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

                                    FORM 10-K

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

For the fiscal year ended December 31, 1996

                                       or

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

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

Commission File Number 0-8676

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

          California                                                95-3146963
-------------------------------                         ----------------------
(State or other jurisdiction of                                  (IRS Employer
incorporation or organization)                          Identification Number)

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

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

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

                                      NONE

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days.

                                    Yes X No
                                       --   --

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

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE


<PAGE>
                                     PART I

ITEM 1.  BUSINESS.
         --------

General
-------

     Public  Storage  Partners II, Ltd. (the  "Partnership")  is a publicly held
limited  partnership formed under the California Uniform Limited Partnership Act
in November 1976. The Partnership raised $4,945,000 in gross proceeds by selling
9,890 units of limited partnership interest ("Units") in an intrastate offering,
available only to California  residents,  which commenced in February,  1977 and
was  completed  in August  1977.  The  Partnership  was  formed to engage in the
business of developing and operating storage space for personal and business use
("mini-warehouses").

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

     The Partnership's general partner is PSI (the "General Partner").  B. Wayne
Hughes  ("Hughes") is chairman of the board and chief executive  officer of PSI,
and  Hughes  and  members  of his family  (the  "Hughes  Family")  are the major
shareholders of PSI.

     The  Partnership is managed,  and its investment  decisions are made by the
executive  officers and directors of PSI, including Hughes. The limited partners
of the  Partnership  have no right to participate in the operation or conduct of
its business and affairs.

     The  Partnership's   objective  are  to  (i)  maximize  the  potential  for
appreciation  in  value  of  the  Partnership's  properties  and  (ii)  generate
sufficient cash flow from operations to pay all expenses,  including the payment
of interest to Noteholders. All of the properties were financed in October 1986.

     The term of the  Partnership is until all properties have been sold and, in
any event, not later than September 30, 2036.

Investment in Facilities
------------------------

     At  December  31,  1996,  the  Partnership   owned  four  properties.   The
Partnership purchased its last property in October 1977.

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

Mini-warehouse Properties
-------------------------

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


                                       2
<PAGE>


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

     Mini-warehouses  in which the Partnership has invested generally consist of
three to seven  buildings  containing an aggregate of between 350 to 750 storage
spaces, most of which have between 25 and 400 square feet and an interior height
of approximately 8 to 12 feet.

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

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

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

Operating Strategies
--------------------

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

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


     *  MAINTAIN HIGH OCCUPANCY LEVELS AND INCREASE  REALIZED RENTS.  Subject to
        market  conditions,  the Partnership  generally seeks to achieve average
        occupancy  levels in excess of 90% and to eliminate  promotions prior to
        increasing  rental  rates.   Average  occupancy  for  the  Partnership's
        mini-warehouses  has increased from 84% in 1995 to 86% in 1996. Realized
        monthly  rents per square  foot  increased  from $.86 in 1995 to $.88 in
        1996. The Partnership  has increased  rental rates in many markets where
        it has  achieved  high  occupancy  levels and  eliminated  or  minimized
        promotions.

     *  SYSTEMS AND CONTROLS. PSI has an organizational structure and a property
        operation system,  "CHAMP"  (Computerized Help and Management  Program),
        which links its corporate office with each mini-warehouse.  This enables
        PSI to obtain daily information from each  mini-warehouse and to achieve
        efficiencies   in  operations  and  maintain   control  over  its  space

                                       3
<PAGE>

        inventory,   rental  rates,  promotional  discounts  and  delinquencies.
        Expense management is achieved through  centralized payroll and accounts
        payable systems and a comprehensive property tax appeals department, and
        PSI has an extensive  internal  audit program  designed to ensure proper
        handling of cash collections.

     *  PROFESSIONAL  PROPERTY  OPERATION.  In addition to the approximately 150
        support  personnel at the Public Storage  corporate  offices,  there are
        approximately   2,700  on-site   personnel  who  manage  the  day-to-day
        operations of the  mini-warehouses  in the Public Storage system.  These
        on-site personnel are supervised by approximately 110 district managers,
        15 regional  managers and three divisional  managers (with an average of
        13 years' experience in the  mini-warehouse  industry) who report to the
        president of the  mini-warehouse  property operator (who has 12 years of
        experience with the Public Storage organization).  PSI carefully selects
        and extensively  trains the operational and support personnel and offers
        them a progressive career path. See "Mini-warehouse Property Operator."

Mini-warehouse Property Operator
--------------------------------

     The  Partnership's  mini-warehouses  are  managed  by PSI (as  successor-in
interest to PSMI) under a Management Agreement. PSI has informed the Partnership
that it is the largest mini-warehouse  facility operator in the United States in
terms of both number of facilities and rentable space operated.


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


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

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

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

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

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

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

                                       4

<PAGE>
Competition
-----------

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

Other Business Activities
-------------------------

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

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

Employees
---------

     There are 4 persons who render  services on behalf of the  Partnership on a
full-time basis, and 11 persons who render services on a part-time basis.  These
persons include resident managers,  assistant  managers,  relief managers,  area
managers,  and administrative and maintenance  personnel.  Some employees may be
employed  on  a  part-time   basis  and  may  be  employed  by  other   persons,
Partnerships, REITs or other entities owning facilities operated by PSI.


                                       5
<PAGE>

ITEM 2.  PROPERTIES.

     The following  table sets forth  information  as of December 31, 1996 about
properties owned by the Partnership:

<TABLE>
<CAPTION>
                                          Net Rentable          Number
     Location         Size of Parcel        Area               of Spaces        Date of Purchase    Completion Date
-----------------    ----------------   ----------------     ------------     -------------------   ---------------  
CALIFORNIA
<S>                     <C>               <C>                      <C>           <C>                  <C> 
Eagle Rock              3.65 acres        70,000 sq. ft.           687           Oct. 21, 1977        Apr. 1978

Long Beach              3.32 acres        70,000 sq. ft.           705           July 22, 1977        Dec. 1977

Los Angeles             3.14 acres        59,000 sq. ft.           568           Mar. 17, 1978         May 1978

San Dimas               2.93 acres        54,000 sq. ft.           537           Aug. 3, 1977         Dec. 1977

</TABLE>

     The weighted  average  occupancy levels for the  mini-warehouse  facilities
were 86% and 84% in 1996 and 1995, respectively.

