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, 1997 or

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

    For the transition period from ____ to ____

    Commission file number 0-4057

                           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.)

  2251 San Diego Avenue, Suite A-151
  San Diego, California                                  92110-2926
  ----------------------------------                 ---------------------
  (Address of Principal Executive Offices)               (Zip Code)

                               (619) 298-7201
               ---------------------------------------------------
               (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
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 [ ]

     Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B 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-KSB or any amendments to
this Form 10-KSB. [X]

     The issuer's revenues for its most recent fiscal year were $2,585,792.

<PAGE> 2
     The aggregate market value of the common equity held by non-affiliates of
issuer computed by reference to the price at which the stock sold on March 11,
1998 was $4,612,073.

    The number of shares outstanding of issuers No Par Value Common Stock, as
of March 13, 1998, 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 5, 1998 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.



                            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       20
              Accounting and Financial Disclosure.

PART III

    Item  9.  Directors, Executive Officers, Promoters and           21
              Control Persons; Compliance With Section 16(a)
              of The Exchange Act.

    Item 10.  Executive Compensation.                                21

    Item 11.  Security Ownership of Certain Beneficial Owners and    21
              Management.

    Item 12.  Certain Relationships and Related Party Transactions.  21

    Item 13.  Exhibits, Financial Statement Schedules, and           21
              Reports on Form 8-K.

SIGNATURES                                                           30

<PAGE> 3
                              PART I

Item 1.  Description of Business.

         (a) Business Development
             --------------------
Portsmouth Square, Inc. ("Portsmouth" or the "Company") is a California
corporation, incorporated on July 6, 1967, to purchase a substantial interest
in the 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.


         (b) 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 Holiday Inns,
Inc., ("Holiday").  Effective April 28, 1997, Holiday merged with Bristol
Hotel Company ("Bristol"), of Dallas, Texas, a publicly held company listed on
the New York Stock Exchange.  Bristol has agreed to assume and perform all of
Holiday's obligations under the lease with the partnership and will continue
to operate the hotel as a Holiday Inn.  In addition, the partnership derives
income from its lease of the garage portion of the hotel to Evon.  The Company
also derives income from the investment of its cash and securities assets.  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.

Most of the Company's funds are invested under the direction of the Company's
Chairman and President.  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.  Although most of
the Company's marketable securities investments are in New York and American
Stock Exchange listed companies, 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.

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,

<PAGE> 4

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, 1997, the Company had three full-time employees and two
part-time employees.  The employees are not part of any collective bargaining
agreement, and the Company believes that its employee relations are
satisfactory.


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, 1997, the principal balance on the note was
$2,624,127.  The loan provides for a maximum borrowing of $7.05 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, Holiday entered into an amended and restated lease with
Justice Investors with an effective date of January 1, 1995.  The initial term
of the new lease is for a 10-year term expiring on December 31, 2004. The
tenant 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 Holiday 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, 1997, the partnership had
paid all of its $2 million commitment.  Rehabilitation and renovation of the
guest rooms, hallways, elevators and safety systems was substantially

<PAGE> 5

completed during 1997.  It is anticipated that renovation of the lobby and
other public areas will commence by the end of 1998 and further improvements
are expected to be made in the future in an effort to achieve Select or Crowne
Plaza status.

The hotel property is now managed by Bristol which, under the terms of the
lease, 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
would plan 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 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.  The Company recently
revised its securities investment policy guidelines to limit the percentage
that may be invested in any one investment to approximately 10% of equity of
the Company's investment portfolio.  The Company 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.


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, names more than 60
defendants, including Evon Garage Corporation, and alleges injuries suffered
as a result of exposure to asbestos-containing materials.  Portsmouth and Evon
Garage Corporation are named among the "premises defendants" as opposed to the
"manufacturing/distributing defendants."  The Complaint seeks an unspecified
amount of damages including recovery for loss of income and medical expenses.
Portsmouth is being 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; however, a final judgment has not been entered to
date.

<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, 1997.



                             PART II

Item 5.  Market Common Equity and Related Stockholder Matters

         (a) Market Information
             ------------------
         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.

      1997                                    High         Low
      ----                                    ----         ---
First Quarter (1/1 to 3/31)                  $ 19.25      $ 17.88
Second Quarter (4/1 to 6/30)                 $ 20.38      $ 19.25
Third Quarter (7/1 to 9/30)                  $ 21.00      $ 20.38
Fourth Quarter (10/1 to 12/31)               $ 21.50      $ 21.00

     1996
     ----
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

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.

         (b) Holders
             -------
           As of March 13, 1998, there were 336 record holders of the common
stock of Portsmouth with 734,183 share issued and outstanding.

