SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

For the quarterly period ended March 31, 2004
                               --------------

                                       or

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

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

Commission File Number:  1-8389

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

                California                              95-3551121
      ------------------------------     ---------------------------------------
      (State or other jurisdiction of    (I.R.S. Employer Identification Number)
      incorporation or organization)

 701 Western Avenue, Glendale, California               91201-2349
-----------------------------------------            --------------
(Address of principal executive offices)               (Zip Code)

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

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.

                                 [X] Yes [ ] No


Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                 [X] Yes [ ] No

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 6, 2004:

Common Stock, $.10 Par Value -  128,541,960 shares

Depositary Shares Each Representing 1/1,000 of a Share of Equity Stock, Series
A, $.01 Par Value - 8,776,102 depositary shares (representing 8,776.102 shares
of Equity Stock, Series A)

Equity Stock, Series AA, $.01 Par Value - 225,000 shares

Equity Stock, Series AAA, $.01 Par Value - 4,289,544 shares



<PAGE>


                              PUBLIC STORAGE, INC.

                                      INDEX


                                                                          Pages

PART I.  FINANCIAL INFORMATION
         ---------------------

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets at
            March 31, 2004 and December 31, 2003                              1

         Condensed Consolidated Statements of Income for the
            Three Months Ended March 31, 2004 and 2003                        2

         Condensed Consolidated Statement of Shareholders' Equity
            for the Three Months Ended March 31, 2004                         3

         Condensed Consolidated Statements of Cash Flows
            for the Three Months Ended March 31, 2004 and 2003                4

         Notes to Condensed Consolidated Financial Statements            5 - 31

Item 2.  Management's Discussion and Analysis of
            Financial Condition and Results of Operations               32 - 59

Item 2A. Risk Factors                                                   59 - 63

Item 3.  Quantitative and Qualitative Disclosures about Market Risk          63

Item 4.  Controls and Procedures                                        63 - 64

PART II. OTHER INFORMATION (Items 3 through 5 are not applicable)
         -----------------

Item 1.  Legal Proceedings                                                   65

Item 2.  Changes in Securities, Use of Proceeds and Issuer
         Purchases of Equity Securities                                      65

Item 6.  Exhibits and Reports on Form 8-K                               66 - 75





<PAGE>




                              PUBLIC STORAGE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (Amounts in thousands, except share data)

<TABLE>
<CAPTION>

                                                                                          March 31,        December 31,
                                                                                            2004               2003
                                                                                       ---------------   ---------------
                                                                                         (Unaudited)
                                       ASSETS

<S>                                                                                     <C>              <C>
Cash and cash equivalents....................................................           $     319,635    $    204,833
Real estate facilities, at cost:
   Land......................................................................               1,342,685       1,332,882
   Buildings.................................................................               3,823,058       3,792,616
                                                                                       ---------------   ---------------
                                                                                            5,165,743       5,125,498
   Accumulated depreciation..................................................              (1,196,142)     (1,153,059)
                                                                                       ---------------   ---------------
                                                                                            3,969,601       3,972,439
   Construction in process...................................................                  51,199          69,620
   Land held for development.................................................                  12,236          12,236
                                                                                       ---------------   ---------------
                                                                                            4,033,036       4,054,295

Investment in real estate entities...........................................                 335,739         336,696
Goodwill.....................................................................                  78,204          78,204
Intangible assets, net.......................................................                 109,638         111,289
Notes receivable, including amounts due from related parties.................                     488         100,510
Other assets.................................................................                  83,640          82,242
                                                                                       ---------------   ---------------
              Total assets...................................................           $   4,960,380    $  4,968,069
                                                                                       ===============   ===============
                       LIABILITIES AND SHAREHOLDERS' EQUITY

Notes payable................................................................           $      49,313    $     76,030
Preferred stock called for redemption........................................                       -         115,000
Accrued and other liabilities................................................                 134,500         131,103
                                                                                       ---------------   ---------------
         Total liabilities...................................................                 183,813         322,133
Minority interest:
   Preferred partnership interests...........................................                 285,000         285,000
   Other partnership interests...............................................                 139,528         141,137
Commitments and contingencies
Shareholders' equity:
   Cumulative Preferred Stock, $0.01 par value, 50,000,000 shares authorized,
     7,368,486 shares issued (in series) and outstanding, (5,763,986 at
     December 31, 2003) at liquidation preference............................               2,019,525       1,867,025

   Common Stock, $0.10 par value, 200,000,000 shares authorized, 127,712,895
     shares issued and outstanding (126,986,734 at December 31, 2003)........                  12,771          12,699
   Equity Stock, Series A, $0.01 par value, 200,000,000 shares authorized,
     8,776.102 shares issued and outstanding.................................                       -               -
   Paid-in capital...........................................................               2,449,998       2,438,632
   Cumulative net income.....................................................               2,435,727       2,366,660
   Cumulative distributions paid.............................................              (2,565,982)     (2,465,217)
                                                                                       ---------------   ---------------
         Total shareholders' equity..........................................               4,352,039       4,219,799
                                                                                       ---------------   ---------------
              Total liabilities and shareholders' equity.....................           $   4,960,380    $  4,968,069
                                                                                       ===============   ===============
</TABLE>

                             See accompanying notes
                                       1

<PAGE>


                              PUBLIC STORAGE, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
           (Amounts in thousands, except net income per share amounts)


                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                      Three Months Ended
                                                                                           March 31,
                                                                                 -------------------------------
                                                                                      2004              2003
                                                                                 --------------  ---------------
Revenues:
<S>                                                                              <C>              <C>
     Rental income:
         Self-storage facilities.........................................        $     206,045    $     189,496
         Commercial properties...........................................                2,695            2,846
         Containerized storage facilities................................                6,606            7,442
     Tenant reinsurance premiums.........................................                5,963            5,215
     Interest and other income...........................................                1,357            1,699
                                                                                 --------------  ---------------
                                                                                       222,666          206,698
                                                                                 --------------  ---------------
Expenses:
     Cost of operations:
         Self-storage facilities.........................................               75,562           65,299
         Commercial properties...........................................                1,141            1,193
         Containerized storage facilities................................                4,014            4,638
         Tenant reinsurance..............................................                3,135            2,699
     Depreciation and amortization.......................................               46,770           45,367
     General and administrative..........................................                5,884            4,250
     Interest expense....................................................                  100              453
                                                                                 --------------  ---------------
                                                                                       136,606          123,899
                                                                                 --------------  ---------------
Income before equity in earnings of real estate entities, minority interest
   in income, discontinued operations and gain on disposition of real estate
   investments...........................................................               86,060           82,799
Equity in earnings of real estate entities (Note 5)......................                4,057            4,687
Minority interest in income:
     Preferred partnership interests:
       Based on ongoing distributions....................................               (6,554)          (6,726)
       Special distribution and restructuring allocation (Note 8)........              (10,063)               -
     Other partnership interests.........................................               (4,003)          (3,942)
                                                                                 --------------  ---------------
Income before discontinued operations and gain on disposition of real estate
   investments...........................................................               69,497           76,818
Discontinued operations (Note 3).........................................                 (430)            (193)
Gain on disposition of real estate investments...........................                    -               14
                                                                                 --------------  ---------------
Net income...............................................................        $      69,067    $      76,639
                                                                                 ==============  ===============
Net income allocation:
---------------------
     Allocable to preferred shareholders:
        Based on distributions paid......................................        $      38,042    $      37,022
        Based on redemptions of preferred stock (Note 2).................                3,723            2,297
     Allocable to Equity Stock, Series A.................................                5,375            5,375
     Allocable to common shareholders (Restated - Note 2)................               21,927           31,945
                                                                                 --------------  ---------------
                                                                                 $      69,067    $      76,639
                                                                                 ==============  ===============
Per common share - basic and diluted (Restated - Note 2)
     Continuing operations...............................................        $        0.17    $        0.26
     Discontinued operations (Note 3)....................................                 -                -
                                                                                 --------------  ---------------
                                                                                 $        0.17    $        0.26
                                                                                 ==============  ===============
 Net income per depositary share of Equity Stock, Series A (basic and
 diluted)................................................................        $        0.61    $        0.61
                                                                                 ==============  ===============
Basic weighted average common shares outstanding.........................              127,182          124,078
                                                                                 ==============  ===============
Diluted weighted average common shares outstanding.......................              128,387          125,232
                                                                                 ==============  ===============
Weighted average shares of Equity Stock, Series A (basic and diluted)....                8,776            8,776
                                                                                 ==============  ===============
</TABLE>

                            See accompanying notes.
                                       2

<PAGE>


                              PUBLIC STORAGE, INC.
            CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                    (Amounts in thousands, except share data)

                                   (Unaudited)

<TABLE>
<CAPTION>


                                                                 Cumulative
                                                              Preferred Stock    Common Stock    Paid-in Capital
                                                              ----------------  ---------------  ----------------
<S>                                                             <C>               <C>              <C>
Balances at December 31, 2003.............................      $  1,867,025      $     12,699     $  2,438,632

Issuance of cumulative preferred stock:
   Series Y (1,600,000 shares)..........................              40,000                 -                -
   Series Z (4,500 shares)..............................             112,500                 -           (3,744)
   Series A (4,600 shares)..............................             115,000                 -           (3,823)

Redemption of cumulative preferred stock, including redemption costs:
   Series L (4,600 shares)................................          (115,000)                -              (21)

Restructuring of Series N preferred units (Note 8)......                   -                 -            2,063

Issuance of common stock:
   Exercise of employee stock options (811,161 shares)....                 -                81           20,261
   Stock based compensation (Note 11) ....................                 -                 -              588

Repurchase of common stock (85,000 shares)................                 -                (9)          (3,958)

Net income................................................                 -                 -                -

Cash distributions:
   Cumulative preferred stock (Note 9)....................                 -                 -                -
   Equity Stock, Series A ($0.61 per depositary share)....                 -                 -                -
   Common Stock ($0.45 per share).........................                 -                 -                -
                                                              ----------------  ---------------  ----------------
Balances at March 31, 2004................................      $  2,019,525      $     12,771     $  2,449,998
                                                              ================  ===============  ================

</TABLE>

                              PUBLIC STORAGE, INC.
            CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                    (Amounts in thousands, except share data)

                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                                         Total
                                                                 Cumulative Net      Cumulative      Shareholders'
                                                                     Income        Distributions         Equity
                                                               -----------------   ---------------   ----------------
<S>                                                                <C>              <C>               <C>
Balances at December 31, 2003.............................         $  2,366,660     $ (2,465,217)     $  4,219,799

Issuance of cumulative preferred stock:
   Series Y (1,600,000 shares)..........................                      -                -            40,000
   Series Z (4,500 shares)..............................                      -                -           108,756
   Series A (4,600 shares)..............................                      -                -           111,177

Redemption of cumulative preferred stock, including redemption costs:
   Series L (4,600 shares)................................                    -                -          (115,021)

Restructuring of Series N preferred units (Note 8)......                      -                -             2,063

Issuance of common stock:
   Exercise of employee stock options (811,161 shares)....                    -                -            20,342
   Stock based compensation (Note 11) ....................                    -                -               588

Repurchase of common stock (85,000 shares)................                    -                -            (3,967)

Net income................................................               69,067                -            69,067

Cash distributions:
   Cumulative preferred stock (Note 9)....................                    -          (38,042)          (38,042)
   Equity Stock, Series A ($0.61 per depositary share)....                    -           (5,375)           (5,375)
   Common Stock ($0.45 per share).........................                    -          (57,348)          (57,348)
                                                               -----------------   ---------------   ---------------
Balances at March 31, 2004................................          $  2,435,727     $ (2,565,982)     $  4,352,039
                                                               =================   ===============   ===============

</TABLE>

                            See accompanying notes.
                                       3
<PAGE>



                              PUBLIC STORAGE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)

                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                          Three Months Ended
                                                                                               March 31,
                                                                                   -------------------------------------
                                                                                       2004                 2003
                                                                                   ----------------    -----------------
Cash flows from operating activities:
<S>                                                                                <C>                  <C>
  Net income..............................................................         $       69,067       $       76,639
   Adjustments to reconcile net income to net cash provided by operating
     activities:
     Gain on sale of assets, net of impairment charge included in equity in
       earnings of real estate entities (Note 5)..........................                      -                2,130
     Gain on sale of real estate investments..............................                      -                  (14)
     Depreciation and amortization........................................                 46,770               45,367
     Depreciation included in equity in earnings of real estate entities..                  8,275                6,294
     Minority interest in income..........................................                 20,620               10,668
     Depreciation, impairment charges and adjustments associated with
       discontinued operations (Note 3) ..................................                    247                  673
     Other................................................................                  1,948                5,158
                                                                                   ----------------    -----------------
              Total adjustments...........................................                 77,860               70,276
                                                                                   ----------------    -----------------
                  Net cash provided by operating activities...............                146,927              146,915
                                                                                   ----------------    -----------------
Cash flows from investing activities:
     Principal payments received on mortgage notes receivable.............                100,022                   43
     Capital improvements to real estate facilities.......................                 (2,705)              (2,333)
     Construction in process and acquisition of land held for development.                (19,119)             (24,184)
     Proceeds from the disposition of land and real estate facilities.....                      -                7,713
     Investment in real estate entities...................................                 (8,261)             (10,302)
     Other investments....................................................                   (701)                   -
                                                                                   ----------------    -----------------
                  Net cash used in investing activities...................                 69,236              (29,063)
                                                                                   ----------------    -----------------
Cash flows from financing activities:
     Borrowings on revolving line of credit...............................                      -               25,000
     Principal payments on notes payable..................................                (26,717)             (26,756)
     Net proceeds from the issuance of common stock.......................                 20,342                3,472
     Net proceeds from the issuance of preferred stock....................                259,933                    -
     Repurchase of common stock...........................................                 (3,967)                   -
     Redemption of preferred stock........................................               (230,021)             (57,517)
     Distributions paid to shareholders...................................               (100,765)             (98,392)
     Distributions paid to holders of preferred partnership interests.....                 (6,554)              (6,726)
     Special distribution paid to holders of preferred partnership interests
       (Note 8)...........................................................                 (8,000)                   -
     Distributions paid to other partnership interests....................                 (5,578)              (5,588)
     Investment (divestment) by minority interests........................                    (34)                 548
                                                                                   ----------------    -----------------
                  Net cash used in provided by financing activities.......               (101,361)            (165,959)
                                                                                   ----------------    -----------------
Net increase (decrease) in cash and cash equivalents......................                114,802              (48,107)
Cash and cash equivalents at the beginning of the period..................                204,833              103,124
                                                                                   ----------------    -----------------
Cash and cash equivalents at the end of the period........................         $      319,635       $       55,017
                                                                                   ================    =================
</TABLE>

                            See accompanying notes.
                                       4

<PAGE>


                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)



1.   Description of the Business
     ----------------------------

              Public Storage, Inc. (the "Company") is a California corporation,
     which was organized in 1980. We are a fully integrated, self-administered
     and self-managed real estate investment trust ("REIT") whose principal
     business activities include the acquisition, development, ownership and
     operation of self-storage facilities which offer storage spaces for lease,
     usually on a month-to-month basis, for personal and business use. In
     addition, to a much lesser extent, we have interests in commercial
     properties, containing commercial and industrial rental space, and
     interests in facilities that lease storage containers.

              We invest in real estate facilities by acquiring facilities
     directly or by acquiring interest in real estate entities that own
     facilities. At March 31, 2004, we had direct and indirect equity interests
     in 1,413 self-storage facilities with 85.5 million net rentable square feet
     located in 37 states operating under the "Public Storage" name. We also
     have direct and indirect equity interests in approximately 20.1 million net
     rentable square feet of commercial and industrial space located in 10
     states.

2.   Summary of Significant Accounting Policies
     ------------------------------------------

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

              The accompanying unaudited condensed consolidated financial
     statements have been prepared in accordance with generally accepted
     accounting principles for interim financial information and with
     instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
     they do not include all of the information and footnotes required by
     generally accepted accounting principles for complete financial statements.
     In the opinion of management, all adjustments (consisting of normal
     recurring accruals) necessary for a fair presentation have been included.
     Operating results for the three months ended March 31, 2004 are not
     necessarily indicative of the results that may be expected for the year
     ended December 31, 2004. For further information, refer to the consolidated
     financial statements and footnotes thereto included in the Company's annual
     report on Form 10-K for the year ended December 31, 2003.

              The consolidated financial statements include the accounts of the
     Company and 38 controlled entities (the "Consolidated Entities").
     Collectively, the Company and the Consolidated Entities own a total of
     1,385 real estate facilities, consisting of 1,377 self-storage facilities,
     five industrial facilities used by the containerized storage operations and
     three commercial properties. All intercompany transactions among the
     Company and the Consolidated Entities are eliminated in consolidation.

              At March 31, 2004, we had equity investments in seven limited
     partnerships in which we do not have a controlling interest. These limited
     partnerships collectively own 36 self-storage facilities, which are managed
     by the Company. In addition, at March 31, 2004, we own approximately 44% of
     the common equity of PS Business Parks, Inc. ("PSB"), which owns and
     operates approximately 18.3 million net rentable square feet of commercial
     space at March 31, 2004. We do not control these entities. Accordingly, our
     investment in these limited partnerships and PSB (these entities are
     referred to collectively as the "Unconsolidated Entities") are accounted
     for using the equity method.

              Certain amounts previously reported have been reclassified to
     conform to the March 31, 2004 presentation, including discontinued
     operations (see Note 3), and the application of the Securities and Exchange
     Commission ("SEC") Observer's clarification of Emerging Issues Task Force
     Topic ("EITF") D-42 (see "Net Income per Common Share" below).

                                       5
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

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

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

     Income Taxes
     ------------

              For all taxable years subsequent to 1980, the Company qualified
     and intends to continue to qualify as a REIT, as defined in Section 856 of
     the Internal Revenue Code. As a REIT, we are not taxed on that portion of
     our taxable income which is distributed to our shareholders, provided that
     we meet certain tests. We believe we will meet these tests during 2004 and,
     accordingly, no provision for income taxes has been made in the
     accompanying financial statements.

     Financial Instruments
     ---------------------

              The methods and assumptions used to estimate the fair value of
     financial instruments are described below. We have estimated the fair value
     of our financial instruments using available market information and
     appropriate valuation methodologies. Considerable judgment is required in
     interpreting market data to develop estimates of market value. Accordingly,
     estimated fair values are not necessarily indicative of the amounts that
     could be realized in current market exchanges.

              For purposes of financial statement presentation, we consider all
     highly liquid debt instruments purchased with a maturity of three months or
     less to be cash equivalents.

              Due to the short period to maturity of our cash and cash
     equivalents, accounts receivable, other financial instruments included in
     other assets, and accrued and other liabilities, the carrying values as
     presented on the consolidated balance sheets are reasonable estimates of
     fair value. The carrying amount of notes payable approximates fair value
     because the aggregate applicable interest rate approximates current market
     rates for similar loans and because the relatively short time until
     maturity reduces the effect of differing interest rates.

              Financial assets that are exposed to credit risk consist primarily
     of cash and cash equivalents, accounts receivable, and notes receivable.
     Cash and cash equivalents, which consist of short-term investments,
     including commercial paper, are only invested in entities with an
     investment grade rating. Accounts receivable are not a significant portion
     of total assets and are comprised of a large number of individual
     customers.

              Included in cash and cash equivalents at March 31, 2004 is
     $391,000 ($1,835,000 at December 31, 2003) held by STOR-Re Mutual Insurance
     Company, Inc. ("STOR-Re"), an association captive insurance company owned
     by the Company and its affiliates, which is 90.1% owned by the Company and
     the Consolidated Entities. Insurance and other regulations place
     significant restrictions on our ability to withdraw these funds for
     purposes other than insurance activities. Other assets at March 31, 2004
     include investments totaling $27,185,000 ($27,995,000 at December 31, 2003)
     in held to maturity debt securities owned by STOR-Re stated at amortized
     cost, which approximates fair value.

                                       6
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

     Real Estate Facilities
     ----------------------

              Real estate facilities are recorded at cost. Costs associated with
     the acquisition, development, construction, renovation and improvement of
     properties are capitalized. Interest, property taxes, and other costs
     associated with development incurred during the construction period are
     capitalized as building cost. Expenditures for repairs and maintenance are
     charged to expense as incurred. Depreciation is computed using the
     straight-line method over the estimated useful lives of the buildings and
     improvements, which are generally between 5 and 25 years.

     Evaluation of Asset Impairment
     ------------------------------

              In August 2001, the Financial  Accounting Standards Board ("FASB")
      issued Statement of Financial  Accounting  Standards No. 144,  "Accounting
      for the Impairment or Disposal of Long-Lived  Assets" ("SFAS No. 144"). In
      June 2001, the FASB issued Statement of Financial Accounting Standards No.
      142,  "Goodwill and Other Intangible  Assets" ("SFAS No. 142"). We adopted
      both of these statements effective January 1, 2002.

              With respect to goodwill, we evaluate impairment annually through
     a two-step process. In the first step, if the fair value of the reporting
     unit to which the goodwill applies is equal to or greater than the carrying
     amount of the assets of the reporting unit, including the goodwill, the
     goodwill is considered unimpaired and the second step is unnecessary. If,
     however, the fair value of the reporting unit including goodwill is less
     than the carrying amount, the second step is performed. In this test, we
     compute the implied fair value of the goodwill based upon the allocations
     that would be made to the goodwill, other assets and liabilities of the
     reporting unit if a business combination transaction were consummated at
     the fair value of the reporting unit. An impairment loss is recorded to the
     extent that the implied fair value of the goodwill is less than the
     goodwill's carrying amount. No impairments of our goodwill were identified
     in our annual evaluation at December 31, 2003.