     Substantially  all of the  Partnership's  facilities were acquired prior to
the time  that it was  customary  to  conduct  environmental  investigations  in
connection with property  acquisitions.  During 1995, the Partnership  completed
environmental  assessments  of its  properties  to  evaluate  the  environmental
condition of, and potential environmental liabilities of such properties.  These
assessments  were performed by an  independent  environmental  consulting  firm.
Based on the  assessments,  the Partnership  expensed  $10,000 in 1995 for known
environmental remediation requirements.

     The properties are held subject to encumbrances which are described in this
report under Note 7 of the Notes to the  Financial  Statements  included in Item
14(a).

ITEM 3.  LEGAL PROCEEDINGS.
         ------------------

     No material legal proceeding is pending against the Partnership.


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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of 1996.


                                     PART II

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

     The Partnership has no common stock.

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

                                       6
<PAGE>

Report  summarize  and  report  information  (on a  monthly,  bimonthly  or less
frequent  basis)  regarding  secondary  sales  transactions  in certain  limited
partnership  interests,  including  the  prices at which  such  secondary  sales
transactions are effectuated.

     Exclusive  of the  General  Partner's  interest in the  Partnership,  as of
December 31, 1996, there were approximately 457 record holders of Units.

     Distributions to the general and limited partners of all cash available for
distribution (as defined) are made quarterly. Cash available for distribution is
generally  funds from  operations of the  Partnership,  without  deductions  for
depreciation,  but after  deducting  funds to pay or establish  reserves for all
other expenses (other than incentive  distributions  to the General Partner) and
capital  improvements,  plus net  proceeds  from any  sale or  financing  of the
Partnership's properties. In the fourth quarter of 1990, quarterly distributions
were  discontinued  to enable the  Partnership  to  increase  its  reserves  for
principal repayments on its debt that commenced in 1992.

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


                                       7
<PAGE>



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


   For the Year Ended December 31,          1996           1995            1994            1993            1992
------------------------------------------------------------------------------------------------------------------

<S>                                     <C>             <C>            <C>             <C>             <C>       
Revenues (2)                            $2,300,000      $2,242,000     $2,187,000      $2,532,000      $2,265,000

Depreciation                               169,000         148,000        139,000         139,000         136,000

Interest expense                           849,000         950,000      1,026,000       1,199,000       1,184,000

Net income                                 638,000         533,000        433,000         588,000         347,000

Limited partners' share                    631,000         528,000        428,000         582,000         343,000

General partner's share                      7,000           5,000          5,000           6,000           4,000

Limited partners' per unit data (1):

    Net income                               63.80           53.39          43.28           58.85           34.68

As of December 31
-----------------
Cash and cash equivalents                 $163,000     $         -       $159,000         $90,000        $275,000
                                                                 

Total assets                            $2,566,000      $2,585,000     $2,813,000      $2,806,000      $3,625,000

Notes payable                           $7,984,000      $8,602,000     $9,384,000      $9,815,000     $11,188,000

</TABLE>

-----------------------
(1)  Per unit  data is based  on the  weighted  average  number  of the  limited
     partnership units (9,890) outstanding during the period.

(2)  Revenues for the years ended  December 31, 1993 and 1995,  include gains on
     sale of marketable securities of an affiliate of $312,000 ($31.26 per unit)
     and $21,000 ($2.10 per Unit), respectively.


                                       8
<PAGE>



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

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

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

     The  Partnership's  net income in 1996 was $638,000 compared to $533,000 in
1995,  representing an increase of $105,000. This increase is primarily due to a
decrease in interest expense and an increase in property net operating income.

     During 1996,  property net  operating  income  (rental  income less cost of
operations,  management  fees paid to an  affiliate  and  depreciation  expense)
increased  $21,000 from  $1,497,000 in 1995 to $1,518,000 in 1996. This increase
is primarily attributable to an increase in rental revenues at the Partnership's
mini-warehouse  facilities  partially  offset by increases in cost of operations
and depreciation expense.

     Rental  income was  $2,296,000  in 1996  compared  to  $2,211,000  in 1995,
representing an increase of $85,000. This increase was primarily attributable to
increased  occupancies at the  Partnership's  real estate  facilities.  Weighted
average  occupancy  levels at the  mini-warehouses  were 86% and 84% in 1996 and
1995,  respectively.  The average  monthly  realized rent per square foot at the
mini-warehouses was $0.88 in 1996 compared to $0.86 in 1995.

     Cost of operations  (including  management  fees paid to an affiliate)  was
$609,000 and $566,000 in 1996 and 1995,  respectively,  representing an increase
of $43,000,  or 8%. This  increase was  primarily  attributable  to increases in
advertising and repairs and maintenance costs.

     In 1995, the  Partnership  prepaid eight months of 1996  management fees on
its  mini-warehouse  operations (based on the management fees for the comparable
period during the calendar year immediately preceding the prepayment) discounted
at the rate of 14% per year to compensate for early payment. The Partnership has
expensed  the prepaid  management  fees during  1996.  The amount is included in
management  fees paid to affiliate in the  statements of income.  As a result of
the prepayment,  the Partnership saved approximately  $8,000 in management fees,
based on the  management  fees that  would have been  payable  on rental  income
generated during 1996 compared to the amount prepaid.

     Interest expense was $849,000 and $950,000 in 1996 and 1995,  respectively,
representing a decrease of $101,000, or 11%. The decrease was primarily a result
of a reduction in the average outstanding debt balance in 1996 compared to 1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994:

     The  Partnership's  net income in 1995 was $533,000 compared to $433,000 in
1994, representing an increase of $100,000. This increase is primarily due to an
increase in property net operating  income  combined with a decrease in interest
expense offset by environmental cost incurred in 1995.

     During 1995,  property net  operating  income  (rental  income less cost of
operations,  management  fees paid to an  affiliate  and  depreciation  expense)
increased $8,000 from $1,489,000 in 1994 to $1,497,000 in 1995. This increase is
primarily  attributable to an increase in rental  revenues at the  Partnership's
mini-warehouse  facilities  partially  offset by increases in cost of operations
and depreciation expense.

     Rental  income was  $2,211,000  in 1995  compared  to  $2,182,000  in 1994,
representing an increase of $29,000. This increase was primarily attributable to
increased  occupancies at the  Partnership's  real estate  facilities.  Weighted
average  occupancy  levels at the  mini-warehouses  were 84% and 80% in 1995 and
1994,  respectively.  The average  monthly  realized rent per square foot at the
mini-warehouses was $0.86 in 1995 compared to $0.72 in 1994.