         (c) 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.  In addition, the Company paid a special dividend in
the amount of $.15 per share on March 1, 1996 to shareholders of record as of
February 1, 1996.

<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 with Holiday Inns, Inc.,
which has been assumed by Bristol Hotel Company ("Bristol") and from a lease
with Evon Garage Corporation.

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Comparison of operating results for the year ended December 31, 1997 to the
year ended December 31, 1996 shows that net income increased 26.5%, resulting
from a net increase in total revenues of 31.9%, partially offset by a 69.3%
increase in costs and expenses.

The 31.9% net increase in total revenues from $1,960,718 to $2,585,792 was
primarily due to a 37.7% increase in partnership income from Justice Investors
from $1,860,190 to $2,560,805 and a 42.3% increase in dividend and interest
income from $81,252 to $115,586.  The increase in partnership income is
primarily attributable to a 37% increase in hotel rental income as a result of
both higher occupancy rates and an increase in the average daily room rate.
The increase in dividend and interest income reflects management's efforts to
diversify the Company's investments to provide for an overall higher yield.
The realized loss on investments of $119,100 should be considered in the
context that the Company had pre-tax unrealized gains on investments of
$313,611 and pre-tax unrealized losses in the amount of $152,448 as of
December 31, 1997.  The net unrealized gain on investments of $96,476 after
tax, is included in shareholders' equity.

The 69.3% increase in costs and expenses from $285,911 to $483,962 reflects an
increase in general and administrative expenses from $220,185 to $322,474, an
increase in professional and outside service fees from $65,726 to $128,678 and
margin interest expenses of $32,810.

The increase in general and administrative expenses reflects adjustments in
the Company's proportionate share of operating expenses with its parent, Santa
Fe, and higher administrative costs and direct and indirect costs associated
with the management of the Company's investments, including its partnership
asset. The increase in professional and outside service fees is primarily

<PAGE> 8

attributable to the retention of a consultant by the Company to advise it on
certain operational and partnership matters as part of its more active role as
a general partner in Justice Investors.


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 Bristol 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.  That additional distribution was also clearly
identified as special, and the limited partners were informed that there was
no guarantee that such a distribution would continue, especially if the
partnership was to participate financially in the future upgrading of the
public areas of the hotel.

The Company has diversified its investment of its cash and securities assets
in an effort to obtain an overall higher yield while seeking to minimize the
associated increased degree of risk.  The Company has invested in short-term,
income-producing instruments and in equity and debt securities when deemed
appropriate.  The Company's securities investments are classified as
available-for-sale and unrealized gains and losses, net of deferred taxes, are
included in shareholders' equity.  As of December 31, 1997, the Company had a
net unrealized gain on investments of $96,476 after tax, which consists of
pre-tax unrealized gains of 313,611 and pre-tax unrealized losses of $152,448.

Realized investment gains and losses 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 investment gain or loss for any
given period may have no predictive value, and variations in amount from
period to period may have no practical analytical value.

In December 1996, the Board of Directors authorized a limited buy-back program
of the Company's common stock.   In instituting the buy-back program, the
Company reaffirmed its intention of continuing with its reporting requirements
under the Exchange Act and the program is not intended to directly or
indirectly cause the cessation of those requirements.  As of December 31,
1997, the Company had repurchased 15,817 of its common shares, primarily in
open market transactions at an aggregate cost of $324,615.  On October 28,
1997, the Board of Directors elected to terminate the limited buy-back program
to preserve the Company's capital as it considers other investment options.

<PAGE> 9

At December 31, 1997, the Company's current assets were $2,037,797.  The
Company remains liquid with a current ratio of approximately 2.5 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.

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 lease revenues from Bristol.  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 Bristol 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, 1997                                 11
Statements of Income - Years Ended                                12
  December 31, 1997 and 1996
Statements of Shareholders' Equity                                13
Statements of Cash Flows - Years Ended                            14
  December 31, 1997 and 1996
Notes to the Financial Statements                                 15

<PAGE> 10


                      Report of Independent Accountants



March 25, 1998



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

In our opinion, the accompanying balance sheet and the related statements of
income, of cash flows, and changes in shareholders' equity present fairly, in
all material respects, the financial position of Portsmouth Square, Inc. at
December 31, 1997, and the results of its operations and their cash flows for
the year ended December 31, 1997, 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.  The financial statements of
Portsmouth Square, Inc. for the year ended December 31, 1996 were audited by
other independent accountants whose report dated February 21, 1997 expressed
an unqualified opinion on those statements.


/s/ Price Waterhouse LLP

<PAGE> 11
<TABLE>
<CAPTION>

PORTSMOUTH SQUARE, INC.

