
management  fees and excluding  depreciation  expense)  increased  approximately
$82,000 in 1996 compared to 1995, as rental income increased by $468,000, or 3%,
and cost of operations (including management fees) increased by $386,000, or 7%.

     Rental  income  for  the   Partnership's   mini-warehouse   operations  was
$13,049,000 in 1996 compared to $12,564,000 in 1995, representing an increase of
$485,000,  or 4%. The increase in rental  income was primarily  attributable  to
increased   average  realized  rental  rates  combined  with  increased  average
occupancy levels at the mini-warehouse  facilities. The monthly average realized
rent  per  square  foot  for the  mini-warehouse  facilities  were  $.61 in 1996
compared  to  $.59  in  1995.  The  weighted  average  occupancy  levels  at the
mini-warehouse  facilities  were 91% in 1996  compared to 90% in 1995.  Costs of
operations  (including management fees) increased $232,000, or 5%, to $4,751,000
in 1996 from  $4,519,000 in 1995.  This increase was primarily  attributable  to
increases in advertising  and  promotion,  repairs and  maintenance,  and office
expenses. Accordingly, for the Partnership's mini-warehouse operations, property
net operating  income  increased by $253,000,  or 3%, to $8,298,000 in 1996 from
$8,045,000 in 1995.

     Rental income for the Partnership's business park operations was $2,347,000
in 1996 compared to $2,364,000 in 1995,  representing a decrease of $17,000. The
decrease in rental income is attributable to decreased  average occupancy levels
at the business park facilities.  The weighted  average  occupancy levels at the
business park  facilities  were 95% in 1996 compared to 97% in 1995. The monthly
average  realized rent per square foot for the business park remained  stable at
$.81 for both 1996 and 1995.  Cost of  operations  (including  management  fees)
increased  $154,000,  or 14%, to $1,286,000 in 1996 from $1,132,000 in 1995. The
increase in cost of operations is primarily due to increases in property  taxes,
lease commissions, utilities, and repairs and maintenance expenses. Accordingly,
for the  Partnership's  business park facilities,  property net operating income
decreased by $171,000, or 14%, to $1,061,000 in 1996 from $1,232,000 in 1995.

     Interest  income  decreased  in 1996 over 1995 as a result of a decrease in
average invested cash balances.

     Depreciation and amortization increased $209,000 to $3,502,000 in 1996 from
$3,293,000 in 1995. This increase is principally attributable to depreciation of
capital expenditures made during 1995 and 1996.

     Interest expense decreased  approximately  $163,000 to $14,000 in 1996 from
$177,000 in 1995 as a result of the payoff of the  Partnership's  mortgage  note
payable in the first quarter of 1996.

     Minority interest in income increased by $138,000,  or 9%, in 1996 compared
to 1995.  This increase was primarily  attributable to an increase in operations
at the Partnership's  real estate  facilities owned jointly with PSI,  partially
offset by the allocation of depreciation and amortization  expense  (pursuant to
the partnership agreement with respect to those real estate facilities which are
jointly  owned with PSI) to PSI of $347,000  compared  to $328,000  for 1996 and
1995, respectively.


                                       12
<PAGE>
     YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994:

     The Partnership's net income in 1995 was $4,185,000  compared to $3,722,000
in 1994,  representing  an increase of $463,000.  Net income in 1994 included an
extraordinary gain on the disposition of real estate facilities of $224,000. Net
income  before this gain  increased by $687,000 or 20% in 1995 compared to 1994.
The  increase  was  primarily  due  to  improved  property   operations  at  the
Partnership's  real estate  facilities  combined with reductions in depreciation
and interest  expenses and minority interest in income for those properties held
jointly with PSI, partially offset by an increase in environmental costs.

     Property net operating  income  (rental  income less cost of operations and
management  fees and excluding  depreciation  expense)  increased  approximately
$218,000 or 2% in 1995 compared to 1994,  as rental income  increased by $96,000
or 1%, and cost of operations  (including management fees) decreased by $122,000
or 2%. However,  net property  income for 1994 includes  $300,000 (none in 1995)
relating  to the  condemned  mini-warehouse  facility.  Accordingly,  for  those
facilities  which were in operation  throughout both 1995 and 1994, net property
income increased $518,000,  or 6%, rental income increased $543,000,  or 4%, and
cost of operations increased $25,000, or 0.4%.

     Rental  income  for  the   Partnership's   mini-warehouse   operations  was
$12,564,000 in 1995 compared to $12,659,000 in 1994,  representing a decrease of
$95,000.  The  decrease  in rental  income  was  primarily  attributable  to the
condemned  facility  which had rental income of $447,000 in 1994 (none in 1995),
accordingly, rental income for the remaining mini-warehouse facilities increased
$352,000,  or 3%. This increase is primarily due to increased  average  realized
rental rates at the  mini-warehouse  facilities.  The weighted average occupancy
levels at the  mini-warehouse  facilities  were 90% in 1995  compared  to 92% in
1994. The monthly average  realized rent per square foot for the  mini-warehouse
facilities  were  $.59 in 1995  compared  to $.56 in 1994.  Costs of  operations
(including  management fees) decreased $50,000 or 1%, to $4,519,000 in 1995 from
$4,569,000 in 1994. Costs of operations for the condemned facility were $147,000
in 1994,  accordingly,  costs of  operations  for the  remaining  mini-warehouse
facilities  increased  $97,000,  or  2%.  Accordingly,   for  the  Partnership's
mini-warehouse  operations,  property net operating  income decreased by $45,000
from  $8,090,000 in 1994 to $8,045,000  in 1995.  Property net operating  income
excluding the condemned facility increased $255,000, or 3%.

     Rental income for the Partnership's business park operations was $2,364,000
in 1995 compared to $2,173,000 in 1994,  representing an increase of $191,000 or
9%. The increase in rental income is attributable to improved  occupancy  levels
and realized rents per square foot. The weighted average occupancy levels at the
business park  facilities  were 97% in 1995 compared to 96% in 1994. The monthly
average realized rent per square foot for the business park facilities were $.81
in 1995 compared to $.71 in 1994. Cost of operations (including management fees)
decreased  $72,000 or 6% to  $1,132,000  in 1995 from  $1,204,000  in 1994.  The
decrease in cost of operations is primarily due to a decrease in property  taxes
and repairs and  maintenance  at the  Lakewood  property.  Accordingly,  for the
Partnership's business park facilities,  property net operating income increased
by $263,000 or 27% from $969,000 in 1994 to $1,232,000 in 1995.

     Substantially  all of the  Partnership's  facilities were acquired prior to
the time that it was customary to conduct extensive environmental investigations
in connection with the property acquisitions. During the fourth quarter of 1995,
an independent environmental consulting firm completed environmental assessments
on the Partnership's  properties to evaluate the environmental condition of, and
potential   environmental   liabilities  of  such   properties.   Based  on  the
assessments,  the  Partnership  expensed in 1995 an estimated  $80,000 for known
environmental remediation requirements.  Although there can be no assurance, the
Partnership  is not aware of any unaccrued  environmental  contamination  of its
facilities  which  individually  or in the  aggregate  would be  material to the
Partnership's overall business, financial condition, or results of operations.

     Minority interest in income decreased by $229,000 in 1995 compared to 1994.
This decrease was primarily  attributed to the  allocation of  depreciation  and
amortization  expense  (pursuant to the  partnership  agreement  with respect to

                                       13
<PAGE>
those real estate  facilities which are jointly owned by PSI) to PSI of $328,000
compared  to $95,000  for 1995 and 1994,  respectively,  partially  offset by an
increase in operations at the Partnership's real estate facilities owned jointly
with PSI.

     In 1991, the Lakewood,  California  business  park,  which is owned jointly
between the  Partnership  and PSI , was occupied by one tenant which leased 100%
of the available net rentable  area.  The tenant  vacated the premises in April,
1991, upon the expiration of its lease. Subsequently,  the Partnership built-out
the facility to  accommodate  multiple  tenants.  The  property's  net operating
income  has  increased  from a net loss of  $237,000  in 1992 to a net income of
$55,000 and $235,000 in 1993 and 1994, respectively.