              With respect to other long-lived assets, we evaluate such assets
     on a quarterly basis. We first evaluate these assets for indicators of
     impairment such as a) a significant decrease in the market price of a
     long-lived asset, b) a significant adverse change in the extent or manner
     in which a long-lived asset is being used or in its physical condition, c)
     a significant adverse change in legal factors or the business climate that
     could affect the value of the long-lived asset, d) an accumulation of costs
     significantly in excess of the amount originally projected for the
     acquisition or construction of the long-lived asset, or e) a current-period
     operating or cash flow loss combined with a history of operating or cash
     flow losses or a projection or forecast that demonstrates continuing losses
     associated with the use of the long-lived asset. When any such indicators
     of impairment are noted, we compare the carrying value of these assets to
     the future estimated undiscounted cash flows attributable to these assets.
     If the asset's recoverable amount is less than the carrying value of the
     asset, then an impairment charge is booked for the excess of carrying value
     over the asset's fair value.

              Any long-lived assets which we expect to sell or otherwise dispose
     of prior to their previously estimated useful life are stated at what we
     estimate to be the lower of their estimated net realizable value (less cost
     to sell) or their carrying value. We recorded $169,000 in impairment
     charges related to a containerized storage facility that was identified for
     closure in the first quarter of 2004 (see Note 3). No additional
     impairments were identified from our evaluations as of March 31, 2004.

     Accounting for Stock-Based Compensation
     ---------------------------------------

              We utilize the Fair Value Method (as defined in Note 11) of
     accounting for our employee stock options issued after December 31, 2001,
     and utilize the APB 25 Method (as defined in Note 11) for employee stock
     options issued prior to January 1, 2002. Restricted Stock Unit expense is
     recorded over the relevant vesting period. For the three months ended March
     31, 2004, a total of $119,000 in compensation expense ($99,000 for the
     three months ended March 31, 2003) with respect to stock options was
     included in general and administrative expense. During the three months
     ended March 31, 2004, a total of $534,000 (none for the three months ended
     March 31, 2003) in restricted stock compensation expense was included in
     general and administrative expense. See Note 11 for a full discussion of
     our accounting policies with respect to employee stock options and
     restricted stock units.

                                       7
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

     Other Assets
     ------------

              Other assets primarily consist of containers and equipment
     associated with the containerized storage operations, assets associated
     with the truck rental business, accounts receivable, and prepaid expenses.
     Accounts receivable from customers are net of allowances for doubtful
     accounts.

              Containers and equipment utilized in our containerized storage
     business totaled $9,445,000 at March 31, 2004 ($10,895,000 at December 31,
     2003). The carrying amounts are net of accumulated depreciation and asset
     impairment charges. As discussed in Note 3, during the three months ended
     March 31, 2004, impairment charges amounting to $169,000 were recorded with
     respect to containers and equipment utilized in the discontinued
     containerized storage operations.

              Included in depreciation and amortization expense for the three
     months ended March 31, 2004 and 2003 is $2,059,000 and $1,703,000,
     respectively, related to other assets. Included in discontinued operations
     for the three months ended March 31, 2004 and 2003, respectively, is
     depreciation expense of $55,000 and $503,000 related to depreciation of
     containers and equipment of the discontinued operations of the
     containerized storage business.

              Other assets at March 31, 2004 also include $27,185,000
     ($27,995,000 at December 31, 2003) in held to maturity debt securities
     owned by STOR-Re stated at amortized cost which approximates fair market
     value.

     Accrued and Other Liabilities
     -----------------------------

              Accrued and other liabilities consist primarily of trade payables,
     real and personal property tax accruals, accrued interest, and losses and
     loss adjustment liabilities, as discussed below.

              Liabilities for losses and loss adjustment expenses include an
     amount determined from loss reports and individual cases and an amount,
     based on recommendations from an outside actuary using a frequency and
     severity method, for losses incurred but not reported. Determining the
     liability for unpaid losses and loss adjustment expense is based upon
     estimates. While we believe that the amount is adequate, the ultimate loss
     may be in excess of or less than the amounts provided. The methods for
     making such estimates and for establishing the resulting liability are
     continually reviewed.

              STOR-Re, which is consolidated with the Company, was formed in
     1994 as an association captive insurance company owned by the Company and
     affiliates of the Company. STOR-Re provides limited property and liability
     insurance to the Company and its affiliates. The Company also utilizes
     other insurance carriers to provide property and liability insurance
     coverage in excess of STOR-Re's limitations which are described in Note 14.
     STOR-Re accrues liabilities for losses and loss adjustment expense that it
     covers, which at March 31, 2004 totaled $30,079,000 ($28,741,000 at
     December 31, 2003).

              PS Insurance Company, Ltd., a wholly-owned subsidiary of the
     Company, reinsures policies against claims for losses to goods stored by
     tenants in our self-storage facilities. PS Insurance Company, Ltd. has
     outside third-party insurance coverage for losses from any individual event
     that exceeds a loss of $500,000, to a maximum of $10,000,000. Losses below
     the third-party insurers' deductible amounts are accrued as cost of
     operations for the tenant insurance operations. The accrued liability for
     losses and loss adjustment expense totaled $2,845,000 at March 31, 2004
     ($2,486,000 at December 31, 2003).

                                       8
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

     Intangible Assets and Goodwill
     ------------------------------

              Intangible assets consist of property management contracts
     ($165,000,000) and the excess of acquisition cost over the fair value of
     net tangible and identifiable intangible assets or "goodwill" ($94,719,000)
     acquired in business combinations. Our goodwill has an indeterminate life
     and, accordingly, is not amortized. Our other intangibles have a defined
     life and are amortized on a straight-line basis over a 25 year period.

              Goodwill is net of accumulated amortization of $16,515,000 at
     March 31, 2004 and December 31, 2003. At March 31, 2004, property
     management contracts are net of accumulated amortization of $55,362,000
     ($53,711,000 at December 31, 2003). Included in depreciation and
     amortization expense for each of the three months ended March 31, 2004 and
     2003 is $1,651,000 with respect to the amortization of property management
     contracts.

     Revenue and Expense Recognition
     -------------------------------

              Rental income, which is generally earned pursuant to
     month-to-month leases for storage space, is recognized as earned.
     Promotional discounts are recognized as a reduction to rental income over
     the promotional period, which is generally during the first month of
     occupancy. Late charges and administrative fees are recognized as rental
     income when collected. Tenant reinsurance premiums are recognized as
     premium revenue when collected. Interest income is recognized as earned.
     Equity in earnings of real estate entities is recognized based on our
     ownership interest in the earnings of each of the unconsolidated real
     estate entities.

              We accrue for property tax expense based upon estimates and
     historical trends. If these estimates are incorrect, the timing of expense
     recognition could be affected.

              Cost of operations, general and administrative expense, interest
     expense, as well as television, yellow page, and other advertising
     expenditures are expensed as incurred. Accordingly, the amounts incurred in
     an interim period may not be indicative of the amounts to be incurred
     during a full year. Television, yellow page, and other advertising expense
     totaled $6,844,000 and $4,387,000 for the three months ended March 31, 2004
     and 2003, respectively.

     Environmental Costs
     -------------------

              Our policy is to accrue environmental assessments and/or
     remediation cost when it is probable that such efforts will be required and
     the related cost can be reasonably estimated. Our current practice is to
     conduct environmental investigations in connection with property
     acquisitions. Although there can be no assurance, we are not aware of any
     environmental contamination of any of our facilities, which, individually
     or in the aggregate, would be material to our overall business, financial
     condition, or results of operations.

     Net Income per Common Share
     ---------------------------

              Distributions paid (or accrued) to the holders of our Cumulative
     Preferred Stock totaling $38,042,000 and $37,022,000 for the three months
     ended March 31, 2004 and 2003, respectively, have been deducted from net
     income to arrive at net income allocable to our common shareholders.

                                       9

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

             Emerging Issues Task Force ("EITF") Topic D-42, "The Effect on the
     Calculation of Earnings per Share for the Redemption or the Induced
     Conversion of Preferred Stock" provides, among other things, that any
     excess of (1) the fair value of the consideration transferred to the
     holders of preferred stock redeemed over (2) the carrying amount of the
     preferred stock should be subtracted from net earnings to determine net
     earnings available to common stockholders in the calculation of earnings
     per share. At the July 31, 2003 meeting of the EITF, the Securities and
     Exchange Commission Observer clarified that for purposes of applying EITF
     Topic D-42, the carrying amount of the preferred stock should be reduced by
     the issuance costs of the preferred stock, regardless of where in the
     stockholders' equity section those costs were initially classified on
     issuance. We implemented the SEC Observer's clarification in the quarter
     ended September 30, 2003.

              In conformity with the SEC Observer's clarification, an additional
     $3,723,000 ($0.03 per diluted share) and $2,297,000 ($0.02 per diluted
     share) was allocated to preferred stockholders for the excess of the
     redemption amount over the carrying amount of our Cumulative Preferred
     Stock for the three months ended March 31, 2004 and 2003, respectively. It
     is our policy to record such allocation at the time the securities are
     called for redemption.

              Prior to the SEC Observer's clarification, we had not allocated
     additional income to the preferred shareholders upon redemption of our
     preferred securities, because the amounts paid in redemption were equal to
     the redemption value stated on our balance sheet. Accordingly, amounts
     previously presented for the three months ended March 31, 2003 have been
     restated to conform to the SEC Observer's clarification.

              Net income allocated to our common shareholders has been further
     allocated among our two classes of common stock; our regular common stock
     and our Equity Stock, Series A. The allocation among each class was based
     upon the two-class method. Under the two-class method, earnings per share
     for each class of common stock is determined according to dividends
     declared (or accumulated) and participation rights in undistributed
     earnings. Under the two-class method, the Equity Stock, Series A was
     allocated net income of $5,375,000 for each of the three months ended March
     31, 2004 and 2003. The remaining $21,927,000 and $31,945,000 (as restated
     for the impact of EITF Topic D-42) for the three months ended March 31,
     2004 and 2003, respectively, was allocated to the regular common shares.

              Basic net income per share is computed using the weighted average
     common shares outstanding (prior to the dilutive impact of stock options
     and restricted stock units outstanding). Diluted net income per common
     share is computed using the weighted average common shares outstanding
     (adjusted for the dilutive impact of stock options and restricted stock
     units outstanding). Weighted average common shares excludes shares owned by
     the Consolidated Entities for the three months ended March 31, 2004 and
     2003, as these shares of common stock are eliminated in consolidation (see
     Note 9).

3.   Discontinued Operations
     -----------------------

              Statement of  Financial  Accounting  Standards  No. 144 ("SFAS No.
      144")  addresses  accounting  for  discontinued  operations.  SFAS No. 144
      requires  the  segregation  of all disposed  components  of an entity with
      operations that (i) can be  distinguished  from the rest of the entity and
      (ii) will be  eliminated  from the ongoing  operations  of the entity in a
      disposal transaction.

              During 2002, we adopted a business plan that included the closure
     of 22 non-strategic containerized storage facilities. During 2003 and the
     three months ended March 31, 2004, an additional ten facilities (nine and
     one, respectively) were identified as non-strategic and scheduled for
     closure. Each of these 32 containerized storage facilities (collectively,
     the "Closed Facilities") represented components of our containerized
     storage business segment. The related assets of the Closed Facilities
     (consisting primarily of storage containers) were deemed not recoverable
     from operations in future periods, and as a result asset impairment charges
     for the excess of these assets' net book value over their fair value,
     determined based upon the values of similar assets, was recorded. In the
     three months ended March 31, 2004, we recorded asset impairment charges in
     the amount of $169,000 relating to the closure of the one facility during
     this period (none in the three months ended March 31, 2003). There are no
     significant assets or liabilities of the Closed Facilities, other than
     remaining lease obligations with total future payments of $711,000 through
     May 2005.

                                       10
<PAGE>


                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

              Four self storage facilities that we owned in the Knoxville market
     (the "Knoxville Facilities") were disposed of on July 25, 2003 for
     aggregate gross proceeds of $11.0 million. The Company financed a
     substantial part of the buyer's consideration in exchange for a note
     receivable from the buyer, and in accordance with generally accepted
     accounting principles, the Company deferred the sale and the corresponding
     gain of approximately $4.5 million until October 2003 at which time the
     note receivable was collected in full.

              On October 16, 2003, we sold a self-storage facility located in
     Perrysburg, Ohio for $2.3 million in cash. A gain of approximately $1.1
     million was recognized from the sale of this property in the fourth quarter
     of 2003. This facility and the Knoxville Facilities (collectively, the
     "Sold Self-Storage Facilities") are reported as discontinued operations.

              The historical operations of the Closed Facilities (including the
     asset impairment charges) and the Sold Self-Storage Facilities are
     classified as discontinued operations. The rental income, cost of
     operations, and depreciation expense with respect to these facilities for
     each period presented are included in the line-item "Discontinued
     Operations" on the consolidated statement of income.

              The following table summarizes the historical operations of the
     Closed Facilities and the Sold Self-Storage Facilities:

DISCONTINUED OPERATIONS:

                                               Three Months Ended March 31,
                                        ---------------------------------------
                                             2004        2003         Change
                                        ------------  -----------  ------------
                                                  (Amounts in thousands)
Rental income (a):
  Closed Facilities...............            802        3,572        (2,770)
  Sold Self-Storage Facilities....              -          463          (463)
                                        ------------  -----------  ------------
Total rental income...............            802        4,035        (3,233)
                                        ------------  -----------  ------------
Cost of operations (a):
  Closed Facilities...............            985        3,369        (2,384)
  Sold Self-Storage Facilities....              -          186          (186)
                                        ------------  -----------  ------------
Total cost of operations..........            985        3,555        (2,570)
                                        ------------  -----------  ------------
Depreciation expense (a):
  Closed Facilities...............             78          514          (436)
  Sold Self-Storage Facilities....              -          159          (159)
                                        ------------  -----------  ------------
Total depreciation ...............             78          673          (595)
                                        ------------  -----------  ------------
Asset impairment charges (b):
  Closed Facilities...............            169            -           169
                                        ------------  -----------  ------------
Net discontinued operations (c)...      $    (430)    $   (193)    $    (237)
                                        ============  ===========  ============

(a)      These amounts represent the historical operations of the Closed
         Facilities and the Sold Self-Storage Facilities, and include amounts
         previously classified as rental income, cost of operations, and
         depreciation expense in the financial statements in prior periods.

(b)      Asset impairment charges with respect to the containerized storage
         assets of one facility in the amount of $169,000 were recorded in the
         three months ended March 31, 2004 (none in the three months ended March
         31, 2003).
(c)      There was no significant per-share impact from discontinued operations
         for the three months ended March 31, 2004 and 2003.

                                       11
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

4.   Real Estate Facilities
     ----------------------

              Activity in real estate facilities is as follows:


                                                              Three Months Ended
                                                                March 31, 2004
                                                             -------------------
                                                                (In thousands)
Operating facilities, at cost:
   Balance at December 31, 2003........................        $    5,125,498
   Newly developed facilities opened for operations....                37,540
   Capital improvements................................                 2,705
                                                             -------------------
   Balance at March 31, 2004...........................             5,165,743
                                                             -------------------
Accumulated depreciation:
   Balance at December 31, 2003........................            (1,153,059)
   Additions during the year...........................               (43,083)
                                                             -------------------
   Balance at March 31, 2004...........................            (1,196,142)
                                                             -------------------
Construction in process:
   Balance at December 31, 2003........................                69,620
   Current development.................................                19,119
   Newly developed facilities opened for operations....               (37,540)
                                                             -------------------
   Balance at March 31, 2004...........................                51,199
                                                             -------------------
Land held for development:
   Balance at December 31, 2003........................                12,236
   Disposition of land.................................                     -
   Transfers to construction in progress...............                     -
                                                             -------------------
   Balance at March 31, 2004...........................                12,236
                                                             -------------------

Total real estate facilities...........................        $    4,033,036
                                                             ===================

              During the three months ended March 31, 2004, we opened three
     newly developed self-storage facilities (237,000 net rentable square feet)
     with an aggregate cost of $27,395,000. We also completed projects to
     convert 105,000 net rentable square feet of industrial space previously
     used by the discontinued containerized storage business into 116,000 net
     rentable square feet of self-storage space for an aggregate of $3,296,000,
     $326,000 in additional costs on newly developed facilities opened in 2003,
     and $6,523,000 in various expansion and remodeling projects to enhance the
     visual and structural appeal of certain of the Company's existing
     self-storage facilities.

              Construction in process at March 31, 2004 consists primarily of 11
     self-storage facilities (718,000 net rentable square feet) and 31 expansion
     projects and various remodeling projects to enhance the visual and
     structural appeal of existing self-storage facilities. In addition, we have
     five parcels of land held for development with total costs of approximately
     $12,236,000.

              Our policy is to capitalize interest incurred on debt during the
     course of construction of our self-storage facilities. Interest capitalized
     during the three months ended March 31, 2004 was $1,125,000 compared to
     $1,525,000 for the same period in 2003.

                                       12

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

5.   Investment in Real Estate Entities
     ----------------------------------

              At March 31, 2004, our investments in real estate entities consist
     of ownership interests in seven partnerships, which principally own
     self-storage facilities, and our ownership interest in PSB. These interests
     are non-controlling interests of less than 50% and are accounted for using
     the equity method of accounting. Accordingly, earnings are recognized based
     upon our ownership interest in each of the partnerships. The accounting
     policies of these entities are similar to the Company's.

              For the three months ended March 31, 2004, we recognized earnings
     from our investments of $4,057,000 as compared to $4,687,000 for the same
     period in 2003. For the three months ended March 31, 2004, our equity in
     earnings includes our net pro-rata share of PSB's application of EITF Topic
     D-42, which reduced our equity in earnings a total of $943,000. For the
     three months ended March 31, 2003, our equity in earnings includes our
     pro-rata share of PSB's impairment charge with respect to impending real
     estate sales, offset by a gain on sale of their real estate assets, which
     reduced our equity in earnings $2,130,000. See the condensed financial
     information with respect to PSB below for further information regarding
     these items recorded by PSB.

              There were no investments made in the real estate entities for the
     three months ended March 31, 2004 and March 31, 2003. We received
     distributions from our investments for the three months ended March 31,
     2004 and 2003, in the amount of $5,014,000 and $2,809,000, respectively.

              The following table sets forth our investments in real estate
     entities at March 31, 2004 and December 31, 2003, and our equity in
     earnings of real estate entities for the three months ended March 31, 2004
     and 2003 (amounts in thousands):

<TABLE>
<CAPTION>
                                                               Equity in Earnings of Real
                             Investments in Real Estate         Estate Entities for the
                                    Entities at               Three Months Ended March 31,
                             ------------------------------   ----------------------------
                                March 31,      December 31,
                                  2004             2003           2004            2003
                             -------------    -------------   -------------  -------------
<S>                           <C>             <C>             <C>            <C>
PSB (a)..................     $   281,269     $   282,428     $     2,524    $     3,419
Other Investments........          54,470          54,268           1,533          1,268
                             -------------    -------------   -------------  -------------
  Total..................     $   335,739     $   336,696     $     4,057    $     4,687
                             ============    ==============   =============  =============
</TABLE>

(a)      Equity in earnings of real estate entities includes our pro-rata share
         of the net impact of gains on sale of assets and impairment charges
         relating to the impending sale of real estate assets as well as our
         pro-rata share of the impact of the application of EITF Topic D-42 on
         redemptions of preferred securities recorded by PSB. Our net pro-rata
         impact from these items resulted in a reduction of equity in earnings
         of $943,000 for the three months ended March 31, 2004, as compared to a
         reduction in equity in earnings of $2,130,000 for the three months
         ended March 31, 2003.

     Investment in PS Business Parks, Inc.
     -------------------------------------

              PS Business Parks, Inc. is a REIT traded on the American Stock
     Exchange, which controls an operating partnership (collectively, the REIT
     and the operating partnership are referred to as "PSB"). The Company has a
     44% common equity interest in PSB as of March 31, 2004. This 44% common
     equity interest is comprised of the ownership of 5,418,273 shares of common
     stock and 7,305,355 limited partnership units in the operating partnership;
     these limited partnership units are convertible at our option, subject to
     certain conditions, on a one-for-one basis into PSB common stock. Based
     upon the closing price at March 31, 2004 ($46.35 per share of PSB common
     stock), the shares and units had a market value of approximately $589.7
     million as compared to a book value of $281.3 million.

                                       13
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

              At March  31,  2004,  PSB owned and  operated  approximately  18.3
     million net rentable  square feet of  commercial  space.  In addition,  PSB
     manages  approximately 960,000 net rentable square feet of commercial space
     owned by the Company  and the  Consolidated  Entities  pursuant to property
     management agreements.

              The following table sets forth the condensed statements of
     operations for the three months ended March 31, 2004 and for the same
     period in 2003, and the condensed balance sheets of PSB at March 31, 2004
     and December 31, 2003. The amounts below represent 100% of PSB's balances
     and not our pro-rata share.

<TABLE>
<CAPTION>

                                                            Three Months Ended March 31,
                                                         -----------------------------------
                                                               2004               2003
                                                         ----------------   ----------------
                                                                (Amounts in thousands)

<S>                                                      <C>                 <C>
   Total revenue prior to gains on sale.............     $       55,357      $       49,607
   Cost of operations and other expenses............            (19,029)            (15,575)
   Depreciation and amortization....................            (17,884)            (13,685)
   Discontinued operations (a)......................                 21              (3,841)
   Minority interest................................             (6,482)             (6,775)
                                                         ----------------   ----------------
     Net income.....................................     $       11,983      $        9,731
                                                         ===============    ================

                                                            March 31,           December 31,
                                                              2004                 2003
                                                         ----------------   ----------------
                                                             (Amounts in thousands)
   Total assets (primarily real estate).............     $    1,348,726      $    1,358,861
   Total debt.......................................             80,540             264,694
   Preferred stock and units called for redemption..             65,573                   -
   Other liabilities................................             37,585              35,701
   Preferred equity and preferred minority interest.            493,350             386,423
   Common equity.............................                   671,678             672,043

</TABLE>


(a)  Includes income from discontinued operations totaling $21,000 and $270,000
     for the three months ended March 31, 2004 and 2003, respectively, and
     equity in income of discontinued joint venture totaling $1,796,000 for the
     three months ended March 31, 2003 (none for the same period in 2004).
     Included in discontinued operations for the three months ended March 31,
     2003 is an impairment charge of $5,907,000 on properties held for sale
     (none for the same period in 2004).