     In November  1995,  the  Partnership  sold its  marketable  securities  for
$89,000 and realized a gain on sale of $21,000.

                                       9
<PAGE>

     Substantially  all of the  Partnership's  facilities were acquired prior to
the time  that it was  customary  to  conduct  environmental  investigations  in
connection  with property  acquisitions.  During the fourth quarter of 1995, the
Partnership  completed  environmental  assessments of its properties to evaluate
the environmental condition of, and potential environmental  liabilities of such
properties.  These  assessments  were performed by an independent  environmental
consulting firm. Based on the assessments,  the Partnership  expensed $10,000 in
1995 for known environmental remediation requirements.  Although there can be no
assurance,  the Partnership is not aware of any  environmental  contamination of
any of its  property  sites  which  individually  or in the  aggregate  would be
material to the Partnership's overall business,  financial condition, or results
of operations.

     Cost of operations  (including  management  fees paid to an affiliate ) was
$566,000 and $554,000 in 1995 and 1994,  respectively,  representing an increase
of $12,000 or 2%. This  increase  was  primarily  attributable  to  increases in
payroll  cost,  and  management  fees  paid to an  affiliate  as a result  of an
increase in rental revenues.

     Interest   expense  was   $950,000  and   $1,026,000   in  1995  and  1994,
respectively,  representing  a  decrease  of $76,000  or 7%.  The  decrease  was
primarily a result of a reduction  in the average  outstanding  debt  balance in
1995 compared to 1994.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     Cash flow from operating  activities ($860,000 in 1996) has been sufficient
to meet all current obligations of the Partnership. During 1997, the Partnership
anticipates  approximately  $143,000 of capital improvements compared to $79,000
in 1996, $87,000 in 1995 and $45,000 in 1994.

     In January 1996 the Partnership  obtained a $230,000 loan from PSI to repay
and terminate an unsecured  note payable to Wells Fargo Bank.  The PSI loan bore
interest  at the prime rate plus 1%,  payable  monthly,  in  addition to monthly
principal payments of $17,708. In December 1996 the loan was paid in full.

     In November 1995, the Management Agreement was amended to provide that upon
demand from PSI or PSMI made prior to December 15, 1995, the Partnership  agreed
to prepay (within 15 days after such demand) up to 12 months of management  fees
(based on the management fees for the comparable period during the calendar year
immediately preceding such prepayment) discounted at the rate of 14% per year to
compensate for early payment. In December 1995, the Partnership prepaid, to PSI,
8 months of 1996  management  fees at a cost of  $83,000.  The  amount  has been
amortized as management fees paid to affiliate during 1996.


                                       10
<PAGE>

     In the fourth quarter of 1990, quarterly distributions were discontinued to
enable the  Partnership  to increase its reserves for  principal  payments  that
commenced in 1992.

     The  distributions  to the limited partners and general partner for each of
the prior years were as follows:

                               1977                     $88,000
                               1978                     394,000
                               1979                     706,000
                               1980                     843,000
                               1981                   1,032,000
                               1982                   1,087,000
                               1983                   1,128,000
                               1984                   1,481,000
                               1985                   1,800,000
                               1986                  13,352,000
                               1987                     369,000
                               1988                     400,000
                               1989                     417,000
                               1990                     283,000
                               1991                           -
                               1992                           -
                               1993                           -
                               1994                           -
                               1995                           -
                               1996                           -


     During  1986,  the  Partnership  financed  all  of  its  facilities  with a
$12,075,000  loan.  Proceeds of $11,920,000  were distributed to the partners in
October  1986 and are included in the 1986  distribution.  At December 31, 1996,
the outstanding balance of the mortgage note was $7,984,000.

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


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

     None.

                                       11
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP.
         ---------------------------------------------------

     The Partnership has no directors or executive officers.

     The Partnership's general partner is PSI. PSI, acting through its directors
and  executive  officers,  including  Mr.  Hughes,  manage  and make  investment
decisions for the Partnership.

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


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

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

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

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

         Hugh W. Horne,  age 52, has been a Vice President of PSI since 1980 and
was  Secretary  of PSI from 1980  until  February  1992 and became  Senior  Vice
President  of PSI in  November  1995.  He was an  officer  of PSMI  from 1973 to
November  1995.  Mr. Horne has been a Vice President of the Public Storage REITs

                                       12
<PAGE>

since 1993. He was a Vice  President of SPI from 1989 until June 1996 and of the
other  Merged  Public  Storage  REITs  from 1993 until the  respective  dates of
merger.  He is responsible for managing all aspects of property  acquisition for
PSI.

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

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

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

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

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

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

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

     William C. Baker,  age 63, became a director of PSI in November 1991. Since
April 1996,  Mr.  Baker has been  Chairman  of the Board of Santa  Anita  Realty
Enterprises,  Inc.,  a REIT that owns the Santa Anita  Racetrack  and other real
estate  assets.  In  August  1996,  he  became  Chairman  of the Board and Chief
Executive  Officer of Santa Anita  Operating  Company,  which operates the Santa
Anita Racetrack through its subsidiary the Los Angeles Turf Club,  Incorporated.
From  April  1993  through  May  1995,  Mr.  Baker  was  President  of Red Robin
International,  Inc., an operator and franchiser of casual dining restaurants in
the United States and Canada. Since January 1992, he has been Chairman and Chief
Executive Officer of Carolina Restaurant Enterprises,  Inc., a franchisee of Red
Robin International,  Inc. From 1976 to 1988, he was a principal shareholder and
Chairman  and  Chief  Executive  Officer  of Del Taco,  Inc.,  an  operator  and
franchiser of fast food  restaurants in  California.  Mr. Baker is a director of
Callaway Golf Company.

                                       13
<PAGE>

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

     Pursuant  to  Articles  16  and  22 of the  Partnership's  Certificate  and
Agreement  of  Limited  Partnership,   a  copy  of  which  is  included  in  the
Partnership's  prospectus included in the Partnership's  Registration  Statement
File No. 2-57750,  the General Partner  continues to serve until (i) retirement,
withdrawal,  adjudication  of  bankruptcy,  insolvency or  dissolution,  or (ii)
removal by a majority vote of the limited partners.