Liquidity and Capital Resources
-------------------------------
     The  Partnership  has adequate  sources of cash to finance its  operations,
both on a short-term and long-term basis, primarily by internally generated cash
from  property  operations  combined  with cash on hand at December  31, 1996 of
$1,239,000.

     Cash  flows  from  operating  activities  ($9,000,000  for the  year  ended
December 31, 1996) have been  sufficient to meet all current  obligations of the
Partnership.  Total capital improvements were $1,236,000,  $803,000 and $727,000
in 1996, 1995, and 1994, respectively. The increase in 1996 capital improvements
is  primarily   attributable  to  painting  and  roofing   improvements  at  the
Partnership's  mini-warehouse  facilities,  combined with tenant improvements at
the  Partnership's  Lakewood,  CA  business  park  facility.  During  1997,  the
Partnership  anticipates   approximately   $1,252,000  of  capital  improvements
(including   PSI  's  joint  venture  share  of  $257,000).   During  1995,  the
Partnership's  property  manager  commenced  a program  to  enhance  the  visual
appearance  of the  mini-warehouse  facilities.  Such  enhancements  include new
signs, exterior color schemes, and improvements to the rental offices.

     In March 1996,  the  Partnership  repaid early its remaining  mortgage note
payable, utilizing cash reserves.

     Total  distributions  paid to the General Partners and the limited partners
(including the per Unit amounts) for 1996 and prior years were as follows:

                                    Total              Per Unit
                             -----------------       --------------       
                 1996            $4,804,000               $33.44
                 1995             8,902,000                61.97
                 1994             1,582,000                11.00
                 1993             1,582,000                11.00
                 1992             1,582,000                11.00
                 1991             2,708,000                18.85
                 1990             1,077,000                 7.50
                 1989             4,310,000                30.00
                 1988             4,309,000                30.00
                 1987             4,310,000                30.00
                 1986             4,669,000                32.50
                 1985             5,747,000                40.00
                 1984             3,239,000                22.54

     During  1990 and 1992,  distribution  levels  were  reduced  to enable  the
Partnership to retire short term borrowings due to PSI and prepay mortgage notes
which  were  scheduled  to mature in 1992,  1993 and 1994 (such  mortgage  notes
having balloon payments at maturity).  The 1992 distribution  includes a special
distribution  of  cash  reserves  of  approximately  $3.60  per  Unit  The  1995
distribution  includes a special distribution of cash reserves and proceeds from
the Weymouth  property  condemnation of  approximately  $31.32 per Unit.  Future
distribution  levels will be based upon cash flows  available for  distributions
(cash flows from operations less capital improvements, distributions to minority
interest and necessary cash reserves).

                                       14
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
         -------------------------------------------    
     The  Partnership's  financial  statements  are included  elsewhere  herein.
Reference  is  made  to the  Index  to  Consolidated  Financial  Statements  and
Financial Statement Schedules in Item 14(a).


ITEM 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
         ----------------------------------------------------
     None.

                                       15
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP.
         ---------------------------------------------------
     The Partnership has no directors or executive officers.

     The Partnership's General Partners are PSI and B. Wayne Hughes. PSI, acting
through its  directors and  executive  officers,  and Mr. Hughes manage and make
investment  decisions  for the  Partnership.  The  Partnership's  mini-warehouse
properties are managed by PSI pursuant to a Management Agreement.  Through 1996,
the  Partnership's  commercial  properties  were managed by PSCPG,  now known as
American Office Park Properties,  Inc., pursuant to a Management  Agreement.  In
January  1997,  the  Partnership  transferred  its  business  parks to AOPPLP in
exchange for a 8.6% interest in AOPPLP.

     The names of all directors and executive  officers of PSI, the offices held
by each of them with PSI, and their ages and business experience during the past
five years are as follows:


        Name                             Positions with PSI
------------------           --------------------------------------------------
B. Wayne Hughes              Chairman of the Board and Chief Executive Officer
Harvey Lenkin                President and Director
John Reyes                   Senior Vice President and Chief Financial Officer
Hugh W. Horne                Senior Vice President
Obren B. Gerich              Senior Vice President
Marvin M. Lotz               Senior Vice President
David Goldberg               Senior Vice President and General Counsel
A. Timothy Scott             Senior Vice President and Tax Counsel
Sarah Hass                   Vice President and Secretary
Robert J. Abernethy          Director
Dann V. Angeloff             Director
William C. Baker             Director
Uri P. Harkham               Director

     B. Wayne Hughes,  age 63, a general partner of the Partnership,  has been a
director of PSI since its  organization  in 1980 and was  President and Co-Chief
Executive  Officer from 1980 until November 1991 when he became  Chairman of the
Board and sole Chief Executive  Officer.  Mr. Hughes was an officer and director
of affiliates of PSMI and a director of PSMI until November 1995. Mr. Hughes has
been  Chairman  of the Board and Chief  Executive  Officer  since 1990 of Public
Storage Properties XI, Inc., Public Storage Properties XIV, Inc., Public Storage
Properties  XV, Inc.,  Public  Storage  Properties  XVI,  Inc.,  Public  Storage
Properties XVII, Inc.,  Public Storage  Properties  XVIII,  Inc., Public Storage
Properties XIX, Inc. and Public Storage Properties XX, Inc.  (collectively,  the
"Public Storage  REITs"),  REITs that were organized by affiliates of PSMI. From
1989-90 until the respective  dates of merger,  he was Chairman of the Board and
Chief Executive  Officer of Public Storage  Properties VI, Inc.,  Public Storage
Properties  VII, Inc.,  Public Storage  Properties  VIII,  Inc.,  Public Storage
Properties  IX, Inc.,  Public  Storage  Properties  X, Inc.  and Public  Storage
Properties XII, Inc., PS Business Parks,  Inc.,  Partners Preferred Yield, Inc.,
Partners  Preferred  Yield II,  Inc.,  Partners  Preferred  Yield III,  Inc. and
Storage  Properties,  Inc.  ("SPI")  (collectively,  the "Merged  Public Storage
REITs"),  affiliated REITs that were merged into PSI between  September 1994 and
December  1996. Mr. Hughes has been active in the real estate  investment  field
for over 25 years.

     Harvey Lenkin,  age 60, became  President and a director of PSI in November
1991.  Mr. Lenkin was an officer and director of PSMI and its  affiliates  until
November  1995. He has been President of the Public Storage REITs since 1990. He
was  President  of the  Merged  Public  Storage  REITs  from  1989-90  until the
respective  dates of merger and was also a director  of SPI from 1989 until June
1996.

                                       16
<PAGE>

     John Reyes, age 36, a certified public accountant,  joined PSMI in 1990 and
was  controller  of PSI from 1992  until  December  1996  when he  became  Chief
Financial  Officer.  He became a Vice  President  of PSI in November  1995 and a
Senior Vice President of PSI in December 1996.  From 1983 to 1990, Mr. Reyes was
employed by Ernst & Young.

     Hugh W. Horne,  age 52, has been a Vice President of PSI since 1980 and was
Secretary of PSI from 1980 until  February 1992 and became Senior Vice President
of PSI in November  1995. He was an officer of PSMI from 1973 to November  1995.
Mr. Horne has been a Vice  President of the Public  Storage REITs since 1993. He
was a Vice  president  of SPI from 1989 until June 1996 and of the other  Merged
Public  Storage  REITs from 1993  until the  respective  dates of merger.  He is
responsible for managing all aspects of property acquisition for PSI.

     Obren B.  Gerich,  age 58, a  certified  public  accountant  and  certified
financial planner, has been a Vice President of PSI since 1980 and became Senior
Vice  President of PSI in November 1995. He was Chief  Financial  Officer of PSI
until  November  1991.  Mr.  Gerich was an officer of PSMI from 1975 to November
1995. He has been Vice President and Secretary of the Public Storage REITS since
1990 and was Chief  Financial  Officer until  November 1995. Mr. Gerich was Vice
President and  Secretary of the Merged  Public  Storage REITs from 1989-90 until
the respective dates of merger.