     Other Investments
     -----------------

              The Other Investments consist primarily of an average 41% common
     equity ownership, which we owned during each of the three months ended
     March 31, 2004 and 2003, in seven limited partnerships (collectively, the
     "Other Investments") owning an aggregate of 36 storage facilities. For the
     three months ended March 31, 2004 and 2003, we did not acquire any
     additional equity interests in these entities.

              The following table sets forth certain condensed financial
     information (representing 100% of these entities' balances and not our
     pro-rata share) with respect to Other Investments:

                                       14


<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                  Three Months Ended March 31,
                                                              -----------------------------------
                                                                    2004               2003
                                                              ----------------   ----------------
                                                                     (Amounts in thousands)

<S>                                                           <C>                 <C>
   Total revenue........................................      $        6,855      $        6,380
   Cost of operations and other expenses................              (2,184)             (2,251)
   Depreciation and amortization........................                (578)               (620)
                                                              ----------------   ----------------
     Net income.........................................      $        4,093      $        3,509
                                                              ================   ================

                                                                  March 31,           December 31,
                                                                   2004                  2003
                                                              ----------------   ----------------
                                                                     (Amounts in thousands)
   Total assets (primarily storage facilities)..........      $       56,667      $       56,592
   Total debt...........................................               1,435               1,930
   Other liabilities....................................               1,735               1,618
   Partners' equity.....................................              53,497              53,044

</TABLE>

6.   Revolving Line of Credit
     ------------------------

              On March 25, 2004, we amended our $200 million credit facility
     with Wells Fargo. The amendment extends the maturity date to April 1, 2007
     and bears an annual interest rate ranging from the London Interbank Offered
     Rate ("LIBOR") plus 0.45% to LIBOR plus 1.20% depending on our credit
     ratings (currently LIBOR plus 0.45%). In addition, we are required to pay a
     quarterly commitment fee ranging from 0.15% per annum to 0.30% per annum
     depending on our credit ratings (currently the fee is 0.15% per annum). At
     March 31, 2004 and at May 6, 2004, we had no outstanding borrowings on our
     line of credit.

              The amended Credit Agreement includes various covenants, the more
     significant of which require us to (i) maintain a balance sheet leverage
     ratio of less than 0.55 to 1.00, (ii) maintain certain quarterly interest
     and fixed-charge coverage ratios (as defined therein) of not less than 2.25
     to 1.0 and 1.5 to 1.0, respectively, and (iii) maintain a minimum total
     shareholders' equity (as defined therein). In addition, we are limited in
     our ability to incur additional borrowings (we are required to maintain
     unencumbered assets with an aggregate book value equal to or greater than
     1.5 times our unsecured recourse debt). We were in compliance with all
     covenants of the Credit Agreement at March 31, 2004.

7.   Notes Payable
     -------------
Notes payable at March 31, 2004 and December 31, 2003 consist of the following:

<TABLE>
<CAPTION>

                                                                         Carrying Amount
                                                                  ------------------------------
                                                                    March 31,       December 31,
                                                                      2004             2003
                                                                  -------------   --------------
                                                                     (Amounts in thousands)
Unsecured senior notes:
<S>                                                               <C>               <C>
  7.47% note due January 2004.............................                  -            14,600
  7.66% note due January 2007.............................             33,600            44,800
Mortgage notes payable:
  10.55% mortgage notes secured by real estate facilities,
      principal and interest payable monthly, due August 2004          13,981            14,863
  7.134% to 8.75% mortgage notes secured by real estate
      facilities, principal and interest payable monthly, due
      at varying dates between May 2004 and September 2028              1,732             1,767
                                                                  -------------   --------------
         Total notes payable..............................        $    49,313       $    76,030
                                                                  =============   ==============
</TABLE>

                                       15
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

              All of our notes payable are fixed rate. The unsecured senior
     notes require interest and principal payments to be paid semi-annually and
     have various restrictive covenants, all of which have been met at March 31,
     2004 and December 31, 2003. The 10.55% mortgage notes consist of five
     notes, which are cross-collateralized by 19 properties and are due to a
     life insurance company. Mortgage notes payable are secured by 21 real
     estate facilities having an aggregate net book value of approximately $55
     million at March 31, 2004 and $56 million at December 31, 2003.


              At March  31,  2004,  approximate  principal  maturities  of notes
     payable are as follows:

<TABLE>
<CAPTION>

                                      Unsecured
                                     Senior Notes       Mortgage Notes          Total
                                     -------------      ---------------        ---------
                                                  (Amounts in thousands)

<C>                                  <C>                <C>                    <C>
2004 (remainder of)..........        $          -       $     14,093           $  14,093
2005.........................              11,200                156              11,356
2006.........................              11,200                170              11,370
2007.........................              11,200                185              11,385
2008.........................                   -                202                 202
Thereafter...................                   -                907                 907
                                     -------------      ---------------        ---------
                                     $     33,600         $   15,713           $  49,313
                                     =============      ===============        =========
Weighted average rate........               7.7%              10.3%                 8.5%
                                     =============      ===============        =========
</TABLE>


8.   Minority Interest
     -----------------

              In consolidation, we classify ownership interests in the net
     assets of each of the Consolidated Entities, other than our own, as
     minority interest on the consolidated financial statements. Minority
     interest in income consists of the minority interests' share of the
     operating results of the Consolidated Entities.

     Preferred Partnership Interests
     -------------------------------

              During 2000, one of our consolidated operating partnerships issued
     preferred partnership units: March 17, 2000 - $240.0 million of 9.5% Series
     N Cumulative Redeemable Perpetual Preferred Units and March 29, 2000 -
     $75.0 million of 9.125% Series O Cumulative Redeemable Perpetual Preferred.
     A portion of the 9.125% Series O Cumulative Redeemable Perpetual Preferred
     ($30 million) was repurchased by the Company in 2001.

              On March 22, 2004, certain investors who held $200 million of our
     9.5% Series N Cumulative Redeemable Perpetual Preferred Units agreed, in
     exchange for a special distribution of $8,000,000, to exchange their 9.5%
     Series N Cumulative Redeemable Perpetual Preferred Units for $200 million
     of our 6.4% Series NN Cumulative Redeemable Perpetual Preferred Units. The
     investors also received a distribution for dividends that accrued from
     January 1, 2004 through the effective date of the exchange.

              The restructure of these Preferred Units resulted in an increase
     in income allocated to minority interests and a reduction to the Company's
     net income for the three months ended March 31, 2004 of $10,063,000 from
     (1) the special distribution to the holders of the preferred units
     ($8,000,000) and (2) the application of the SEC's recent clarification of
     EITF Topic D-42 ($2,063,000). The $2,063,000 additional reduction in the
     Company's net income represents the excess of the stated amount of the
     preferred units over their carrying amount.

              For the three months ended March 31, 2004 and 2003, the holders of
     preferred units were paid distributions aggregating approximately
     $14,554,000 (including the $8,000,000 special distribution) and $6,726,000,
     respectively. Income allocated to the minority interest was $16,617,000
     (comprised of the distributions paid and an allocation of income of
     $2,063,000 resulting from the application of EITF Topic D-42) and
     $6,726,000 for the three months ended March 31, 2004 and 2003,
     respectively.

                                       16
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

              The following table summarizes the preferred partnership units
     outstanding at March 31, 2004 and December 31, 2003:

<TABLE>
<CAPTION>

                                                        At March 31, 2004             At December 31, 2003
                     Earliest        Distribution     Units          Carrying         Units         Carrying
    Series      Redemption Date (a)     Rate       Outstanding        Amount       Outstanding       Amount
-------------   -------------------  ------------  --------------   ------------  --------------   -----------
                                                  (Amounts in thousands)

<S>                 <C>                  <C>             <C>         <C>                <C>         <C>
Series N......      March 17, 2005       9.500%           1,600      $  40,000           9,600      $  240,000
Series NN.....      March 17, 2010       6.400%           8,000         200,000              -               -
Series O......      March 29, 2005       9.125%           1,800          45,000          1,800          45,000
                                                   --------------   ------------  --------------   -----------
Total                                                    11,400      $ 285,000          11,400      $  285,000
                                                   ==============   ============  ==============   ===========
</TABLE>

(a)      After these dates, at our option,  we can call the units for redemption
         at the issuance amount plus any unpaid distributions. The units are not
         redeemable by the holder.

              Subject to certain conditions, the Series N preferred units are
     convertible into shares of our 9.5% Series N Cumulative Preferred Stock,
     the Series O preferred units are convertible into shares of our 9.125%
     Series O Cumulative Preferred Stock, and the Series NN preferred units are
     convertible into shares of our 6.4% Series NN Cumulative Preferred Stock.

     Other Partnership Interests
     ---------------------------

              The following table sets forth the minority interests at March 31,
     2004 and December 31, 2003 as well as the distributions paid to minority
     interests for the three months ended March 31, 2004 and 2003 with respect
     to the other partnership interests (amounts in thousands):

<TABLE>
<CAPTION>

                                                                                     Distributions to Minority
                                                 Minority Interest at          Interests for the Three Months Ended
                                            -----------------------------      ------------------------------------
                                             March 31,       December 31,           March 31,          March 31,
               Description                     2004              2003                 2004              2003
-----------------------------------------   ------------     ------------       ---------------      --------------
<S>                                          <C>              <C>                   <C>              <C>
Consolidated Development Joint Venture...    $   66,986       $    68,490           $     2,461      $    2,463
Convertible Partnership Units...........          6,192             6,259                   107             107
Other consolidated partnerships..........        66,350            66,388                 3,044           2,470
                                            ------------     ------------       ---------------      --------------
Total other partnership interests........    $  139,528       $   141,137           $     5,612      $    5,040
                                            ===========      ============       ===============      ==============
</TABLE>

              Income is allocated to the minority interests based upon their
     pro-rata interest in the operating results of the Consolidated Entities.
     The following table sets forth the income allocated to minority interest in
     income with respect to the other partnership interests for the three months
     ended March 31, 2004 and 2003 (amounts in thousands):

                                       17

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)


                                                Minority Interest in Income for
                                                the Three Months Ended March 31,
                                                --------------------------------
                 Description                         2004             2003
--------------------------------------------    ---------------   --------------
Consolidated Development Joint Venture......      $       957      $      743
Convertible Partnership Units...............               40              65
Other Consolidated Partnerships.............            3,006           3,134
                                                ---------------   --------------
Total other partnership interests...........      $     4,003      $    3,942
                                                ===============   ==============

     Consolidated Development Joint Venture
     --------------------------------------

              In November 1999, we formed a development joint venture (the
     "Consolidated Development Joint Venture") with a joint venture partner
     (PSAC Storage Investors, LLC) whose partners include a third party
     institutional investor and B. Wayne Hughes ("Mr. Hughes"), to develop
     approximately $100 million of self-storage facilities and to purchase $100
     million of the Company's Equity Stock, Series AAA (see Note 9). At March
     31, 2004, the Consolidated Development Joint Venture was fully committed
     having completed construction on 22 self-storage facilities for a total
     cost of $108.6 million.

              The Consolidated Development Joint Venture is funded solely with
     equity capital consisting of 51% from the Company and 49% from PSAC Storage
     Investors, LLC. The accounts of the Consolidated Development Joint Venture
     are included in the Company's consolidated financial statements. The
     accounts of PSAC Storage Investors, LLC are not included in the Company's
     consolidated financial statements, as the Company has no ownership interest
     in this entity. Minority interests primarily represent the total
     contributions received from PSAC Storage Investors combined with the
     accumulated net income allocated to PSAC Storage Investors, LLC, net of
     cumulative distributions. The amounts included in our financial statements
     with respect to the minority interest in the Consolidated Development Joint
     Venture are denoted in the tables above.

              The term of the Consolidated Development Joint Venture is 15
     years; however, during the sixth year PSAC Storage Investors, LLC has the
     right to cause an early termination of the partnership. If PSAC Storage
     Investors, LLC exercises this right, we then have the option, but not the
     obligation, to acquire their interest for an amount that will allow them to
     receive an annual return of 10.75%. If the Company does not exercise its
     option to acquire PSAC Storage Investors, LLC's interest, the partnership's
     assets will be sold to third parties and the proceeds distributed to the
     Company and PSAC Storage Investors, LLC in accordance with the partnership
     agreement. If PSAC Storage Investors, LLC does not exercise its right to
     early termination during the sixth year, the partnership will be liquidated
     15 years after its formation with the assets sold to third parties and the
     proceeds distributed to the Company and PSAC Storage Investors, LLC in
     accordance with the partnership agreement.

              PSAC Storage Investors, LLC provides Mr. Hughes with a fixed yield
     of approximately 8.0% per annum on his preferred non-voting interest
     (representing an investment of approximately $64.1 million at March 31,
     2004). In addition, Mr. Hughes receives 1% of the remaining cash flow of
     PSAC Storage Investors, LLC (estimated to be less than $50,000 per year).
     If PSAC Storage Investors, LLC does not elect to cause an early
     termination, Mr. Hughes' 1% interest in residual cash flow can increase to
     10%.

              In consolidation, the Equity Stock, Series AAA owned by the joint
     venture and the related dividend income have been eliminated. Minority
     interests primarily represent the total contributions received from PSAC
     Storage Investors combined with the accumulated net income allocated to
     PSAC Storage Investors, net of cumulative distributions.

                                       18

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

              See Note 13, "Recent Accounting Pronouncements" for further
     discussion of the impact of recent accounting pronouncements on the
     accounting for these interests.

     Convertible Partnership Units
     -----------------------------

              As of March 31, 2004 and December 31, 2003, one of our
     Consolidated Entities had approximately 237,935 convertible operating
     partnership units ("Convertible Units") outstanding, representing a limited
     partnership interest in the partnership. The Convertible Units are
     convertible on a one-for-one basis (subject to certain limitations) into
     the Company's common stock at the option of the unitholder. Minority
     interest in income with respect to the Convertible Units reflects the
     Convertible Units' share of the net income of the Company, with net income
     allocated to minority interests with respect to weighted average
     outstanding Convertible Units on a per unit basis equal to diluted earnings
     per common share. During the three months ended March 31, 2004 and the year
     ended December 31, 2003, no units were converted.

     Other Consolidated Partnerships
     -------------------------------

              At March 31, 2004, the other consolidated partnerships reflect
     common equity interests that the Company does not own in 25 entities owning
     an aggregate of 123 self-storage facilities.

              On April 28, 2003 we acquired through a merger all of the
     remaining limited partnership interest not currently owned by the Company
     in PS Partners IV, Ltd., a partnership which is consolidated with the
     Company. The acquisition cost was $23,377,000, consisting of the issuance
     of 426,859 shares of our common stock ($13,510,000) valued at the closing
     price of our common stock on the date of acquisition and cash of
     $9,867,000; this acquisition had the effect of reducing minority interest
     by $6,690,000, with the excess of cost over underlying book value
     ($16,687,000) allocated to real estate.

              The partnership agreements of the other consolidated partnerships
     have termination dates that cannot be unilaterally extended by the Company
     and, upon termination of each partnership, the net assets of these entities
     would be liquidated and paid to the minority interests and the Company
     based upon their relative ownership interests. See Note 13, "Recent
     Accounting Pronouncements - Accounting for Certain Financial Instruments
     with Characteristics of both Liabilities and Equity" for further discussion
     of the impact of recent accounting pronouncements on the accounting for
     these interests.

9.   Shareholders' Equity
     --------------------

     Cumulative Preferred Stock
     --------------------------

              At March 31, 2004 and December 31, 2003, we had the following
     series of Cumulative Preferred Stock outstanding:

                                       19

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

<TABLE>
<CAPTION>


                                                            At March 31, 2004             At December 31, 2003
                                                        ----------------------------    --------------------------
                           Earliest
                          Redemption       Dividend        Shares        Carrying         Shares         Carrying
       Series               Date (a)         Rate        Outstanding      Amount        Outstanding       Amount
-----------------       -------------     ---------     -------------  -------------    -----------    -----------
                                                                       (Dollar amount in thousands)
<S>                      <C>                  <C>          <C>          <C>               <C>          <C>
Series D                 9/30/04              9.500%       1,200,000    $    30,000       1,200,000    $    30,000
Series E                 1/31/05             10.000%       2,195,000         54,875       2,195,000         54,875
Series F                 4/30/05              9.750%       2,300,000         57,500       2,300,000         57,500
Series K                 1/19/04 (b)(c)       8.250%               -              -               -              -
Series L                 3/10/04 (c)          8.250%               -              -           4,600        115,000
Series M                 8/17/04              8.750%           2,250         56,250           2,250         56,250
Series Q                 1/19/06              8.600%           6,900        172,500           6,900        172,500
Series R                 9/28/06              8.000%          20,400        510,000          20,400        510,000
Series S                 10/31/06             7.875%           5,750        143,750           5,750        143,750
Series T                 1/18/07              7.625%           6,086        152,150           6,086        152,150
Series U                 2/19/07              7.625%           6,000        150,000           6,000        150,000
Series V                 9/30/07              7.500%           6,900        172,500           6,900        172,500
Series W                 10/6/08              6.500%           5,300        132,500           5,300        132,500
Series X                 11/13/08             6.450%           4,800        120,000           4,800        120,000
Series Y                 1/2/09               6.850%       1,600,000         40,000               -              -
Series Z                 3/5/09               6.250%           4,500        112,500               -              -
Series A                 3/31/09              6.125%           4,600        115,000               -              -
                                                        -------------  -------------    -----------    -----------
Total Cumulative
Preferred Stock                                            7,368,486    $ 2,019,525       5,763,986    $ 1,867,025
                                                        =============  =============    ===========    ===========

</TABLE>

(a)      Except under certain conditions relating to the Company's qualification
         as a REIT, the Cumulative Preferred Stock outstanding at March 31, 2004
         is not redeemable prior to the dates  indicated.  On or after the dates
         indicated,  each series of Cumulative  Senior  Preferred  Stock will be
         redeemable,  at the  option  of the  Company,  in whole or in part,  at
         $25.00  per  share  (or  depositary  share in the case of the  Series K
         through  X, and Series Z and A),  plus  accrued  and unpaid  dividends.

(b)      The Series K Cumulative  Preferred  Stock was called for  redemption in
         December  2003 and was  redeemed in January  2004 along with the unpaid
         distributions  from  January  1,  2004  through  the  redemption  date.
         Accordingly,  the redemption  value of $115,000,000 was classified as a
         liability  at December  31,  2003.

(c)      Series was redeemed on the date indicated.

              Our Cumulative Preferred Stock, issued in series, has general
     preference rights with respect to liquidation and quarterly distributions.
     Holders of the preferred stock, except under certain conditions and as
     noted below, will not be entitled to vote on most matters. In the event of
     a cumulative arrearage equal to six quarterly dividends or failure to
     maintain a Debt Ratio (as defined) of 50% or less, holders of all
     outstanding series of preferred stock (voting as a single class without
     regard to series) will have the right to elect two additional members to
     serve on the Company's Board of Directors until events of default have been
     cured. At March 31, 2004, there were no dividends in arrears and the Debt
     Ratio was 0.8%.

              During the first quarter of 2004, we issued three series of
     Cumulative Preferred Stock: Series Y - issued January 2, 2004, net proceeds
     $40,000,000, Series Z - issued March 5, 2004, net proceeds $108,756,000,
     and Series A - issued March 31, 2004, net proceeds $111,177,000. In
     addition during the first quarter of 2004, we redeemed our Series K (which
     was called for redemption in December 2003) and Series L Cumulative
     Preferred Stock, at par. The total cost of redemption of Series L was
     $115,021,000 (including redemption expenses, plus accrued dividends).

                                       20
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

              During 2003, we issued our Series W and Series X Cumulative
     Preferred Stock: Series W - issued on October 6, 2003, net proceeds of
     $128,126,000 and Series X - issued November 13, 2003, net proceeds of
     $116,020,000. In addition during 2003, we redeemed our Series B and Series
     C Cumulative Preferred Stock, at par, at a total cost of $57,517,000 and
     $30,018,000 (including related redemption expenses), respectively. In
     December 2003, we called for redemption our Series K Cumulative Preferred
     Stock, at par. The total cost of redemption of the Series K was
     approximately $115,000,000, plus accrued dividends, on the redemption date,
     January 20, 2004.

     Equity Stock
     ------------

              The Company is authorized to issue 200,000,000 shares of Equity
     Stock. The Articles of Incorporation provide that the Equity Stock may be
     issued from time to time in one or more series and gives the Board of
     Directors broad authority to fix the dividend and distribution rights,
     conversion and voting rights, redemption provisions and liquidation rights
     of each series of Equity Stock.

     Equity Stock, Series A
     ----------------------

              At March 31, 2004, we had 8,776,102 depositary shares outstanding,
     each representing 1/1,000 of a share of Equity Stock, Series A ("Equity
     Stock A"). The Equity Stock A ranks on a parity with common stock and
     junior to the Cumulative Preferred Stock with respect to general preference
     rights and has a liquidation amount which cannot exceed $24.50 per share.
     Distributions with respect to each depositary share shall be the lesser of:
     (i) five times the per share dividend on our common stock or (ii) $2.45 per
     annum. We have no obligation to pay distributions on the depositary shares
     if no distributions are paid to common shareholders.

              Except in order to preserve the Company's federal income tax
     status as a REIT, we may not redeem the depositary shares before March 31,
     2010. On or after March 31, 2010, we may, at our option, redeem the
     depositary shares at $24.50 per depositary share. If the Company fails to
     preserve its federal income tax status as a REIT, the depositary shares
     will be convertible at the option of the shareholder into .956 shares of
     common stock. The depositary shares are otherwise not convertible into
     common stock. Holders of depositary shares vote as a single class with
     holders of our common stock on shareholder matters, but the depositary
     shares have the equivalent of one-tenth of a vote per depositary share.

