SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549
                        ----------------------
                              FORM 10-KSB

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

For the fiscal year ended December 31, 1998 or

[ ] 	Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from ____ to ____

Commission file number 0-4057

                            PORTSMOUTH SQUARE, INC.
                            -----------------------
                (Name of Small Business Issuer in Its Charter)

             California                                    94-1674111        
             ----------                                    ----------
     (State or Other Jurisdiction of                     (IRS Employer
      Incorporation or Organization)                     Identification No.)

                                
                                
    11315 Rancho Bernardo Road, Suite 129 San Diego, California    92127-1463
    -----------------------------------------------------------    ----------
          (Address of Principal Executive Offices)                 (Zip Code)

                                (619) 673-4722
                                --------------
               (Registrant's Telephone Number, Including Area Code)

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

       Securities registered pursuant to Section 12(g) of the Act:
                                 
                          Common Stock, No Par Value
                          --------------------------
                                Title of Class
 
    Check whether the issuer: (1) has filed all reports required to be filed by 
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 
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 [ ]

    Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, 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-KSB or any 
amendments to this Form 10-KSB. [X]

    The issuer's revenues for its most recent fiscal year were $2,846,750.

<PAGE> 2

    The aggregate market value of the voting and non-voting common equity held 
by non-affiliates of issuer computed by reference to the price at which the 
common equity was sold on March 3, 1999 was $3,650,869.

    The number of shares outstanding of issuer's No Par Value Common Stock, as 
of March 23, 1999, was 734,183.

                  DOCUMENTS INCORPORATED BY REFERENCE

    The following documents are incorporated by reference: Proxy Statement for 
Annual Meeting of Shareholders to be held May 4, 1999 which is incorporated by 
reference into Part III, Items 9 through 12.  The Company's definitive Proxy 
Statement will be filed within one hundred twenty (120) days of the end of the 
fiscal year covered by this Form 10-KSB pursuant to Regulation 14A.

    Transitional Small Business Disclosure Format:  Yes [ ]    No [X]




                            TABLE OF CONTENTS

PART I                                                               PAGE 
------                                                               ----
  Item  1.  Description of Business.                                   3

  Item  2.  Description of Property.                                   4

  Item  3.  Legal Proceedings.                                         5

  Item  4.  Submission of Matters to a Vote of Security Holders.       6

PART II
-------
  Item  5.  Market For Common Equity and Related                       6
             Stockholder Matters.

  Item  6.  Management's Discussion and Analysis of Financial          7
             Condition and Results of Operations.

  Item  7.  Financial Statements and Supplementary Data.               9

  Item  8.  Changes in and Disagreements With Accountants on          19
             Accounting and Financial Disclosure.

PART III 
--------
  Item  9.  Directors, Executive Officers, Promoters and              19
             Control Persons; Compliance With Section 16(a)
             of The Exchange Act.

  Item 10.  Executive Compensation.                                   19

  Item 11.  Security Ownership of Certain Beneficial Owners and       19
             Management.

  Item 12.  Certain Relationships and Related Party Transactions.     19

  Item 13.  Exhibits, Financial Statement Schedules, and              20
             Reports on Form 8-K.

  SIGNATURES                                                          28

<PAGE> 3

                              PART I

Item 1.  Description of Business.
                                                                 
BUSINESS DEVELOPMENT

Portsmouth Square, Inc. ("Portsmouth" or the "Company") is a California 
corporation, incorporated on July 6, 1967, to purchase a substantial interest 
in a California limited partnership known as Justice Investors.  Justice 
Investors was formed to purchase certain real property in San Francisco, 
California and to construct a hotel thereon.

Portsmouth has a 49.8% limited partnership interest in Justice Investors and 
also serves as one of the two general partners.  The other general partner, 
Evon Garage Corporation ("Evon"), acts as the managing general partner.  There 
are approximately 91 limited partners in Justice Investors.

        
BUSINESS OF ISSUER
             
The Company's principal business is conducted through its general and limited 
partnership interest in Justice Investors.  Justice Investors owns the land 
improvements and leaseholds at 750 Kearny Street, San Francisco, California 
commonly known as the Holiday Inn Financial District/Chinatown.  The most 
significant income source is a lease between the partnership and Felcor Lodging 
Trust, Inc. ("Felcor", NYSE: FCH) for the hotel portion of the property.  The 
partnership also derives income from its lease of the garage portion of the 
property to Evon.  As a general partner, Portsmouth has become more active in 
monitoring the operations of the hotel and the parking garage as part of its 
effort to improve revenues.

The Company also derives income from management fees as a general partner in 
Justice Investors and from the investment of its cash and securities assets. 
The Company has invested in income-producing instruments, equity and debt 
securities and will consider other investments if such an investment will 
offer growth or profit potential.


COMPETITION

The hotel enjoys a favorable year-round occupancy rate and is part of Holiday's 
worldwide reservation system.  It was designed to Holiday's specifications to 
serve both business persons and tourists and caters to both individuals and 
tour groups.  It also handles conference and meeting business, having meeting 
and dining facilities for groups of up to 400 people.  Management believes 
that the hotel and garage are in a competitive position in their respective 
markets; however, some competitors may have better financial resources and 
newer facilities.  The Company intends, where appropriate, to continue in its
efforts as a general partner to find ways to improve the physical condition of
the hotel and garage properties to remain competitive. 

EMPLOYEES

As of December 31, 1998, the Company had two full-time employees and one 
part-time employee.  The employees are not part of any collective bargaining
agreement, and the Company believes that its employee relations are 
satisfactory. 

<PAGE> 4

Item 2.  Description of Property.

PROPERTIES

The San Francisco, California hotel property owned by Justice Investors is 
located near the Financial District, one block from the Transamerica Pyramid.  
Embarcadero Center is within walking distance.  Chinatown is directly across 
the bridge that runs from the hotel to Portsmouth Square Park. The hotel is a 
31-storied, steel and concrete, A-frame building which contains 566 guest rooms 
situated on 22 floors.  One floor houses the Chinese Culture Center pursuant to 
a long-term, nominal-rent lease, and three floors are devoted to a registration 
desk, lobby shops, dining room, coffee shop, hotel support facilities, a 
fitness center, a guest business center, meeting and banquet rooms and offices.
Other features of the Holiday Inn include a rooftop swimming pool, 5-storied 
underground garage and pedestrian bridge across Kearny Street connecting the 
hotel and the Chinese Culture Center with Portsmouth Square Park in Chinatown.  
The bridge, built and owned by the partnership, is included in the lease to the 
Chinese Culture Center.  

The property is subject to a first deed of trust securing a loan from Wells 
Fargo Bank.  As of December 31, 1998, the principal balance on the note was 
$2,604,686.  The loan provides for a maximum borrowing of $6.8 million and has 
the characteristics of a line of credit with certain declining maximum 
borrowings available at the end of each year.  The major portion of the debt is 
carried at LIBOR plus 2% and there is a monthly adjustment to that rate.  The 
remainder of the debt is carried at the prime rate and also adjusted monthly.  

On March 15, 1995, an amended and restated lease was entered into by Justice 
Investors with an effective date of January 1, 1995.  That lease was assumed by 
Felcor, effective July 28, 1999.  The initial term of the new lease is for a 
10-year term expiring on December 31, 2004. The lessee also has an option to 
renew the lease for one additional term of five years which would extend the 
lease to December 31, 2009.  The lease requires the lessee to pay an annual 
rent of the greater of twenty percent (20%) of gross room revenues or 
$2,500,000 plus fifty percent (50%) of total revenues from the demised premises
less operating expenses, base rent and capital requirements.  