     Marvin M. Lotz, age 54, has had overall responsibility for Public Storage's
mini-warehouse  operations  since 1988. He became a Senior Vice President of PSI
in  November  1995.  Mr.  Lotz was an  officer of PSMI with  responsibility  for
property acquisitions from 1983 until 1988.

     David Goldberg,  age 47, joined PSMI's legal staff in June 1991,  rendering
services  on behalf  of PSI and PSMI.  He  became a Senior  Vice  President  and
General  Counsel of PSI in November 1995 and Vice President and General  Counsel
of the Public Storage REITs in December 1995. From December 1982 until May 1991,
he was a partner  in the law firm of Sachs &  Phelps,  then  counsel  to PSI and
PSMI.

     A. Timothy Scott, age 45, became a Senior Vice President and Tax Counsel of
PSI and Vice  President and Tax Counsel of the Public  Storage REITs in November
1996.  From June 1991  until  joining  PSI,  Mr.  Scott  practiced  tax law as a
shareholder of the law firm of Heller, Ehrman, White & McAuliffe, counsel to PSI
and PSMI. Prior to June 1991, his professional  corporation was a partner in the
law firm of Sachs & Phelps, then counsel to PSI and PSMI.

     Sarah Hass, age 41, became  Secretary of PSI in February 1992. She became a
Vice President of PSI in November  1995.  She joined PSMI's legal  department in
June 1991,  rendering  services  on behalf of PSI and PSMI.  From 1987 until May
1991,  her  professional  corporation  was a partner  in the law firm of Sachs &
Phelps,  then counsel to PSI and PSMI,  and from April 1986 until June 1987, she
was associated  with that firm,  practicing in the area of securities  law. From
September 1979 until  September  1985, Ms. Hass was associated with the law firm
of Rifkind & Sterling, Incorporated.

     Robert J. Abernethy,  age 57, is President of American Standard Development
Company  and of  Self-Storage  Management  Company,  which  develop  and operate
mini-warehouses. Mr. Abernethy has been a director of PSI since its organization
in 1980.  He is a member of the board of directors of Johns  Hopkins  University
and of the Los Angeles County Metropolitan Transportation Authority and a former
member of the board of directors of the Metropolitan  Water District of Southern
California.

     Dann V. Angeloff, age 61, is President of the Angeloff Company, a corporate
financial  advisory firm. The Angeloff Company has rendered,  and is expected to
continue to render,  financial  advisory and securities  brokerage  services for
PSI. Mr.  Angeloff is the general partner of a limited  partnership  that owns a
mini-warehouse  operated  by PSI and  which  secures  a note  owned by PSI.  Mr.
Angeloff  has been a director  of PSI since its  organization  in 1980.  He is a
director  of Bonded  Motors,  Inc.,  Compensation  Resource  Group,  Datametrics
Corporation,   Nicholas/Applegate   Growth   Equity   Fund,   Nicholas/Applegate
Investment  Trust,  ReadyPac  Produce,  Inc.,  Royce  Medical  Company  and Seda
Specialty Packaging Corp. He was a director of SPI from 1989 until June 1996.

     William C. Baker,  age 63, became a director of PSI in November 1991. Since
April 1996,  Mr.  Baker has been  Chairman  of the Board of Santa  Anita  Realty
Enterprises,  Inc.,  a REIT that owns the Santa Anita  Racetrack  and other real

                                       17
<PAGE>
estate  assets.  In  August  1996,  he  became  Chairman  of the Board and Chief
Executive  Officer of Santa Anita  Operating  Company,  which operates the Santa
Anita Racetrack through its subsidiary the Los Angeles Turf Club,  Incorporated.
From  April  1993  through  May  1995,  Mr.  Baker  was  President  of Red Robin
International,  Inc., an operator and franchiser of casual dining restaurants in
the United States and Canada. Since January 1992, he has been Chairman and Chief
Executive Officer of Carolina Restaurant Enterprises,  Inc., a franchisee of Red
Robin International,  Inc. From 1976 to 1988, he was a principal shareholder and
Chairman  and  Chief  Executive  Officer  of Del Taco,  Inc.,  an  operator  and
franchiser of fast food  restaurants in  California.  Mr. Baker is a director of
Callaway Golf Company.

     Uri P. Harkham, age 48, became a director of PSI in March 1993. Mr. Harkham
has been the  President  and Chief  Executive  Officer  of the  Jonathan  Martin
Fashion  Group,  which  specializes  in designing,  manufacturing  and marketing
women's  clothing,  since its  organization in 1976. Since 1978, Mr. Harkham has
been the  Chairman  of the  Board of  Harkham  Properties,  a real  estate  firm
specializing  in buying and  managing  fashion  warehouses  in Los  Angeles  and
Australia.

     Pursuant to Articles 16 and 17 of the Partnership's Amended Certificate and
Agreement of Limited Partnership (the "Partnership Agreement"),  a copy of which
is  included  in the  Partnership's  prospectus  included  in the  Partnership's
Registration Statement, File No. 2-86355, each of the General Partners continues
to serve until (i) death, insanity, insolvency,  bankruptcy or dissolution, (ii)
withdrawal  with the consent of the other general partner and a majority vote of
the  limited  partners,  or (iii)  removal  by a  majority  vote of the  limited
partners.

     Each  director of PSI serves  until he resigns or is removed from office by
PSI, and may resign or be removed from office at any time with or without cause.
Each  officer  of PSI  serves  until he  resigns  or is  removed by the board of
directors  of PSI.  Any such officer may resign or be removed from office at any
time with or without cause.

     There  have  been  no  events  under  any   bankruptcy   act,  no  criminal
proceedings,  and no judgments or injunctions  material to the evaluation of the
ability of any director or executive officer of PSI during the past five years.

ITEM 11. EXECUTIVE COMPENSATION.
         ----------------------
     The Partnership has no subsidiaries, directors or officers. See Item 13 for
a description of certain  transactions  between the  Partnership and the General
Partners and their affiliates.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
         --------------------------------------------------------------
     (a) At February 19, 1997, PSI beneficially  owned more than 5% of the Units
         of the Partnership:
<TABLE>
<CAPTION>

         Title                                                                        Amount of             Percent
           of                             Name and Address of                         Beneficial               of
         Class                             Beneficial Owner                           Ownership              Class
---------------------     -----------------------------------------             -------------------       -------------
<S>                       <C>                                                      <C>                    <C>
Units of                  Public Storage, Inc.
Limited                   701 Western Avenue
Partnership Interest      Glendale, CA 91201-2394  (1)                             94,171 Units (1)          73.57%

-------------------------
(1)  These  Units  are  held  of  record  by  SEI   Arlington   Acquisition
     Corporation, a wholly-owned subsidiary of PSI.

</TABLE>

          The  Partnership is not aware of any other  beneficial  owners of more
     than 5% of the Units.

          In  October  1996,  PSI  completed  a cash  tender  offer,  which  had
     commenced in August  1996,  pursuant to which PSI acquired a total of 9,013
     additional limited partnership units at $520 per Unit.

          (b) The Partnership has no officers and directors.

                                       18
<PAGE>
          The  General   Partners   (or  their   predecessor-in-interest)   have
     contributed  $646,000 to the capital of the Partnership  representing 1% of
     the aggregate  capital  contributions  and as a result  participate  in the
     distributions to the limited partners and in the Partnership's  profits and
     losses  in  the  same  proportion  that  the  general   partners'   capital
     contribution bears to the total capital contribution. Information regarding
     ownership  of the Units by PSI , a  General  Partner,  is set  forth  under
     section  (a) above.  The  directors  and  executive  officers of PSI , as a
     group, do not own any Units.