     Equity Stock, Series AA
     -----------------------

              In June 1997, we contributed $22,500,000 (225,000 shares) of
     equity stock, now designated as Equity Stock, Series AA ("Equity Stock AA")
     to a partnership in which we are the general partner. The Company has a
     controlling interest in the partnership and therefore consolidates the
     accounts of the partnership. As a result, the Equity Stock AA is eliminated
     in consolidation. The Equity Stock AA ranks on a parity with our common
     stock and junior to the Cumulative Preferred Stock with respect to general
     preference rights and has a liquidation amount of ten times the amount paid
     to each common share up to a maximum of $100 per share. Quarterly
     distributions per share on the Equity Stock AA are equal to the lesser of
     (i) 10 times the amount paid per share of common stock or (ii) $2.20. We
     have no obligation to pay distributions on these shares if no distributions
     are paid to common shareholders.

                                       21

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

              If the Company determines that it is necessary to maintain its
     status as a Real Estate Investment Trust, subject to certain limitations it
     may cause the redemption of shares of Equity Stock, Series AA at a price of
     $100 per share. The shares are not otherwise redeemable or convertible into
     shares of any other class or series of the Company's capital stock. Other
     than as required by law, the Equity Stock, Series AA has no voting rights.

     Equity Stock, Series AAA
     ------------------------

              In November 1999, we sold $100,000,000 (4,289,544 shares) of
     Equity Stock, Series AAA ("Equity Stock AAA") to a newly formed joint
     venture. We control the joint venture and consolidate the accounts of the
     joint venture, and accordingly the Equity Stock AAA is eliminated in
     consolidation. The Equity Stock AAA ranks on a parity with our common stock
     and junior to the Cumulative Preferred Stock with respect to general
     preference rights, and has a liquidation amount equal to 120% of the amount
     distributed to each common share. Annual distributions per share are equal
     to the lesser of (i) five times the amount paid per common share or (ii)
     $2.1564. We have no obligation to pay distributions on these shares if no
     distributions are paid to common shareholders.

              Upon liquidation of the Consolidated Development Joint Venture, at
     the Company's option either a) each share of Equity Stock AAA shall convert
     into 1.2 shares of our common stock or b) the Company can redeem the Equity
     Stock AAA at a per share amount equal to 120% of the market price of our
     common stock. In addition, if the Company determines that it is necessary
     to maintain its status as a Real Estate Investment Trust, subject to
     certain limitations it may cause the redemption of shares of Equity Stock
     AAA at a per share amount equal to 120% of the market price of our common
     stock. The shares are not otherwise redeemable or convertible into shares
     of any other class or series of the Company's capital stock. Other than as
     required by law, the Equity Stock AAA has no voting rights.

     Common Stock
     ------------

              At March 31, 2004, entities consolidated with the Company owned
     808,732 common shares of the Company. These shares continue to be legally
     issued and outstanding. In the consolidation process, these shares and the
     related balance sheet amounts have been eliminated. In addition, these
     shares are not included in the computation of weighted average shares
     outstanding.

              The following chart reconciles the Company's legally issued and
     outstanding shares of common stock and the reported outstanding shares of
     common stock at March 31, 2004 and December 31, 2003:

<TABLE>
<CAPTION>

Reconciliation of Common Shares Outstanding     At March 31,       At December 31,
-------------------------------------------         2004               2003
                                               ---------------   ---------------

<S>                                               <C>                 <C>
Legally issued and outstanding shares........     128,521,627         127,710,466
Less - Shares owned by the Consolidated
    Entities that are eliminated in                  (808,732)           (723,732)
    consolidation............................
                                               ---------------   ---------------
Reported issued and outstanding shares.......     127,712,895         126,986,734
                                               ===============   ===============
</TABLE>

              The Company's Board of Directors authorized the repurchase from
     time to time of up to 25,000,000 shares of the Company's common stock on
     the open market or in privately negotiated transactions. During the first
     quarter of 2004 we purchased 85,000 shares through one of the Consolidated
     Entities for a total of $3,967,000. From the initial authorization through
     March 31, 2004, we repurchased a total of 21,757,020 shares of common stock
     at an aggregate cost of approximately $545,830,000. From March 31, 2004
     through April 23, 2004, the Company purchased an aggregate of 324,700
     shares at an aggregate cost of $14,267,000.

                                       22
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

     Dividends
     ---------

              The following table summarizes dividends declared and paid during
     the three months ended March 31, 2004:

                                        Distributions Per
                                       Share or Depositary     Total
                                              Share          Distribution
                                       ----------------- ------------------
Preferred Stock:
Series D..............................        $0.594     $     713,000
Series E..............................        $0.625         1,372,000
Series F..............................        $0.609         1,401,000
Series K..............................        $0.109           501,000
Series L .............................        $0.395         1,818,000
Series M..............................        $0.547         1,230,000
Series Q..............................        $0.538         3,709,000
Series R..............................        $0.500        10,200,000
Series S..............................        $0.492         2,830,000
Series T..............................        $0.477         2,900,000
Series U..............................        $0.477         2,860,000
Series V..............................        $0.469         3,234,000
Series W..............................        $0.406         2,153,000
Series X..............................        $0.403         1,935,000
Series Y..............................        $0.424           678,000
Series Z..............................        $0.113           508,000
Series A..............................          -                    -
                                                         ----------------
                                                            38,042,000
Common Stock:
Equity Stock, Series A................        $0.613         5,375,000
Common ...............................        $0.450        57,348,000
                                                         ----------------
   Total dividends....................                   $ 100,765,000
                                                         ================

              The dividend rate on the common stock was $0.45 per common share
     for the three months ended March 31, 2004. The dividend rate on the Equity
     Stock A was $0.6125 per depositary share for the three months ended March
     31, 2004.

10.  Segment Information
     -------------------

     Description of Each Reportable Segment
     --------------------------------------

              Our reportable segments reflect significant operating activities
     that are evaluated separately by management. We have four reportable
     segments: self-storage operations, containerized storage operations,
     commercial property operations, and tenant reinsurance operations.

              The self-storage segment comprises the direct ownership,
     development, and operation of traditional storage facilities, and the
     ownership of equity interests in entities that own self-storage properties.
     The containerized storage operations represent another segment. The
     commercial property segment reflects our interest in the ownership,
     operation, and management of commercial properties. The vast majority of
     the commercial property operations are conducted through PSB, and to a much
     lesser extent the Company and certain of its unconsolidated subsidiaries
     own commercial space, managed by PSB, within facilities that combine
     storage and commercial space for rent. The tenant reinsurance segment
     reflects the operations of PS Insurance Company, Ltd., which reinsures
     policies against losses to goods stored by tenants in our self-storage
     facilities.

                                       23

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

     Measurement of Segment Profit or Loss
     -------------------------------------

              We evaluate performance and allocate resources based upon the net
     segment income of each segment. Net segment income represents net income in
     conformity with accounting principles generally accepted in the United
     States and our significant accounting policies as denoted in Note 2, before
     interest and other income, interest expense, corporate general and
     administrative expense, and minority interest in income. The accounting
     policies of the reportable segments are the same as those described in the
     Summary of Significant Accounting Policies.

              Interest and other income, interest expense, corporate general and
     administrative expense, and minority interest in income and gains and
     losses on sales of real estate assets are not allocated to segments because
     management does not utilize them to evaluate the results of operations of
     each segment.

     Measurement of Segment Assets
     -----------------------------

              No segment data relative to assets or liabilities is presented,
     because management does not consider the historical cost of the Company's
     real estate facilities and investments in real estate entities in
     evaluating the performance of operating management or in evaluating
     alternative courses of action. The only other types of assets that might be
     allocated to individual segments are trade receivables, payables, and other
     assets which arise in the ordinary course of business, but they are also
     not a significant factor in the measurement of segment performance.

     Presentation of Segment Information
     -----------------------------------

              Our income statement provides most of the information required in
     order to determine the performance of each of the Company's four segments.
     The following tables reconcile the performance of each segment, in terms of
     segment revenues and segment income, to our consolidated revenues and net
     income. It further provides detail of the segment components of the income
     statement item, "Equity in earnings of real estate entities."

              The following table reconciles the revenue by segment to the
Company's consolidated revenues:

                                                 Three Months Ended
                                                     March 31,
                                              ----------------------
                                                 2004        2003       Change
                                              ----------  ----------  ----------
                                                 (Dollar amounts in thousands)
Reconciliation of Revenues by Segment:

Self-storage property rentals................ $  206,045  $  189,496  $  16,549
Commercial property rentals..................      2,695       2,846       (151)
Containerized storage........................      6,606       7,442       (836)
Tenant re-insurance..........................      5,963       5,215        748
Interest and other income....................      1,357       1,699       (342)
                                              ----------  ----------  ----------
Total revenues............................... $ 222,666   $  206,698  $  15,968
                                              ==========  ==========  ==========

                                       24

<PAGE>


                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

         The following table reconciles the performance of each segment to our
consolidated net income. It further provides detail of the segment components of
the income statement item, "Equity in earning of real estate entities."

<TABLE>
<CAPTION>

                                                                        Three Months Ended
                                                                            March 31,
                                                                   ------------------------
                                                                      2004          2003        Change
                                                                   ----------    ----------   ----------
                                                                          (Amounts in thousands)
  Reconciliation of Net Income by Segment:

  <S>                                                              <C>           <C>           <C>
  Self-storage
  Self-storage net operating income........................        $ 130,483     $ 124,197     $  6,286
  Self-storage depreciation................................          (44,747)      (43,235)      (1,512)
  Equity in earnings - self - storage property operations..            1,684         1,428          256
  Equity in earnings - depreciation (self-storage) ........             (394)         (265)        (129)
  Discontinued operations (Note 3) ........................                -           118         (118)
                                                                   ----------    ----------   ----------
      Total self-storage segment net income................           87,026        82,243        4,783
                                                                   ----------    ----------   ----------
  Commercial  properties
  Commercial properties....................................            1,554         1,653          (99)
  Depreciation and amortization - commercial properties....             (585)         (625)          40
  Equity in earnings - commercial property operations......           17,193        14,700        2,493
  Equity in earnings - depreciation (commercial properties)           (7,881)       (6,029)      (1,852)
                                                                   ----------    ----------   ----------
      Total commercial property segment net income.........           10,281         9,699          582
                                                                   ----------    ----------   ----------
  Containerized storage
  Containerized storage net operating income...............            2,592         2,804         (212)
  Containerized storage depreciation.......................           (1,438)       (1,507)          69
  Discontinued operations (Note 3) ........................             (430)         (311)        (119)
                                                                   ----------    ----------   ----------
      Total containerized storage segment net income.......              724           986         (262)
                                                                   ----------    ----------   ----------
  Tenant Reinsurance
   Tenant reinsurance net income...........................            2,828         2,516          312
                                                                   ----------    ----------   ----------
  Other items not allocated to segments
  Equity in earnings - general and administrative and other           (6,545)       (5,147)      (1,398)
  Interest and other income................................            1,357         1,699         (342)
  General and administrative...............................           (5,884)       (4,250)      (1,634)
  Interest expense.........................................             (100)         (453)         353
  Minority interest in income..............................          (20,620)      (10,668)      (9,952)
  Gain on disposition of real estate.......................                -            14          (14)
                                                                   ----------    ----------   ----------
      Total other items not allocated to segments                    (31,792)      (18,805)     (12,987)
                                                                   ----------    ----------   ----------
       Total consolidated net income.......................        $  69,067     $  76,639     $ (7,572)
                                                                   ==========    ==========   ==========
</TABLE>

                                       25

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)


11.  Stock-Based Compensation
     ------------------------

     Stock Options
     -------------

              The Company has a 1990 Stock Option Plan (the "1990 Plan") which
     provides for the grant of non-qualified stock options. The Company has a
     1994 Stock Option Plan (the "1994 Plan"), a 1996 Stock Option and Incentive
     Plan (the "1996 Plan") and a 2000 Non-Executive/Non-Director Stock Option
     and Incentive Plan (the "2000 Plan"), each of which provides for the grant
     of non-qualified options and incentive stock options. (The 1990 Plan, the
     1994 Plan, the 1996 Plan and the 2000 Plan are collectively referred to as
     the "PSI Plans".) Under the PSI Plans, the Company has granted
     non-qualified options to certain directors, officers and key employees to
     purchase shares of the Company's common stock at a price equal to the fair
     market value of the common stock at the date of grant. Generally, options
     under the PSI Plans vest over a three-year period from the date of grant at
     the rate of one-third per year and expire (i) under the 1990 Plan, five
     years after the date they became exercisable and (ii) under the 1994 Plan,
     the 1996 Plan and the 2000 Plan, ten years after the date of grant. The
     1996 Plan and the 2000 Plan also provide for the grant of restricted stock
     to officers, key employees and service providers on terms determined by an
     authorized committee of the Board of Directors.

              Accounting principles generally accepted in the United States
     permit, but do not require, companies to recognize compensation expense for
     stock-based awards based on their fair value at date of grant, which is
     then amortized as compensation expense over the vesting period (the "Fair
     Value Method"). Companies can also elect to disclose, but not recognize as
     an expense, stock option expense when stock options are granted to
     employees at an exercise price equal to the market price at the date of
     grant (the "APB 25 Method").

              For periods prior to December 31, 2001, we utilized the APB 25
     Method of accounting for employee stock options. As of January 1, 2002, we
     adopted the Fair Value Method, and have elected to use the prospective
     method of transition, whereby the Company applies the recognition
     provisions of the Fair Value Method to all stock options granted after the
     beginning of the year in which the Company adopts such method. Accordingly,
     we recognize compensation expense in our income statement using the Fair
     Value Method only with respect to stock options issued after January 1,
     2002.

              For the three months ended March 31, 2004, we recorded $119,000 in
     stock option compensation expense ($99,000 for the three months ended March
     31, 2003) related to options granted after January 1, 2002. The fair value
     of each option grant is estimated on the date of the grant using the
     Black-Scholes option pricing model. The estimated average value of stock
     options granted in the first three months of 2004 was based upon an
     estimated life of 5 years, a risk-free rate of 3.0%, an expected dividend
     yield of 7%, and expected volatility of 0.185.

              If we had recorded stock option expense applying the Fair Value
     Method to all awards, we would have recognized an additional $146,000 and
     $701,000 for the three months ended March 31, 2004 and 2003, respectively,
     in stock option compensation expense. Basic and diluted earnings per share
     would have been $0.17 and $0.25 for the three months ended March 31, 2004
     and 2003, respectively.

                                       26
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

    Restricted Stock Units
     ----------------------

              Restricted stock units vest over a five-year period from the date
     of grant at the rate of one-fifth per year. The employee receives
     additional compensation equal to the per-share dividends received by common
     shareholders. Upon vesting, the employee receives regular common shares
     equal to the number of vested restricted stock units in exchange for the
     units The total value of each restricted stock unit grant, based upon the
     market price of the Company's common stock at the date of grant, combined
     with the estimated payroll taxes and other payroll burden costs to be
     incurred upon vesting, is amortized over the vesting period as compensation
     expense. Outstanding restricted stock units are included on a one-for-one
     basis in the Company's diluted weighted average shares, less a reduction
     for the treasury stock method applied to the average cumulative measured
     but unrecognized compensation expense during the period.

              Throughout 2003, we granted a total of 249,000 restricted stock
     units to employees of the Company. An additional 7,000 restricted stock
     units were granted in the first quarter of 2004. A total of $534,000 in
     restricted stock expense was recorded for the three months ended March 31,
     2004, of which $469,000 represents amortization of the fair value of the
     grant, which was reflected as an increase to paid-in capital, and the
     remainder represents accrued estimated burden to be incurred upon vesting.

12.  Related Party Transactions
     --------------------------

     Relationships and Transactions with the Hughes Family
     -----------------------------------------------------

              B. Wayne Hughes, Chairman of the Board of Directors, and his
     family (the "Hughes Family") have ownership interests in, and operate,
     approximately 38 self-storage facilities in Canada under the name "Public
     Storage." We currently do not own any interests in these facilities nor do
     we own any facilities in Canada. The Hughes Family owns approximately 36%
     of our common stock outstanding at March 31, 2004. We have a right of first
     refusal to acquire the stock or assets of the corporation engaged in the
     operation of the 38 self-storage facilities in Canada if the Hughes family
     or the corporation agrees to sell them. However, we have no interest in the
     operations of this corporation, have no right to acquire this stock or
     assets unless the Hughes family decides to sell, and receive no benefit
     from the profits and increases in value of the Canadian self-storage
     facilities.

              Our personnel have been engaged in the supervision and the
     operation of these 38 self-storage facilities and currently provide certain
     administrative services for the Canadian owners, and certain other
     services, primarily tax services, with respect to certain other Hughes
     Family interests. The Hughes Family and the Canadian owners reimbursed us
     at cost for these services, amounting to $268,000 for the three months
     ended March 31, 2003 (none for the three months ended March 31, 2004).
     There have been conflicts of interest in allocating the time of our
     personnel between our properties, the Canadian properties, and certain
     other Hughes Family interests. The sharing of personnel and systems with
     the Canadian entities was substantially discontinued by December 31, 2003.
     The Canadian entities claim that the Company owes them CND $653,424,
     representing the amount charged to them for the development of certain
     systems that they no longer utilize. This amount has been accrued on the
     Company's financial statements for the three months ended March 31, 2004.

              In November 1999, we formed the Consolidated Development Joint
     Venture with a joint venture partner whose partners include an
     institutional investor and Mr. Hughes. This transaction is discussed more
     fully in Note 8.

                                       27
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

     PS Business Parks, Inc.
     -----------------------

              Ronald L.  Havner  Jr.,  our  vice-chairman  and  chief  executive
     officer,  is also chairman of PSB and was CEO of PSB until August 12, 2003.
     For 2003  services,  Mr. Havner was  compensated  by PSB, as well as by the
     Company.

              Pursuant to a cost-sharing and administrative services agreement,
     PSB reimburses the Company for certain administrative services. PSB's share
     of these costs totaled approximately $85,000 for each of the three month
     periods ended March 31, 2004 and 2003.

              PSB manages certain of the commercial facilities owned by the
     Company pursuant to management agreements for a management fee equal to 5%
     of revenues. The Company paid a total of $138,000 and $140,000 for the
     three months ended March 31, 2004 and 2003, respectively, in management
     fees with respect to PSB's property management services.

              In December 2003, the Company loaned $100,000,000 to PSB. This
     loan bore interest at the rate of 1.45% per year. This loan, which was
     fully repaid by March 8, 2004, was included in Notes Receivable at December
     31, 2003. For the three months ended March 31, 2004, we recorded
     approximately $127,000 of interest income with respect to this loan.

              STOR-Re Mutual Insurance Company, Inc.
              --------------------------------------

              STOR-Re, an entity that is consolidated by the Company and is
     partially owned by PSB (approximately 4.0%) and the owners of the Canadian
     self-storage facilities (approximately 2.2%), provides limited property and
     liability insurance to PSB and the owners of the Canadian self-storage
     facilities at commercially competitive rates. PSB and the Company utilize
     unaffiliated insurance carriers to provide property and liability insurance
     in excess of STOR-Re's limitations. Effective April 1, 2004, PSB and the
     owners of the Canadian self-storage facilities have obtained their own
     insurance coverage independent from the Company for losses occurring after
     March 31, 2004.

              At March 31, 2004, the Canadian  entities owed STOR-Re USD $63,526
     for insurance premiums.

13.  Recent Accounting Pronouncements
     --------------------------------

     Accounting for Certain Financial  Instruments with  Characteristics of both
     ---------------------------------------------------------------------------
     Liabilities and Equity
     ----------------------


              In May 2003, the FASB issued Statement of Financial Accounting
     Standards No. 150 - "Accounting for Certain Financial Instruments with
     Characteristics of both Liabilities and Equity" ("SFAS No. 150"). This
     statement prescribes reporting standards for financial instruments that
     have characteristics of both liabilities and equity. This standard
     generally indicates that certain financial instruments that give the issuer
     a choice of settling an obligation with a variable number of securities or
     settling an obligation with a transfer of assets, any mandatorily
     redeemable security, and certain put options and forward purchase
     contracts, should be classified as a liability on the balance sheet. With
     the exception of minority interests, described below, we implemented SFAS
     No. 150 on July 1, 2003, and the adoption had no impact on our financial
     statements.

              The provisions of SFAS No. 150 indicate certain minority interests
     in consolidated entities are to be classified as liabilities at fair value.
     However, on October 29, 2003, the FASB decided to defer indefinitely the
     implementation of SFAS No. 150 as it relates to these minority interests.

                                       28

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

              Assuming the FASB had not deferred the implementation of SFAS 150
     as it relates to minority interests, the impact on the Company's balance
     sheet at March 31, 2004 would have been to reclassify the Company's
     minority interests described in Note 8 as the "Consolidated Development
     Joint Venture and the "Other Consolidated Partnerships", as liabilities at
     their estimated fair value. Such adoption would reduce the Company's common
     minority interest by approximately $133,336,000 and increase liabilities by
     $319,100,000, representing the estimated settlement value of these minority
     interests at March 31, 2004.

     FASB Interpretation No. 46 - Consolidation of Variable Interest Entities
     ------------------------------------------------------------------------

              In January 2003, the FASB issued FASB Interpretation No. 46 -
     "Consolidation of Variable Interest Entities, an interpretation of
     Accounting Research Bulletin No. 51." This interpretation explains how to
     identify variable interest entities and how an enterprise assesses its
     interests in a variable interest entity to decide whether to consolidate
     that entity. In general, a variable interest entity is a corporation,
     partnership, trust, or any other legal structure used for business purposes
     that either (a) does not have equity investors with voting rights, or (b)
     has equity investors that do not provide sufficient financial resources for
     the entity to support its activities. We adopted this statement effective
     January 1, 2004 and the adoption had no effect.