The lease also required the lessee and Justice Investors to make substantial 
capital improvements and renovations to the hotel property. A rehabilitation 
budget of more than $8 million was set forth in the new lease agreement, of 
which the partnership was responsible for $2 million and the lessee was 
responsible for the remainder.  As of December 31, 1998, the partnership had 
paid all of its $2 million commitment.  Rehabilitation and renovation of the 
guest rooms, hallways, elevators and safety systems was substantially completed 
during 1998.  Renovation of the lobby and other public areas commenced in 
December of 1998 and further improvements are expected to be made in the future 
to meet standards for Holiday Inn Select hotels.  The financial responsibility 
for those improvements rests with Felcor.

<PAGE> 5

Under the terms of the lease, the lessee is responsible for all maintenance and 
repairs to the property, certain capital improvements, taxes and insurance.  In 
the opinion of management the property is adequately covered by insurance.

The garage lease between the partnership and Evon provides for a monthly rental 
of sixty percent (60%) of gross parking revenues with a minimum rent of $21,750 
per month.  That lease expires in November 2010.  The lessee is responsible for 
insurance, repairs and maintenance, utilities and all taxes assessed against 
the improvements to the leased premises.   The garage is operated by Ampco 
Parking pursuant to a sublease agreement with Evon.

INVESTMENT POLICIES     

The most significant real estate investment of the Company has been through its 
investment in Justice Investors.  The Company will continue to explore ways to 
increase the value of that investment and to improve operations of the 
underlying asset.

The Company may also look for new real estate investment opportunities in 
hotels, apartments, office buildings and shopping centers.  The acquisition of 
any new real estate investments will depend on the Company's ability to find 
suitable investment opportunities and the availability of sufficient financing 
to acquire such investments.  To help fund any such acquisition, the Company 
plans to borrow funds to leverage its investment capital.  The amount of this 
mortgage debt will depend on a number of factors including, but not limited to, 
the availability of financing and the sufficiency of the project's projected 
cash flows to support the operations and debt service.

The Company has also invested in income producing instruments, equity and debt 
securities, which may include interests in real estate based companies and 
REITs, where financial benefit could inure to its shareholders through income 
and/or capital gain.  Those investments are made under the direction of the 
Company's Chairman and President.  The Company primarily will invest in 
securities priced above $5.00 a share of companies listed on the New York and 
American Stock Exchanges and the Nasdaq National Stock Market.  Although most 
of the Company's marketable securities investments are in companies listed on 
those stock markets, the overall investment portfolio and some of the Company's 
investment strategies could be viewed as risky and the market values of the 
portfolio may be subject to large fluctuations.  The Company may realize gains 
and losses in its overall investment portfolio from time to time to take 
advantage of market conditions and/or manage the portfolio's resources and the 
Company's tax liability.  The Company may also assume short positions in 
marketable securities. Short sales are used by the Company to potentially 
offset normal market risks undertaken in the course of its investing activities 
or to provide additional return opportunities.  In addition, the Company may 
utilize margin for its marketable securities purchases through the use of 
standard margin agreements with national brokerage firms.  The use of available
leverage is guided by the business judgment of management.



Item 3.  LEGAL PROCEEDINGS

On May 30, 1996, Portsmouth was served with a personal injury action entitled 
Taylor v. Raybestos-Manhattan, et al., San Francisco Superior Court Case No. 
977148.  The suit, which was filed on March 26, 1996, named more than 60 
defendants, including Evon Garage Corporation, and alleged injuries suffered as 
a result of exposure to asbestos-containing materials.  The Complaint sought an 
unspecified amount of damages including recovery for loss of income and medical 
expenses. Portsmouth was defended through its insurance carrier under a 
reservation of rights.  On September 16, 1997, the trial court granted the 
Company's motion for summary judgment dismissing it from the lawsuit.  That 
judgment became final on April 13, 1998 and was not appealed.

<PAGE> 6

Item 4.  Submission of Matters to a Vote of Shareholders.

No matters were submitted to a vote of shareholders during the fourth quarter 
of Registrant's fiscal year ended December 31, 1998.  



                                 
                             PART II

Item 5.  Market For Common Equity and Related Stockholder Matters
         
MARKET
             
Portsmouth's common stock is traded over-the-counter.  Quotes for its
stock are printed in the National Quotation Bureau's Non-NASDAQ Price Report. 
The Company's trading symbol is PRSI.  

The following table sets forth the high and low bid prices as of the end of 
each full quarterly period for the last two fiscal years as reported on the 
National Quotation Bureau's Non-NASDAQ Price Report.

	
              1998                                   High         Low
              ----                                   ----         ---
     	First Quarter (1/1 to 3/31)                  $ 17.50      $ 16.63
      Second Quarter (4/1 to 6/30)                 $ 18.00      $ 17.50
      Third Quarter (7/1 to 9/30)                  $ 16.13      $ 17.88
      Fourth Quarter (10/1 to 12/31)               $ 18.00      $ 16.75

              1997
              ----
      First Quarter (1/1 to 3/31)                  $ 24.00      $ 21.50
      Second Quarter (4/1 to 6/30)                 $ 34.00      $ 23.25
      Third Quarter (7/1 to 9/30)                  $ 32.00      $ 18.00
      Fourth Quarter (10/1 to 12/31)               $ 20.00      $ 17.50


Such over-the-counter market quotations reflect inter-dealer prices and do not 
include retail markup, markdown or commission and may not necessarily represent 
actual transactions. 

DIVIDENDS
             
On January 13, 1982, the Board of Directors established a regular semi-annual 
dividend of $.25 per share payable on March 1 and September 1 to shareholders 
of record February 1 and August 1, respectively.  These regular semi-annual 
dividends have been declared and paid at the established intervals since 
September 1, 1982. 

<PAGE> 7

Item 6. Management's Discussion and Analysis of Financial
        Condition and Results of Operations		

FORWARD-LOOKING STATEMENTS AND PROJECTIONS

The Company may from time to time make forward-looking statements and
projections concerning future expectations.  When used in this discussion,
the words "estimate," "project," "anticipate" and similar expressions, are
intended to identify forward-looking statements.  Such statements are subject 
to certain risks and uncertainties, including partnership distributions, 
general economic conditions of the hotel industry in the San Francisco area, 
securities markets, litigation and other factors, including natural disasters 
and those discussed below, that could cause actual results to differ materially
from those projected.  Readers are cautioned not to place undue reliance on 
these forward-looking statements, which speak only as to the date hereof.  
The Company undertakes no obligation to publicly release the results of any 
revisions to those forward-looking statements which may be made to reflect 
events or circumstances after the date hereof or to reflect the occurrence of 
unanticipated events.

RESULTS OF OPERATIONS

The Company's principal sources of revenue continue to be derived from its 
49.8% interest in the Justice Investors limited partnership and income received
from the investment of its cash and securities assets.  The partnership 
derives most of its income from a lease of its hotel property to Felcor and 
from a lease with Evon Garage Corporation.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

Comparison of operating results for the year ended December 31, 1998 to the 
year ended December 31, 1997 shows that net income increased 11.0%, resulting 
from a net increase in total revenues of 13.0%, partially offset by a 18.6% 
increase in costs and expenses.