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

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


Section 16 (a) Beneficial Ownership Reporting Compliance
--------------------------------------------------------
     Based  on a  review  of  the  reports  filed  under  Section  16(a)  of the
Securities  and  Exchange  Act of 1934  with  respect  to the  Units  that  were
submitted to the Partnership,  the Partnership believes that with respect to the
fiscal year ended December 31, 1996, Hughes (a director and executive officer of
PSI, the General Partner,  and an owner of more than 10% of the Units) filed one
report on Form 4 which disclosed (in addition to  transactions  that were timely
reported) five transactions that were not timely reported.



                                       14
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION.
         ----------------------

     The Partnership has no subsidiaries, directors or officers. See Item 13 for
a description of certain  transactions  between the  Partnership and its General
Partner and their affiliates.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
         --------------------------------------------------------------
     (a)  At February 28, 1997, the following persons beneficially owned more 
          than 5% of the Units:
<TABLE>
<CAPTION>
                                   Name and Address of
       Title of Class               Beneficial Owners            Beneficial Ownership      Percent of Class
-----------------------       ----------------------------     ------------------------    ----------------

<S>                           <C>                               <C>                        <C>  
Units of Limited              Public Storage, Inc.              4,038 Units (1)             40.8%
Partnership Interest          701 Western Avenue
                              2nd Floor
                              Glendale, California  91201

Units of Limited              B. Wayne Hughes                   1,102 Units (2)               11.1%
Partnership Interest          701 Western Avenue
                              2nd Floor
                              Glendale, California  91201

</TABLE>

(1)  Includes  (i) 3,174  Units owned by PSI as to which PSI has sole voting and
     dispositive  power  and (ii) 864 Units  which PSI has an option to  acquire
     (together  with  other  securities)  from  BWH  Marina  Corporation  II  (a
     corporation  wholly-owned  by Hughes)  and as to which PSI has sole  voting
     power (pursuant to an irrevocable proxy) and no dispositive power.

(2)  Includes (i) 238 Units owned by BWH Marina  Corporation  II, a  corporation
     wholly-owned by Hughes,  as to which Hughes has sole voting and dispositive
     power and (ii) 864 Units  owned by BWH  Marina  Corporation  II as to which
     Hughes has sole dispositive power and no voting power; PSI has an option to
     acquire  these  Units and an  irrevocable  proxy to vote  these  Units (see
     footnote 1 above).

     (b)  The Partnership has no officers and directors.

          The General Partner (or its predecessor-in-interest)  have contributed
$101,010 to the capital of the Partnership  and as a result  participates in the
distributions  to the  limited  partners  and in the  Partnership's  profits and
losses in the same proportion that the General  Partner's  capital  contribution
bears to the total  capital  contribution.  Information  regarding  ownership of
Units by PSI , the General Partner, and Hughes, a director and executive officer
of PSI,  is set forth under  section  (a) above.  The  directors  and  executive
officers of PSI (including Hughes), as a group (13 persons), own an aggregate of
1,128  Units,  representing  11.4%  of the  Units  (including  the  1,102  Units
beneficially owned by Hughes as set forth above.).


          (c)  The  Partnership  knows  of  no  contractual  arrangements,   the
operation of the terms of which may at a  subsequent  date result in a change in
control  of  the  Partnership,  except  for  articles  16,  17 and  21.1  of the
Partnership's  Amended  Certificate  and Agreement of Limited  Partnership  (the
"Partnership  Agreement"),  a copy of which  is  included  in the  Partnership's
prospectus  included  in  the  Partnership's  Registration  Statement  File  No.
2-57750.  Those articles provide, in substance,  that the limited partners shall
have the right,  by majority  vote,  to remove the general  partner and that the
general  partner may designate a successor with the consent of a majority of the
limited partners.


                                       15
<PAGE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
         ----------------------------------------------

     The  Partnership  Agreement  provides  that  the  General  Partner  will be
entitled  to  cash  incentive  distributions  in an  amount  equal  to (i) 8% of
distributions  of cash  flow from  operations  until  the  distributions  to all
partners from all sources equal their capital contributions;  thereafter, 25% of
distributions of cash flow from operations,  and (ii) 25% of distributions  from
net proceeds from sale and financing of the Partnership's  properties  remaining
after  distribution  to all  partners of any portion  thereof  required to cause
distributions to partners from all sources to equal their capital contributions.
During  1985,  the partners  received  cumulative  distributions  equal to their
capital contributions.  During 1996, there were no incentive  distributions paid
by the Partnership.

     The    Partnership    has   a   Management    Agreement    with   PSI   (as
successor-in-interest  to PSMI). Under the Management Agreement, the Partnership
pays PSI a fee of 6% of the  gross  revenues  of the  mini-warehouse  properties
operated for the Partnership.  During 1996, the Partnership paid fees of $47,000
to PSI pursuant to the Management Agreement.

     In November 1995, the Management Agreement was amended to provide that upon
demand from PSI or PSMI made prior to December 15, 1995, the Partnership  agreed
to prepay (within 15 days after such demand) up to 12 months of management  fees
(based on the management fees for the comparable period during the calendar year
immediately preceding such prepayment) discounted at the rate of 14% per year to
compensate for early payment. In December 1995, the Partnership prepaid, to PSI,
8 months of 1996  management  fees at a cost of  $83,000.  The  amount  has been
amortized as management fees paid to affiliate during 1996.


                                       16
<PAGE>
                                     PART IV

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

     (a) List of Documents filed as part of the Report.

         1.   Financial  Statements.  See  Index to  Financial  Statements  and
              Financial  Statement Schedule.

         2.   Financial  Statement  Schedules.  See  Index  to  Financial  
              Statements  and  Financial  Statement Schedule.

         3.   Exhibits: See Exhibit Index contained below.


     (b) Reports  on Form  8-K:  No  reports  on Form 8-K were  filed  during  
         the last quarter of fiscal 1996.

     (c) Exhibits:  See Exhibit Index contained below.


                                       17
<PAGE>
                        PUBLIC STORAGE PARTNERS II, LTD.

                                  EXHIBIT INDEX

                                  (Item 14(c))

3.1       Amended Certificate and Agreement of Limited  Partnership.  Previously
          filed with the Securities and Exchange Commission as an exhibit to the
          Registrant's  Registration Statement of Form 10, filed on May 1, 1978,
          and incorporated herein by reference.