Balance Sheet
------------------------------------------------------------------------------

                                                         December 31, 1997
                                                         -----------------
<S>                                                         <C>
Assets

  Cash and cash equivalents                                 $    56,348
  Investment in marketable securities                         1,877,532
  Investment in Justice Investors                             1,334,114
  Other investments                                              87,500
  Note receivable                                                60,000
  Other assets                                                  155,844
                                                             ----------
    Total assets                                            $ 3,571,338
                                                             ==========



Liabilities and Shareholders' Equity

Liabilities
  Due to securities broker                                  $   664,211
  Accounts payable and accrued expenses                          40,489
  Due to Santa Fe Financial Corporation                          17,503
  Other liabilities                                             145,916
                                                             ----------
    Total liabilities                                           868,119
                                                             ----------

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
  Unrealized gain on investment securities,
    net of deferred taxes                                       96,476
  Accumulated deficit                                         (401,233)
                                                            ----------
    Total shareholders equity                                2,703,219
                                                            ----------

    Total liabilities and shareholders' equity             $ 3,571,338
                                                             =========

See accompanying notes to financial statements.

</TABLE>

<PAGE> 12
<TABLE>
<CAPTION>

PORTSMOUTH SQUARE, INC.

Statements of Income
------------------------------------------------------------------------------


                                                           Years ended
                                                           December 31,
                                                      1997            1996
                                                  -----------     -----------
<S>                                               <C>             <C>
Revenues
  Equity in net income of Justice Investors       $ 2,560,805     $ 1,860,190
  Dividend and interest income                        115,586          81,252
  Net investment losses                              (119,100)         (5,596)
  Other income                                         28,501          24,872
                                                    ---------       ---------
                                                    2,585,792       1,960,718
                                                    ---------       ---------

Costs and expenses
  General and administrative                          322,474         220,185
  Professional and outside services                   128,678          65,726
  Margin interest expense                              32,810               -
                                                    ---------       ---------
                                                      483,962         285,911
                                                    ---------       ---------
Income before income taxes                          2,101,830       1,674,807

Income taxes                                          831,193         670,694
                                                    ---------       ---------
Net income                                        $ 1,270,637     $ 1,004,113
                                                    =========       =========

  Basic earnings per share                        $      1.71     $      1.34
                                                    =========       =========

  Weighted average number of shares outstanding       744,027         750,000
                                                    =========       =========


See accompanying notes to financial statements

</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>

PORTSMOUTH SQUARE, INC.

Statement of Shareholders' Equity
------------------------------------------------------------------------------

                       Common Stock                       Unrealized
                   ---------------------   Additional      gain on
                    Shares                   paid-in      marketable     Accumulated
                  outstanding   Amount       capital      securities       deficit       Total
                  -----------  ---------    ----------   -----------     -----------   ----------
<S>                 <C>       <C>           <C>           <C>           <C>            <C>
Balance at
 December 31, 1995  750,000   $2,092,300    $1,240,291    $       -     $(1,814,809)   $1,517,782

Net income                                                                1,004,113     1,004,113

Dividends paid                                                             (487,500)     (487,500)

Increase in
 unrealized gain
 on marketable
 securities, net
 of tax                                                        23,207                      23,207
                     --------   ---------     ---------     ---------      ---------    ---------

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)

Increase in
 unrealized gain
 on marketable
 securities, net
 of tax                                                       73,269                       73,269
                     -------   ----------    ----------    ---------     -----------   ----------
Balance at
 December 31, 1997   734,183   $2,092,300    $  915,676   $   96,476     $ (401,233)   $2,703,219



See accompanying notes to financial statements.

</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>

PORTSMOUTH SQUARE, INC.

Statements of Cash Flows
------------------------------------------------------------------------------

                                                     For the years ended
                                                         December 31,
                                                   1997               1996
                                                -----------       -----------
<S>                                             <C>               <C>
Operating activities
Net income                                      $ 1,270,637       $ 1,004,113
Adjustments to reconcile net income to
  net cash used by operating activities:
    Equity in net income of Justice Investors    (2,560,805)       (1,860,190)
    Net investment losses                           119,100             5,596
    Change in assets and liabilities:
      Other assets                                  (78,176)          (12,981)
      Due to Santa Fe Financial Corporation         (29,628)                -
      Accounts payable and other liabilities         36,060            15,487
                                                 ----------        ----------
       Net cash used in operating activities     (1,242,812)         (847,975)


Investing activities
Cash distributions from Justice Investors         2,196,180         1,254,960
Purchase of investment securities                (3,129,471)       (1,532,172)
Purchase of other investments                      (100,000)                -
Proceeds from sales of investment securities      2,345,304           427,774
                                                 ----------         ---------
      Net cash provided by investing activities   1,312,013           150,562