          (c)  The  Partnership  knows  of  no  contractual  arrangements,   the
     operation of the terms of which may at a subsequent date result in a change
     in control of the  Partnership,  except for articles 16, 17 and 21.1 of the
     Partnership's  Amended Certificate and Agreement of Limited Partnership,  a
     copy of which is included in the Partnership's  prospectus  included in the
     Partnership's  Registration  Statement  File No.  2-86355.  Those  articles
     provide,  in substance,  that the limited partners shall have the right, by
     majority vote, to remove a general  partner and that a general  partner may
     designate a successor  with the consent of the other general  partner and a
     majority of the limited partners.

          The  Partnership  owns  interests in 33 properties  (which exclude the
     properties  transferred to AOPPLP in January 1997);  27 of such  properties
     are held in a general  partnership  comprised of the  Partnership  and PSI.
     Under the terms of the partnership  agreement  relating to the ownership of
     the properties,  PSI has the right to compel a sale of each property at any
     time after  seven years from the date of  acquisition  at not less than its
     independently   determined  fair  market  value  provided  the  Partnership
     receives its share of the net sales proceeds solely in cash. As of December
     31, 1996,  PSI has the right to require the  Partnership to sell all of the
     joint venture properties on these terms.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
         ----------------------------------------------
     The  Partnership  Agreement  provides  that the General  Partners and their
affiliates are entitled to the following compensation:

         1.   Incentive distributions equal to 10% of Cash Flow from Operations.

         2.   Provided the limited partners have received distributions equal to
              100% of  their  investment  plus a  cumulative  8% per  year  (not
              compounded) on their investment  (reduced by  distributions  other
              than  from  Cash Flow  from  Operations),  subordinated  incentive
              distributions  equal  to 15%  of  remaining  Cash  from  Sales  or
              Refinancings.

         3.   Provided the limited partners have received distributions equal to
              100% of their capital  contributions plus a cumulative 6% per year
              (not  compounded) on their  investment  (reduced by  distributions
              other  than   distributions   from  Cash  Flow  from  Operations),
              brokerage  commissions at the lesser of 3% of the sales price of a
              property or 50% of a competitive commission.

     During 1996,  approximately  $480,000 was paid to PSI with respect to items
1, 2, and 3 above.  The  Partnership  owns  interests  in 33  properties  (which
exclude  the  properties  transferred  to AOPPLP in  January  1997);  27 of such
properties are held in a general  partnership  comprised of the  Partnership and
PSI.

     The Partnership  has a Management  Agreement with PSI pursuant to which the
Partnership  pays PSI a fee of 6% of the gross  revenues  of the  mini-warehouse
spaces operated for the  Partnership.  During 1996, the Partnership paid fees of
$783,000 to PSI pursuant to the Management Agreement.

     Through 1996, the Partnership's commercial properties were managed by PSCPG
pursuant to a Management  Agreement  which  provides for the payment of a fee by
the Partnership of 5% of the gross revenues of the commercial space operated for
the Partnership. During 1996, the Partnership paid $117,000 to PSCPG pursuant to
the Management Agreement. PSI has a 95% economic interest (represented by voting
preferred  stock) in PSCPG and the  Hughes  Family  had a 5%  economic  interest
(represented  by voting common  stock) in PSCPG until  December  1996,  when the
Hughes Family sold its interest to Ronald L. Havner,  Jr.,  formerly Senior Vice
President  and Chief  Financial  Officer of PSI, who became the Chief  Executive
Officer of PSCPG.  PSCPG  issued  additional  voting  common  stock to two other

                                       19
<PAGE>

unaffiliated  investors.  In January  1997,  the  Partnership  and PSI and other
related  partnerships  transferred  a total of 35 business  parks to AOPPLP,  an
operating  partnership formed to own and operate business parks in which PSI has
an approximate 85% economic interest.  Included among the properties transferred
was the Partnership's transfer of its business parks to AOPPLP in exchange for a
8.6% interest in AOPPLP.  The general  partner of AOPPLP is PSCPG,  now known as
American Office Park Properties, Inc.

  
                                       20
<PAGE>
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
         ----------------------------------------------------------------
         (a)  List of Documents filed as part of the Report.
              1. Financial  Statements:  See Index to Consolidated  Financial  
                 Statements and Financial  Statement Schedules.
              2. Financial  Statement  Schedules:  See Index to  Consolidated  
                 Financial  Statements and Financial Statement Schedules.
              3. Exhibits:  See Exhibit Index contained herein.

         (b)  Reports on Form 8-K:
              None

         (c)  Exhibits:  See Exhibit Index contained herein.


                                       21
<PAGE>
                              PS PARTNERS II, LTD.
                                INDEX TO EXHIBITS


3.1  Amended Certificate and Agreement of Limited Partnership.  Previously filed
     with  the  Securities   and  Exchange   Commission  as  Exhibit  A  to  the
     Partnership's Prospectus included in Registration Statement No. 2-86355 and
     incorporated herein by reference.

10.1 Second Amended and Restated  Management  Agreement dated November 16, 1995,
     between the  Partnership  and Public Storage  Management,  Inc.  Previously
     filed  with the  Securities  and  Exchange  Commission  as an exhibit to PS
     Partners, Ltd.'s Annual Report on Form 10-K for the year ended December 31,
     1996 and incorporated herein by reference.

10.2 Amended  Management  Agreement  dated  February  21, 1995  between  Storage
     Equities,  Inc.  and  Public  Storage  Commercial  Properties  Group,  Inc.
     Previously filed with the Securities and Exchange  Commission as an exhibit
     to the Partnership's Annual Report on Form 10-K for the year ended December
     31, 1994 and incorporated herein by reference.


10.3 Participation  Agreement  dated  as of  November  9,  1984,  among  Storage
     Equities,  Inc. the Partnership,  Public Storage, Inc., B. Wayne Hughes and
     Kenneth Q. Volk,  Jr.  Previously  filed with the  Securities  and Exchange
     Commission as an exhibit to Storage  Equities,  Inc.  Annual Report on Form
     10-K for the year  ended  December  31,  1983 and  incorporated  herein  by
     reference.

27   Financial data schedule, Filed herewith.


                                       22
<PAGE>
                                   SIGNATURES


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

                                         PS PARTNERS II, LTD.
Dated:  March 26, 1997           By:     Public Storage, Inc., General Partner

                                 By:     /s/  B. Wayne Hughes
                                         --------------------------------------
                                         B. Wayne Hughes, Chairman of the Board
                                 By:     /s/  B. Wayne Hughes
                                         --------------------------------------
                                         B. Wayne Hughes, General Partner


     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
Partnership in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

                Signature                                       Capacity                           Date
-------------------------------            ---------------------------------------------        --------------         
<S>                                         <C>                                                 <C> 
/s/ B. Wayne Hughes                        Chairman of the Board and Chief                      March 26, 1997
-------------------------------            Executive Officer of Public Storage, Inc. and
B. Wayne Hughes                            General Partner (principal executive officer)
                               

/s/ Harvey Lenkin                          President and Director                               March 26, 1997
-------------------------------            of Public Storage, Inc.
Harvey Lenkin                              


/s/ John Reyes                             Senior Vice President and Chief Financial Officer    March 26, 1997
-------------------------------            of Public Storage, Inc. (principal financial
John Reyes                                 officer and principal accounting officer)


/s/ Robert J. Abernethy                    Director of Public Storage, Inc.                     March 26, 1997
-------------------------------
Robert J. Abernethy


/s/ Dann V. Angeloff                       Director of Public Storage, Inc.                     March 26, 1997
-------------------------------
Dann V. Angeloff


/s/ William C. Baker                       Director of Public Storage, Inc.                     March 26, 1997
-------------------------------
William C. Baker


/s/ Uri P. Harkham                         Director of Public Storage, Inc.                     March 26, 1997
-------------------------------
Uri P. Harkham

</TABLE>
                                       23
<PAGE>
                              PS PARTNERS II, LTD.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULES

                                  (Item 14 (a))


                                                                   Page
                                                                References
                                                                ----------



Report of Independent Auditors                                      F-1

Consolidated Financial Statements and Schedules:

Consolidated Balance Sheets as of December 31, 1996
   and 1995                                                         F-2

For the years ended December 31, 1996, 1995 and 1994:
                                                                    F-3
   Consolidated Statements of Income

   Consolidated Statements of Partners' Equity                      F-4

   Consolidated Statements of Cash Flows                            F-5

   Notes to Consolidated Financial Statements                    F-6 - F-9

Schedule

III - Real Estate and Accumulated Depreciation                   F-10 - F-13


     All other schedules have been omitted since the required information is not
present or not  present  in amounts  sufficient  to  require  submission  of the
schedule,  or because the information  required is included in the  consolidated
financial statements or the notes thereto.