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

10.2      Loan documents dated October 7, 1986 between the Partnership and Aetna
          Life  Insurance  Company.  Previously  filed with the  Securities  and
          Exchange  Commission as an exhibit to the Partnership's  Annual Report
          on Form 10-K for the year ended  December  31,  1993 and  incorporated
          herein by reference.

10.3      Modified  loan   documents   dated   September  1,  1993  between  the
          Partnership and Aetna Life Insurance  Company.  Previously  filed with
          the  Securities   and  Exchange   Commission  as  an  exhibit  to  the
          Partnership's  Annual Report on Form 10-K for the year ended  December
          31, 1993 and incorporated herein by reference.

10.4      Loan documents  dated March 17, 1994 between the Partnership and Wells
          Fargo  Bank.   Previously  filed  with  the  Securities  and  Exchange
          Commission  as an exhibit to the  Partnership's  Annual Report on Form
          10-K for the year ended December 31, 1994 and  incorporated  herein by
          reference.

10.5      Loan  documents  dated  January 26, 1996 between the  Partnership  and
          Public Storage, Inc. Previously filed with the Securities and Exchange
          Commission  as an exhibit to the  Partnership's  Annual Report on Form
          10-K for the year ended December 31, 1995 and  incorporated  herein by
          reference.

27        Financial Data Schedule. Filed herewith.

                                       18
<PAGE>
                                   SIGNATURES

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

                                         PUBLIC STORAGE PARTNERS II, LTD.
                                         a California Limited Partnership
Dated:  March 26, 1997            By:    Public Storage, Inc., General Partner


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


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Partnership in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
  Signature                                       Capacity                                            Date
---------------------------                  ---------------------------------------------     -----------------   

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


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

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


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

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

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

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


                                       19
<PAGE>

                        PUBLIC STORAGE PARTNERS II, LTD.

                                    INDEX TO
                              FINANCIAL STATEMENTS
                                       AND
                          FINANCIAL STATEMENT SCHEDULE
                                  (Item 14 (a))





                                                                          Page
                                                                      References

Report of Independent Auditors                                            F-1


Financial Statements and Schedule:


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

For the years ended December 31, 1996, 1995 and 1994:

     Statements of Income                                                 F-3

     Statements of Partner's Deficit                                      F-4

     Statements of Cash Flows                                             F-5

Notes to Financial Statements                                         F-6 - F-9


Schedule 

     III - Real Estate and Accumulated Depreciation                  F-10 - F11


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


<PAGE>

                         Report of Independent Auditors




The Partners
Public Storage Partners II, Ltd.

We have audited the  accompanying  balance sheets of Public Storage Partners II,
Ltd. as of December  31, 1996 and 1995,  and the related  statements  of income,
partners' deficit and cash flows for each of the three years in the period ended
December 31, 1996. Our audits also included the schedule  listed in the index at
item 14(a).  These financial  statements and schedule are the  responsibility of
the  Partnership's  management.  Our  responsibility is to express an opinion on
these financial statements and schedule based on our audits.

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

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


                                                     ERNST & YOUNG LLP



March 24, 1997
Los Angeles, California



<PAGE>
<TABLE>
<CAPTION>
                        PUBLIC STORAGE PARTNERS II, LTD.
                                 BALANCE SHEETS
                           December 31, 1996 and 1995




                                                                                 1996                   1995
                                                                           ----------------      ----------------
                                     ASSETS
                                     ------

<S>                                                                        <C>                    <C>        
Cash and cash equivalents                                                  $   163,000            $         -
Rent and other receivables                                                      17,000                 23,000

Real estate facilities:
     Building, land improvements and equipment                               3,360,000              3,281,000
     Land                                                                    1,267,000              1,267,000
                                                                           ----------------      ----------------
                                                                             4,627,000              4,548,000

     Less accumulated depreciation                                          (2,434,000)            (2,265,000)
                                                                           ----------------      ----------------
                                                                             2,193,000              2,283,000
                                                                           ----------------      ----------------

Other assets                                                                   193,000                279,000
                                                                           ----------------      ----------------

Total assets                                                                $2,566,000             $2,585,000
                                                                           ================      ================


                        LIABILITIES AND PARTNERS' DEFICIT
                        ---------------------------------

Accounts payable                                                           $     4,000           $     35,000
Deferred revenue                                                                66,000                 74,000
Note payable                                                                 7,984,000              8,602,000

Partners' deficit:
     Limited partners' deficit, $500 per unit, 10,000 units
       authorized, 9,890 issued and outstanding                             (4,071,000)            (4,544,000)
     General partner's deficit                                              (1,417,000)            (1,582,000)
                                                                           ----------------      ----------------

     Total partners' deficit                                                (5,488,000)            (6,126,000)
                                                                           ----------------      ----------------

Total liabilities and partners' deficit                                     $2,566,000             $2,585,000
                                                                           ================      ================

</TABLE>

                             See Accompanying Notes.
                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                        PUBLIC STORAGE PARTNERS II, LTD.
                              STATEMENTS OF INCOME
                       For each of the three years in the
                         period ended December 31, 1996




                                                               1996                     1995                      1994
                                                            ----------               ----------               ----------
REVENUES:

<S>                                                         <C>                      <C>                      <C>       
Rental income                                               $2,296,000               $2,211,000               $2,182,000
Gain on sale of marketable securities                                -                   21,000                        -
Other income                                                     4,000                   10,000                    5,000
                                                            ----------               ----------               ----------
                                                             2,300,000                2,242,000                2,187,000
                                                            ----------               ----------               ----------

COSTS AND EXPENSES:

Cost of operations                                             479,000                  432,000                  423,000
Management fees paid to affiliate                              130,000                  134,000                  131,000
Depreciation                                                   169,000                  148,000                  139,000
Administrative                                                  35,000                   35,000                   35,000
Environmental cost                                                   -                   10,000                        -
Interest expense                                               849,000                  950,000                1,026,000
                                                            ----------               ----------               ----------

                                                             1,662,000                1,709,000                1,754,000
                                                            ----------               ----------               ----------

NET INCOME                                                 $   638,000              $   533,000              $   433,000
                                                            ==========               ==========               ==========


Limited partners' share of net income ($63.80
per unit in 1996, $53.39 per unit in 1995, and
  $43.28 per unit in 1994)                                 $   631,000              $   528,000              $   428,000