14.  Commitments and Contingencies
     -----------------------------

     LEGAL MATTERS

     Serrao v. Public Storage,  Inc. (filed April 2003) (Superior Court - Orange
     ---------------------------------------------------------------------------
     County)
     -------

              The plaintiff in this case filed a suit against the Company on
     behalf of a putative class of renters who rented self-storage units from
     the Company. Plaintiff alleges that the Company misrepresented the size of
     its storage units, has brought claims under California statutory and common
     law relating to consumer protection, fraud, unfair competition, and
     negligent misrepresentation, and is seeking monetary damages, restitution,
     and declaratory and injunctive relief.

              The claim in this case is substantially similar to those in
     Henriquez v. Public Storage, Inc., which was disclosed in prior reports. In
     January 2003, the plaintiff caused the Henriquez action to be dismissed.
     Based upon the uncertainty inherent in any putative class action, the
     Company cannot presently determine the potential damages, if any, or the
     ultimate outcome of this litigation. On November 3, 2003, the court granted
     the Company's motion to strike the plaintiff's nationwide class allegations
     and to limit any putative class to California residents only. The Company
     is vigorously contesting the claims upon which this lawsuit is based
     including class certification efforts.

     Salaam et al v. Public Storage,  Inc. (filed February 2000)
     -----------------------------------------------------------
     (Superior Court - Los Angeles County)
     -------------------------------------

              The plaintiffs in this case are suing the Company on behalf of a
     putative class of California resident property managers who claim that they
     were not compensated for all the hours they worked. The named plaintiffs
     have indicated that their claims total less than $20,000 in aggregate. On
     December 1, 2003, the California Court of Appeals affirmed the Supreme
     Court's 2002 denial of plaintiff's motion for class certification. The
     maximum potential liability cannot be estimated, but can only be increased
     if claims are permitted to be brought on behalf of others under the
     California Unfair Business Practices Act. The affirmation of denial of
     class certification does not address the claim under the California Unfair
     Business Practices Act.

              The Company is continuing to vigorously contest the claims in this
     case and intends to resist any expansion beyond the named plaintiffs,
     including by opposing claims on behalf of others under the California
     Unfair Business Practices Act. The Company cannot presently determine the
     potential damages, if any, or the ultimate outcome of this litigation.

                                       29
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

     Gustavson et al. v. Public Storage,  Inc. (filed June 2003)
     -----------------------------------------------------------
     (Superior Court - Los Angeles County)
     -------------------------------------

              In November 2002, a shareholder of the Company made a demand on
     the Board of Directors that challenged the fairness of the Company's
     acquisition of PS Insurance Company, Ltd. ("PSIC") and demanded that the
     Board recover the profits earned by PSIC from November 1995 through
     December 2001 and that the entire purchase price paid by the Company for
     PSIC in excess of PSIC's net assets be returned to the Company.

              The contract to acquire PSIC was approved by the independent
     directors of the Company in March 2001, and the transaction was closed in
     December 2001. PSIC was formerly owned by B. Wayne Hughes, currently the
     Chairman of the Board (and in 2001 also the Chief Executive Officer) of the
     Company, B. Wayne Hughes, Jr., currently a director (and in 2001 also an
     officer) of the Company and Tamara H. Gustavson, who in 2001 was an officer
     of the Company. In exchange for the Hughes family's shares in PSIC, the
     Company issued to them 1,439,765 shares of common stock (or a net of
     1,138,733 shares, after taking into account 301,032 shares held by PSIC).

              The shareholder has threatened litigation against the Hughes
     family and the directors of the Company arising out of this transaction and
     alleged a pattern of deceptive disclosures with respect to PSIC since 1995.
     In December 2002, the Board held a special meeting to authorize an inquiry
     by its independent directors to review the fairness to the Company's
     shareholders of its acquisition of PSIC and the ability of the Company to
     have started its own tenant reinsurance business in 1995. The Company
     believes that, prior to the effectiveness in 2001 of the federal REIT
     Modernization Act and corresponding California legislation that authorized
     the creation and ownership of "taxable REIT subsidiaries," the ownership by
     the Company of a reinsurance business relating to its tenants would have
     jeopardized the Company's status as a REIT and that other REITs faced
     similar concerns about tenant insurance programs.

              In June 2003, the Hughes family filed a complaint for declaratory
     relief relating to the Company's acquisition of PSIC naming the Company as
     defendant. The Hughes family is seeking that the court make (i) a binding
     declaration that the Company either is not entitled to recover profits or
     other moneys earned by PSIC from November 1995 through December 2001; or
     alternatively the amounts that the Hughes family should be ordered to
     surrender to the Company if the court determines that the Company is
     entitled to recover any such profits or moneys; and (ii) a binding
     declaration either that the Company cannot establish that the acquisition
     agreement was not just and reasonable as to the Company at the time it was
     authorized, approved or ratified; or alternatively the amounts that the
     Hughes family should surrender to the Company, if the court determines that
     the agreement was not just and reasonable to the Company at that time. The
     Hughes family is not seeking any payments from the Company. In the event of
     a determination that the Hughes family is obligated to pay certain amounts
     to the Company, the complaint states that they have agreed to be bound by
     that determination to pay such amounts to the Company.

              In July 2003 the Company filed an answer to the Hughes family's
     complaint requesting a final judicial determination of the Company's rights
     of recovery against the Hughes family in respect of PSIC. In September
     2003, by order of the Superior Court, Justice Malcolm Lucas, a former chief
     justice of the California Supreme Court, was appointed to try the case.
     Discovery is proceeding and it is expected that in mid-2004, Justice Lucas
     will set a trial date for the matter. The Company believes that the lawsuit
     by the Hughes family will ultimately resolve matters relating to PSIC and
     will not have any financially adverse effect on the Company (other than the
     costs and other expenses relating to the lawsuit).

     Other Items
     -----------

              The Company is a party to various claims, complaints, and other
     legal actions that have arisen in the normal course of business from time
     to time, that are not described above. We believe that it is unlikely that
     the outcome of these other pending legal proceedings including employment
     and tenant claims, in the aggregate, will have a material adverse impact
     upon the operations or financial position of the Company.

                                       30
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004

                                   (Unaudited)

     INSURANCE AND LOSS EXPOSURE

              Our facilities have historically carried comprehensive insurance,
     including fire, earthquake, liability and extended coverage through
     STOR-Re, one of the Consolidated Entities, and insure portions of these
     risks through nationally recognized insurance carriers. STOR-Re also
     insures affiliates of the Company.

              The Company, STOR-Re, and its affiliates' maximum aggregate annual
     exposure for losses that are below the deductibles set forth in the
     third-party insurance contracts, assuming multiple significant events
     occur, is approximately $30 million. In addition, if losses exhaust the
     third-party insurers' limit of coverage of $125,000,000 for property
     coverage and $101,000,000 for general liability, our exposure could be
     greater. These limits are higher than estimates of maximum probable losses
     that could occur from individual catastrophic events (i.e. earthquake and
     wind damage) determined in recent engineering and actuarial studies.

              PS Insurance Company reinsures policies against claims for losses
     to goods stored by tenants at our self-storage facilities. PSIC reinsures
     its risks with third-party insurers from any individual event that exceeds
     a loss of $500,000, up to the policy limit of $10,000,000.

     DEVELOPMENT OF REAL ESTATE FACILITIES

              We currently have 42 projects in our development pipeline,
     including 11 newly developed self-storage facilities and expansions to 31
     existing self-storage facilities, with total estimated development costs of
     $148,724,000, of which $51,199,000 has been spent through March 31, 2004.
     Development of these facilities is subject to contingencies.

15.  Subsequent Events
     -----------------

              During April 2004, we repurchased 324,700 shares of our common
     stock at an aggregate cost of approximately $14,267,000. These repurchases
     were made under a previously announced plan approved by our Board of
     Directors to repurchase up to 25,000,000 shares of our common stock.

                                       31

<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

         The following discussion and analysis should be read in conjunction
with our consolidated financial statements and notes thereto.

         FORWARD LOOKING STATEMENTS: When used within this document, the words
"expects," "believes," "anticipates," "should," "estimates," and similar
expressions are intended to identify "forward-looking statements" within the
meaning of that term in Section 27A of the Securities Exchange Act of 1933, as
amended, and in Section 21E of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements involve known and unknown risks, uncertainties,
and other factors, which may cause the actual results and performance of the
Company to be materially different from those expressed or implied in the
forward looking statements. Such factors are described in Item 2A, "Risk
Factors" and include changes in general economic conditions and in the markets
in which the Company operates and the impact of competition from new and
existing storage and commercial facilities and other storage alternatives, which
could impact rents and occupancy levels at the Company's facilities;
difficulties in the Company's ability to evaluate, finance and integrate
acquired and developed properties into the Company's existing operations and to
fill up those properties, which could adversely affect the Company's
profitability; the impact of the regulatory environment as well as national,
state, and local laws and regulations including, without limitation, those
governing Real Estate Investment Trusts, which could increase the Company's
expense and reduce the Company's cash available for distribution; consumers'
failure to accept the containerized storage concept which would reduce the
Company's profitability; difficulties in raising capital at reasonable rates,
which would impede the Company's ability to grow; delays in the development
process, which could adversely affect the Company's profitability; and economic
uncertainty due to the impact of war or terrorism could adversely affect our
business plan. We disclaim any obligation to publicly release the results of any
revisions to these forward-looking statements reflecting new estimates, events
or circumstances after the date of this report.

         CRITICAL ACCOUNTING POLICIES

         QUALIFICATION AS A REIT - INCOME TAX EXPENSE: We believe that we have
been organized and operated, and we intend to continue to operate, as a
qualifying Real Estate Investment Trust ("REIT") under the Internal Revenue Code
and applicable state laws. A qualifying REIT generally does not pay corporate
level income taxes on its taxable income that is distributed to its
shareholders, and accordingly, we do not pay or record as an expense income tax
on the share of our taxable income that is distributed to shareholders.

         Given the complex nature of the REIT qualification requirements, the
ongoing importance of factual determinations and the possibility of future
changes in our circumstances, we cannot provide any assurance that we actually
have satisfied or will satisfy the requirements for taxation as a REIT for any
particular taxable year. For any taxable year that we fail or have failed to
qualify as a REIT and applicable relief provisions did not apply, we would be
taxed at the regular corporate rates on all of our taxable income, whether or
not we made or make any distributions to our shareholders. Any resulting
requirement to pay corporate income tax, including any applicable penalties or
interest, could have a material adverse impact on our financial condition or
results of operations. Unless entitled to relief under specific statutory
provisions, we also would be disqualified from taxation as a REIT for the four
taxable years following the year during which qualification was lost. There can
be no assurance that we would be entitled to any statutory relief.

         IMPAIRMENT OF LONG-LIVED ASSETS: Substantially all of our assets
consist of long-lived assets, including real estate, assets associated with the
containerized storage business, goodwill, and other intangible assets. We
evaluate our goodwill for impairment on an annual basis, and on a quarterly
basis evaluate other long-lived assets for impairment. As described in Note 2 to
the consolidated financial statements, the evaluation of goodwill for impairment
entails valuation of the reporting unit to which goodwill is allocated, which
involves significant judgment in the area of projecting earnings, determining
appropriate price-earnings multiples, and discount rates. In addition, the
evaluation of other long-lived assets for impairment requires determining
whether indicators of impairment exist, which is a subjective process. When any
indicators of impairment are found, the evaluation of such long-lived assets
then entails projections of future operating cash flows, which also involves
significant judgment. We identified an impairment charge as of March 31, 2004
related to our plan to close a containerized storage facility - see Note 3 to
the consolidated financial statements. Future events, or facts and circumstances
that currently exist, that we have not yet identified, could cause us to
conclude in the future that other long lived assets are impaired. Any resulting
impairment loss could have a material adverse impact on our financial condition
and results of operations.

                                       32
<PAGE>

         ESTIMATED USEFUL LIVES OF LONG-LIVED ASSETS: Substantially all of our
assets consist of depreciable, long-lived assets. We record depreciation expense
with respect to these assets based upon their estimated useful lives. Any change
in the estimated useful lives of those assets, caused by functional or economic
obsolescence or other factors, could have a material adverse impact on our
financial condition or results of operations.

         ESTIMATED LEVEL OF RETAINED RISK LIABILITIES: As described in Notes 2
and 14 to the consolidated financial statements, we retain certain risks with
respect to property perils, legal liability, and other such risks. In connection
with our retention of these risks, we accrue losses based upon our estimated
level of losses incurred using certain actuarial assumptions followed in the
insurance industry and based upon our experience. While we believe that the
amounts of the accrued losses are adequate, the ultimate liability may be in
excess of or less than the amounts provided.

         ACCRUALS FOR CONTINGENCIES: We are exposed to business and legal
liability risks with respect to events that have occurred, but in accordance
with accounting principles generally accepted in the United States, we have not
accrued for such potential liabilities because the loss is either not probable
or not estimable or because we are not aware of the event. Future events and the
result of pending litigation could result in such potential losses becoming
probable and estimable, which could have a material adverse impact on our
financial condition or results of operations. Some of these potential losses,
which we are aware of, are described in Note 14 to the consolidated financial
statements.

         ACCRUALS FOR OPERATING EXPENSES: We accrue for property tax expense and
other operating expenses based upon estimates and historical trends and current
and anticipated local and state government rules and regulations. If these
estimates and assumptions are incorrect, our expenses could be misstated. Cost
of operations, interest expense, general and administrative expense, as well as
television, yellow page, and other advertising expenditures are expensed as
incurred. Accordingly, the amounts incurred in an interim period may not be
indicative of the amounts to be incurred in a full year.

                                       33

<PAGE>


RESULTS OF OPERATIONS
---------------------

FOR THE THREE MONTHS ENDED MARCH 31, 2004

         Net income for the three months ended March 31, 2004 was $69,067,000
compared to $76,639,000 for the same period in 2003, representing a decrease of
$7,572,000 or 9.9%. This decrease is primarily due to an increase in minority
interest in income of $10,063,000 attributable to the restructuring of our
preferred partnership interests (as discussed in Note 8 to the consolidated
financial statements), an increase in depreciation expense due to newly opened
facilities, and increased general and administrative expense attributable
primarily to increased stock-based compensation expense and terminated employee
expense. The effect of these items was partially offset by improved operations
of the Consistent Group self-storage facilities (as discussed below), and
increased net income from our newly developed self-storage facilities.

         Net income allocable to our common shareholders (after allocating net
income to our preferred and equity shareholders) was $21,927,000 or $0.17 per
common share on a diluted basis (based on 128,387,000 weighted average diluted
common equivalent shares) for the three months ended March 31, 2004 compared to
$31,945,000 or $0.26 per common share on a diluted basis (based on 125,232,000
weighted average diluted common equivalent shares) for the same period in 2003,
representing a decrease of 34.6% on a per share basis. The decrease in net
income allocable to common shareholders and earnings per common diluted share is
due to the impact of the factors described above with respect to net income as
well as an increase in income allocated to our preferred shareholders. The
increase in income allocated to preferred shareholders was caused by increased
allocations of income in connection with redemptions of preferred securities
(described below), as well as an increase in distributions to preferred
shareholders due to an increase in average outstanding securities offset by
lower average coupon rates.

         For the three months ended March 31, 2004 and 2003, we allocated
$38,042,000 and $37,022,000 of our net income, respectively, to our preferred
shareholders based on their distributions. During the third quarter of 2003, we
implemented the Securities and Exchange Commission's clarification of Emerging
Issues Task Force ("EITF") Topic D-42, "The Effect on the Calculation of
Earnings per Share for the Redemption or Induced Conversion of Preferred Stock."
This implementation resulted in an additional allocation of net income to our
preferred shareholders and a corresponding reduction of net income allocable to
our common shareholders for the three months ended March 31, 2004 of $3,723,000
or $0.03 per common share. This allocation represents the excess of the
redemption amount over the carrying amount (primarily representing the
underwriter's commission) of our Series L Preferred Stock that was redeemed on
March 10, 2004. Similarly, for the three months ended March 31, 2003, we
allocated net income to our preferred shareholders and a corresponding reduction
of net income allocation to our common shareholders of $2,297,000 or $0.02 per
common share, representing the excess of the redemption amount over the carrying
amount (primarily representing the underwriter's commission) of our Series B
Preferred Stock that we called for redemption during the three months ended
March 31, 2003.

         Since March 31, 2003, we have redeemed $317.5 million of our preferred
stock, including $230 million that was redeemed during the three months ended
March 31, 2004. The average dividend rate with respect to these securities was
approximately 8.28% annually. As a result of these redemptions, distributions
paid to the holders of these securities were reduced by $4,254,000 during the
three months ended March 31, 2004 as compared to the same period in 2003.
Offsetting this reduction was an increase in distributions paid to our preferred
shareholders as the result of the issuance of $520.0 million of preferred stock
over the past year, including $267.5 million that was issued during the three
months ended March 31, 2004. The average annual dividend rate with respect to
these securities is approximately 6.38%. As a result of these issuances,
distributions paid to our preferred shareholders increased by approximately
$5,274,000 during the three months ended March 31, 2004 as compared to the same
period in 2003.

                                       34

<PAGE>

Approximately $230.0 million of the $520.0 million was utilized
during the three months ended March 31, 2004 to redeem preferred securities. The
remaining net proceeds from the issuances remains on-hand in our invested cash
reserves earning interest at nominal rates relative to the distribution
requirement of the preferred stock. Net income was negatively impacted by the
difference between the distribution rates with respect to these preferred
securities and the nominal interest income earned on the net proceeds raised. We
expect that the negative impact will continue until such net proceeds are
ultimately deployed into the acquisition or development of real estate assets,
the redemption of higher rate preferred stock, the repayment of scheduled
principal payments on debt, or other corporate purposes, including common stock
repurchases.

REAL ESTATE OPERATIONS
----------------------

         SELF-STORAGE OPERATIONS: Our self-storage operations are by far the
largest component of our operations, representing approximately 93% of our total
revenues generated for the three months ended March 31, 2004. As a result of
acquisitions and development of self-storage facilities, year over year
comparisons as presented on the consolidated statements of income with respect
to our self-storage operations are not meaningful.

         To enhance year over year comparisons, the following table summarizes,
and the ensuing discussion describes, the operating results of (i) 1,194
self-storage facilities that are reflected in the financial statements on a
stabilized basis since January 1, 2002 (the "Consistent Group"), (ii) 64
facilities that were acquired since January 1, 2000 ( the "Acquired
Facilities"), (iii) 41 facilities that were owned prior to January 1, 2002 but
were not stabilized due primarily to expansions in their net rentable square
footage (the "Expansion Facilities") and (iv) 78 newly-developed facilities that
were opened after January 1, 2000 (the "Developed Facilities"):

Self - storage operations summary:             Three Months Ended March 31,
----------------------------------          ------------------------------------
                                                                      Percentage
                                              2004          2003        Change
                                            -----------   ----------  ----------
                                                  (Amounts in thousands)
Rental income (a):
   Consistent Group (b)................     $  175,923    $ 165,821       6.1%
   Acquired Facilities (c).............         11,945       10,799      10.6%
   Expansion Facilities (d)............          6,604        5,880      12.3%
   Developed Facilities (e)............         11,573        6,996      65.4%
                                            -----------   ----------  ----------
     Total rental income...............        206,045      189,496       8.7%
                                            -----------   ----------  ----------
Cost of operations:
   Consistent Group....................         63,022       55,379      13.8%
   Acquired Facilities.................          4,180        3,752      11.4%
   Expansion Facilities................          2,518        2,228      13.0%
   Developed Facilities................          5,842        3,940      48.3%
                                            -----------   ----------  ----------
   Total cost of operations............         75,562       65,299      15.7%
                                            -----------   ----------  ----------
Net operating income (before depreciation):
   Consistent Group....................        112,901      110,442       2.2%
   Acquired Facilities.................          7,765        7,047      10.2%
   Expansion Facilities................          4,086        3,652      11.9%
   Developed Facilities................          5,731        3,056      87.5%
                                            -----------   ----------  ----------
   Total net operating income..........        130,483      124,197       5.1%

 Depreciation..........................        (44,747)     (43,235)     (3.5%)
                                            -----------   ----------  ----------
   Operating Income....................      $  85,736    $  80,962       5.9%
                                            ==========    ==========  ==========
Number of self-storage facilities (at end
of period):.............................         1,377        1,365       1.1%
Net rentable square feet (at end of period
- in thousands):........................        83,285       82,019       1.5%


(a)  Rental income includes late charges and administrative fees and is net of
     promotional discounts given. Rental income does not include retail sales,
     truck rental income or tenant insurance revenues generated at the
     facilities.

(b)  The Consistent Group includes 1,194 facilities containing 69,402,000 net
     rentable square feet that have been owned prior to January 1, 2002, and
     operated at a mature, stabilized occupancy level since January 1, 2002.

(c)  The Acquired Facilities includes 64 facilities containing 3,975,000 net
     rentable square feet that were acquired after January 1, 2000, that were
     substantially all mature, stabilized facilities at the time of their
     acquisition.

(d)  The Expansion Facilities includes 41 facilities containing 4,036,000 net
     rentable square feet (of which 823,000 square feet is industrial space
     developed for containerized storage activities). These facilities were
     owned since January 1, 2002, however, operating results are not comparable
     throughout the periods presented due primarily to expansions in their net
     rentable square feet or their conversion into Combination Facilities
     (described below). Such construction activities can cause a drop in revenue
     levels, as existing capacity is made unavailable in order to accommodate
     construction activities. Since January 1, 2000, we completed construction
     on expansion projects to these facilities with a total cost of $65.3
     million.