Financing activities
Increase in due to securities broker                664,211                 -
Purchase and retirement of common stock            (324,615)                -
Dividends paid                                     (373,674)         (487,500)
                                                 ----------         ---------
      Net cash used in financing activities         (34,078)         (487,500)
                                                 ----------         ---------

Net increase (decrease) in cash and
  cash equivalents                                   35,123        (1,184,913)
Cash and cash equivalents at the
  beginning of the year                              21,225         1,206,138)
                                                 ----------        ----------
Cash and cash equivalents at end of year        $    56,348       $    21,225
                                                 ==========        ==========

Supplemental information
Income taxes paid, net of refunds               $   815,000       $   684,203
                                                 ==========        ==========
Margin interest paid                            $    32,810                 -
                                                 ==========        ==========


See accompanying notes to financial statements.
</TABLE>

<PAGE> 15


PORTSMOUTH SQUARE, INC.
Notes to the Financial Statements
------------------------------------------------------------------------------
NOTE 1 - OWNERSHIP AND SIGNIFICANT ACCOUNTING POLICIES

Ownership

As of December 31, 1997, Santa Fe Financial Corporation (Santa Fe) holds
480,757 shares, or 65.5%, of Portsmouth Square, Inc.'s (the Company)
outstanding shares.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Investment in Marketable Securities

The Company has classified its portfolio of marketable investment 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 a separate component of shareholders' equity.  Any
unrealized gains or losses related to "naked" 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.

The cost os decurities sold is based on a first-in, first-out basis.
Realized gains and losses are included in net investment losses.
Interest on securities classified as available-for-sale is included in
investment and interest income.

Revenue Recognition

During 1997 and 1996, 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 on the equity basis.

Earnings per Share

Effective December 31, 1997, the Company adopted a new accounting standard
which replaces retroactively the presentation of primary earnings per share
(EPS) and fully diluted EPS.  The new basic EPS represents net income divided
by the weighted average common shares outstanding during the period excluding
any potential dilutive effects.  Diluted EPS gives effect to all potential
issuances of common stock that would have caused basic EPS to be lower as if
the issuance had already occurred.  As of December 31, 1997 and 1996, the
Company did not have any potentially dilutive securities outstanding.

Accounting Standard on Impairment of Long-Lived Assets

During 1996, the Company adopted an accounting standard for the impairment of
long-lived assets and for long-lived assets to be disposed of.  This standard
requires the Company to record impairment losses 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 their carrying
amount.  There was no effect on the financial statements from the adoption of
this standard.

<PAGE> 16

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 or 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 which will be in effect when these differences reverse.
Deferred tax expense is the result of changes in the asset and /or liability
for deferred taxes.

Reclassifications

Certain prior year balances have been reclassified to conform to the current
year presentation.


NOTE 2 - INVESTMENT IN MARKETABLE SECURITIES

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

<TABLE>
<CAPTION>
                                        Gross          Gross
                                     Unrealized      Unrealized       Fair
                          Cost          Gains          Losses         Value
                       ----------    ----------      ----------     ---------
<S>                    <C>           <C>            <C>            <C>
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
                        =========     =========      =========      =========


                                         Gross          Gross
                                       Unrealized     Unrealized      Fair
                          Cost           Gains          Losses        Value
                        ---------      ----------    -----------    ---------
December 31, 1996
Equity securities      $  563,048    $   47,673     $  (19,908)    $  590,813
Debt securities           475,753        12,310         (1,307)       486,756
                        ---------     ---------      ---------      ---------
                       $1,038,801    $   59,983     $  (21,215)    $1,077,569
                        =========     =========      =========      =========

</TABLE>

Gross realized gains and losses on sales of investments totaled $200,608 and
$319,708, respectively, during the year ended December 31, 1997, and $28,102
and $33,698, respectively, during the year ended December 31, 1996.

<PAGE> 17

At December 31, 1997, the company had short investment positions totaling
approximately $356,000 all of which were covered by long positions.


The amortized cost and fair value of debt securities at December 31, 1997, by
contractual maturity, are shown below:

<TABLE>
<CAPTION>
                                                     Cost        Fair Value
                                                  ---------      ----------
 <S>                                             <C>             <C>
 Due after one year through five years           $  100,400      $  102,000
 Due after five years through ten years              60,339          69,450
 Due after ten years                                 76,949         101,250
                                                  ---------       ---------
                                                 $  237,688      $  272,700
                                                  =========       =========

</TABLE>

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,
                                                          1997         1996
                                                          ----         ----
<S>                                                    <C>          <C>
Assets