General partner's share of net income                            7,000                    5,000                    5,000
                                                            ----------               ----------               ----------

                                                           $   638,000              $   533,000              $   433,000
                                                            ==========               ==========               ==========


</TABLE>
                             See Accompanying Notes.
                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                        PUBLIC STORAGE PARTNERS II, LTD.
                         STATEMENTS OF PARTNERS' DEFICIT
                       For each of the three years in the
                         period ended December 31, 1996


                                                                                      Unrealized
                                                                                        Gain on
                                                      Limited          General         Marketable       Total Partners'
                                                     Partners          Partner        Securities          Deficit
                                                    ----------       ----------       -----------       ---------- 

<S>                                                <C>              <C>               <C>              <C>         
Balance at December 31, 1993                       $(5,260,000)     $(1,832,000)      $    -           $(7,092,000)

Unrealized gain on marketable securities                -                -                  4,000            4,000

Net income                                             428,000            5,000            -               433,000

Equity transfer                                       (107,000)         107,000            -                -
                                                    ----------       ----------       -----------       ---------- 

Balance at December 31, 1994                        (4,939,000)      (1,720,000)            4,000       (6,655,000)

Sale of marketable securities                           -                -                 (4,000)          (4,000)

Net income                                             528,000            5,000            -               533,000

Equity transfer                                       (133,000)         133,000            -                -
                                                    ----------       ----------       -----------       ---------- 

Balance at December 31, 1995                        (4,544,000)      (1,582,000)           -            (6,126,000)

Net income                                             631,000            7,000            -               638,000

Equity transfer                                       (158,000)         158,000            -                -
                                                    ----------       ----------       -----------       ---------- 

Balance at December 31, 1996                       $(4,071,000)     $(1,417,000)      $    -           $(5,488,000)
                                                    ==========       ==========       ===========       ========== 
</TABLE>

                             See Accompanying Notes.
                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                                         PUBLIC STORAGE PARTNERS II, LTD.
                                               STATEMENTS OF CASH FLOWS
                                          For each of the three years in the
                                            period ended December 31, 1996

                                                                          1996              1995              1994
                                                                       -----------      ----------         ----------
Cash flows from operating activities:
<S>                                                                    <C>               <C>               <C>     
     Net income                                                        $638,000          $533,000          $433,000


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

     Depreciation                                                       169,000           148,000           139,000
     Gain on sale of marketable securities                                    -           (21,000)                -
     Decrease (increase) in rent and other receivables                    6,000             9,000            (6,000)
     Amortization of prepaid loan fees                                   11,000            11,000            47,000
     Amortization (payment) of prepaid management fees                   83,000           (83,000)                -
     Increase in other assets                                            (8,000)           (1,000)           (1,000)
     (Decrease) increase in accounts payable                            (31,000)           25,000             1,000
     Decrease in deferred revenue                                        (8,000)                -                 -
                                                                       -----------      ----------         ----------


         Total adjustments                                              222,000            88,000           180,000
                                                                       -----------      ----------         ----------


         Net cash provided by operating activities                      860,000           621,000           613,000
                                                                       -----------      ----------         ----------


Cash flows from investing activities:


     Proceeds from sale (purchase costs) of marketable securities             -            89,000           (68,000)
     Additions to real estate facilities                                (79,000)          (87,000)          (45,000)
                                                                       -----------      ----------         ----------

         Net cash (used in) provided by investing activities            (79,000)            2,000          (113,000)
                                                                       -----------      ----------         ----------

Cash flows from financing activities:

    Proceeds from note payable to bank                                        -                 -           850,000
    Proceeds from note payable to affiliate                             230,000                 -                 -
    Principal payments on note payable to affiliate                    (230,000)                -          (850,000)
    Principal payments on note payable                                 (618,000)         (782,000)         (431,000)
                                                                       -----------      ----------         ----------

         Net cash used in financing activities                         (618,000)         (782,000)         (431,000)
                                                                       -----------      ----------         ----------

Net increase (decrease) in cash and cash equivalents                    163,000          (159,000)           69,000

Cash and cash equivalents at the beginning of the year                        -           159,000            90,000
                                                                       -----------      ----------         ----------

Cash and cash equivalents at the end of the year                       $163,000                 -          $159,000
                                                                       ===========      ==========         ==========


Supplemental schedule of non-cash investing and financing activities:


    Increase in fair value of marketable securities of affiliate      $      -           $      -          $ (4,000)
                                                                       ===========      ==========         ==========

    Unrealized gain on marketable securities of affiliate             $      -           $      -          $  4,000
                                                                       ===========      ==========         ==========
</TABLE>
                             See Accompanying Notes.
                                      F-5
<PAGE>
                         PUBLIC STORAGE PARTNERS II, LTD
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996

1.       DESCRIPTION OF PARTNERSHIP

              Public Storage  Partners II, Ltd. (the  "Partnership")  was formed
         with the  proceeds of a public  offering.  The  general  partner in the
         Partnership  is  Public  Storage,   Inc.,  formerly  known  as  Storage
         Equities,  Inc. In 1995,  there were a series of mergers  among  Public
         Storage  Management,  Inc. (which was the Partnership's  mini-warehouse
         property operator),  Public Storage,  Inc. (which was the Partnership's
         general   partner)  and  their   affiliates   (collectively,   "PSMI"),
         culminating  in the  November  16,  1995  merger of PSMI  into  Storage
         Equities,  Inc., a real estate  investment trust listed on the New York
         Stock Exchange. In the PSMI merger,  Storage Equities,  Inc.'s name was
         changed to Public  Storage,  Inc.  ("PSI")  and PSI became the  general
         partner  of the  Partnership  and  the  operator  of the  Partnership's
         mini-warehouse properties.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS

         Basis of Presentation:
         --------------------------

              Certain prior year amounts have been  reclassified to confrom with
         the 1996 presentation.

         Mini-Warehouse Facilities:
         --------------------------

              Cost of land  includes  appraisal  fees and legal fees  related to
         acquisition  and  closing  costs.  Buildings,   land  improvements  and
         equipment  reflect costs incurred through December 31, 1996 and 1995 to
         develop  mini-warehouse  facilities which provide  self-service storage
         spaces for lease,  usually on a  month-to-month  basis,  to the general
         public.  The buildings and equipment are depreciated on a straight-line
         basis over estimated useful lives of 25 and 5 years, respectively.