                                       24
<PAGE>
                         Report of Independent Auditors




The Partners
PS Partners II, Ltd.


We have audited the  consolidated  balance  sheets of PS Partners II, Ltd. as of
December 31, 1996 and 1995 and the related  consolidated  statements  of income,
partners'  equity and cash flows for each of the three years in the period ended
December 31, 1996.  Our audits also  included the financial  statement  schedule
listed in the Index at Item 14(a).  These financial  statements and schedule are
the  responsibility of the Partnership's  management.  Our  responsibility is to
express an opinion  on these  financial  statements  and  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 are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the consolidated  financial  position of PS
Partners II, Ltd. at December 31, 1996 and 1995, and the consolidated results of
its  operations  and its cash  flows for each of the three  years in the  period
ended  December 31, 1996,  in  conformity  with  generally  accepted  accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered  in  relation  to the basic  financial  statements  taken as a whole,
presents fairly in all material respects the information set forth therein.





                                                              ERNST & YOUNG LLP

Los Angeles, CA
March 18, 1997

                                       F-1

<PAGE>
<TABLE>
<CAPTION>

                              PS PARTNERS II, LTD.
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1996 and 1995


                                                                                             1996               1995
                                                                                   --------------------------------------

                                     ASSETS


<S>                                                                                   <C>               <C>          
Cash and cash equivalents                                                              $   1,239,000     $     904,000

Rent and other receivables                                                                   123,000            85,000

Real estate facilities, at cost:
     Land                                                                                 17,414,000        17,414,000
     Buildings and equipment                                                              73,222,000        71,986,000
                                                                                   --------------------------------------
                                                                                                     
                                                                                          90,636,000        89,400,000

     Less accumulated depreciation                                                       (37,683,000)      (34,181,000)
                                                                                   --------------------------------------
                                                                                          52,953,000        55,219,000

Other assets                                                                                 243,000           163,000
                                                                                   --------------------------------------

                                                                                        $ 54,558,000      $ 56,371,000
                                                                                   ======================================


                        LIABILITIES AND PARTNERS' EQUITY


Accounts payable                                                                        $    519,000      $    648,000

Advance payments from renters                                                                427,000           433,000

Mortgage notes payable                                                                             -         2,260,000

Minority interest in general partnerships                                                 15,069,000        13,797,000

Partners' equity:
     Limited partners' equity, $500 per unit, 128,000
          units authorized, issued and outstanding                                        38,077,000        38,760,000
     General partners' equity                                                                466,000           473,000
                                                                                   --------------------------------------

               Total partners' equity                                                     38,543,000        39,233,000
                                                                                   --------------------------------------

                                                                                        $ 54,558,000      $ 56,371,000
                                                                                   ======================================

</TABLE>
                             See accompanying notes.
                                       F-2

<PAGE>
<TABLE>
<CAPTION>
                              PS PARTNERS II, LTD.
                        CONSOLIDATED STATEMENTS OF INCOME
              For the years ended December 31, 1996, 1995, and 1994




                                                                            1996              1995              1994
                                                                   -----------------------------------------------------

REVENUE:
<S>                                                                    <C>               <C>               <C>         
Rental income                                                          $ 15,396,000      $ 14,928,000      $ 14,832,000
Interest income                                                              60,000           160,000            49,000
                                                                   -----------------------------------------------------

                                                                         15,456,000        15,088,000        14,881,000
                                                                   -----------------------------------------------------   

COSTS AND EXPENSES:

Cost of operations                                                        5,137,000         4,779,000         4,905,000
Management fees                                                             900,000           872,000           868,000
Depreciation and amortization                                             3,502,000         3,293,000         3,419,000
Interest expense                                                             14,000           177,000           285,000
Administrative                                                              152,000           159,000           178,000
Environmental costs                                                               -           124,000                 -
                                                                   -----------------------------------------------------
                                                                          9,705,000         9,404,000         9,655,000
                                                                   -----------------------------------------------------

Income before minority interest and gain on disposition
     of a real estate facility                                            5,751,000         5,684,000         5,226,000

Minority interest in income                                              (1,637,000)       (1,499,000)       (1,728,000)
                                                                   -----------------------------------------------------

Income before gain on disposition of real
     estate facility                                                      4,114,000         4,185,000         3,498,000

Extraordinary gain on disposition of a real estate facility,
     net of minority interests' share                                             -                 -           224,000
                                                                   -----------------------------------------------------

NET INCOME                                                             $  4,114,000      $  4,185,000      $  3,722,000
                                                                   =====================================================

Limited partners' share of net income
     ($28.10, $25.48, and $27.56 per unit in
     1996, 1995, and 1994, respectively)                               $  3,597,000      $  3,262,000      $  3,528,000
General partners' share of net income                                       517,000           923,000           194,000
                                                                   -----------------------------------------------------
                                                                       $  4,114,000      $  4,185,000      $  3,722,000
                                                                   =====================================================




</TABLE>
                             See accompanying notes.
                                       F-3
<PAGE>
<TABLE>
<CAPTION>

                              PS PARTNERS II, LTD.
                   CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
              For the years ended December 31, 1996, 1995, and 1994




                                                                        Limited             General
                                                                       Partners             Partners          Total
                                                              ----------------------------------------------------------

<S>                                                                 <C>                    <C>            <C>         
Balances at December 31, 1993                                       $ 41,310,000           $ 500,000      $ 41,810,000

Net income                                                             3,528,000             194,000         3,722,000

Distributions                                                         (1,408,000)           (174,000)       (1,582,000)
                                                              ----------------------------------------------------------

Balances at December 31, 1994                                         43,430,000             520,000        43,950,000

Net income                                                             3,262,000             923,000         4,185,000

Distributions                                                         (7,932,000)           (970,000)       (8,902,000)
                                                              ----------------------------------------------------------

Balances at December 31, 1995                                         38,760,000             473,000        39,233,000

Net income                                                             3,597,000             517,000         4,114,000

Distributions                                                         (4,280,000)           (524,000)       (4,804,000)
                                                              ----------------------------------------------------------

Balances at December 31, 1996                                       $ 38,077,000           $ 466,000      $ 38,543,000
                                                              ==========================================================


</TABLE>

                             See accompanying notes.
                                       F-4

<PAGE>
<TABLE>
<CAPTION>
                              PS PARTNERS II, LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the years ended December 31, 1996, 1995, and 1994




                                                                                1996            1995            1994
                                                                         ------------------------------------------------

Cash flows from operating activities:
<S>                                                                         <C>             <C>             <C>        
     Net income                                                             $ 4,114,000     $ 4,185,000     $ 3,722,000

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

               Depreciation and amortization                                  3,502,000       3,293,000       3,419,000
               Gain on disposition of real estate facilities                          -               -        (224,000)
               (Increase) decrease in rent and other receivables                (38,000)        (57,000)          2,000
                Increase in other assets                                        (80,000)         (9,000)        (20,000)
               (Decrease) increase in accounts payable                         (129,000)        215,000         102,000
               Decrease in advance payments from renters                         (6,000)         (6,000)        (30,000)
               Minority interest in income                                    1,637,000       1,499,000       1,728,000
                                                                         ------------------------------------------------

                    Total adjustments                                         4,886,000       4,935,000       4,977,000
                                                                         ------------------------------------------------

                    Net cash provided by operating activities                 9,000,000       9,120,000       8,699,000
                                                                         ------------------------------------------------