The 13.0% net increase in total revenues from $2,585,792 to $2,923,747 was 
primarily due to a 18.0% increase in partnership income from Justice Investors 
from $2,560,805 to $3,021,878, partially offset by a 57.4% decrease in dividend 
and interest income from $115,586 to $49,165 and a $86,001 change in other 
income/loss from income of $28,501 to a loss of $57,500.  

The increase in partnership income is primarily attributable to a 13.3% increase
in hotel rental income as a result of an increase in the average daily room 
rate without a significant reduction in occupancy rates.  The decrease in 
dividend and interest income and losses on marketable securities were due to 
management's continuing efforts to reposition the Company's investment portfolio
by selling certain of its underperforming securities.  The change in other 
income/loss is primarily due to a write-down of one of the Company's 
investments of $87,500.  

Realized gains and losses on marketable securities may fluctuate significantly 
from period to period in the future and could have a meaningful effect on the 
Company's net earnings.  However, the amount of realized gain or loss on 
marketable securities for any given period may have no predictive value and 
variations in amount from period to period may have no analytical value.  

The 18.6% increase in costs and expenses from $483,962 to $574,299 is primarily 
attributable to a 33.7% increase in professional and outside service fees from 
$128,678 to $172,155 and the 115.4% increase in margin interest expense from 
$32,810 to $70,695.  The increase in professional and outside service fees 
reflects the accrual for the annual audit and an increase in professional 
consulting fees related to the Company's investment activities. The increase in 
the margin interest expense is due to the maintenance of a higher margin 
balance in the current year.  

<PAGE> 8

Beginning July 1, 1998, certain accounting and administrative functions of the 
Company and its parent corporation, Santa Fe Financial Corporation ("Santa Fe") 
were consolidated with the Los Angeles, California offices of The InterGroup 
Corporation.  Effective October 31, 1998, the Company and Santa Fe also 
terminated their office lease and moved to a much smaller space in an effort to 
reduce expenses.


LIQUIDITY AND SOURCES OF CAPITAL

The Company's cash flows are primarily generated by its investment in the
Justice Investors limited partnership, which derives the majority of its
income from its lease with Felcor and a lease with Evon. In addition to its 
monthly limited partnership distributions from Justice Investors, the Company 
also receives monthly management fees as a general partner.  The Company also 
derives revenue from the investment of its cash and securities assets.  

As a result of increases in the amount of rental income from the hotel lease, 
the general partners of Justice Investors decided that there would be a special 
one-third increase in the monthly distribution to limited partners effective 
with the February 1997 distribution.  As a result, Portsmouth's 
monthly distribution increased to $139,440 from $109,580.  In February 1998, 
the general partners decided to continue monthly distributions at the higher 
monthly rate for another year.  The increases in monthly distributions were 
clearly identified as special distributions and, at any time, unforeseen 
circumstances could dictate a change in the amount distributed.  The general 
partners will continue to conduct an annual review and analysis to determine 
an appropriate monthly distribution for the ensuing year.  At that time, the 
monthly distribution could be decreased or increased.  In addition, Portsmouth 
received $557,760 as its share of a special distribution paid to the limited 
partners on December 10, 1997 and $697,200 as its share of a special 
distribution paid on December 10, 1998.  Those additional distributions were 
also clearly identified as special, and the limited partners were informed 
that there was no guarantee that such distributions would continue, especially 
if the partnership was to participate financially in the future upgrading of 
the public areas of the hotel.  During 1998, the Company received distributions 
totaling $2,509,920 from Justice Investors.  

The Company has invested in short-term, income-producing instruments and in 
equity and debt securities when deemed appropriate.  The Company's marketable 
securities are classified as available-for-sale and unrealized gains and 
losses, net of deferred taxes, are included in accumulated other comprehensive 
income.  As of December 31, 1998, the Company had a net unrealized loss on 
marketable securities of $50,777 after tax, which consists of pre-tax 
unrealized gains of $141,387 and pre-tax unrealized losses of $229,032.

At December 31, 1998, the Company's current assets were $2,851,431.  The 
Company remains liquid with a current ratio of approximately 2.6 to 1 at the 
end of the year.  Management believes that its capital resources are currently 
adequate to meet its short and long-term obligations.  

<PAGE> 9

YEAR 2000 ISSUES

The Company is aware of the potential implications of the year 2000 ("Y2K") 
issue could have on its business and as a result, is in the process of 
determining what, if any, steps the Company must take to cure any potential 
software or hardware problems associated with Y2K.  The Company has hired 
professional outside consultants to assist it in addressing its Y2K needs.  The 
Company's plans include upgrading existing software applications to make them 
Y2K compliant, replacing some hardware required by software upgrades, 
purchasing new computer hardware and upgrading its computer network and 
communication systems.  The Company has also contacted its suppliers of various
services and materials regarding their readiness and plans for Y2K.  

Based on preliminary discussions with the Company's outside consultants, 
service providers and software and hardware vendors, the Company has determined 
that its systems, both information technology and non-information technology, 
are not reasonably likely to be impacted by Y2K and that the costs to complete 
the Y2K compliance will not have a material effect on the Company's financial 
position or results of operations.  Management expects to be Y2K compliant by 
September 30, 1999.


IMPACT OF INFLATION

Since the Company's primary source of revenue is its partnership investment in 
Justice Investors, the impact of inflation on Portsmouth should be viewed at 
the partnership level.  As discussed above, partnership income is primarily 
dependent on hotel lease revenues.  Hotel room rates are typically impacted by 
supply and demand factors, not inflation, since rental of a hotel room is 
usually for a limited number of nights.  Room rates can be, and usually are, 
adjusted to account for inflationary cost increases.  To the extent that the 
hotel lessee is able to adjust room rates, there should be minimal impact on 
partnership revenues due to inflation.  Partnership revenues are also subject 
to interest rate risks which may be influenced by inflation.  For the two most 
recent fiscal years, the impact of inflation on the Company's income is not 
viewed by management as material.


Item 7. Financial Statements

INDEX TO FINANCIAL STATEMENTS                                    PAGE

Report of Independent Accountants                                 10
Balance Sheet - December 31, 1998                                 11
Statements of Income and Comprehensive Income - Years Ended       12
  December 31, 1998 and 1997 
Statements of Shareholders' Equity                                13
Statements of Cash Flows - Years Ended                            14 
  December 31, 1998 and 1997
Notes to the Financial Statements                                 15

<PAGE> 10

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of 
Portsmouth Square, Inc.

In our opinion, the accompanying balance sheet and the related statements of 
income and comprehensive income, of cash flows, and of changes in shareholders' 
equity present fairly, in all material respects, the financial position of 
Portsmouth Square, Inc. at December 31, 1998, and the results of its operations 
and its cash flows for the year ended December 31, 1998, in conformity with 
generally accepted accounting principles.  These financial statements are the 
responsibility of the Company's management; our responsibility is to express an 
opinion on these financial statements based on our audit.  We conducted our 
audit of these statements in accordance with generally accepted auditing 
standards which 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, assessing 
the accounting principles used and significant estimates made by management, 
and evaluating the overall financial statement presentation.  We believe that 
our audit provides a reasonable basis for the opinion expressed above. 


/s/ PricewaterhouseCoopers LLP


Los Angeles, California
March 23, 1999

<PAGE> 11
<TABLE>
<CAPTION>

                           PORTSMOUTH SQUARE, INC.