              In 1995, the Financial Accounting Standards Board issued Statement
         of  Financial   Accounting  Standards  No.  121,  "Accounting  for  the
         Impairment  of  Long-Lived  Assets  and  for  Long-Lived  Assets  to be
         Disposed of"  ("Statement  121").  Statement  121  requires  impairment
         losses to be recorded on  long-lived  assets  used in  operations  when
         indicators of impairment  are present and the  undiscounted  cash flows
         estimated  to be  generated  by those  assets are less than the assets'
         carrying  amount.  Statement  121 also  addresses  the  accounting  for
         long-lived  assets that are expected to be disposed of. The Partnership
         adopted  Statement  121 in 1996 and,  the adoption had no effect on the
         Partnership's financial statements.

         Allocation of Net Income:
         -------------------------

              The  general  partner's  share of net income  consists  of amounts
         attributable  to  their  1%  capital  contribution  and  an  additional
         percentage  of cash flow (as  defined)  which  relates  to the  general
         partner's share of cash  distributions  as set forth in the Partnership
         Agreement  (Note 4).  All  remaining  net  income is  allocated  to the
         limited partners.

              Per unit  data is  based on the  weighted  average  number  of the
         limited partnership units (9,890) outstanding during the period.

         Cash and Cash Equivalents:
         --------------------------

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

        Gain on Sale of Marketable Securities:
        --------------------------------------

              Through November 1995, the Partnership held 5,000 shares of common
         stock in PSI. In November 1995, the  Partnership  sold its 5,000 shares
         of common stock of PSI and  recognized a gain  totaling  $21,000 on the
         sale. The Partnership  recognized  $4,000 in dividends in both 1995 and
         1994.


                                      F-6
<PAGE>
                         PUBLIC STORAGE PARTNERS II, LTD
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS 
         (CONTINUED)
         ------------------------------------------------------------------

         Other Assets:
         -------------

              Included in other assets are deferred  financing costs of $61,000.
         In addition, deferred financing costs of approximately $11,000, $11,000
         and $47,000  relating to the  pre-modified  mortgage loan were expensed
         during  1996,  1995 and 1994,  respectively,  and  included as interest
         expense.

         Use of Estimates:
         -----------------

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

         Environmental Cost:
         -------------------

              Substantially  all of the  Partnership's  facilities were acquired
         prior  to the  time  that it was  customary  to  conduct  environmental
         investigations in connection with property  acquisitions.  During 1995,
         the Partnership completed  environmental  assessments of its properties
         to evaluate the environmental  condition of and potential environmental
         liabilities of such properties.  These assessments were performed by an
         independent  environmental  consulting  firm. Based on the assessments,
         the  Partnership  expensed  $10,000  in 1995  for  known  environmental
         remediation  requirements.  Although  there  can be no  assurance,  the
         Partnership is not aware of any  environmental  contamination of any of
         its property  sites which  individually  or in the  aggregate  would be
         material to the Partnership's overall business,  financial condition or
         results of operations.

3.       CASH DISTRIBUTIONS

              The  Partnership   Agreement  requires  that  cash  available  for
         distribution  (cash flow from all sources less cash  necessary  for any
         obligations  or  capital  improvement  needs) be  distributed  at least
         quarterly.  Cash  distributions  have been  suspended  since the fourth
         quarter of 1990 in order to build cash reserves for future debt service
         payments.

4.       PARTNERS' EQUITY

              The general  partner has a 1.1%  interest in the  Partnership.  In
         addition,   the  general  partner  has  an  8%  interest  in  all  cash
         distributions  attributable to operations  (exclusive of  distributions
         attributable to sale and financing  proceeds until the limited partners
         recover  all of their  initial  investment).  Thereafter,  the  general
         partner has a 25% interest in all cash  distributions  (including  sale
         and financing proceeds). In 1984, the limited partners recovered all of
         their initial  investment.  All subsequent cash distributions are being
         made 25.83%  (including the 1.1%  interest) to the general  partner and
         74.17%  to  the  limited   partners.   Transfers  of  equity  are  made
         periodically to conform the partners' equity accounts to the provisions
         of the  Partnership  Agreement.  These  transfers have no effect on the
         results of operations or distributions to partners.


              Concurrent with the financing of the  Partnership's  properties in
         1986 (Note 7), the  Partnership  made a special  distribution  totaling
         $11,920,000 to the partners. This special distribution had no effect on
         the Partnership's taxable income;  however, it resulted in a deficit in
         the limited and general partner's equity accounts.


5.       RELATED PARTY TRANSACTIONS

              The   Partnership   has  a  Management   Agreement  with  PSI  (as
         successor-in-interest  to PSMI). Under the terms of the agreement,  PSI
         operates  the  mini-warehouse  facilities  for a fee equal to 6% of the
         facilities' monthly gross revenue (as defined).


                                      F-7
<PAGE>
                         PUBLIC STORAGE PARTNERS II, LTD
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996

5.       RELATED PARTY TRANSACTIONS (CONTINUED)

              In November 1995, the Management  Agreement was amended to provide
         that upon demand from PSI or PSMI made prior to December 15, 1995,  the
         Partnership  agreed to prepay  (within 15 days after such demand) up to
         12 months of  management  fees  (based on the  management  fees for the
         comparable  period during the calendar year immediately  preceding such
         prepayment)  discounted at the rate of 14% per year to  compensate  for
         early payment.  In December 1995, the  Partnership  prepaid,  to PSI, 8
         months of 1996  management  fees at a cost of  $83,000.  The  amount is
         included in other assets in the balance sheet at December 31,1995.  The
         amount has been amortized as management  fees paid to affiliate  during
         1996.

         See footnote 7 on related party note payable.


6.       TAXES BASED ON INCOME

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

              Taxable net income was  $675,000,  $556,000  and $446,000 for the
         years  ended  December  31,  1996,  1995 and  1994,  respectively.  The
         difference  between  taxable  net income  and net  income is  primarily
         related  to   depreciation   expense   resulting  from   difference  in
         depreciation methods.