Cash flows from investing activities:

               Proceeds from disposition of real estate facilities                    -               -       1,910,000
               Additions to real estate facilities                           (1,236,000)       (803,000)       (727,000)
                                                                         ------------------------------------------------

                    Net cash (used in) provided by investing activities      (1,236,000)       (803,000)      1,183,000
                                                                         ------------------------------------------------

Cash flows from financing activities:

               Principal payments on mortgage notes payable                  (2,260,000)        (66,000)     (4,959,000)
               Distributions to holder of minority interest                    (365,000)     (1,703,000)     (1,166,000)
               Distributions to partners                                     (4,804,000)     (8,902,000)     (1,582,000)
                                                                         ------------------------------------------------

                    Net cash used in financing activities                    (7,429,000)    (10,671,000)     (7,707,000)
                                                                         ------------------------------------------------

Net increase (decrease) in cash and cash equivalents                            335,000      (2,354,000)      2,175,000

Cash and cash equivalents at the beginning of the year                          904,000       3,258,000       1,083,000
                                                                         ------------------------------------------------

Cash and cash equivalents at the end of the year                            $ 1,239,000     $   904,000     $ 3,258,000
                                                                         ================================================
</TABLE>
                             See accompanying notes.
                                       F-5
<PAGE>
                              PS PARTNERS II, LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996


1.   Summary of Significant Accounting Policies and Partnership Matters

     Description of Partnership
     --------------------------

          PS Partners II, Ltd. (the  "Partnership") was formed with the proceeds
     of an interstate  public  offering.  PSI  Associates  II,  Inc.("PSA"),  an
     affiliate of Public Storage  Management,  Inc.,  organized the  Partnership
     along with B. Wayne Hughes ("Hughes"). In September 1993, Storage Equities,
     Inc., now known as Public  Storage,  Inc. ("PSI ") acquired the interest of
     PSA relating to its general partner capital contribution in the Partnership
     and was substituted as a co-general partner in place of PSA.

          In  1995,   there  was  a  series  of  mergers  among  Public  Storage
     Management,  Inc. (which was the  Partnership's  mini-warehouse  operator),
     Public  Storage,   Inc.  and  their  affiliates   (collectively,   "PSMI"),
     culminating  in the  November  16, 1995 merger (the "PSMI  Merger") of PSMI
     into Storage Equities,  Inc. In the PSMI Merger, Storage Equities, Inc. was
     renamed Public Storage,  Inc. and it acquired  substantially  all of PSMI's
     United  States  real  estate  operations  and  became the  operator  of the
     Partnership's mini-warehouse properties.

          The  Partnership  has  invested  in  existing  mini-warehouse  storage
     facilities which offer self-service  storage spaces for lease, usually on a
     month-to-month  basis,  to the general public and, to a lesser  extent,  in
     existing  business park facilities  which offer industrial and office space
     for lease.

          The  Partnership  has  ownership  interests  in 33  properties,  which
     exclude two properties transferred to American Office Park Properties, L.P.
     ("AOPPLP")  in January  1997 (see Note 7). 27 of the  properties  are owned
     jointly through 22 general  partnerships  (the "Joint  Ventures") with PSI.
     For tax  administrative  efficiency  the Joint  Ventures were  subsequently
     consolidated  into a single  general  partnership.  The  Partnership is the
     managing general partner of the Joint Ventures, with ownership interests in
     the Joint Ventures ranging from 36% to 90%.

     Basis of Presentation
     ---------------------
          The  consolidated  financial  statements  include the  accounts of the
     Partnership and the Joint Ventures.  PSI 's ownership interest in the Joint
     Ventures  is shown as  minority  interest  in general  partnerships  in the
     accompanying  consolidated  balance sheets.  All  significant  intercompany
     balances and transactions have been eliminated.

          Minority interest in income represents PSI 's share of net income with
     respect  to  the  Joint  Ventures.  Under  the  terms  of  the  partnership
     agreements all  depreciation  and  amortization  with respect to each Joint
     Venture is allocated  solely to the Partnership  until the limited partners
     recover their initial capital  contribution.  Thereafter,  all depreciation
     and  amortization is allocated  solely to PSI until it recovers its initial
     capital  contribution.  All  remaining  depreciation  and  amortization  is
     allocated  to the  Partnership  and PSI in  proportion  to their  ownership
     percentages.

          Depreciation and amortization allocated to PSI was $347,000,  $328,000
     and  $95,000  in 1996,  1995 and  1994,  respectively.  The  allocation  of
     depreciation  and  amortization to PSI has the effect of reducing  minority
     interest  in  income  and has no effect on the  reported  depreciation  and
     amortization expense.

          Under  the  terms  of  the   partnership   agreements,   for  property
     acquisitions in which PSI issued convertible  securities to the sellers for
     its  interest,  PSI 's rights to receive cash flow  distributions  from the
     partnerships   for  any  year  after  the  first  year  of  operation   are
     subordinated to cash distributions to the Partnership equal to a cumulative
     annual 7% of its cash investment (not  compounded).  These  agreements also
     specify  that  upon sale or  refinancing  of a  property  for more than its
     original purchase price, distribution of


                                      F-6
<PAGE>
                              PS PARTNERS II, LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996


1.   Summary of Significant Accounting Policies and Partnership Matters 
     (continued)
     ------------------------------------------------------------------

     Basis of Presentation (continued)
     ---------------------------------
     proceeds to PSI is subordinated to the return to the Partnership of the
     amount of its cash investment and the 7% distribution described above.

          In addition to the above  provisions,  PSI has the right to compel the
     sale of each property in the general  partnerships  at any time after seven
     years  from the date of  acquisition  at not  less  than its  independently
     determined fair market value provided the Partnership receives its share of
     the net  sales  proceeds  solely  in  cash.  PSI 's right  to  require  the
     Partnership  to  sell  all  of  the  properties   owned  jointly  with  the
     Partnership became exercisable in 1991.

     Depreciation and amortization
     -----------------------------
          The   Partnership   depreciates  the  buildings  and  equipment  on  a
     straight-line  method  over  estimated  useful  lives  of 25  and 5  years,
     respectively.  Leasing commissions relating to business park properties are
     expensed when incurred.

     Revenue Recognition
     -------------------
          Property rents are recognized as earned.

     Allocation of Net Income
     ------------------------
          The  General  Partners'  share of net  income  consists  of an  amount
     attributable to their 1% capital contribution and an additional  percentage
     of cash  flow  (as  defined,  see  Note 4)  which  relates  to the  General
     Partners'  share of cash  distributions  as set  forth  in the  Partnership
     Agreement. All remaining net income is allocated to the limited partners.

     Per Unit Data
     -------------
          Per unit data is based on the  number  of  limited  partnership  units
     (128,000) outstanding during the year.

     Cash Distributions
     ------------------
          The Partnership Agreement provides for quarterly distributions of cash
     flow from operations (as defined).  Cash distributions per unit were $33.44
     for 1996, $61.97 for 1995 and $11.00 for 1994.

     Cash and Cash Equivalents
     -------------------------
          For financial statement purposes, the Partnership considers all highly
     liquid investments  purchased with a maturity of three months or less to be
     cash equivalents.

     Environmental Cost
     ------------------
          Substantially all of the Partnership's  facilities were acquired prior
     to the  time  that it was  customary  to  conduct  extensive  environmental
     investigations  in connection  with the property  acquisitions.  During the
     fourth  quarter  of 1995,  an  independent  environmental  consulting  firm
     completed  environmental  assessments  on the  Partnership's  properties to
     evaluate  the  environmental  condition  of,  and  potential  environmental
     liabilities of such properties.  Based on the assessments,  the Partnership
     believes that it is probable that it will incur costs totaling  $80,000 for
     known  environmental  remediation  requirements  which the  Partnership has
     accrued and expensed in 1995.  During 1996 and 1995, the  Partnership  paid
     $12,000 and $44,000,  respectively,  in connection  with the  environmental
     remediations.  Although there can be no assurance,  the  Partnership is not
     aware of any unaccrued environmental  contamination of its facilities which
     individually or

                                      F-7
<PAGE>
                              PS PARTNERS II, LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1996


1.   Summary of Significant Accounting Policies and Partnership Matters 
     (continued)
     ------------------------------------------------------------------

     Environmental Cost (continued)
     ------------------------------
     in  the  aggregate  would  be  material  to the  Partnership's  overall
     business, financial condition, or results of operations.