                                       35

<PAGE>

(e)  The Developed Facilities includes 78 facilities containing 5,872,000 net
     rentable square feet (of which 607,000 square feet is industrial space
     initially developed for use in containerized storage activities, see
     "Containerized Storage" and "Discontinued Operations"). These facilities
     were developed and opened since January 1, 2000 at a total cost of $540.4
     million.

         Self-Storage Operations - Consistent Group

         For the three months ended March 31, 2004, we increased the number of
facilities included in the Consistent Group of facilities from 1,164 at December
31, 2003 to 1,194 facilities. The increase in the Consistent Group's pool of
facilities is due to the inclusion of 30 facilities that were previously in the
Acquired Facilities, Developed Facilities, or the Expansion Facilities, because
they had reached stabilization and had been owned at January 1, 2002.

         As a result of the change in the Consistent Group, the relative
weighting of markets has changed. Accordingly, comparisons should not be made
between information presented in 2003 for the Consistent Group pool of 1,164
facilities and the current Consistent Group pool of 1,194 facilities in order to
identify trends in occupancies, realized rents per square foot, or operating
results.

         The Consistent Group consists of facilities that have operated at a
stabilized level of operations since January 1, 2002. This group of facilities
contains approximately 69,402,000 net rentable square feet, representing
approximately 83% of the aggregate net rentable square feet of our self-storage
portfolio. Revenues and operating expenses with respect to this group of
properties are set forth in the above Self-Storage Operations table under the
caption, "Consistent Group." The following table sets forth additional operating
data with respect to the Consistent Group of facilities:

                                       36

<PAGE>


<TABLE>
<CAPTION>

CONSISTENT GROUP                                         Three Months Ended March 31,
----------------                                  -------------------------------------------
                                                                               Percentage
                                                      2004          2003           Change
                                                  ------------   -----------   --------------
                                                  (Dollar amounts in thousands except
                                                           weighted average amounts)

<S>                                                <C>           <C>                <C>
Base rental income.........................        $  181,388    $  169,655         6.9%
Promotional discounts......................           (13,225)      (10,434)       26.7%
                                                  ------------   -----------   --------------
   Adjusted base rental income.............           168,163       159,221         5.6%
Late charges and administrative fees
collected..................................             7,760         6,600        17.6%
                                                  ------------   -----------   --------------
   Total rental income.....................           175,923       165,821         6.1%

Cost of operations:
     Property taxes........................            17,489        16,734         4.5%
     Direct property payroll...............            13,772        12,951         6.3%
     Cost of managing facilities...........             5,825         5,172        12.6%
     Advertising and promotion.............             5,216         3,601        44.8%
     Utilities.............................             4,300         3,896        10.4%
     Repairs and maintenance...............             5,006         3,801        31.7%
     Telephone reservation center..........             2,584         2,272        13.7%
     Property insurance....................             2,145         1,430        50.0%
     Other.................................             6,685         5,522        21.1%
                                                  ------------   -----------   --------------
   Total cost of operations................            63,022        55,379        13.8%
                                                  ------------   -----------   --------------
Net operating income before depreciation...           112,901       110,442         2.2%
Depreciation...............................           (36,401)      (35,807)        1.7%
                                                  ------------   -----------   --------------
Operating income...........................        $    76,500   $   74,635         2.5%
                                                  ============   ===========   ==============
Gross margin (before depreciation).........            64.2%         66.6%         (3.6)%

Weighted average for the period:
   Square foot occupancy (a)...............            89.5%         84.9%          5.4%
   Realized annual rent per occupied
     square foot (b).......................        $   10.83     $   10.81          0.2%
   REVPAF (c)..............................        $    9.69     $    9.18          5.6%

 Weighted average at March 31:
   Square foot occupancy...................            89.9%         85.4%          5.3%
   In place annual rent per occupied
      square foot (d)......................        $    11.92    $    11.80         1.0%
   Posted annual rent per square foot (e)..        $    12.53    $    11.95         4.9%
Total net rentable square feet (in
thousands).................................            69,402        69,402         -

</TABLE>

(a)  Square foot occupancies  represent  weighted average  occupancy levels over
     the entire period.

(b)  Realized annual rent per occupied square foot is computed by annualizing
     the result of dividing adjusted base rental income by the weighted average
     occupied square footage for the period. Realized rents per square foot take
     into consideration promotional discounts, bad debt costs, credit card fees
     and other costs which reduce rental income from the contractual amounts
     due.

(c)  Annualized revenue per available square foot ("REVPAF") represents
     annualized adjusted base rental income divided by total available net
     rentable square feet.

(d)  In place annual rent per occupied square foot represents contractual rents
     per occupied square foot without reductions for promotional discounts.

(e)  Posted annual rent per square foot represents the rents charged to new
     tenants prior to any promotional discounts.


                                       37

<PAGE>

         During the first quarter of 2004, net operating income before
depreciation for the Consistent Group of facilities increased 2.2% as compared
to the same period in 2003, due to the following:

o         REVPAF increased 5.6% from $9.18 per square foot in the first quarter
          of 2003 to $9.69 in the first quarter of 2004. This was attributable
          to a 5.4% increase in weighted average occupancy levels from 84.9% in
          the first quarter of 2003 to 89.5% in the first quarter of 2004. In
          addition, realized annual rent per occupied square foot increased 0.2%
          from $10.81 in the first quarter of 2003 to $10.83 in the first
          quarter of 2004, due primarily to higher monthly average rates charged
          to existing and new tenants, offset in large part by the impact of
          increased promotional discounts given to incoming tenants from
          $10,434,000 for the first quarter of 2003 to $13,225,000 for the first
          quarter of 2004.

o         The impact of the increase in REVPAF was partially offset by a 13.8%
          increase in operating expenses from $55,379,000 in the first quarter
          of 2003 to $63,022,000 in the first quarter of 2004. This increase in
          cost of operations is primarily due to 1) a $1,615,000 (44.8%)
          increase in advertising and promotion expense, attributable primarily
          to a $1,518,000 (96.1%) increase in television advertising expense, 2)
          a $1,474,000 (8.1%) increase in direct property payroll and cost of
          managing facilities, attributable primarily to higher wage rates and
          increased incentives to property personnel, and 3) a $1,205,000
          (31.7%) increase in repairs and maintenance expense.

o         Net operating income also benefited from a 17.6% increase in late
          charges and administrative fees collected from $6,600,000 in the first
          quarter of 2003 to $7,760,000 in the first quarter of 2004. This
          increase is primarily attributable to an increase in administrative
          fees charged to new tenants upon move-in from $10 to $15 effective
          January 1, 2004, combined with a 5.9% increase in move-ins.

REVENUE OUTLOOK

         As previously reported, we suffered operating difficulties in our
self-storage portfolio in 2001, 2002, and 2003. Our occupancy levels dropped
below historical levels in late 2001 and 2002 due to a change in marketing
strategy to aggressively increase rental rates and reduce the amount of
promotional discounts offered to new tenants.

         Throughout late 2002 and 2003, we focused upon regaining occupancy
levels through increased advertising and promotional discounting. By the end of
2003, we had attained our goal of reestablishing our occupancy levels to
historical levels. This improvement in occupancy levels enabled us to begin to
increase rates that we charge to new tenants, which as of March 31, 2004 were
4.9% higher than at the same time in 2003. More importantly, throughout 2003 and
in the first quarter of 2004 we experienced positive year-over-year trends in
the growth of our quarterly REVPAF, resulting in improvements in the growth
trends of our rental income. For the Consistent Group, during 2003, rental
income for the first quarter decreased 2.4%, for the second quarter - increased
2.3%, for the third quarter - increased 3.2% and for the fourth quarter -
increased 6.2%; and for the first quarter of 2004 - increased 6.1%, all compared
to the same periods in the prior year.

         The growth in rental income during the remainder of 2004 will depend on
various factors, among which will be our ability to stabilize and maintain high
occupancy levels, increase rental rates charged to new and existing tenants, and
stabilize or reduce the level of promotional discounts to attract new tenants.

         Despite our occupancy gains, our expectations are significantly
moderated by our experience that on average approximately 25% to 30% of our new
customers will move out within the first 60 to 90 days of their move-in date.
Our current occupancy levels have been achieved in large part by the elevated
move-in activity experienced over the past four quarters. Our elevated level of
move-outs has made it more important to continue to generate a high level of
move-ins in order to maintain occupancy levels.

         We are working toward a goal of a high level of sustainable occupancy,
characterized by a less volatile tenant base that is not as heavily weighted
toward recent move-ins, thereby mitigating the level of move-outs. While we have
seen some indicators of stabilization in our existing tenant base, including
move-out ratios which appear to be stabilizing at historical levels, we expect
to continue to remain aggressive in our discounting and television advertising
programs at least in the second quarter of 2004, and we continue to regularly
evaluate our call volume, reservation activity, and move-in/move-out rates for
each of our markets relative to our marketing activities and rental rates. In
addition, we are evaluating market supply and demand factors and, based upon
these analyses, we are continuing to adjust our marketing activities in specific
markets. There can be no assurance that we will achieve our goal of a high level
of sustainable occupancy.

                                       38

<PAGE>

EXPENSE OUTLOOK

         Our increases in operating expenses in the first quarter of 2004 as
compared to the same period in 2003 are primarily attributable to programs which
we began to initiate in the second and third quarters of 2003. Repairs and
maintenance costs increased 31.7% in the first quarter of 2004 as compared to
the same quarter in 2003, due to our desire to continue to address maintenance
at our facilities and improve their "rent ready" condition. Payroll and property
management costs also increased in the first quarter of 2004 as compared to the
same period in 2003, due to our concerted effort to increase staffing levels and
incentive programs.

         Advertising and promotion costs increased 44.8% in the first quarter of
2004 as compared to the same period in 2003, due primarily to an expansion in
our television advertising from $1,580,000 in the quarter ended March 31, 2003
to $3,098,000 for the same period in 2004. In April 2004, our television
advertising costs were $877,000, as compared to $561,000 in the first quarter of
2003, an increase of 56.3%. While we expect television advertising to be higher
in the second quarter of 2004 as compared to the same period in 2003, the level
of advertising and promotion costs in the third and fourth quarters of 2004 will
be dependent primarily upon our future marketing programs.

         We expect that property taxes will increase approximately 4% to 5% in
the full year of 2004 as compared to 2003. The increases in property insurance
for the first quarter of 2004 as compared to 2003 reflect increased insurance
costs as a result of the Company's increasing its self-insured portion of risks.
This change in insurance became effective with the policy year ending March 31,
2004; accordingly, year over year increases in the remainder of 2004 will not be
as high as those experienced in the first quarter of 2004.

         We expect that the year over year rate of growth in our operating
expenses should be lower in the remainder of 2004 than what was experienced in
the first quarter of 2004.

         The following table summarizes selected financial data with respect to
the Consistent Group of facilities:

                                       39

<PAGE>

<TABLE>
<CAPTION>


                                                Three Months Ended
                      -----------------------------------------------------------------------
                        March 31,          June 30,         September 30,       December 31,         Full Year
                      -------------     --------------     --------------      --------------     -------------
                                      (Amounts in thousands, except for per square foot amounts)
Total rental income:
<S>                   <C>                <C>                 <C>                 <C>               <C>
2004............      $   175,923
2003............      $   165,821        $   171,431         $  178,301          $  176,184        $   691,737

Promotional discounts given:
2004............      $    13,225
2003............      $    10,434        $    13,491         $   12,277          $   12,245        $    48,447

Total cost of operations:
2004............      $    63,022
2003............      $    55,379        $    59,271         $   60,220          $   62,999        $   237,869

Television advertising expense:
2004............      $     3,098
2003............      $     1,580        $     2,818         $    3,166          $    1,098        $     8,662

REVPAF:
2004............      $     9.69
2003............      $     9.18         $     9.48         $     9.85          $     9.75         $     9.57

Weighted average realized annual rent per occupied square foot for the period:
2004............      $    10.83
2003............      $    10.81         $    10.63         $    10.72          $    10.75         $    10.72

Weighted  average   occupancy  levels
for the period:
2004............          89.5%
2003............          84.9%              89.2%               91.9%               90.7%              89.2%

Weighted average occupancy at April 30:
2004............                                                 91.3%
2003............                                                 86.7%

Television advertising expense in April:
2004............                                             $       877
2003............                                             $       561

Promotional discounts given in April:
2004............                                             $     5,194
2003............                                             $     4,037

</TABLE>

                                       40

<PAGE>


         ANALYSIS OF REGIONAL TRENDS

         The following table sets forth regional trends in our Consistent Group
of facilities:

CONSISTENT GROUP OPERATING TRENDS BY REGION:

<TABLE>
<CAPTION>
                                                  Three Months Ended March 31,
                                               ------------------------------------
                                                                         Percentage
                                                 2004          2003        Change
                                               -----------  ----------  -----------
                                                 (Dollar amounts in thousands)
Rental income:
<S>                                            <C>          <C>              <C>
   Southern California  (124 facilities)..     $   29,687   $   27,986       6.1%
   Northern California  (124 facilities)..         22,499       21,755       3.4%
   Texas  (143 facilities)................         16,316       15,381       6.1%
   Florida  (116 facilities)..............         15,849       14,792       7.2%
   Illinois  (79 facilities)..............         12,396       11,933       3.9%
   Georgia  (60 facilities)...............          6,463        6,085       6.2%
   All other states  (548 facilities).....         72,713       67,889       7.1%
                                               -----------  ----------  -----------
Total rental income.......................        175,923      165,821       6.1%
                                               -----------  ----------  -----------
Cost of operations:
   Southern California....................          7,218        6,766       6.7%
   Northern California....................          5,938        5,655       5.0%
   Texas..................................          7,676        6,457      18.9%
   Florida................................          6,228        5,454      14.2%
   Illinois...............................          6,170        5,371      14.9%
   Georgia................................          2,289        2,091       9.5%
   All other states.......................         27,503       23,585      16.6%
                                               -----------  ----------  -----------
Total cost of operations..................         63,022       55,379      13.8%
                                               -----------  ----------  -----------
Net operating income (before depreciation):
   Southern California....................         22,469       21,220       5.9%
   Northern California....................         16,561       16,100       2.9%
   Texas..................................          8,640        8,924      (3.2)%
   Florida................................          9,621        9,338       3.0%
   Illinois...............................          6,226        6,562      (5.1)%
   Georgia................................          4,174        3,994       4.5%
   All other states.......................         45,210       44,304       2.0%
                                               -----------  ----------  -----------
Total net operating income................     $  112,901   $  110,442       2.2%
                                               -----------  ----------  -----------
Weighted average occupancy:
   Southern California....................          90.2%        88.7%     1.7%
   Northern California....................          88.4%        85.2%     3.8%
   Texas..................................          89.3%        84.1%     6.2%
   Florida................................          90.6%        86.7%     4.5%
   Illinois...............................          87.7%        82.7%     6.0%
   Georgia................................          90.1%        85.0%     6.0%
   All other states.......................          89.7%        84.0%     6.8%
                                               -----------  ----------  -----------
   Total weighted average occupancy.......          89.5%        84.9%     5.4%
                                               -----------  ----------  -----------
</TABLE>

                                       41

<PAGE>




Consistent Group Operating Trends by Region: (Continued)

<TABLE>
<CAPTION>

                                                  Three Months Ended March 31,
                                               ------------------------------------
                                                                         Percentage
                                                 2004          2003        Change
                                               -----------  ----------  -----------
REVPAF:
<S>                                                 <C>          <C>         <C>
   Southern California...................           $14.65       $13.83      5.9%
   Northern California...................            12.97        12.58      3.1%
   Texas.................................             7.05         6.65      6.0%
   Florida...............................             9.14         8.51      7.4%
   Illinois..............................             9.88         9.58      3.1%
   Georgia...............................             7.04         6.64      6.0%
   All other states......................             8.88         8.36      6.2%
                                               -----------  ----------  -----------
Total REVPAF:............................            $9.69        $9.18      5.6%
                                               -----------  ----------  -----------
Realized annual rent per occupied square foot:
   Southern California...................           $16.24       $15.59      4.2%
   Northern California...................            14.68        14.76     (0.5)%
   Texas.................................             7.89         7.91     (0.3)%
   Florida...............................            10.09         9.82      2.7%
   Illinois..............................            11.27        11.60     (2.8)%
   Georgia...............................             7.82         7.82      -
   All other states......................             9.91         9.94     (0.3)%
                                               -----------  ----------  -----------
Total realized annual rent per occupied
  square foot:...........................           $10.83       $10.81      0.2%
                                               -----------  ----------  -----------
</TABLE>

                                       42

<PAGE>


         Self-Storage Operations - Acquired Facilities

The "Acquired  Facilities,"  at March 31, 2004, are comprised of 64 self-storage
facilities  containing  3,975,000 net rentable square feet that were acquired in
2000, 2001, and 2002. The following table summarizes operating data with respect
to these 64 facilities:

ACQUIRED FACILITIES

<TABLE>
<CAPTION>
                                                        Three Months Ended March 31,
                                                     ------------------------------------
                                                       2004          2003        Change
                                                     -----------  ----------   ----------
                                                        (Dollar amounts in thousands)
Rental income:
<S>                                                  <C>          <C>           <C>
   Self-storage facilities acquired in 2002 (a)      $   10,566   $    9,614    $    952
   Self-storage facility acquired in 2001 (b)..             137          131           6
   Self-storage facilities acquired in 2000 (c)           1,242        1,054         188
                                                     -----------  ----------   ----------
     Total rental income.......................          11,945       10,799       1,146
                                                     -----------  ----------   ----------
Cost of operations:
   Self-storage facilities acquired in 2002 (a)           3,578        3,234         344
   Self-storage facility acquired in 2001 (b)..              60           39          21
   Self-storage facilities acquired in 2000 (c)             542          479          63
                                                     -----------  ----------   ----------
     Total cost of operations..................           4,180        3,752         428
                                                     -----------  ----------   ----------
Net operating income (loss) before depreciation:
   Self-storage facilities acquired in 2002 (a)           6,988        6,380         608
   Self-storage facility acquired in 2001 (b)..              77           92         (15)
   Self-storage facilities acquired in 2000 (c)             700          575         125
                                                     -----------  ----------   ----------
     Net operating income......................           7,765        7,047         718
 Depreciation..................................          (2,415)      (2,471)         56
                                                     -----------  ----------   ----------
   Operating Income............................      $    5,350   $    4,576    $    774
                                                     ===========  ==========   ==========
Weighted average square foot occupancy during the
period:
   Self-storage facilities acquired in 2002 (a)           91.8%        85.0%          8.0%
   Self-storage facility acquired in 2001 (b)..           91.1%        84.5%          7.8%
   Self-storage facilities acquired in 2000 (c)           90.1%        73.5%         22.6%
                                                     -----------  ----------   ----------
                                                          91.6%        83.5%          9.7%
                                                     ===========  ==========   ==========
Number of self-storage facilities (at end of
period)........................................              64           64           -
Net rentable square feet (in thousands, at end of
   period).....................................           3,975        3,975           -
Cumulative acquisition cost (at end of period).      $  345,156   $  345,156    $      -

</TABLE>


(a)  The 2002 acquisitions  includes 47 properties  acquired on January 16, 2002
     from  an  affiliated   development   joint  venture  at  a  total  cost  of
     $269,898,000  and nine  facilities  acquired  from third parties at a total
     cost of $30,117,000.

(b)  The single 2001  acquisition  was acquired  from a third party at a cost of
     $3,503,000.

(c)  The 2000 acquisitions are comprised of seven facilities acquired from third
     parties at a total cost of $41,638,000.

         Similar to our Consistent Group of facilities, the Acquired Facilities
have experienced improvements in revenues, and increased costs of operations,
for the first quarter of 2004 as compared to the same period in 2003.

                                       43
<PAGE>

         Self-Storage Operations - Expansion Facilities

         Since January 1, 2002, we have expanded, or began the process of
expanding, certain self-storage facilities or converted them to Combination
Facilities (defined below). These activities caused a drop in revenue levels, as
existing capacity was made unavailable in order to accommodate construction
activities and, as a result, the current operating results are not comparable
with prior periods. For the quarter ended March 31, 2004, the weighted average
occupancy level was approximately 82.1% as compared to 72.3% for the same period
in 2003. The operating results for these facilities are presented in the
Self-Storage Operations table above under the caption, "Expansion Facilities."

         Depreciation expense with respect to the Expansion Facilities was
$1,885,000 for the three months ended March 31, 2004, as compared to $1,886,000
for the same period in 2003. These 41 facilities contain approximately 4,036,000
net rentable square feet at March 31, 2004 (which includes the expanded space,
and 823,000 square feet of industrial space developed for containerized storage
activities - see "Containerized Storage" and "Discontinued Operations"). The
aggregate construction costs incurred on completed expansions totaled
approximately $65,334,000.

         A portion of the 823,000 net rentable square feet of industrial space
included in these facilities was previously used by the discontinued
containerized storage operations. As described under "Liquidity and Capital
Resources," we are converting a portion of this industrial space into
traditional self-storage units.

         Self-Storage Operations - Developed Facilities

         Since January 1, 2000, we have opened 61 newly developed self-storage
facilities and 17 facilities that were developed to contain both self-storage
and containerized storage at the same location ("Combination Facilities"). These
newly developed facilities have an aggregate of 5,872,000 net rentable square
feet (of which 607,000 net rentable square feet is industrial space initially
developed for containerized storage activities - see "Containerized Storage" and
"Discontinued Operations"). Aggregate development cost for these 78 facilities
was approximately $540,431,000. The operating results of the self-storage
facilities and Combination Facilities are reflected in the Self-Storage
Operations table under the caption, "Developed Facilities."