7.       NOTES PAYABLE

              Notes  payable  at  December  31,  1996  and 1995  consist  of the
         following:
<TABLE>
<CAPTION>
                                                                   1996                 1995
                                                              --------------      ---------------
     <S>                                                      <C>                 <C>                    
      10.3152% (9% after  November 1, 1996) mortgage note 
      payable to an insurance company with principal and 
      interest due monthly; remaining principal due 
      November 2002                                             $7,984,000           $8,356,000

      Unsecured  note  payable,  which bore interest at 1% 
      above bank's prime rate with interest payable monthly, 
      and requiring monthly principal payment of $18,000               -                246,000
                                                              --------------      ---------------
                                                                $7,984,000           $8,602,000
                                                              ==============      ===============
</TABLE>
              During 1986, the Partnership financed all of its properties with a
         $12,075,000,  ten year  nonrecourse  note secured by the  Partnership's
         properties.  In  September  1993,  the  General  Partner and the lender
         agreed to modify  the terms of the  mortgage  note  payable,  which the
         General Partner believed to be favorable to the Partnership.  Under the
         modified terms (i) the interest rate was reduced from 10.3152% to 9.00%
         (effective  November 1, 1996),  and (ii) the maturity date was extended
         from  November 1, 1996 to  November 1, 2002 and (iii) the monthly  debt
         service payments (principal and interest) were reduced from $112,400 to
         $100,000 based on a 25 year amortization period.

              To obtain the mortgage note  modifications,  the  Partnership  was
         required  to  make  an  initial   prepayment   of  principal   totaling
         $2,000,000.  In order to make such  prepayment,  the  Partnership  used
         funds from cash reserves, the proceeds from a sale of marketable equity
         securities, and the proceeds from a $950,000 loan from PSI. The related
         unsecured promissory note bore interest at a rate of 10% (which is less
         than  the  interest  rate  on the  pre-modified  mortgage  note),  with
         interest  only payments  that were due monthly.  Principal  payments of
         $100,000  were made in 1993,  and the remaining  principal  balance was
         repaid with proceeds obtained from a term loan with Wells Fargo Bank in
         March 1994.

                                      F-8

<PAGE>
                         PUBLIC STORAGE PARTNERS II, LTD
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996


7.       NOTES PAYABLE (CONTINUED)

              In January 1996, the partnership obtained a $230,000 loan from PSI
         to repay and  terminate  the  unsecured  note  payable from Wells Fargo
         Bank. In December 1996, the loan was paid in full.

              The Partnership  believes that it is not practical to estimate the
         fair  value of its  long-term  fixed  rate debt at  December  31,  1996
         because there is no public  market for such debt and although  interest
         rates at December 31, 1996, are lower than when such debt was incurred,
         the Partnership does not believe it could obtain financing currently on
         such  favorable  terms.  This is in part due to the reduced  sources of
         real estate  financing  resulting from a variety of factors,  including
         the present condition of financial institutions.

              The principal  repayment schedule of the above note payable as of
         December 31, 1996, is as follows:


                   1997                           $502,000
                   1998                            549,000
                   1999                            601,000
                   2000                            657,000
                   2001                            718,000
                   Thereafter                    4,957,000
                                               -----------
                                                $7,984,000
                                               ===========

              Interest paid on the notes was $838,000, $939,000 and $977,000 for
         the years ended December 31, 1996, 1995 and 1994, respectively.

                                      F-9
<PAGE>
<TABLE>
<CAPTION>

                        Public Storage Partners II, Ltd.

             Schedule III - Real Estate and Accumulated Depreciation

                                                                                                    
                                                        Initial Cost                                
                                                    ------------------------                        
                                                                   Building,    Costs Subsequent    
                                                                  Land Imp &     to construction    
        Description            Encumbrances          Land          Equipment     (Improvements)     
------------------------      -----------------  ------------   --------------  -----------------   
<S>                                                <C>               <C>            <C>             
Eagle Rock                           -             $531,000          $758,000       $135,000        
Long Beach                           -              343,000           727,000        124,000        
Los Angeles                          -              298,000           686,000        182,000        
San Dimas                            -               95,000           584,000        164,000        
                              -----------------  ------------   --------------  -----------------   
Total                            $7,984,000(1)   $1,267,000        $2,755,000       $605,000        
                              =================  ============   ==============  ================= 
</TABLE>
<TABLE>
<CAPTION>

                        Public Storage Partners II, Ltd.

             Schedule III - Real Estate and Accumulated Depreciation

                                        Gross Carrying Amount
                                         at December 31, 1996
                                  ------------------------------------
                                               Building,
                                              Land Imp &                    Accumulated        Date
        Description               Land         Equipment        Total      Depreciation     Completed
------------------------         ---------    -----------   ----------     -------------    ---------
<S>                               <C>           <C>         <C>               <C>             <C> 
Eagle Rock                        $531,000      $893,000    $1,424,000        $654,000        4/78
Long Beach                         343,000       851,000     1,194,000         624,000       12/77
Los Angeles                        298,000       868,000     1,166,000         621,000        5/78
San Dimas                           95,000       748,000       843,000         535,000       12/77
------------------------         ---------    -----------   ----------     -------------    ---------
Total                           $1,267,000    $3,360,000    $4,627,000      $2,434,000
                                 =========    ===========   ==========     =============   

</TABLE>

 (1) All four  properties  are  encumbered by a promissory  note. The $7,984,000
     listed above is the principal balance remaining on the note at December 31,
     1996.

                                      F-10
<PAGE>
<TABLE>
<CAPTION>
                        Public Storage Partners II, Ltd.
                           Real Estate Reconciliation
                            Schedule III (continued)




(a)  The  following  is  a  reconciliation  of  costs  and  related  accumulated
     depreciation:

                                      COST

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

<S>                                                          <C>                  <C>                   <C>       
Balance at the beginning of the period                       $4,548,000           $4,461,000            $4,416,000

Additions during the period

     Improvements                                                79,000               87,000                45,000

Deductions during the period                                          -                    -                     -
                                                            -------------        ------------          ------------
Balance at the close of the period                           $4,627,000           $4,548,000            $4,461,000
                                                            =============        ============          ============



                     ACCUMULATED DEPRECIATION RECONCILIATION

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

Balance at the beginning of the period                       $2,265,000           $2,117,000            $1,978,000

Additions during the period

     Depreciation                                               169,000              148,000               139,000

Deductions during the period                                          -                    -                     -
                                                            -------------        ------------          ------------
Balance at the close of the period                           $2,434,000           $2,265,000            $2,117,000
                                                            =============        ============          ============
</TABLE>

                                      F-11