                                BALANCE SHEET


As of December 31,                                                 1998
                                                                   ----
ASSETS
  <S>                                                       <C>
  Cash and cash equivalents                                 $    74,466
  Investment in marketable securities                         2,387,046
  Investment in Justice Investors                             1,846,072
  Other investments                                             100,000
  Other assets                                                  277,253
  Due from Santa Fe Financial Corp.                              12,666
                                                              ---------
    Total assets                                            $ 4,697,503
                                                              =========


LIABILITIES AND SHAREHOLDERS' EQUITY
 
Liabilities
  Due to securities broker                                  $ 1,018,779
  Accounts payable and accrued expenses                          65,825
  Obligations for securities sold                                12,870
                                                              ---------
    Total liabilities                                         1,097,474
                                                              ---------

Commitments and contingencies

Shareholders' equity
  Common stock, no par value:
    Authorized shares - 750,000
    Issued and outstanding shares - 734,183                   2,092,300
  Additional paid-in-capital                                    915,676
  Accumulated other comprehensive income,
    net of deferred taxes                                       (50,777)
  Retained earnings                                             642,830
                                                              ---------
    Total shareholders' equity                                3,600,029
                                                              ---------
    Total liabilities and shareholders' equity              $ 4,697,503
                                                              =========
</TABLE>

See accompanying notes to financial statements.

<PAGE> 12


<TABLE>
<CAPTION>                       PORTSMOUTH SQUARE, INC.

                  STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


For years ended December 31,                             1998           1997
                                                  -----------     ----------
Revenues 
  <S>                                             <C>             <C>
  Equity in net income of Justice Investors       $ 3,021,878     $ 2,560,805
  Dividend and interest income                         49,165         115,586
  Net losses on marketable securities                 (89,796)       (119,100)
  Other income (loss)                                 (57,500)         28,501
                                                    ---------       ---------
                                                    2,923,747       2,585,792
                                                    ---------       ---------

Costs and expenses 
  General and administrative                          331,449         322,474
  Professional and outside services                   172,155         128,678
  Margin interest expense                              70,695          32,810
                                                    ---------       ---------
                                                      574,299         483,962
                                                    ---------       ---------
Income before income taxes                          2,349,448       2,101,830

Income taxes                                          938,294         831,193
                                                    ---------       ---------
Net income                                        $ 1,411,154     $ 1,270,637
                                                    =========       =========

Basic earnings per share                          $      1.92     $      1.71
                                                    =========       =========

Weighted average number of shares outstanding         734,183         744,027
                                                    =========       =========

Comprehensive income 
  Net income                                      $ 1,411,154     $ 1,270,637
    Other comprehensive income
     Unrealized holding gain (loss) 
      on marketable securities                       (331,868)        269,316
    Reclassification adjustment for holding
     gain (loss) included in net earnings              89,796        (119,100)
    Income tax benefit (expense) related to 
     other comprehensive income                        94,819         (76,947)
                                                    ---------       ---------
  Total comprehensive income                      $ 1,263,901     $ 1,343,906
                                                    =========       =========
</TABLE>
  
See accompanying notes to financial statements

<PAGE> 1

<TABLE>
<CAPTION>
                                   

                                     PORTSMOUTH SQUARE, INC.

                               STATEMENT OF SHAREHOLDERS' EQUITY


                      Common Stock                         Accumulated       Retained
                    ----------------        Additional     other             earnings
                    Common                  Paid-in        comprehensive    (accumulated
                    Stock     Amount        Capital        income            deficit)           Total
                    ------    ------        ---------      -------------     -----------        -----
                   	
<S>                 <C>      <C>           <C>             <C>              <C>            <C>
Balance at 
December 31, 1996   750,000  $2,092,300    $1,240,291      $  23,207        $(1,298,196)   $2,057,602

Net income                                                                    1,270,637     1,270,637

Dividends paid                                                                 (373,674)     (373,674)
 
Purchase and
 retirement of
 common stock       (15,817)                 (324,615)                                       (324,615)
 
Unrealized holding
 gain on marketable
 securities, net
 of tax                                                       73,269                           73,269
                    -------    ---------    ---------       --------         ---------      ---------
                     
December 31, 1997   734,183    2,092,300      915,676         96,476          (401,233)     2,703,219

Net income                                                                   1,411,154      1,411,154

Dividends paid	                                                               (367,091)      (367,091)

Unrealized holding
 loss on marketable
 securities, net	
 of tax	                                                     (147,253)                       (147,253)
                     -------   ---------      ---------      --------         ---------      --------

December 31, 1998    734,183  $2,092,300     $  915,676    $  (50,777)       $  642,830    $3,600,029
                     =======   =========      =========     =========         =========     =========
</TABLE>

See accompanying notes to financial statements.

<PAGE> 14 



<TABLE>
<CAPTION

                             PORTSMOUTH SQUARE, INC.

                             STATEMENTS OF CASH FLOWS


For the years ended December 31,                          1998             1997
                                                          ----             ----
<S>                                                <C>              <C>
Operating activities
Net income                                         $ 1,411,154      $ 1,270,637
Adjustments to reconcile net income to
  net cash used by operating activities:
    Equity in net income of Justice Investors       (3,021,878)      (2,560,805)
    Net losses on marketable securities                 89,796          119,100
    Write-down of other investments	                     87,500               -
    Change in assets and liabilities:
      Other assets                                     (61,409)         (78,176)
      Due from Santa Fe Financial Corporation          (30,169)         (29,628)
      Accounts payable and other liabilities          (120,580)          36,060
                                                     ---------        --------- 
       Net cash used in operating activities        (1,645,586)      (1,242,812)
                                                     ---------        ---------

Investing activities
Cash distributions from Justice Investors            2,509,920        2,196,180
Purchase of marketable securities                   (6,199,520)      (3,129,471)
Proceeds from sales of marketable securities         5,452,957        2,345,304
Purchase of other investments                         (100,000)        (100,000)
                                                     ---------        ---------
       Net cash provided by investing activities     1,663,357        1,312,013
                                                     ---------        ---------

Financing activities
Increase in due to securities broker                   354,568          664,211
Obligations for securities sold                         12,870                -
Purchase and retirement of common stock            	       -         (324,615)
Dividends paid                                        (367,091)        (373,674)
                                                     ---------        ---------
Net cash provided by (used in)
       financing activities                                347          (34,078)
                                                     ---------        ---------
Net increase in cash and 
  cash equivalents                                      18,118           35,123
Cash and cash equivalents at the
  beginning of the year                                 56,348           21,225
                                                     ---------         --------
Cash and cash equivalents at end of year            $   74,466       $   56,348
                                                     =========         ========

Supplemental information
Income taxes paid, net of refunds                   $1,097,000       $  815,000
                                                     =========        =========

Margin interest paid                                $   70,695       $   32,810
                                                     =========        =========
                                                 
</TABLE>

See accompanying notes to financial statements.


<PAGE> 15


                         PORTSMOUTH SQUARE, INC.

                       NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Description of Business

As of December 31, 1998, Santa Fe Financial Corporation ("Santa Fe") holds 
493,687 shares or approximately 67.2% of the outstanding common shares of 
Portsmouth Square, Inc. ("Portsmouth" or the "Company").  Portsmouth's primary 
source of revenues is from its 49.8% interest in Justice Investors, a 
California limited partnership in which Portsmouth serves as both a general 
and limited partner (see Note 3).  Justice Investors owns the land, 
improvements and leaseholds at 750 Kearny Street, San Francisco, California, 
commonly known as the Holiday Inn Financial District/Chinatown.  Justice 
Investor's most significant income source is a lease between the partnership 
and Felcor Lodging Trust, Inc. for the hotel portion of the property.  
The partnership also derives income from the lease of the garage portion of 
the property to Evon Garage Corporation.  The Company also derives revenue 
from management fees as a general partner and from the investment of its cash 
and securities assets.