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

2.   Real Estate Facilities
     ----------------------
          In November  1994,  the  Massachusetts  Bay  Transportation  Authority
     exercised  its  right  of  eminent  domain  and  took   possession  of  the
     mini-warehouse property located in Weymouth,  Massachusetts which was owned
     jointly  by the  Partnership  and PSI.  The  Partnership  received  initial
     condemnation  proceeds  of  approximately  $1,910,000,   resulting  in  the
     recognition of a gain on disposition of real estate facilities of $224,000.

          The  Partnership  is  presently  contesting  the amount of the initial
     condemnation proceeds,  however, there is no assurance that the Partnership
     will obtain additional condemnation proceeds.

          In 1995, the Financial  Accounting Standards Board issued Statement of
     Financial Accounting  Standards No. 121 ("Statement 121"),  "Accounting for
     the  Impairment  of  Long-Lived  Assets  and for  Long-Lived  Assets  to be
     Disposed of."  Statement 121 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  are less  than the  assets'  carrying  amount.  Statement  121 also
     addresses the method of accounting for long-lived  assets that are expected
     to be  disposed.  The  Partnership  adopted  Statement  121 in 1996 and the
     adoption had no effect.

3.   Mortgage Notes Payable
     ----------------------
          Mortgage  notes  payable at December 31, 1995  consisted of a variable
     rate  mortgage  note due to a group of banks and  secured by a real  estate
     facility  with a net book value of  $2,963,000  at December 31,  1995.  The
     balance was paid off in March 1996.

          Interest  paid during 1996,  1995 and 1994 was  $14,000,  $177,000 and
     $285,000, respectively.

4.   General Partners' Equity
     ------------------------
          The  General  Partners  have  a 1%  interest  in the  Partnership.  In
     addition,  the General  Partners have a 10% interest in cash  distributions
     attributable  to operations,  exclusive of  distributions  attributable  to
     sales and refinancing proceeds.

          Proceeds from sales and refinancings  will be distributed  entirely to
     the limited  partners until the limited  partners  recover their investment
     plus a  cumulative  8% annual  return  (not  compounded);  thereafter,  the
     General Partners have a 15% interest in remaining proceeds.


                                      F-8
<PAGE>



5.    Related Party Transactions
                  The Partnership  has a management  agreement with PSI pursuant
         to which PSI operates the Partnership's mini-warehouses for a fee equal
         to 6% of the  facilities'  monthly gross revenue (as defined).  Through
         1996, the Partnership's  commercial  properties were operated by Public
         Storage  Commercial  Properties  Group,  Inc.  ("PSCPG")  pursuant to a
         management  agreement  which  provides  for a fee  equal  to 5% of  the
         facilities' monthly gross revenue (as defined).

                  PSI has a 95% economic interest in PSCPG and the Hughes Family
         had a 5%  economic  interest  in PSCPG until  December  1996,  when the
         Hughes  Family sold its  interest to Ronald L.  Havner,  Jr.,  formerly
         Senior Vice  President and Chief  Financial  Officer of PSI, who became
         the Chief  Executive  Officer of PSCPG.  PSCPG,  now known as  American
         Office Park Properties,  Inc., issued additional voting common stock to
         two other unaffiliated investors. See Note 7.


6.    Taxes Based on Income
                  Taxes based on income are the responsibility of the individual
         partners and,  accordingly,  the Partnership's  consolidated  financial
         statements do not reflect a provision for such taxes.

                   Taxable net income was $2,637,000,  $4,068,000 and $4,038,000
         for the years ended December 31, 1996, 1995 and 1994, respectively. The
         difference  between taxable income and book income is primarily related
         to timing differences in depreciation expense.

7.       Subsequent Event
                  In January  1997,  the  Partnership  and PSI and other related
         partnerships  transferred  a total of 35 business  parks to AOPPLP,  an
         operating partnership formed to own and operate business parks in which
         PSI has an  approximate  85%  economic  interest.  Included  among  the
         properties  transferred was the Partnership's  transfer of its business
         parks to AOPPLP in exchange for a 8.6% interest in AOPPLP.  The general
         partner  of  AOPPLP  is  PSCPG,  now  known  as  American  Office  Park
         Properties, Inc.

                                      F-9
<PAGE>
<TABLE>
                               PS PARTNERS II, LTD
                           SCHEDULE III - REAL ESTATE
                          AND ACCUMULATED DEPRECIATION

<CAPTION>

                                                                                                  Costs        
                                                                     Initial Cost               subsequent     
                                                           ----------------------------------  to acquisition  
       Date                                                                    Building &       Building &     
     Acquired          Description          Encumbrances         Land         Improvement      Improvements    
   ------------------------------------------------------------------------------------------------------------

   Mini-warehouses
<S>             <C>                                    <C>      <C>             <C>              <C>           
   12/83         Charlotte                             -        $ 165,000      $ 1,274,000        $ 298,000    

   12/83         Greensboro/Market                     -          214,000        1,653,000          386,000    

   12/83         Greensboro/Electra                    -          112,000          869,000          219,000    

   1/83          Raleigh/Yonkers                       -          203,000          914,000          293,000    

   12/83         Columbia                              -          171,000        1,318,000          403,000    

   12/83         Richmond                              -          176,000        1,360,000          282,000    

   12/83         Augusta                               -           97,000          747,000          198,000    

   4/84          Providence                            -           92,000        1,087,000          258,000    

   1/85          Cranston                              -          175,000          722,000          239,000    

   3/84          Marrietta/Cobb                        -           73,000          542,000          200,000    

   1/84          Fremont/Albrae                        -          636,000        1,659,000          381,000    

   12/83         Tacoma                                -          553,000        1,173,000          336,000    

</TABLE>
<TABLE>
                               PS PARTNERS II, LTD
                           SCHEDULE III - REAL ESTATE
                          AND ACCUMULATED DEPRECIATION

<CAPTION>

                                                                  Gross Carrying Amount
                                                                  At December 31, 1996
                                             -----------------------------------------------------------------
       Date                                                   Building &                       Accumulated
     Acquired          Description               Land        Improvements        Total         Depreciation
   -----------------------------------------------------------------------------------------------------------

   Mini-warehouses
<S>             <C>                             <C>           <C>             <C>                <C>
   12/83         Charlotte                       $ 165,000     $ 1,572,000     $ 1,737,000       $ 794,000

   12/83         Greensboro/Market                 214,000       2,039,000       2,253,000       1,080,000

   12/83         Greensboro/Electra                112,000       1,088,000       1,200,000         553,000

   1/83          Raleigh/Yonkers                   203,000       1,207,000       1,410,000         611,000

   12/83         Columbia                          171,000       1,721,000       1,892,000         885,000

   12/83         Richmond                          176,000       1,642,000       1,818,000         843,000

   12/83         Augusta                            97,000         945,000       1,042,000         482,000

   4/84          Providence                         92,000       1,345,000       1,437,000         682,000

   1/85          Cranston                          175,000         961,000       1,136,000         480,000

   3/84          Marrietta/Cobb                     73,000         742,000         815,000         352,000

   1/84          Fremont/Albrae                    636,000       2,040,000       2,676,000       1,061,000

   12/83         Tacoma                            553,000       1,509,000       2,062,000         754,000

</TABLE>

                                      F-10
<PAGE>
<TABLE>
                               PS PARTNERS II, LTD
                           SCHEDULE III - REAL ESTATE
                          AND ACCUMULATED DEPRECIATION