Total current assets - Note A                          $  500,374   $  420,220
Property, plant and equipment, net of accumulated
 depreciation of $10,607,195 in 1997 and
 $10,188,059 in 1996                                    5,968,488    6,220,506
Loan fees and deferred lease costs, net of accumulated
 amortization of $85,741 in 1997 and $54,696 in 1996      224,671      255,716
                                                        ---------    ---------
                                                       $6,693,533   $6,896,442
                                                        =========    =========

Liabilities and partners' equity
Total current liabilities                              $  293,166   $  568,093
Long-term liabilities - Note B                          2,624,127    3,284,288
Partners' capital - Note C                              3,776,240    3,044,061
                                                        ---------    ---------
                                                       $6,693,533   $6,896,442
                                                        =========    =========
</TABLE>
<TABLE>
<CAPTION>

                         CONDENSED STATEMENTS OF OPERATIONS

                                                            December 31,
                                                         1997          1996
                                                         ----          ----
<S>                                                    <C>          <C>
Revenues - Note A                                      $6,194,532   $4,758,778
Costs and expenses                                      1,052,354    1,023,457
                                                        ---------    ---------
 Net income                                            $5,142,178   $3,735,321
                                                        =========    =========
</TABLE>

Note A - Revenues include $1,212,491 and $1,116,019 for the years ended
December 31, 1997 and 1996, respectively, of garage rental income from the
garage lessee who is also the managing general partner of Justice Investors.

<PAGE> 18

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 in the lease, or an annual minimum
guaranteed rent of $2,500,000 plus 50% of available cash, as defined in the
lease, 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, 1996 and 1995 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, 1997 of approximately $7,100,000 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, 1997 and 1996, total
annual distributions to partners amounted to approximately $4,410,000 and
$2,520,000.



NOTE 4 - DUE TO SECURITIES BROKER

A securities broker has advanced funds for the purchase of marketable
securities under standard margin agreements.   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%
(7.625% at December 31, 1997).  The interest rate on cash or deposits is based
on the Federal Funds rate less 0.5% (6.25% at December 31, 1997).
The interest rate on interest rebates in connection with short positions is
based on the Federal Funds rate less 0.375% (6.375% at December 31, 1997).


NOTE 5 - INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                            Year ended
                                                           December 31,
                                                       1997            1996
                                                       ----            ----
 <S>                                               <C>             <C>
 Federal
   Current                                         $  689,632      $  524,879
   Deferred (credit)                                  (53,883)         (9,848)
                                                    ---------       ---------
                                                      635,749         515,031
                                                    =========       =========

 State
   Current                                            206,598         156,261
   Deferred (credit)                                  (11,154)           (598)
                                                    ---------       ---------
                                                      195,444         155,663
                                                    ---------       ---------
                                                   $  831,193      $  670,694
                                                    =========       =========
</TABLE>
<PAGE> 19

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

<TABLE>
<CAPTION>
                                                            Year ended
                                                           December 31,
                                                        1997         1996
                                                        ----         ----
  <S>                                                   <C>          <C>
  Statutory federal tax rate                            34.0%        34.0%
  State income taxes, net of federal tax benefit         6.1          6.1
  Other                                                 (O.5)           -
                                                        -----        -----
                                                        39.6%        40.1%
                                                        =====        =====
</TABLE>

The components of the Company's deferred tax assets and liabilities as of
December 31, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
                                                            Year ended
                                                           December 31,
                                                       1997          1996
                                                       ----          ----
 <S>                                               <C>            <C>
 Deferred tax assets
   State income taxes                              $   70,243     $   53,345
   Capital loss carryforwards                          50,052          2,247
   Other miscellaneous differences                      1,875          1,541
                                                    ---------      ---------
      Deferred tax assets                          $  122,170     $   57,133
                                                    =========      =========

 Deferred tax liabilities
   Unrealized gains on marketable securities       $   64,687     $   15,560
                                                    =========      =========
</TABLE>


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 $188,000 and $157,000
during the years ended December 31, 1997 and 1996, respectively.  In addition,
The InterGroup Corporation allocates corporate expenses to the Company based
on InterGroup's management's estimate of the pro rata utilization of
resources.  In 1997, these expenses were approximately $75,000.

<PAGE> 20

NOTE 7 - COMMITMENTS AND CONTINGENCIES

During 1996, the Company was served with a personal injury action in the San
Francisco Superior Court.  The suit names more than 60 defendants, including
the managing general partner of Justice Investors and alleges injuries
suffered as a result of exposure to asbestos-containing materials.  The
complaint seeks an unspecified amount of damages.  PSI's insurance carrier is
defending PSI  under a reservation of rights.  During 1997, the trial court
granted Portsmouth's motion for summary judgment; however a final judgment has
not been entered to date.  Management of the Company believes that the
ultimate resolution of this claim will not have a material adverse effect on
the Company's consolidated financial position.