During 1998, the Company adopted Statement of Financial Accounting Standards 
No. 131, "Disclosures about Segments of an Enterprise and Related Information" 
(SFAS No. 131).  SFAS No. 131 established standards for disclosure about 
operating segments and related disclosures about products and services, 
geographic areas and major customers.  The Company currently operates in one 
business segment, as a general and limited partner in Justice Investors.  

Cash Equivalents

The Company considers all investments purchased with an original maturity of 
three months or less to be cash equivalents.

Investment in Marketable Securities

The Company has classified its portfolio of marketable securities as available-
for-sale and has reported it at fair value, as primarily determined by quoted 
market prices, with unrealized gains and losses, net of deferred taxes, 
reported in accumulated other comprehensive income.  Any unrealized gains or 
losses related to short positions are recognized in earnings in the current 
period. The Company borrows funds from securities brokers to purchase 
marketable securities under standard margin agreements.

Realized gains and losses are included in net losses on marketable securities.  
The cost of securities sold is determined based on the specific identification 
method.  Interest and dividends on securities classified as available-for-sale 
are included in dividend and interest income.

Obligations for Securities Sold

Obligations for securities sold represents the fair market value of shares sold 
with the promise to deliver the security at some future date.  The obligation 
may be satisfied with current holdings of the same security or by subsequent 
purchase of that security.  Unrealized gains and losses from changes in the 
obligation are included in earnings. 

Revenue Recognition

During 1998 and 1997, the Company's major source of revenue was its 49.8% 
interest in Justice Investors, a limited partnership which owns and leases a 
hotel in San Francisco, California, in which the Company is both a limited and 
general partner (see Note 3).  The Company accounts for its investment in 
Justice Investors by the equity method.

<PAGE> 16

Basic Earnings per Share

Basic earnings per share are calculated based upon the weighted average number 
of common shares outstanding during each fiscal year.  As of December 31, 1998 
and 1997, the Company did not have any potentially dilutive securities 
outstanding; and therefore, does not report diluted earnings per share.

Accounting for Impairment of Long-Lived Assets

The Company records impairment losses on long-lived assets used in operations 
when indicators of impairment are present and the estimated undiscounted cash 
flows generated by those assets are less that their carrying value.  During 
1998 and 1997, the Company did not record any impairment losses.


Use of Estimates

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

Income Taxes

Deferred income taxes are determined using the liability method.  A deferred 
tax asset or liability is determined based on the difference between the 
financial statement and tax basis of assets and liabilities as measured by the 
enacted tax rates.  Based on the Company's earning history and projections, 
management considers the Company's net deferred tax assets to be realizeable.  
Accordingly, no valuation allowance has been established. 


NOTE 2 - INVESTMENT IN MARKETABLE SECURITIES

The following is a summary of the Company's investment in marketable securities:

<TABLE>
                                        Gross          Gross
                                      Unrealized     Unrealized        Fair
                         Cost           Gains          Losses          Value
                      ---------       ----------     ----------      ---------
<S>                  <C>              <C>            <C>            <C> 
December 31, 1998
Equity securities    $2,411,359       $  140,519     $ (229,032)    $2,322,846  
Debt securities          60,332            3,868              -         64,200
                      ---------        ---------      ---------      ---------
                     $2,471,691       $  144,387     $ (229,032)    $2,387,046
                      =========        =========      =========      =========

December 31, 1997
Equity securities    $1,478,681       $  278,599     $ (152,448)    $1,604,832
Debt securities         237,688	          35,012              -        272,700
                      ---------        ---------      ---------      ---------
                     $1,716,369       $  313,611     $ (152,448)    $1,877,532
                      =========        =========      =========      =========
                        
</TABLE>

Gross realized gains and losses on sales of marketable securities totaled 
$498,270 and $588,067, respectively, for the year ended December 31, 1998, and 
$200,608 and $319,708, respectively, for the year ended December 31, 1997.

As of December 31, 1998, all of the Company's debt securities mature on 
July 15, 2003.
	
<PAGE> 17

NOTE 3 - INVESTMENT IN JUSTICE INVESTORS

Condensed financial statements for Justice Investors, a limited partnership, 
in which Portsmouth Square, Inc. has a 49.8% interest, are as follows:

<TABLE>
<CAPTION>
                        CONDENSED BALANCE SHEETS
                                                                 December 31,
                                                               1998         1997
                                                               ----         ----
<S>
Assets                                                   <C>           <C>    

Total current assets                                     $1,696,404    $ 500,374
Property, plant and equipment, net of accumulated
 depreciation of $10,999,473 in 1998 and
 $10,607,195 in 1997                                      5,576,210    5,968,488
Loan fees and deferred lease costs, net of accumulated
 amortization of $116,783 in 1998 and $85,741 in 1997       193,629      224,671
                                                          ---------    ---------
                                                         $7,466,243    6,693,533
                                                          =========    =========

Liabilities and partners' equity
Total current liabilities                                $   57,292    $ 293,166
Long-term liabilities - Note B                            2,604,686    2,624,127
Partners' capital - Note C                                4,804,265    3,776,240
                                                          ---------    ---------
                                                         $7,466,243    6,693,533
                                                          =========    =========

</TABLE>
<TABLE>
                         CONDENSED STATEMENTS OF OPERATIONS
                                                                		          
                                                                 Years ended
                                                                 December 31,
                                                               1998         1997
                                                               ----         ----
<S>                                                      <C>           <C>   
Revenues - Note A                                        $7,036,744    6,194,532
Costs and expenses                                          968,716    1,052,354
                                                          ---------    ---------
Net income                                               $6,068,028    5,142,178
                                                          =========    =========

</TABLE

Note A - Revenues include $1,337,833 and $1,212,491 for the years ended 
December 31, 1998 and 1997, respectively, of garage rental income from the 
garage lessee who is also the managing general partner of Justice Investors.

Justice Investors and the hotel lessee entered into a new lease agreement 
effective January 1, 1995.  The hotel lease provides for Justice Investors to 
20% of hotel room revenue, as defined, or an annual minimum guaranteed rent of 
$2,500,000 plus 50% of available cash, as defined, and expires December 31, 
2004, with a five-year renewal option.  The parking garage lease for which 
revenue is based upon a percentage of parking receipts, expires on November 30, 
2010.

Note B - During 1995, Justice Investors refinanced its long-term debt 
obligations.  The long-term debt at December 31, 1998 and 1997 consists of 
revolving, reducing line of credit agreement payable to Wells Fargo Bank which 
is collateralized by a trust deed on land, hotel property and the Partnership's 
interest in hotel and garage leases.  The line of credit agreement provides for 
maximum borrowings at December 31, 1998 of approximately $6,800,000 with an 
annual reduction of the maximum borrowings to approximately $4,500,000 at the 
December 31, 2004 maturity date and generally provides for interest at LIBOR 
plus 2% per annum (the annual rate on $4,000,000 of principal is guaranteed not 
to exceed 11.5%).

Note C - During each of the years ended December 31, 1998 and 1997, total 
annual distributions to partners amounted to approximately $5,040,000 and 
$4,410,000.