<CAPTION>

                                                                                                  Costs       
                                                                     Initial Cost               subsequent    
                                                           ----------------------------------  to acquisition 
       Date                                                                    Building &       Building &    
     Acquired          Description          Encumbrances         Land         Improvement      Improvements   
   -----------------------------------------------------------------------------------------------------------

   Mini-warehouses
<S>             <C>                                    <C>      <C>             <C>              <C>          
   1/84          Belton                                -          175,000          858,000          385,000   

   1/84          Gladstone                             -        $ 275,000      $ 1,799,000        $ 292,000   

   1/84          Hickman/112                           -          257,000        1,848,000          336,000   

   1/84          Holmes                                -          289,000        1,333,000          196,000   

   1/84          Independence                          -          221,000        1,848,000          239,000   

   1/84          Merriam                               -          255,000        1,469,000          267,000   

   1/84          Olathe                                -          107,000          992,000          210,000   

   1/84          Shawnee                               -          205,000        1,420,000          311,000   

   1/84          Topeka                                -           75,000        1,049,000          164,000   

   2/84          Unicorn/Knoxville                     -          662,000        1,887,000          323,000   

   2/84          Central/Knoxville                     -          449,000        1,281,000          186,000   

   3/84          Manassas                              -          320,000        1,556,000          311,000   

   3/84          Pico Rivera                           -          743,000          807,000          288,000   

   5/84          Raleigh/Departure                     -          302,000        2,484,000          326,000   

   4/84          Milwaukie/Oregon                      -          289,000          584,000          207,000   
</TABLE>
<TABLE>
                               PS PARTNERS II, LTD
                           SCHEDULE III - REAL ESTATE
                          AND ACCUMULATED DEPRECIATION

<CAPTION>

                                                                  Gross Carrying Amount
                                                                  At December 31, 1996
                                             ------------------------------------------------------------------
       Date                                                   Building &                       Accumulated
     Acquired          Description               Land        Improvements        Total         Depreciation
   -----------------------------------------------------------------------------------------------------------

   Mini-warehouses
<S>             <C>                             <C>           <C>             <C>                <C>
   1/84          Belton                            175,000       1,243,000       1,418,000         607,000

   1/84          Gladstone                       $ 275,000     $ 2,091,000     $ 2,366,000     $ 1,057,000

   1/84          Hickman/112                       257,000       2,184,000       2,441,000       1,094,000

   1/84          Holmes                            289,000       1,529,000       1,818,000         775,000

   1/84          Independence                      221,000       2,087,000       2,308,000       1,065,000

   1/84          Merriam                           255,000       1,736,000       1,991,000         854,000

   1/84          Olathe                            107,000       1,202,000       1,309,000         604,000

   1/84          Shawnee                           205,000       1,731,000       1,936,000         856,000

   1/84          Topeka                             75,000       1,213,000       1,288,000         614,000

   2/84          Unicorn/Knoxville                 662,000       2,210,000       2,872,000       1,127,000

   2/84          Central/Knoxville                 449,000       1,467,000       1,916,000         758,000

   3/84          Manassas                          320,000       1,867,000       2,187,000         943,000

   3/84          Pico Rivera                       743,000       1,095,000       1,838,000         557,000

   5/84          Raleigh/Departure                 302,000       2,810,000       3,112,000       1,417,000

   4/84          Milwaukie/Oregon                  289,000         791,000       1,080,000         395,000
</TABLE>
                                      F-11

<PAGE>
<TABLE>
                               PS PARTNERS II, LTD
                           SCHEDULE III - REAL ESTATE
                          AND ACCUMULATED DEPRECIATION

<CAPTION>

                                                                                                  Costs       
                                                                     Initial Cost               subsequent    
                                                           ----------------------------------  to acquisition 
       Date                                                                    Building &       Building &    
     Acquired          Description          Encumbrances         Land         Improvement      Improvements   
   -----------------------------------------------------------------------------------------------------------

   Mini-warehouses
<S>             <C>                                    <C>      <C>             <C>              <C>          
   7/84          Trevose/Old Lincoln                   -          421,000        1,749,000          305,000   

   5/84          Virginia Beach                        -        $ 509,000      $ 2,121,000        $ 537,000   

   5/84          Philadelphia/Grant                    -        1,041,000        3,262,000          355,000   

   6/84          Lorton                                -          435,000        2,040,000          427,000   

   6/84          Baltimore                             -          382,000        1,793,000          491,000   

   6/84          Laurel                                -          501,000        2,349,000          568,000   

     Business
   parks

   12/83         Lakewood                                       2,513,000        4,238,000        1,844,000   

   3/84          Austin                                -        4,321,000        5,937,000        3,139,000   

                                          --------------------------------------------------------------------
                 TOTAL                                 -     $ 17,414,000     $ 58,022,000     $ 15,200,000   
                                          ====================================================================

</TABLE>
<TABLE>
                               PS PARTNERS II, LTD
                           SCHEDULE III - REAL ESTATE
                          AND ACCUMULATED DEPRECIATION

<CAPTION>

                                                                 Gross Carrying Amount
                                                                 At December 31, 1996
                                            ------------------------------------------------------------------
       Date                                                  Building &                       Accumulated
     Acquired          Description              Land        Improvements        Total         Depreciation
   ----------------------------------------------------------------------------------------------------------

   Mini-warehouses
<S>             <C>                            <C>           <C>             <C>                <C>
   7/84          Trevose/Old Lincoln              421,000       2,054,000       2,475,000         996,000

   5/84          Virginia Beach                 $ 509,000     $ 2,658,000     $ 3,167,000     $ 1,309,000

   5/84          Philadelphia/Grant             1,041,000       3,617,000       4,658,000       1,859,000

   6/84          Lorton                           435,000       2,467,000       2,902,000       1,229,000

   6/84          Baltimore                        382,000       2,284,000       2,666,000       1,145,000

   6/84          Laurel                           501,000       2,917,000       3,418,000       1,423,000

     Business
   parks

   12/83         Lakewood                       2,513,000       6,082,000       8,595,000       3,564,000

   3/84          Austin                         4,321,000       9,076,000      13,397,000       4,858,000

                                          -------------------------------------------------------------------
                 TOTAL                       $ 17,414,000    $ 73,222,000    $ 90,636,000    $ 37,683,000
                                          ===================================================================

</TABLE>
                                      F-12

<PAGE>
<TABLE>

                              PS PARTNERS II, LTD.
                        A CALIFORNIA LIMITED PARTNERSHIP
                           REAL ESTATE RECONCILIATION
                            SCHEDULE III (CONTINUED)

(a) The  following  is a  reconciliation  of cost and  related  accumulated
    depreciation.

                       GROSS CARRYING COST RECONCILIATION

<CAPTION>
                                                                                  Years Ended December 31,
                                                                       ------------------------------------------------
                                                                            1996             1995            1994
                                                                       ------------------------------------------------
<S>                                                                      <C>             <C>              <C>         
Balance at beginning of the period                                       $ 89,400,000    $ 88,597,000     $ 90,507,000

Additions during the period:

  Improvements, etc.                                                        1,236,000         803,000          727,000


Deductions during the period                                                        -               -       (2,637,000)

                                                                       ------------------------------------------------
Balance at the close of the period                                       $ 90,636,000    $ 89,400,000     $ 88,597,000
                                                                       ================================================


                                       ACCUMULATED DEPRECIATION RECONCILIATION

                                                                                  Years Ended December 31,
                                                                       ------------------------------------------------
                                                                            1996             1995            1994
                                                                       ------------------------------------------------


Balance at beginning of the period                                       $ 34,181,000    $ 30,887,000     $ 28,486,000

Additions during the period:

  Depreciation                                                              3,502,000       3,294,000        3,376,000


Deductions during the period                                                        -               -         (975,000)

                                                                       ------------------------------------------------
Balance at the close of the period                                       $ 37,683,000    $ 34,181,000     $ 30,887,000
                                                                       ================================================

(b) The  aggregate  cost of real estate for Federal  income tax purposes is
    $90,126,000 at December 31, 1996.

</TABLE>
                                      F-13