Item 8. Changes in Accountants.

(a)  Previous independent accountants

     (i)   On January 26, 1998, Ernst & Young LLP indicated that it declined
to stand for re-election as the independent accountants for Portsmouth.

     (ii)  The reports of Ernst & Young LLP on the consolidated financial
statements for the past two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle.

     (iii) The Company's Board of Directors participated in and approved the
decision to change independent accountants.

     (iv)  In connection with its audits for the two most recent fiscal years
and through January 26, 1998, there have been no disagreements with Ernst &
Young LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if
not resolved to the satisfaction of Ernst & Young LLP would have caused them
to make reference thereto in their report on the financial statements for such
years.

     (v)  During the two most recent fiscal years and through January 26,
1998, there have been no reportable events (as defined in Regulation S-K Item
304(a)(1)(v)).

     (vi) Ernst & Young LLP furnished the Company with a letter addressed to
the SEC stating it agreed with the above statements.  A copy of such letter,
dated January 28, 1998 was filed as Exhibit 16 to the Company's Form 8-K dated
January 26, 1998.

(b)  New independent accountants

     (i)  The Company engaged Price Waterhouse LLP as its new independent
accountants as of January 26, 1998.  During the two most recent fiscal years
and through January 26, 1998, the Company has not consulted with Price
Waterhouse LLP regarding either (i) the application of accounting principles
to a specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on the Company's financial statements, and
either a written report was provided to the Company or oral advice was
provided that Price Waterhouse LLP concluded was an important factor
considered by the Company in reaching a decision as to the accounting,
auditing or financial reporting issue; or (ii) any matter that was either the
subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of
Regulation S-K and the related instructions to Item 304 of Regulation S-K, or

<PAGE> 21

a reportable event, as that term is defined in Item 304 (a)(1)(v) of
Regulation S-K.


                             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 5, 1998, which will be filed with the Commission
within one hundred twenty (120) days of the close of the fiscal year pursuant
to Regulation 14A.



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 6, 1997, 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

* 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.

<PAGE> 22


     (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                                   23
Balance Sheets - December 31, 1997 and 1996                    24
Statements of Income and Partners' Capital - Years             25
  Ended December 31, 1997, 1996 and 1995
Statements of Cash Flows - Years Ended                         26
  December 31, 1997, 1996 and 1995
Notes to Financial Statements - December 31, 1997,             27
  1996 and 1995

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> 23


                          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

                            February 3, 1998

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, 1997, and 1996, and the related
statements of income and partners' capital and cash flows for each of the
three years in the period ended December 31, 1997.  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, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting
principles.



/s/ COLLIER AND MARKOWITZ
Certified Public Accounts

<PAGE> 24
<TABLE>
<CAPTION>


                           JUSTICE INVESTORS
                        (A LIMITED PARTNERSHIP)

                             BALANCE SHEETS

                       December 31, 1997 and 1996
                       --------------------------

                                                       1997           1996
                                                       ----           ----
                                   ASSETS
                                   ------
<S>                                                <C>            <C>
Current assets
  Cash                                             $        -     $   28,990
  Rents receivable                                    465,751        355,195
  Prepaid expenses                                     34,623         36,035
                                                     --------       --------
       Total current assets                           500,374        420,220
                                                     --------       --------
Fixed assets
  Office equipment (net of accumulated
    depreciation of $2,936 in 1997 and
    $1,813 in 1996)                                     2,617          3,740
  Building and improvements (net of accumulated
    depreciation of $10,604,259 in 1997 and
    $10,186,246 in 1996)                            4,841,743      5,092,638
  Land                                              1,124,128      1,124,128
                                                    ---------      ---------
      Total fixed assets                            5,968,488      6,220,506
                                                    ---------      ---------
Other assets
 Loan fees (net of accumulated amortization
   of $81,310 in 1997 and $51,742 in 1996)            206,947        236,515
 Deferred lease costs (net of accumulated
   amortization of $4,431 in 1997 and
   $2,954 in 1996)                                     17,724         19,201
                                                    ---------      ---------
      Total other assets                              224,671        255,716
                                                    ---------      ---------
      Total assets                                $ 6,693,533    $ 6,896,442
                                                    =========      =========


                    LIABILITIES AND PARTNERS' CAPITAL
                    ---------------------------------
Current liabilities
  Trade accounts payable and accrued expenses      $   86,916     $  358,428
  Rents received in advance                           206,250        208,333
  Accrued interest                                          -          1,332
                                                    ---------      ---------
      Total current liabilities                       293,166        568,093
Long-term liabilities
  Notes payable                                     2,624,127      3,284,288
                                                    ---------      ---------
      Total liabilities                             2,917,293      3,852,381
Commitment - Lease commission
Partners' capital                                   3,776,240      3,044,061
                                                    ---------      ---------
       Total liabilities and partners' capital     $6,693,533     $6,896,442
                                                    =========      =========