<PAGE> 18

NOTE 4 - DUE TO SECURITIES BROKER

A securities broker has advanced funds for the purchase of, and secured by, 
marketable securities under standard margin agreements in accordance with and 
subject to the limitations of 17CFR Section 240 15c3-3 under the Securities 
Exchange Act of 1934 and Section #220.6 of Regulation T issued by the Board of 
Governors of the Federal Reserve System.  The interest rate on advances or cash 
on deposit can vary daily with money market rates.  The interest rate on margin 
balances is based on the Federal Funds rate plus 0.875% (6.125% at December 31, 
1998).  The interest rate on cash or deposits is based on the Federal Funds 
rate less 0.5% (4.75% at December 31, 1998).  The interest rate on interest 
rebates in connection with short positions is based on the Federal Funds rate 
less 0.375% (4.875% at December 31, 1998).


NOTE 5 - INCOME TAXES

The provision for income taxes consists of the following:

</TABLE>
<TABLE>		
                                                            
                                                             December 31,
                                                         1998            1997
                                                         ----            ----
 <S>                                               <C>             <C>   
 Federal                                            
   Current                                         $  799,995      $  689,632
   Deferred (credit)                                  (59,695)        (53,883)
                                                      -------         -------
                                                      740,300         635,749
                                                      -------         -------

 State
   Current                                            212,622         206,598
   Deferred (credit)                                  (14,628)        (11,154)
                                                      -------         -------
                                                      197,994         195,444
                                                      -------         -------
                                                   $  938,294      $  831,193
                                                      =======         =======
</TABLE>

A reconciliation of the statutory federal income tax rate to the effective tax 
rate is as follows:

                                                           Years ended
                                                           December 31,
                                                        1998         1997
                                                        

  Statutory federal tax rate                            34.0%        34.0%
  State income taxes, net of federal tax benefit         6.1          6.1
  Other                                                 (0.2)        (0.5)
                                                         ---          ---
                                                        39.9%        39.6%
                                                        ====         ====

The components of the Company's deferred tax assets and liabilities as of 
December 31, 1998 and 1997 are as follows:

		
                                                           Years ended
                                                           December 31,
                                                        1998           1997
                                                        ----           ----
 Deferred tax assets
   State income taxes                              $  75,913      $  70,243
   Capital loss carryforwards                        149,988         50,052
   Other miscellaneous differences                     1,391          1,875
                                                     -------        -------
      Deferred tax assets                          $ 227,292      $ 122,170
                                                     =======        =======
Deferred tax assets (liabilities) 
   Unrealized gains (losses)on marketable 
     Securities                                    $   3,069      $ (64,687)
                                                    ========       ========
<PAGE> 19

NOTE 6 - RELATED PARTY TRANSACTIONS

Certain shared costs and expenses, primarily administrative salaries, rent and 
insurance, are allocated between the Company and Santa Fe based on management's 
estimate of the pro rata utilization of resources.  Total shared costs and 
expenses allocated to the Company approximated $213,900 and $188,000 during the 
years ended December 31, 1998 and 1997, respectively.  In addition, The 
InterGroup Corporation, the parent of Santa Fe, allocates corporate expenses to 
the Company based on InterGroup's management's estimate of the pro rata 
utilization of resources. For the years ended December 31, 1998 and 1997, these 
expenses were approximately $81,000 and $75,000 respectively.  


NOTE 7 - COMMITMENTS AND CONTINGENCIES

During 1996, the Company was served with a personal injury action in the San 
Francisco Superior Court.  The suit named more than 60 defendants, including 
the managing general partner of Justice Investors and alleged injuries suffered 
as a result of exposure to asbestos-containing materials.  The complaint sought 
an unspecified amount of damages. The Company was defended through its 
insurance carrier under a reservation of rights.  During 1997, the trial court 
granted Company's motion for summary judgment.  That judgment became final 
April 13, 1998 and was not appealed.  Since the Company's insurance carrier 
paid the cost of the defense, the resolution of this claim did not have any 
effect on the Company's financial position.  


Item 8. Changes in Accountants.

None.

                             PART III 

Item  9.  Directors, Executive Officers, Promoters and Control Persons; 
Compliance With Section 16(a)of The Exchange Act.

Item 10.  Executive Compensation.                               

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

Item 12.  Certain Relationships and Related Party Transactions. 

The information for Part III, Items 9 through 12, are hereby incorporated by 
reference to the Company's Proxy Statement for the Annual Meeting of 
Shareholders to be held May 4, 1999, which will be filed with the Commission 
within one hundred twenty (120) days of the close of the fiscal year pursuant 
to Regulation 14A.

<PAGE> 20


Item 13.  Exhibits and Reports on Form 8-K.

(a) Listing of Exhibits by Table Number
         
Set forth below is an index of applicable exhibits filed with this report
according to exhibit table number.

           Exhibit                                                   Page
           -------                                                   ----

          3.  Articles of Incorporation and Bylaws                     * 

          4.  Instruments defining the rights of Security              * 
              Holders, including indentures (see Articles
              of Incorporation and Bylaws)                              

         22.  Published report regarding matters submitted to vote
              of Security Holders - Proxy Statement for Annual
              Meeting of Shareholders to be held May 4, 1999, which
              will be filed with the Commission within one hundred
              twenty (120) days of the fiscal year pursuant to
              Regulation 14A

         27.  Financial Data Schedule                                  29

* All exhibits marked by an asterisk have been previously filed with other 
documents, including Registrant's Form 10 filed on October 27, 1967, and 
subsequent filings on Forms 8-K, 10-K and 10-Q which are incorporated herein by 
reference.

        
(b) Reports on Form 8-K
         
Registrant filed no reports on Form 8-K during the last quarter of the period 
covered by this Report.

(c) Financial Statements and Schedules Required by Regulation S-X
         
The following financial statements of Justice Investors are included in 
Item 13: 
                                                              PAGE
                                                              ----

Independent Auditor's Report                                   21
Balance Sheets - December 31, 1998 and 1997                    22
Statements of Income and Partners' Capital - Years             23
  Ended December 31, 1998 and 1997
Statements of Cash Flows - Years Ended                         24
  December 31, 1998 and 1997 
Notes to Financial Statements - December 31, 1998 and 1997     25
  

All other schedules for which provision is made in the applicable accounting 
regulation of the Securities and Exchange Commission are not required under the 
related instructions or are inapplicable and therefore have been omitted.


<PAGE> 21



                          COLLIER & MARKOWITZ
                      CERTIFIED PUBLIC ACCOUNTANTS
                  (SUCCESSORS TO AARON, BLUM & COLLIER)
 
                   235 MONTGOMERY STREET, SUITE 1049
                    SAN FRANCISCO, CALIFORNIA 94104
                           TEL (415) 982-7852
                           FAX (415) 982-1429
 
                            January 27, 1999

Managing General Partner
Justice Investors
(A Limited Partnership)
San Francisco, California

                   Independent Auditor's Report
                   ----------------------------

We have audited the accompanying balance sheets of Justice Investors ( A 
Limited Partnership) as of December 31, 1998, and 1997, and the related 
statements of income and partners' capital and cash flows years then ended.  
These financial statements are the responsibility of the Partnership's 
management.  Our responsibility is to express an opinion on these financial 
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in 
all material respects, the financial position of Justice Investors (A Limited 
Partnership) as of December 31, 1998 and 1997, and the results of its 
operations and its cash flows for years then ended, in conformity with 
generally accepted accounting principles.