                                       44

<PAGE>


         The following table sets forth the operating results and selected
operating data with respect to the Developed Facilities:

DEVELOPED FACILITIES
                                               Three Months Ended March 31,
                                            -----------------------------------
                                               2004         2003        Change
                                            ----------   ----------   ---------
                                                  (Amounts in thousands)
Rental income:
   Self-storage facilities............      $   8,396    $   4,854     $  3,542
   Combination Facilities.............          3,177        2,142        1,035
                                            ----------   ----------   ---------
     Total rental income..............         11,573        6,996        4,577
                                            ----------   ----------   ---------
Cost of operations:
   Self-storage facilities............          4,417        2,758        1,659
   Combination Facilities.............          1,425        1,182          243
                                            ----------   ----------   ---------
     Total cost of operations.........          5,842        3,940        1,902
                                            ----------   ----------   ---------
Net operating income before depreciation:
----------------------------------------
   Self-storage facilities............          3,979        2,096        1,883
   Combination Facilities.............          1,752          960          792
                                            ----------   ----------   ---------
     Net operating income.............          5,731        3,056        2,675
 Depreciation.........................         (4,046)      (3,071)        (975)
                                            ----------   ----------   ---------
   Operating income (loss)............      $   1,685    $     (15)    $  1,700
                                            ==========   ==========   =========

Weighted average square foot occupancies
for the period:
   Self-storage facilities............        77.4%        57.0%         35.8%
   Combination Facilities.............        78.6%        65.3%         20.4%
     Total............................        77.7%        58.9%         31.9%

Self-storage facilities, at end of
   period:
   Number of facilities...............              61           49          12
   Net rentable square feet...........           4,017        3,132         885
   Total development cost.............       $ 378,458    $ 276,947     $101,511
Combination Facilities, at end of period:
   Number of facilities...............              17           17           -
   Net rentable square feet (a).......           1,855        1,844          11
   Total development cost (a).........       $ 161,973    $ 154,177     $ 7,796


(a)   During 2003, we completed the conversion of 166,000 net rentable square
      feet of containerized storage space into 166,000 net rentable square feet
      of self-storage space at an aggregate cost of $4,500,000. During the three
      months ended March 31, 2004, we completed the conversion of 105,000 net
      rentable square feet of containerized storage space into 116,000 net
      rentable square feet of self-storage space at an aggregate cost of
      $3,296,000.

                                       45

<PAGE>


         The following table summarizes operating data for the 61 newly
developed self-storage facilities that opened since January 1, 2000:

DEVELOPED SELF-STORAGE FACILITIES

<TABLE>
<CAPTION>
                                                      Three Months Ended March 31,

                                                        2004        2003        Change
                                                     ----------- ----------   ----------
                                                       (Dollar Amounts in thousands)
Rental income:
<S>                                                  <C>         <C>          <C>
   Self-storage facilities opened in 2004......      $       9   $        -   $       9
   Self-storage facilities opened in 2003......           1,399           4        1,395
   Self-storage facilities opened in 2002......           2,238       1,127        1,111
   Self-storage facilities opened in 2000 and 2001        4,750       3,723        1,027
                                                     ----------- ----------   ----------
     Total rental income.......................           8,396       4,854        3,542
                                                     ----------- ----------   ----------
Cost of operations:
   Self-storage facilities opened in 2004......              93           -           93
   Self-storage facilities opened in 2003......           1,027          75          952
   Self-storage facilities opened in 2002......           1,119         815          304
   Self-storage facilities opened in 2000 and 2001        2,178       1,868          310
                                                     ----------- ----------   ----------
     Total cost of operations..................           4,417       2,758        1,659
                                                     ----------- ----------   ----------
Net operating income (loss) before depreciation:
   Self-storage facilities opened in 2004......             (84)          -          (84)
   Self-storage facilities opened in 2003......             372         (71)         443
   Self-storage facilities opened in 2002......           1,119         312          807
   Self-storage facilities opened in 2000 and 2001        2,572       1,855          717
                                                     ----------- ----------   ----------
   Net operating income........................           3,979       2,096        1,883
 Depreciation..................................          (2,831)     (1,959)        (872)
                                                     ----------- ----------   ----------
   Operating income............................      $   1,148   $      137   $   1,011
                                                     =========== ==========   ===========

Weighted average square foot occupancy during the
period:

   Self-storage facilities opened in 2004......            7.3%        -            -
   Self-storage facilities opened in 2003......           51.9%        6.5%       698.5%
   Self-storage facilities opened in 2002......           83.1%       39.6%       109.8%
   Self-storage facilities opened in 2000 and 2001        92.8%       70.2%        32.2%
                                                     ----------- ----------   ----------
                                                          77.4%       57.0%        35.8%
                                                     =========== ==========   ===========
Number of facilities:
   Self-storage facilities opened in 2004......            3           -            3
   Self-storage facilities opened in 2003......           14           5            9
   Self-storage facilities opened in 2002......           14          14            -
   Self-storage facilities opened in 2000 and 2001        30          30            -
                                                     ----------- ----------   ----------
                                                          61          49           12
                                                     =========== ==========   ===========
Cumulative Development Cost:
   Self-storage facilities opened in 2004......      $  27,395   $        -   $  27,395
   Self-storage facilities opened in 2003......         107,452      33,744      73,708
   Self-storage facilities opened in 2002......          93,887      93,479         408
   Self-storage facilities opened in 2000 and 2001      149,724     149,724           -
                                                     ----------- ----------   ----------
                                                     $ 378,458   $  276,947   $ 101,511
                                                     =========== ==========   ===========
</TABLE>


         Unlike many other forms of real estate, we are unable to pre-lease our
newly developed facilities due to the nature of our tenants. Accordingly, at the
time a newly developed facility first opens for operations, the facility is
entirely vacant, generating no rental income. We estimate that on average it
takes approximately 36 months for a newly developed facility to fill up and
reach a targeted occupancy level of approximately 90%.

                                       46


<PAGE>

         We believe that the newly developed self-storage facilities have been
affected by the operating trends in occupancy and realized rents noted above
with respect to the consistent group of facilities. In addition, move-in
discounts, which increased significantly, have had a more pronounced effect upon
realized rents for the newly developed facilities, because such facilities tend
to have a higher ratio of new tenants. During the three months ended March 31,
2004, the newly developed self-storage facilities had a weighted average
occupancy level of approximately 77.7% as compared to 58.9% in the same period
in 2003.

         Property operating expenses are substantially fixed, consisting
primarily of payroll, property taxes, utilities, and marketing costs. The rental
revenue of a newly developed facility will generally not cover its property
operating expenses (excluding depreciation) until the facility has reached an
occupancy level of approximately 30% to 35%. However, at that occupancy level,
the rental revenues from the facility are still not sufficient to cover the
related depreciation expense and cost of capital with respect to the facility's
development cost. During construction of the self-storage facility, we
capitalize interest costs and include such cost as part of the overall
development cost of the facility. Once the facility is opened for operations,
interest is no longer capitalized.

         Due to the relationship between the generation of rental income and
immediate recognition of expenses upon opening of a facility, our development
activities have had a negative impact on our net income. We estimate that our
net income has been negatively impacted by approximately $9,351,000 and
$8,359,000, in the three months ended March 31, 2004 and 2003, respectively, as
a result of the difference between the revenues generated by the Developed
Facilities and the operating expenses, depreciation, and cost of capital (at an
assumed rate of 8%) with respect to these facilities as described above. These
amounts include approximately $4,046,000 and $3,071,000, for the three months
ended March 31, 2004 and 2003, respectively, in depreciation expense.

         We continue to develop facilities, despite the short-term earnings
dilution experienced during the fill-up period, because we believe that the
ultimate returns on developed facilities are favorable. In addition, we believe
that it is advantageous for us to continue to expand our asset base and benefit
from the resultant increased critical mass, with facilities that will improve
our portfolio's overall average construction and location quality.

         We expect that over at least the next 24 months, the Developed
Facilities will continue to have a negative impact to our earnings. Furthermore,
the 42 expansion and newly developed facilities in our development pipeline,
with total estimated costs of $148,724,000, described in "Liquidity and Capital
Resources - Acquisition and Development of Facilities" that will be opened for
operation over the next 12 - 24 months will also negatively impact our earnings
until they reach a stabilized occupancy level. Following completion of our
development pipeline, we expect our ongoing development expenditures to
approximate $75,000,000 per year. Our earnings will continue to be negatively
impacted by any future newly developed facilities and expansions until they
reach a stabilized occupancy level.

         COMMERCIAL PROPERTY OPERATIONS: Commercial property operations included
in our consolidated financial statements include commercial space owned by the
Company and entities consolidated by the Company. We have a much larger interest
in commercial properties through our ownership interest in PS Business Parks
Inc. and its consolidated operating partnership (PS Business Parks, Inc. and its
consolidated operating partnership are hereinafter referred to as "PSB"). Our
investment in PSB is accounted for on the equity method of accounting, and
accordingly our share of PSB's earnings is reflected as "Equity in earnings of
real estate entities," see below.

         Our commercial operations are comprised of 1,187,000 net rentable
square feet of commercial space operated at certain of the self-storage
facilities, and three stand-alone commercial facilities having a total of
204,000 net rentable square feet.

                                       47
<PAGE>

         The following table sets forth the historical commercial property
amounts included in the financial statements:

COMMERCIAL PROPERTY OPERATIONS:
                                               Three Months Ended March 31,
                                            -----------------------------------
                                              2004         2003       Change
                                            ----------   ----------  ----------
Rental income                               $   2,695    $   2,846   $   (151)
 Cost of operations...................         (1,141)      (1,193)        52
                                            ----------   ----------  ----------
   Net operating income...............          1,554        1,653        (99)

 Depreciation.........................            (585)        (625)       40
                                            ----------   ----------  ----------
   Operating income...................       $     969    $  1,028   $    (59)
                                            ==========   ==========  ==========


         CONTAINERIZED STORAGE OPERATIONS: In August 1996, Public Storage Pickup
& Delivery ("PSPUD"), a subsidiary of the Company, made its initial entry into
the containerized storage business through its acquisition of a single facility
operator located in Irvine, California. At December 31, 2001, PSPUD had 55
facilities that were opened between 1996 and 2001 either through development or
leasing of facilities. During 2002, we reevaluated our operational strategy and
closed 22 facilities. In 2003 we closed nine non-strategic facilities and one
additional facility in the first quarter of 2004. Collectively the 32
discontinued facilities are referred to as the "Closed Facilities." At March 31,
2004 PSPUD operated 23 facilities in 10 states and major markets in which we
have a significant presence with respect to our traditional self-storage
facilities. The operations with respect to the Closed Facilities, including
historical operating results for previous periods, are not included in the table
below and instead are included in "Discontinued Operations" on our income
statement. PSPUD's operations, which exclude the Closed Facilities, are
reflected on the table below:


CONTAINERIZED STORAGE
(EXCLUDING DISCONTINUED OPERATIONS)

                                            Three Month Ended March 31,
                                         ------------------------------------
                                             2004        2003         Change
                                         -----------   ---------   ----------
                                                (Amounts in thousands)

Rental and other income ............       $ 6,606     $  7,442    $   (836)
                                         -----------   ---------   ----------
Cost of operations:
    Direct operating costs..........         3,659        4,293        (634)
    Facility lease expense..........           355          345          10
                                         -----------   ---------   ----------
      Total cost of operations......         4,014        4,638        (624)
                                         -----------   ---------   ----------
Operating income prior to depreciation       2,592        2,804        (212)
   Depreciation expense (a).........        (1,438)      (1,507)         69
                                         -----------   ---------   ----------
Operating income....................       $ 1,154      $ 1,297    $   (143)
                                         ===========   =========   ==========

(a)  Depreciation expense principally relates to the depreciation related to the
     containers; however, depreciation expense for the three months ended March
     31, 2004 and 2003 includes $345,000 and $379,000, respectively, related to
     real estate facilities.


         Rental and other income includes monthly rental charges to customers
for storage of the containers, service fees charged for pickup and delivery of
containers to customers' homes and businesses and moving service fees to move
customers' goods from city to city. Rental income decreased to $6,606,000 for
the three months ended March 31, 2004 from $7,442,000 for the same period in
2003, primarily as a result of the discontinuation of our long-distance moving
product. At March 31, 2004, there were approximately 34,543 occupied containers
in the 23 facilities that are reflected in "ongoing" operations.

         Direct operating costs principally  includes  payroll,  equipment lease
expense,  utilities and vehicle expenses (fuel and insurance).  The reduction in
direct  operating  costs  is  due to the  aforementioned  discontinuance  of our
long-distance moving services.


                                       48

<PAGE>

         At March 31, 2004, five of the 23 containerized storage facilities are
leased from third parties. The remaining 18 facilities were operated in
facilities owned by the Company, comprised of 13 Combination Facilities with an
aggregate of 805,000 square feet of industrial space (this square footage is a
component of the total net rentable square footage of the Expansion Facilities
and the Developed Facilities in the table above) and five industrial facilities
having an aggregate of 420,000 net rentable square feet.

         There can be no assurance as to the level of the containerized storage
business's expansion, level of gross rentals, level of move-outs or
profitability. We continue to evaluate the business operations, and additional
facilities may be closed.

         See "Discontinued Operations" below for a discussion of operating
results of the Closed Facilities.

         TENANT REINSURANCE OPERATIONS: On December 31, 2001, we acquired PS
Insurance Company, Ltd. ("PS Insurance") from a related party. PS Insurance
reinsures policies against losses to goods stored by tenants in our self-storage
facilities. The operations of PS Insurance are included in the income statement
under "Revenues - tenant reinsurance premiums" and "Cost of operations - tenant
reinsurance."

TENANT REINSURANCE OPERATIONS
                                                 Three Months Ended March 31,
                                            ------------------------------------
                                               2004         2003         Change
                                            ----------   ----------    ---------
                                                    (Amounts in thousands)

Tenant reinsurance revenues...........      $   5,963    $   5,215     $    748
 Cost of operations...................         (3,135)      (2,699)        (436)
                                            ----------   ----------    ---------
   Operating income...................      $   2,828    $   2,516     $    312
                                            =========    =========     =========

         The level of tenant reinsurance revenues is largely dependent upon our
occupancy level and move-in activity. New insurance business comes from tenants
who sign up for insurance as they move into our self-storage facilities. During
the three months ended March 31, 2004 and 2003, approximately 36% of our tenants
had such policies.

         The increase in tenant insurance revenues is due to a larger number of
insured tenants, as well as higher insurance rates which increased, depending
upon the level of insurance selected by the tenant, from 9.1% to 16.7% from the
amounts previously charged. These new rates apply to newly-insured tenants after
December 31, 2003. As a higher proportion of our insured tenants are subject to
these increased insurance rates, our revenue per insured tenant should increase;
however, this may be offset by a reduced number of tenants selecting insurance
due to the rate increases.

         Cost of operations for the tenant reinsurance operations has increased
in the three months ended March 31, 2004 as compared to the same period in 2003,
due primarily to increased customer claims attributable to a larger tenant base
as well as an increase in average claim value.

         We have outside third-party insurance coverage for losses from any
individual event that exceeds a loss of $500,000, to a limit of $10,000,000.
Losses below these amounts are recorded as cost of operations for the tenant
reinsurance operations.

         EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: In addition to our
ownership of equity interests in PSB, we had general and limited partnership
interests in seven limited partnerships at March 31, 2004. (PSB and the limited
partnerships are collectively referred to as the "Unconsolidated Entities.") Due
to our limited ownership interest and limited control of these entities, we do
not consolidate the accounts of these entities for financial reporting purposes.
We account for such investments using the equity method.

                                       49

<PAGE>

         Equity in earnings of real estate entities for the three months ended
March 31, 2004 and 2003 consists of our pro-rata share of the Unconsolidated
Entities based upon our ownership interest for the period. The following table
sets forth the significant components of equity in earnings of real estate
entities:

                                                Three Months Ended March 31,
                                             ----------------------------------
                                               2004         2003        Change
                                             --------     --------     --------
                                                   (Amounts in thousands)
Property operations:
  PSB                                        $17,193       $14,700      $2,493
  Other investments (1)..................      1,684         1,428         256
                                             --------     ---------    --------
                                              18,877        16,128       2,749
                                             --------     ---------     --------
Depreciation:
  PSB....................................     (7,881)       (6,029)     (1,852)
  Other investments (1)..................       (394)         (265)       (129)
                                             --------     ---------    --------
                                              (8,275)       (6,294)     (1,981)
                                             --------     ---------    --------
Other: (2)
  PSB (3)................................     (6,788)       (5,252)     (1,536)
  Other investments (1)..................        243           105         138
                                             --------     ---------    --------
                                              (6,545)       (5,147)     (1,398)
                                             --------     ---------    --------
Total equity in earnings of real estate
entities..................................    $4,057        $4,687       $(630)
                                             ========     =========    ========

(1)  Amounts primarily reflect equity in earnings recorded for investments that
     have been held consistently throughout each of the three months ended March
     31, 2004 and 2003.

(2)  "Other" reflects our share of general and administrative expense,  interest
     expense, interest income, and other non-property,  non-depreciation related
     operating  results  of these  entities.  The  amount  of  interest  expense
     included in "other" is $564,000 and  $490,000,  respectively  for the three
     months ended March 31, 2004 and 2003, respectively.

(3)  "Other" with respect to PSB also includes our pro-rata share of gains on
     sale of real estate assets, impairment charges relating to pending sales of
     real estate and the impact of PSB's application of the SEC's clarification
     of EITF Topic D-42 on redemptions of preferred securities. Our net pro-rata
     share of these items totaled net income reductions of $943,000 and
     $2,130,000 for the three months ended March 31, 2004 and 2003,
     respectively.

         The decrease in equity in earnings of real estate entities for the
three months ended March 31, 2004 as compared to 2003 is primarily due to a
reduction in our pro-rata share of PSB's earnings. Our share of PSB's
depreciation expense increased $1,852,000 primarily due to PSB's significant
acquisitions of real estate facilities in December 2003. In addition, our equity
in earnings for the first quarter of 2004 was reduced $943,000 by our share of
PSB's application of the SEC's clarification of EITF Topic D-42 with respect to
redemptions of preferred securities in the first quarter of 2004. Our equity in
earnings for the first quarter of 2003 was reduced an aggregate of $2,130,000,
comprised of our share of impairment charges recorded by PSB with respect to
impending real estate sales, offset partially by gains from PSB on the sale of
real estate assets.

         Equity in earnings of PSB represents our pro-rata share (an average of
approximately 44% for the three months ended March 31, 2004 and 2003) of the
earnings of PSB. As of March 31, 2004, we owned 5,418,273 common shares and
7,305,355 operating partnership units (units which are convertible into common
shares on a one-for-one basis) in PSB. At March 31, 2004, PSB owned and operated
18.3 million net rentable square feet of commercial space located in eight
states. PSB also manages approximately 960,000 net rentable square feet of
commercial space owned by the Company and affiliated entities at March 31, 2004
pursuant to property management agreements.

         Accordingly, our future equity income from PSB will be dependent
entirely upon PSB's operating results. PSB's filings and selected financial
information can be accessed through the Securities and Exchange Commission, and
on its website, www.psbusinessparks.com.


                                       50

<PAGE>

         The "Other Investments" is comprised primarily of our equity in
earnings from seven limited partnerships, for which we held an approximately
consistent level of equity interest during each of the three months ended March
31, 2004 and 2003. These limited partnerships were formed by the Company during
the 1980's. The Company is the general partner in each limited partnership, and
manages each of these facilities for a management fee that is included in
"Interest and Other Income." The limited partners consist of numerous individual
investors, including the Company, which throughout the 1990's acquired units of
limited partnership interests in these limited partnerships in various
transactions.

         Our future earnings with respect to the "Other investments" will be
dependent upon the operating results of the 36 self-storage facilities that
these entities own. The operating characteristics of these facilities are
similar to those of the Company's self-storage facilities, and are subject to
the same operational issues as the Consistent Group of self-storage facilities
as discussed above. See Note 5 to the consolidated financial statements for the
operating results of these entities for the three months ended March 31, 2004
and 2003.

OTHER INCOME AND EXPENSE ITEMS

         INTEREST AND OTHER INCOME: Interest in other income includes (i) the
net operating results from our third party property management operations, (ii)
the net operating results from our merchandise sales and consumer truck rentals
and (iii) interest income.

         Interest and other income  decreased to $1,357,000 for the three months
ended March 31, 2004 from  $1,699,000 for the same period in 2003. This decrease
primarily  reflects  reduced  interest  income from notes  receivable.  This was
offset partially by an increase in bank interest income, which was due primarily
to higher average cash balances.

         As discussed more fully in "Liquidity and Capital Resources" below, at
March 31, 2004, we had cash balances totaling approximately $319,635,000, which
includes significant uninvested proceeds from recent equity issuances. These
balances are typically invested in short-term low-risk securities that, during
the quarter ended March 31, 2004, earned a nominal yield. Our future interest
and other income will be partially dependent upon the timing of our investment
of these unused offering proceeds and the level of interest earned on these
short-term investments.

         DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense
was $46,770,000 for the three months ended March 31, 2004 compared to
$45,367,000 for the same period in 2003. Included in depreciation expense with
respect to our real estate facilities was $43,060,000 and $42,013,000 for the
three months ended March 31, 2004 and 2003, respectively. The increase is due
primarily to the development of additional real estate facilities in 2003 and
2004. Depreciation expense with respect to other assets, primarily depreciation
of equipment and containers associated with the containerized storage
operations, was $2,059,000 and $1,703,000 for the three months ended March 31,
2004 and 2003, respectively. Depreciation expense also includes $1,651,000 for
each of the three months ended March 31, 2004 and 2003, relating to the
amortization of property management contracts.

         Depreciation and amortization for the three months ended March 31, 2004
with respect to real estate facilities developed the first quarter of 2004
amounted to approximately $59,000. We expect the quarterly depreciation and
amortization expense with respect to these facilities for quarters beginning
with second quarter of 2004 will approximate $179,000.

         GENERAL AND ADMINISTRATIVE: General and administrative expense for the
three months ended March 31, 2004 increased 38.4% to $5,884,000 as compared to
$4,250,000 for the same period in 2003. General and administrative expense
principally consists of state income taxes, investor relation expenses and
corporate and executive salaries. In addition, general and administrative
expense includes expenses that vary depending on the Company's activity levels
in certain areas, such as overhead associated with the acquisition and
development of real estate facilities, employee severance, stock-based
compensation and product research and development expenditures.