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

</TABLE>
<PAGE> 25

<TABLE>
<CAPTION>

                            JUSTICE INVESTORS
                         (A LIMITED PARTNERSHIP)

                STATEMENTS OF INCOME AND PARTNERS' CAPITAL

               Years Ended December 31, 1997, 1996 and 1995
               --------------------------------------------

                                         1997           1996          1995
                                         ----           ----          ----
<S>                                   <C>            <C>           <C>
Revenues
  Rental income
    Hotel                             $4,977,471     $3,634,109    $3,076,210
    Garage                             1,212,491      1,116,019     1,069,150
    Lobby and other                        2,400          8,650         4,200
                                       ---------      ---------     ---------
      Total rental income              6,192,362      4,758,778     4,149,560
  Interest income                          2,170              -         2,857
                                       ---------      ---------     ---------
      Total revenues                   6,194,532      4,758,778     4,152,417
                                       ---------      ---------     ---------

Expense
  Interest                               241,641        308,710       348,971
  Loan prepayment charge                       -              -        59,803
  Depreciation and amortization          450,181        374,206       266,927
  Lease commission                        49,776         36,341        55,888
  Property taxes                          41,428         40,306        39,507
  Repairs and maintenance                  3,208          1,500        20,254
  General and administrative -
    Administrative expenses              150,000        146,862       120,000
    Accounting fees                       10,263         13,152         7,943
    Audit and tax preparation             21,700         23,648        19,790
    Business taxes                        18,829         16,179        13,588
    Bank charges                           6,319          5,385         4,816
    Consultants                            2,210          4,615        16,685
    Franchise taxes                          800            800           800
    Insurance expense                     39,421         39,864        39,452
    Legal fees                            11,918         10,525        16,659
    Office expense and miscellaneous       4,660          1,364         5,191
                                       ---------      ---------     ---------
      Total expenses                   1,052,354      1,023,457     1,036,274
                                       ---------      ---------     ---------

Net income                             5,142,178      3,735,321     3,116,143

Partners' capital at beginning of
  year                                 3,044,061      1,828,740     1,232,597
Less distributions to partners        (4,409,999)    (2,520,000)   (2,520,000)
                                       ---------      ---------     ---------
Partners' capital at end of year      $3,776,240     $3,044,061    $1,828,740
                                       =========      =========     =========

The accompanying notes are in integral part of these financial
statements.
</TABLE>

<PAGE> 26

<TABLE>
<CAPTION>

                           JUSTICE INVESTORS
                        (A LIMITED PARTNERSHIP)
                       STATEMENTS OF CASH FLOWS
              Years Ended December 31, 1997, 1996 and 1995
              --------------------------------------------
            Increase (Decrease) in Cash and Cash Equivalents

                                           1997          1996        1995
                                           ----          ----        ----
<S>                                     <C>          <C>           <C>
Cash flows from operating activities
  Cash received from tenants            $6,079,723   $4,834,649    $4,239,935
  Interest received                          2,170            -         3,572
  Interest paid                           (242,973)    (309,557)     (486,297)
  Deposits to mortgage escrow account            -            -       (10,414)
  Cash paid for other operating
    activities                            (349,956)    (369,911)     (294,967)
                                         ---------    ---------     ---------
     Net cash provided by operating
        activities                       5,488,964    4,155,181     3,451,829
                                         ---------    ---------     ---------
Cash flows from investing activities
  Capital expenditures                    (447,793)  (1,425,197)     (431,465)
                                         ---------    ---------     ---------
    Net cash used in
      investing activities                (447,793)  (1,425,197)     (431,465)
                                        ----------    ---------     ---------