/s/ COLLIER AND MARKOWITZ
Certified Public Accounts


<PAGE> 22

<TABLE>
<CAPTION>
                           JUSTICE INVESTORS
                        (A LIMITED PARTNERSHIP)

                             BALANCE SHEETS
                                 
                       December 31, 1998 and 1997
                       --------------------------

                                                       1998           1997
                                                       ----           ----      
                                   ASSETS
                                   ------
<S>                                                <C>            <C>
Current assets
  Cash                                             $    3,265     $        -
  Rents receivable                                  1,688,253        465,751 
  Prepaid expenses                                      4,886         34,623
                                                    ---------       --------
       Total current assets                         1,696,404        500,374  
                                                    ---------       --------
Fixed assets
  Office equipment (net of accumulated
    depreciation of $3,846 in 1998 and
    $2,936 in 1997)                                     1,707          2,617  
  Building and improvements (net of accumulated
    depreciation of $10,995,627 in 1998 and
    $10,604,259 in 1997)                            4,450,375      4,841,743
  Land                                              1,124,128      1,124,128
                                                    ---------      ---------
      Total fixed assets                            5,576,210      5,968,488
                                                    ---------      ---------
Other assets
 Loan fees (net of accumulated amortization
   of $110,875 in 1998 and $81,310 in 1997)           177,382        206,947
 Deferred lease costs (net of accumulated
   amortization of $5,908 in 1998 and
   $4,431 in 1997)                                     16,247         17,724
                                                    ---------      ---------
      Total other assets                              193,629        224,671
                                                    ---------      ---------
      Total assets                                 $7,466,243     $6,693,533
                                                    =========      =========

</TABLE>
<TABLE>
                    LIABILITIES AND PARTNERS' CAPITAL
                    ---------------------------------
<S>                                                <C>            <C>
Current liabilities
  Trade accounts payable and accrued expenses      $   50,539     $   86,916
  Rents received in advance                               200        206,250
  Accrued interest                                      6,553              -
                                                    ---------      ---------
      Total current liabilities                        57,292        293,166
Long-term liabilities
  Notes payable                                     2,604,686      2,624,127
                                                    ---------      ---------
      Total liabilities                             2,661,978      2,917,293
Commitment - Lease commission
Partners' capital                                   4,804,265      3,776,240
                                                    ---------      ---------
       Total liabilities and partners' capital     $7,466,243     $6,693,533
                                                    =========      =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

<PAGE> 23
<TABLE>
<CAPTION>
                            JUSTICE INVESTORS
                         (A LIMITED PARTNERSHIP)
    
                STATEMENTS OF INCOME AND PARTNERS' CAPITAL

                  Years Ended December 31, 1998 and 1997
                  --------------------------------------
                                                                   
                                                         1998           1997
                                                          ----          ----
<S>                                                 <C>           <C>
Revenues 
  Rental income
    Hotel                                           $5,677,119    $4,977,471
    Garage                                           1,337,833     1,212,491
    Other                                                2,400         2,400 
                                                     ---------     ---------
      Total rental income                            7,017,352     6,192,362 
    Interest income                                          -         2,170
    Miscellaneous income                                19,392             - 
                                                     ---------     ---------
      Total revenues                                 7,036,744     6,194,532
                                                     ---------     ---------

Expense
  Interest                                             175,468       241,641 
  Depreciation and amortization                        423,320       450,181 
  Lease commission                                      56,771        49,776 
  Property taxes                                        41,928        41,428
  Repairs and maintenance                                    -         3,208 
  General and administrative 
    Administrative expenses                            150,000       150,000 
    Accounting fees                                      9,999        10,263 
    Audit and tax preparation                           25,527        21,700   
    Business taxes                                      20,554        18,829 
    Bank charges                                         6,935         6,319 
    Consultants                                          5,005         2,210  
    Franchise taxes                                        800           800 
    Insurance expense                                   45,518        39,421 
    Legal fees                                           6,178        11,918 
    Office expense and miscellaneous                       713         4,660 
                                                     ---------     --------- 
      Total expenses                                   968,716     1,052,354
                                                     ---------     ---------
 
Net income                                           6,068,028     5,142,178 
Partners' capital at beginning of
  year                                               3,776,240     3,044,061
Less distributions to partners                      (5,040,003)   (4,409,999)
                                                     ---------     --------- 
Partners' capital at end of year                    $4,804,265    $3,776,240
                                                     =========     =========
</TABLE>
The accompanying notes are in integral part of these financial statements.     

<PAGE> 24

<TABLE>
<CAPTION>
                           JUSTICE INVESTORS
                        (A LIMITED PARTNERSHIP)
                       STATEMENTS OF CASH FLOWS
                Years Ended December 31, 1998 and 1997
                --------------------------------------
            Increase (Decrease) in Cash and Cash Equivalents

                                                          1998          1997 
                                                          ----          ----
<S>                                                 <C>           <C>
Cash flows from operating activities
  Cash received from tenants                        $5,588,801    $6,079,723   
  Interest received                                          -         2,170 
  Interest paid                                       (168,915)     (242,973)
  Cash paid for other operating 
    activities                                         (357,178     (349,956)
                                                      ---------    --------- 
     Net cash provided by operating
        activities                                    5,062,708    5,488,964 
                                                      ---------    ---------
Cash flows from investing activities
  Capital expenditures                                        -     (447,793)  
                                                      ---------    --------- 
Net cash used in
  investing activities                                        -     (447,793) 
                                                      ---------    ---------

Cash flows from financing actives                   
  Distributions to partners                         (5,040,003)   (4,409,999)  
  Proceeds from borrowing of long-
    term debt                                        3,992,727     4,375,802    
  Principal payments of long-term
    debt                                            (4,012,167)   (5,035,964)  
  Payments (advances)-garage lessee                          -             - 
                                                    ----------    ----------    
     Net cash used in financing 
       activities                                   (5,059,443)   (5,070,161)
Net decrease in cash and 
  cash equivalents                                       3,265       (28,990)
Cash and cash equivalents at 
  beginning of year                                          -        28,990 
                                                     ---------     ---------
Cash and cash equivalents at end                                              
of year                                             $    3,265    $        - 
                                                     =========     =========
Reconciliation of net income to net
  cash provided by operating 
  activities
Net income                                          $6,068,028    $5,142,178 
                                                     ---------     ---------
Adjustments to reconcile net income
  to net cash provided by operating
  activities
   Depreciation and amortization                       423,320       450,181 
   Rents receivable                                 (1,222,502)     (110,556)
   Prepaid expenses                                     29,737         1,412   
   Accounts payable                                    (36,378)        9,164
   Rents paid in advance                              (206,050)       (2,083)
   Interest payable                                      6,553        (1,332) 
                                                     ---------     ---------
                                                    (1,005,320)      346,786
                                                     ---------     ---------
Net cash provided by operating
  activities                                        $5,062,708    $5,488,964 
                                                     =========     =========
Supplemental disclosures of cash
  flows information:
    Cash paid during the year for:
      Interest                                      $  168,915    $  242,973
   
</TABLE>

The accompanying notes are an integral part of these financial statements.
                              