Cash flows from financing actives
  Distributions to partners             (4,409,999)  (2,520,000)   (2,520,000)
  Proceeds from borrowing of long-
    term debt                            4,375,802    3,033,047     5,513,076
  Principal payments of long-term
    debt                                (5,035,964)  (3,568,734)   (6,107,075)
  Payments (advances)-garage lessee             -         1,491        30,196
                                        ----------   ----------    ----------
     Net cash used in financing
       activities                       (5,070,161)  (3,054,196)   (3,083,803)
Net decrease in cash and
  cash equivalents                         (28,990     (324,212)      (63,439)
Cash and cash equivalents at
  beginning of year                         28,990      353,202       416,641
                                         ---------    ---------     ---------
Cash and cash equivalents at
  end of year                           $        -   $   28,990    $  353,202
                                         ---------    ---------     ---------
Reconciliation of net income to net
  cash provided by operating
  activities
Net income                              $5,142,178   $3,735,321    $3,116,143
                                         ---------    ---------     ---------
Adjustments to reconcile net income
  to net cash provided by operating
  activities
   Depreciation and amortization           450,181      374,206       266,927
   Rents receivable                       (110,556)      73,788      (115,875)
   Other receivables                             -            -        38,271
   Prepaid expenses                          1,412        2,264        10,128
   Accounts payable                          9,164      (31,634)       10,508
   Rents paid in advance                    (2,083)       2,083       206,250
   Interest payable                         (1,332)        (847)      (77,523)
   Lease deposits                                -            -        (3,000)
                                         ---------    ---------     ---------
                                           346,786      419,860       335,686
                                         ---------    ---------     ---------
Net cash provided by operating
  activities                            $5,488,964   $4,155,181    $3,451,829
                                         =========    =========     =========
Supplemental disclosures of cash
  flows information:
    Cash paid during the year for:
      Interest                          $  242,973   $  309,557    $  486,297


The accompanying notes are an integral part of these financial statements.
</TABLE>

<PAGE> 27



                         JUSTICE INVESTORS
                      (A LIMITED PARTNERSHIP)

                   NOTES TO FINANCIAL STATEMENTS

                  December 31, 1997, 1996 and 1995
                  -------------------------------

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, 1997 and
1996, 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> 28

                         JUSTICE INVESTORS
                      (A LIMITED PARTNERSHIP)

                   NOTES TO FINANCIAL STATEMENTS

                  December 31, 1997, 1996 and 1995
                  --------------------------------

LONG-TERM DEBT
--------------
At December 31, 1997 and 1996, long-term debt consisted of the following:


                                                       1997          1996
                                                       ----          ----
  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                                          $2,200,000     $3,200,000


  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        424,127         84,288
                                                     ---------      ---------
                                                    $2,624,127     $3,284,288
                                                     =========      =========

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, 1996                                  7,290,567
  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:

  1998                                              $        -
  1999                                                       -
  2000                                                       -
  2001                                                       -
  2002                                                       -
  Subsequent to 2002                                 2,624,127
                                                     ---------
                                                    $2,624,127
                                                     =========

<PAGE> 29

                        JUSTICE INVESTORS
                      (A LIMITED PARTNERSHIP)

                   NOTES TO FINANCIAL STATEMENTS

                  December 31, 1997, 1996 and 1995
                  --------------------------------


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

  1998                                          $ 2,761,000
  1999                                            2,761,000
  2000                                            2,761,000
  2001                                            2,761,000
  2002                                            2,761,000
  Subsequent to 2002                              7,066,250
                                                 ----------
                                                $20,871,250
                                                 ==========


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:

<TABLE>
<CAPTION
                                                  1997      1996      1995
                                                  ----      ----      ----
  <S>                                         <C>        <C>        <C>
  General partners                            $150,000   $146,862   $120,000
  Legal services                                11,918     10,525     16,659
                                               -------    -------    -------
                                              $161,918   $157,387   $136,659
                                               =======    =======   ========
</TABLE>

The garage lessee, the managing general partner, paid the Partnership
$1,212,491, $1,116,019 and $1,069,150 during 1997, 1996 and 1995,
respectively, under the terms of the rental agreement.  Rents receivable from
the garage lessee at December 31, 1997 and 1996 were $99,046 and $86,759,
respectively. Accounts payable to general partners at December 31, 1997 and
1996 were $30,000 and $22,504.

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> 30


                                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 31, 1998              By /s/ John V. Winfield
       --------------                 ----------------------------------------
                                      John V. Winfield, Chairman of the Board,
                                      President and Chief Executive 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 31, 1998                  /s/ John V. Winfield
      --------------                  ---------------------------------------
                                      John V. Winfield, Chairman of the Board,
                                      President and Chief Executive Officer


Date: March 31, 1998                  /s/ L. Scott Shields
      --------------                  ---------------------------------------
                                      L. Scott Shields, Treasurer and
                                      Chief Financial Officer

Date: March 31, 1998                  /s/ John C. Love
      --------------                  ---------------------------------------
                                      John C. Love,
                                      Director


Date: March 31, 1998                  /s/ William J. Nance
      --------------                  ---------------------------------------
                                      William J. Nance,
                                      Director


Date: March 31, 1998                  /s/ Jerold R. Babin
      --------------                  ---------------------------------------
                                      Jerold R. Babin,
                                      Director


Date: March 31, 1998                  /s/ Josef A. Grunwald
      --------------                  ---------------------------------------
                                      Josef A. Grunwald
                                      Director