<PAGE> 25



                         JUSTICE INVESTORS
                      (A LIMITED PARTNERSHIP)
 
                   NOTES TO FINANCIAL STATEMENTS
 
                    December 31, 1998 and 1997
                    --------------------------

SIGNIFICANT ACCOUNTING POLICIES
-------------------------------

Organization
------------
Justice Investors, a Limited Partnership (the "Partnership") was formed in 
1967 to acquire real property in San Francisco, California, for the development 
and lease of hotel and related facilities.  The leases became effective during 
1970 upon completion of the hotel and parking garage. The lease of the hotel 
provided for the Partnership to receive certain percentages of hotel revenue, 
as defined, to December 31, 2004, with a five year renewal option.  The parking
garage lease provided for payments of certain percentages of parking receipts 
to November 30, 2010.

Rents Receivable
----------------
Management believes that all rents receivable as of December 31, 1998 and 1997, 
were fully collectible.  Therefore, no allowance for doubtful accounts was 
recorded.

Depreciation
------------
Depreciation on the hotel facilities is computed using the straight line method 
over a useful life of 40 years.  Building improvements are being depreciated on 
a straight line basis over their useful lives ranging from 5 to 39 years. 
Office equipment is being depreciated using the 150% declining balance method 
with a useful life of 5 years.

Amortization
------------
Loan fees are amortized using the straight line method over 10 years. Deferred
lease costs are amortized using the straight line method over 15 years.

Income Tax
----------
No income taxes have been provided in the accompanying financial statements 
since the Partnership profits and losses are reportable by the partners on 
their individual income tax returns.

Statement of Cash Flows
-----------------------
For purposes of the statement of cash flows, cash equivalents include time 
deposits, certificates of deposit, and all highly liquid debt instruments with 
original maturities of three months or less.

Use of Estimates
----------------
The process of preparing financial statements in conformity with generally 
accepted accounting principles required the use of estimates and assumptions 
regarding certain types of assets, liabilities, revenues, and expenses. Such 
estimates primarily relate to unsettled transactions and events as of the date 
of the financial statements. Accordingly, upon settlement, actual results may 
differ from estimated amounts.

<PAGE> 26 

                         JUSTICE INVESTORS
                      (A LIMITED PARTNERSHIP)

                   NOTES TO FINANCIAL STATEMENTS

                    December 31, 1998 and 1997
                    --------------------------

LONG-TERM DEBT
--------------
At December 31, 1998 and 1997, long-term debt consisted of the following:

<TABLE>
                                                    
                                                          1998           1997
                                                          ----           ----
  <S>                                                 <C>           <C>
  Note payable to Wells Fargo Bank collateralized
  by first deed of trust on land, hotel property
  and the Partnership's interest in hotel and 
  garage leases.  The note provided for interest
  at LIBOR PLUS 2% per annum to a total capped 
  rate of 11.5% up to $4,000,000 due December
  31, 2004                                            $2,590,000    $2,200,000

 
  Note payable to Wells Fargo Bank collateralized
  by first deed of trust on land, hotel property
  and the Partnership's interest in hotel and 
  garage leases.  The note provided for interest
  at prime rate per annum due December 31, 2004          14,686        424,127  
                                                      ---------      ---------
                                                     $2,604,686     $2,624,127
                                                      =========      =========
</TABLE>

Under the terms of the revolving reducing line of credit with Wells Fargo Bank, 
the above notes are subject to a maximum credit limit as follows:
                  
  December 31, 1997                                  7,057,050
  December 31, 1998                                  6,796,678
  December 31, 1999                                  6,506,363
  December 31, 2000                                  6,182,662
  December 31, 2001                                  5,821,736
  December 31, 2002                                  5,419,302
  December 31, 2003                                  4,970,590
  December 31, 2004                                  4,470,275
 
Maturities of long-term debt for each of the next five years are as follows:
                                          
  1999                                              $        - 
  2000                                                       -
  2001                                                       -
  2002                                                       -
  Subsequent to 2003                                 2,604,686
                                                     ---------
                                                    $2,604,686 
                                                     ========= 

<PAGE> 27

                        JUSTICE INVESTORS
                      (A LIMITED PARTNERSHIP)

                   NOTES TO FINANCIAL STATEMENTS

                    December 31, 1998 and 1997
                    --------------------------       
                                                                               
MINIMUM FUTURE RENTALS
----------------------
Minimum future rentals to be received on non-cancelable leases as of December 
31, 1998 for each of the next five years and in the aggregate are:

    1999                                         $ 2,761,000
    2000                                           2,761,000
    2001                                           2,761,000 
    2002                                           2,761,000
    2003                                           2,761,000
    Subsequent to 2003                             4,305,250        
                                                  ---------- 
                                                 $18,110,250
                                                  ==========

COMMITMENT - LEASE COMMISSION
-----------------------------
The Partnership was obligated to pay a lease commission of 2% of the rentals
received under the primary lease of the hotel property for the initial 25-year
term of the lease which expired on October 31, 1995. In addition, the 
Partnership is obligated to pay a lease commission of 1% of rentals received to 
December 31, 2004 plus Holiday Inn lease extension, if any, to December 31, 
2010.


RELATED PARTY TRANSACTIONS 
--------------------------
Expenses were incurred for services rendered by related parties as follows:

                                                  1998           1997  
                                                  ----           ----
  General partners                            $150,000       $150,000   
  Legal services                                 6,178         11,918 
                                               -------        -------
                                              $156,178       $161,918   
                                               =======        =======   

The garage lessee, the managing general partner, paid the Partnership 
$1,337,833 and $1,212,491 during 1998 and 1997, respectively, under the terms 
of the rental agreement.  Rents receivable from the garage lessee at December 
31, 1998 and 1997 were $115,794 and $99,046, respectively. Accounts payable to 
general partners at December 31, 1998 and 1997 were $30,000 and $30,000.

LITIGATION
---------- 
The Partnership is a co-defendant in a lawsuit filed by a former employee of 
the general contractor who constructed the hotel and garage facilities, for 
alleged personal injuries resulting from exposure to asbestos-containing 
materials.  The suit seeks an unspecified amount of damages.  Outside counsel 
for the Partnership has advised that at this stage in the proceedings, they 
cannot offer an opinion as to the probable outcome. The Partnership believes 
the suit is without merit and is vigorously defending its position.

<PAGE> 28



                                SIGNATURES
                                ----------

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

                                       PORTSMOUTH SQUARE, INC.


Date:  March 24, 1999              By /s/ John V. Winfield
       --------------                 ----------------------------------------
                                      John V. Winfield, Chairman of the Board,
                                      President and Chief Executive Officer
                                      (Principal Executive Officer)

Date:  March 24, 1999              By /s/ L. Scott Shields
       --------------                 ----------------------------------------
                                      Treasurer 
                                     (Principal Financial Officer)

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


Date: March 24, 1999                  /s/ John V. Winfield
      --------------                  ---------------------------------------
                                      John V. Winfield, Chairman of the Board,
                                      President and Chief Executive Officer
                                      (Principal Executive Officer)

Date: March 24, 1999                  /s/ L. Scott Shields
      --------------                  ---------------------------------------
                                      Treasurer
                                      (Principal Financial Officer)


Date: March 24, 1999                  /s/ John C. Love
      --------------                  ---------------------------------------
                                      John C. Love,
                                      Director


Date: March 24, 1999                  /s/ William J. Nance
      --------------                  ---------------------------------------
                                      William J. Nance,
                                      Director


Date: March 24, 1999                  /s/ Jerold R. Babin
      --------------                  ---------------------------------------
                                      Jerold R. Babin,
                                      Director


Date: March 24, 1999                  /s/ Josef A. Grunwald
      --------------                  ---------------------------------------
                                      Josef A. Grunwald
                                      Director