         The increase in general and administrative expense for the three months
ended March 31, 2004 as compared to the same period in 2003 is primarily due to
increased stock-based compensation expense from $167,000 to $967,000, combined
with $610,000 in employee termination costs during the three months ended March
31, 2004 (none in the same period in 2003).


                                       51

<PAGE>

         Stock-based compensation expense for the three months ended March 31,
2004 included $119,000 in stock option expense, $534,000 in restricted stock
expense, and $314,000 in payroll taxes and other costs associated with
employees' exercise of approximately 811,000 stock options in the three months
ended March 31, 2004. Stock-based compensation expense totaled $167,000 in the
three months ended March 31, 2003, which is comprised of $99,000 in stock option
expense and $68,000 in payroll taxes and other costs associated with employees'
exercise of 143,000 stock options during the three months ended March 31, 2003.

         Restricted stock expense, based upon restricted stock units outstanding
at March 31, 2004, should approximate $2,136,0000 for the year ended December
31, 2004, while stock option expense should approximate $510,000 in 2004,
exclusive of payroll taxes on exercise of options. Future grants of restricted
stock units and stock options could further increase our future stock-based
compensation expense. The future level of payroll taxes and other costs
associated with the employees' exercise of stock options will depend upon the
timing of the employees' exercise of approximately 2.3 million remaining stock
options outstanding at March 31, 2004, the Company's stock price at the time of
exercise, and the level of future grants of stock options.

         INTEREST EXPENSE: Interest expense was $100,000 and $453,000 for the
three months ended March 31, 2004 and 2003, respectively. Interest capitalized
during the three months ended March 31, 2004 and 2003 was $1,125,000 and
$1,525,000, respectively. The decrease in interest expense in 2004 compared to
2003 is principally the result of lower interest expense on notes payable due to
scheduled principal repayments. The reduction in capitalized interest is a
result of a lower average balance of in-process development projects. Interest
expense (prior to capitalized interest) should continue to decrease as we make
scheduled principal payments.

         MINORITY INTEREST IN INCOME: Minority interest in income represents the
income allocable to equity interests in Consolidated Entities, which are not
owned by the Company. The following table summarizes minority interest in income
for the three months ended March 31, 2004 and 2003:

<TABLE>
<CAPTION>

                                                     Three Months Ended March 31,
                                               -----------------------------------------
                Description                       2004           2003          Change
--------------------------------------------   -----------   ------------    -----------
                                                        (Amounts in thousands)
Preferred partnership interests:
<S>                                            <C>              <C>           <C>
     Special Distribution and Topic D-42 (a)   $   10,063       $       -     $  10,063
     Ongoing distributions (b)..........            6,554           6,726          (172)
Consolidated Development Joint Venture (c)            957             743           214
Convertible Partnership Units (d).......               40              65           (25)
Acquired minority interests (e) ........                -             359          (359)
Other minority interests (f)............            3,006           2,775           231
                                               -----------   ------------    -----------
    Total minority interests in income..        $  20,620      $   10,668     $   9,952
                                               ===========   ============    ===========

</TABLE>

(a)  As described more fully below, holders of $200,000,000 of our Series N
     preferred partnership units agreed to a restructuring which included
     reducing their distribution rate from 9.5% to 6.4% in exchange for a
     special distribution of $8,000,000. This special distribution, combined
     with $2,063,000 in costs incurred at the time the units were originally
     issued that were charged against income in accordance with the Securities
     and Exchange Commissions' clarification of EITF Topic D-42, are included in
     minority interest in income.

(b)  The decrease in ongoing distributions is due to the reduction in rate on
     $200,000,000 of the preferred partnership units from 9.5% to 6.4%,
     effective March 22, 2004. Ongoing distributions, beginning in the second
     quarter of 2004, should amount to approximately $5,176,000 per quarter.

(c)  These amounts reflect income allocated to the minority interests in the
     Consolidated Development Joint Venture. Included in minority interest in
     income is $963,000 and $851,000 in depreciation expense for the three
     months ended March 31, 2004 and 2003, respectively.

(d)  These amounts reflect the minority interests represented by the Convertible
     Partnership Units (see Note 8 to the consolidated financial statements).
     Included in minority interest in income is $85,000 and $97,000 in
     depreciation expense for the three months ended March 31, 2004 and 2003,
     respectively.

                                       52

<PAGE>

(e)  These amounts reflect income allocated to minority interests that the
     Company acquired in April, 2003 and are no longer outstanding at March 31,
     2004. Included in minority interest in income is $143,000 in depreciation
     expense for the three months ended March 31, 2003 (none for the three
     months ended March 31, 2004).

(f)  These amounts reflect income allocated to minority interests that were
     outstanding consistently throughout the three months ended March 31, 2004
     and 2003. Included in minority interest in income is $527,000 and $555,000
     in depreciation expense for the three months ended March 31, 2004 and 2003,
     respectively.

         On March 22, 2004, certain investors who hold $200 million of our 9.5%
Series N Cumulative Redeemable Perpetual Preferred Units agreed, in exchange for
a special distribution of $8,000,000, to a reduction in the distribution rate on
their preferred units from 9.50% per year to 6.40% per year, and an extension of
the call date for these securities to March 17, 2010. The investors also
received their distribution that accrued from January 1, 2004 through the
effective date of the exchange.

         As a result of this agreement, income allocable to minority interests
increased, and the Company's net income decreased $10,063,000 due to (1) the
$8,000,000 cash payment to the holders of the preferred units and (2) the
application of the SEC Observer's recent clarification of EITF Topic D-42, "The
Effect on the Calculation of Earnings per Share for the Redemption or Induced
Conversion of Preferred Stock" totaling $2,063,000, which represents the excess
of the $200 million stated amount of the preferred units over their carrying
amount. Beginning with the second quarter of 2004, this restructuring will
result in a decrease in income allocable to minority interests causing an
increase in our net income by $1.55 million per quarter.

         The increase in minority interest in income with respect to the
Consolidated Development Joint Venture is due to an increase in income with
respect to the properties owned by this entity. We expect that minority interest
in income with respect to the Consolidated Development Joint Venture will
continue to increase as the properties owned by this entity, substantially all
of which are newly developed facilities in the fill-up stage, continue to
stabilize their operations and increase the earnings of this entity.

         The acquired minority interests reflect earnings allocated to interests
the Company didn't own in PS Partners IV, Ltd, which the Company acquired on
April 28, 2003 for an aggregate cost of approximately $23,377,000. Following the
Company's acquisition of these interests, there will be no further income
allocated to these interests.

         Other minority interests reflect income allocated to minority interests
that have maintained a consistent level of interest throughout the three months
ended March 31, 2004 and 2003, comprised of investments in the Consolidated
Entities described in Note 8 to the Company's financial statements. The level of
income allocated to these interests in the future is dependent upon the
operating results of the storage facilities that these entities own, as well as
any minority interests that the Company acquires in the future.

         DISCONTINUED OPERATIONS: During the first quarter of 2003, we entered
into a business plan to exit the Knoxville, Tennessee market, and listed our
four self-storage facilities (the "Knoxville Facilities") in this market for
sale. In addition, in October 2003, we sold a self-storage facility located in
Perrysburg, Ohio (collectively, the "Sold Self-Storage Facilities").

         As described more fully in Note 3 to the consolidated financial
statements, during 2002 and 2003 we implemented a business plan which included
the closure of 31 of 55 containerized storage facilities that were open at
December 31, 2001. We also closed an additional facility during the three months
ended March 31, 2004.
The 32 facilities are hereinafter referred to as the "Closed Facilities."

         The current and prior period operations for the Sold Self-Storage
Facilities and Closed Facilities have been reclassified into the line-item
"Discontinued Operations" on our consolidated income statement.

                                       53

<PAGE>

         The following table summarizes the historical operations of the Sold
Self-Storage Facilities and the Closed Facilities:

DISCONTINUED OPERATIONS:

                                             Three Months Ended March 31,
                                        --------------------------------------
                                           2004          2003          Change
                                        -----------   ----------   -----------
                                                 (Amounts in thousands)
Rental income (a):
  Sold Self-Storage Facilities....      $       -     $    463     $    (463)
  Closed Facilities...............            802        3,572        (2,770)
                                        -----------   ----------   -----------
       Total rental income........            802        4,035        (3,233)
                                        -----------   ----------   -----------
Cost of operations (a):
  Sold Self-Storage Facilities....              -         (186)          186
  Closed Facilities...............           (985)      (3,369)        2,384
                                        -----------   ----------   -----------
       Total cost of operations...           (985)      (3,555)        2,570
                                        -----------   ----------   -----------
Depreciation expense (a):
  Sold Self-Storage Facilities....              -         (159)          159
  Closed Facilities...............            (78)        (514)          436
                                        -----------   ----------   -----------
       Total depreciation ........            (78)        (673)          595
                                        -----------   ----------   -----------
Asset impairment and lease termination charges (b):
  Closed Facilities...............           (169)           -          (169)
                                        -----------   ----------   -----------
Net discontinued operations.......      $    (430)    $   (193)    $    (237)
                                        ===========   ==========   ===========

(a)  These amounts represent the historical operations of the Sold Self-Storage
     Facilities and the Closed Facilities, and include amounts previously
     classified as rental income, cost of operations, and depreciation expense
     in the financial statements in prior periods.

(b)  An asset impairment charge in the amount of $169,000 was recorded in the
     three months ended March 31, 2004 related to the closure of a non-strategic
     containerized storage facility during the period. There was no impairment
     charge related to discontinued operations recorded during the three months
     ended March 31, 2003.

         As of March 31, 2004, three of the Closed Facilities remained open. We
expect that the remaining facilities will be closed by the end of the third
quarter 2004 and will continue to generate operating losses until final closure.
These losses will include the remaining lease obligations on the closed
facilities, which, at March 31, 2004, amount to approximately $711,000.

         GAIN (LOSS) ON DISPOSITION OF REAL ESTATE: During the first quarter of
2003, we disposed of two self-storage facilities and a parcel of land for an
aggregate of $7,713,000 in cash, and recognized a gain on disposition of
$14,000. There were no such gains or losses recorded in the same period in 2004.

                                       54

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

         We believe that our internally generated net cash provided by operating
activities will continue to be sufficient to enable us to meet our operating
expenses, capital improvements, debt service requirements and distributions to
shareholders for the foreseeable future.

         Operating as a real estate investment trust ("REIT"), our ability to
retain cash flow for reinvestment is restricted. In order for us to maintain our
REIT status, a substantial portion of our operating cash flow must be
distributed to our shareholders (see "Requirement to Pay Distributions" below).
However, despite the significant distribution requirements, we have been able to
retain a significant amount of our operating cash flow. The following table
summarizes our ability to fund distributions to the minority interest, capital
improvements to maintain our facilities, and distributions to our shareholders
through the use of cash provided by operating activities. The remaining cash
flow generated is available to make both principal payments on debt and for
reinvestment.



<PAGE>

<TABLE>
<CAPTION>

                                                                            Three Months Ended March 31,
                                                                         ---------------------------------
                                                                              2004               2003
                                                                         --------------     --------------
                                                                             (Amounts in thousands)

<S>                                                                      <C>                <C>
Net cash provided by operating activities.......................         $    146,927       $    146,915

Allocable to minority interest (Preferred Units) - ongoing
distributions...................................................               (6,554)            (6,726)
Allocable to minority interest (Preferred Units) - special
distribution (a)................................................               (8,000)                 -
Allocable to minority interest (common equity)..................               (5,578)            (5,588)
                                                                         --------------     --------------
Cash from operations allocable to our shareholders..............              126,795            134,601

Capital improvements to maintain our facilities.................               (2,705)            (2,333)
 Add back:  minority interest share of capital improvements to
    maintain facilities.........................................                   44                 57
                                                                         --------------     --------------
 Remaining operating cash flow available for distributions to our
    shareholders................................................              124,134            132,325

Distributions paid:
  Preferred stock dividends.....................................              (38,042)           (37,022)
  Equity Stock, Series A dividends..............................               (5,375)            (5,375)
  Distributions to Common and Class B shareholders..............              (57,348)           (55,995)
                                                                         --------------     --------------
Cash available for principal payments on debt and reinvestment..         $     23,369       $     33,933
                                                                         ==============     ==============

</TABLE>

(a)  The $8 million  special  distribution  was paid to a unitholder of our 9.5%
     Series N Cumulative  Redeemable  Perpetual  Preferred  Units in conjunction
     with a March 22,  2004  agreement  that,  among other  things,  lowered the
     distribution rate from 9.5% to 6.4%.

         Our financial profile is characterized by a low level of debt to total
capitalization and a conservative dividend payout ratio with respect to the
common stock. We expect to fund our growth strategies with cash on hand at March
31, 2004, internally generated retained cash flows and proceeds from issuing
equity securities. In general, our current strategy is to continue to finance
our growth with permanent capital; either common or preferred equity. We have in
the past used our $200 million line of credit as temporary "bridge" financing
and repaid those amounts with internally generated cash flows and proceeds from
the placement of permanent capital. At March 31, 2004, we had no outstanding
borrowings under our $200 million bank line of credit.


                                       55
<PAGE>

         Over the past three years, we have funded substantially all of our
acquisitions with permanent capital (both common and preferred securities). We
have elected to use preferred securities as a form of leverage despite the fact
that the dividend rates of our preferred securities exceed the prevailing market
interest rates on conventional debt. We have chosen this method of financing for
the following reasons: (i) under the REIT structure, a significant amount of
operating cash flow needs to be distributed to our shareholders, making it
difficult to repay debt with operating cash flow alone, (ii) our perpetual
preferred stock has no sinking fund requirement or maturity date and does not
require redemption, all of which eliminate any future refinancing risks, (iii)
after the end of a non-call period, we have the option to redeem the preferred
stock at any time, which in 2002 and 2001 enabled us to effectively refinance
higher coupon preferred stock with new preferred stock at lower rates, (iv)
preferred stock does not contain onerous covenants, thus allowing us to maintain
significant financial flexibility, and (v) dividends on the preferred stock can
be applied to our REIT distribution requirements.

         Our credit ratings on each of our series of Cumulative Preferred Stock
are "Baa2" by Moody's and "BBB+" by Standard & Poor's.

         Our portfolio of real estate facilities remains substantially
unencumbered. At March 31, 2004, we had mortgage debt outstanding of $15.7
million (which encumbers 21 facilities with a book value of $55 million) and
unsecured long-term debt in the amount of $33.6 million.

         We believe that our size and financial flexibility enables us to access
capital when appropriate.

         RECENT ISSUANCE OF PREFERRED STOCK AND PROJECTED REDEMPTION OF
PREFERRED SECURITIES: One of our financing objectives over the past several
years has been to reduce our average cost of capital with respect to our
preferred securities. Accordingly, we have redeemed higher rate preferred
securities outstanding and have financed the redemption with cash on-hand or
from the proceeds from the issuance of lower rate preferred securities.

         During 2004 and 2005, we had approximately $714 million of preferred
securities that became redeemable at our option. The weighted average annual
dividend rate with respect to these securities was approximately 9.1%; a rate
that is significantly higher than current market conditions. However, during the
fourth quarter of 2003 and into 2004, we became increasingly concerned that
conditions soon change and that dividend rates with respect to new offerings of
preferred securities would begin to rise. It was our desire to limit our
"refinancing risk" with respect to anticipated rising rates.

         In that regard, over the past two quarters, we have issued
approximately $520 million of our preferred stock raising net proceeds of
approximately $504 million. The weighted average annual dividend rate with
respect to these securities is approximately 6.4% (6.6% based on the net
proceeds received).

         During the first quarter of 2004, we utilized $230 million of the
capital raised to redeem our 8.25% Series K preferred stock (which was called
for redemption in December 2003) and our 8.25% Series L preferred stock. In
addition, during the first quarter of 2004, we restructured $200 million of our
9.5% Series N preferred units reducing the annual dividend rate to 6.4%. These
securities were not become callable until 2005. We have approximately
$283,625,000 in preferred securities that, at our option, become redeemable in
the remainder of 2004 and 2005, with an average coupon of 9.4%, as follows:

<TABLE>
<CAPTION>

                                            Earliest
                                           Redemption       Dividend      Liquidation
               Security                       Date            Rate       Value (000's)
-----------------------------------        ----------       ---------    --------------

<S>                                          <C>              <C>          <C>
 Series M Preferred Stock                    8/17/04           8.750%      $   56,250
 Series D Preferred Stock                    9/30/04           9.500%          30,000
 Series E Preferred Stock                    1/31/05          10.000%          54,875
 Series N Preferred Units                    3/17/05           9.500%          40,000
 Series O Preferred Units                    3/29/05           9.125%          45,000
 Series F Preferred Stock                    4/30/05           9.750%          57,500
                                                            ---------    --------------
    Total securities available for
    redemption                                                   9.4%      $  283,625
                                                            =========    ==============

</TABLE>

         Our $319,635,000 cash on hand at March 31, 2004 is sufficient to fund
these redemptions. If, however, our cash on hand is utilized for alternative
investments such as the acquisition or development of real estate assets, we
intend to issue additional lower-rate preferred securities to redeem these
securities if. There can be no assurance that we would be able to issue
additional preferred securities at a lower rate.

                                       56

<PAGE>

         REQUIREMENT TO PAY DISTRIBUTIONS: We have operated, and intend to
continue to operate, in such a manner as to qualify as a REIT under the Internal
Revenue Code of 1986, but no assurance can be given that we will at all times so
qualify. To the extent that the Company continues to qualify as a REIT, we will
not be taxed, with certain limited exceptions, on the taxable income that is
distributed to our shareholders, provided that at least 90% of our taxable
income is so distributed to our shareholders prior to filing of the Company's
tax return. We have satisfied the REIT distribution requirement since 1980.

         During the three months ended March 31, 2004 and 2003, we paid cash
dividends totaling $38,042,000 and $37,022,000, respectively, to the holders of
our Cumulative Preferred Stock. We estimate that the distribution requirements
with respect to our Preferred Stock outstanding at March 31, 2004 to be
approximately $155.2 million per year.

         During the three months ended March 31, 2004 and 2003, we paid cash
dividends totaling $6,554,000 and $6,726,000, respectively, to the holders of
our preferred partnership units. On March 22, 2004, certain investors who hold
$200 million of our 9.5% Series N Cumulative Redeemable Preferred Units agreed,
in exchange for a special distribution of $8,000,000, to a reduction in the
distribution rate on their preferred units from 9.5% per year to 6.4% per year.
We estimate that the remaining distribution requirement with respect to the
preferred partnership units outstanding at March 31, 2004 to be approximately
$20.7 million per year.

         During each of the three months ended March 31, 2004 and 2003, we paid
cash dividends totaling $5,375,000 to the holders of our Equity Stock, Series A.
With respect to the depositary shares of Equity Stock, Series A, we have no
obligation to pay distributions if no distributions are paid to the common
shareholders. To the extent that we do pay common distributions in any year, the
holders of the depositary shares receive annual distributions equal to the
lesser of (i) five times the per share dividend on the common stock or (ii)
$2.45. The depositary shares are non-cumulative, and have no preference over our
common stock either as to dividends or in liquidation. With respect to the
Equity Stock, Series A outstanding at March 31, 2004, we estimate the total
regular distribution for the remainder of 2004 to be approximately $16.1 million
assuming that dividends of at least $0.49 per share per year are paid to the
common shareholders.

         During the three months ended March 31, 2004, we paid dividends
totaling $57,348,000 ($0.45 per common share) to the holders of our common
stock. Based upon shares outstanding at March 31, 2004 and a quarterly
distribution of $0.45 per share, which was declared by the Board of Directors on
May 6, 2004 and payable on June 30, 2004, we estimate dividend payments with
respect to our common stock of approximately $57.5 million for the second
quarter of 2004.

         CAPITAL IMPROVEMENT REQUIREMENTS: For 2004, we have budgeted
approximately $53.0 million for capital improvements. During the three months
ended March 31, 2004, we incurred capital improvements of approximately $2.7
million. Capital improvements include major repairs or replacements to the
facilities that maintain the facilities' existing operating condition and visual
appeal. Capital improvements do not include costs relating to the development or
expansion of facilities, or expenditures associated with improving the visual
and structural appeal of our existing self-storage facilities.

         DEBT SERVICE REQUIREMENTS: We do not believe we have any significant
refinancing risks with respect to our notes payable, all of which are fixed
rate. At March 31, 2004, we had total outstanding notes payable of approximately
$49.3 million. See Note 7 to the consolidated financial statements for
approximate principal maturities of such borrowings. We anticipate that our
retained operating cash flow will continue to be sufficient to enable us to make
schedule principal payments. It is our current intention to fully amortize our
debt as opposed to refinance debt maturities with additional debt.


                                       57

<PAGE>

         ACQUISITION AND DEVELOPMENT OF REAL ESTATE FACILITIES: No facilities
were acquired from third parties during the first three months of 2004 or during
the year ended December 31, 2003. Our low level of third party acquisitions is
not indicative of either the supply of facilities offered for sale or our
ability to finance the acquisitions, but primarily due to prices sought by
sellers and our lack of desire to pay such prices. During the remainder of 2004
we will seek to acquire additional self-storage facilities from third parties;
however, it is difficult to estimate the amount of third party acquisitions we
will undertake.

         On January 1, 2004, we entered into a joint venture with an
institutional investor for the purpose of acquiring up to $125.0 million of
existing self-storage properties in the United States from third parties. The
venture will be funded entirely with equity consisting of 30% from the Company
and 70% from the institutional investor. The venture has a nine month investment
period (through September 30, 2004) to identify and acquire facilities. To date
no facilities have been acquired by the venture, and accordingly there have been
no capital contributions to this partnership from the Company or from the
institutional investor.

         In June 2004, we anticipate that we will acquire a limited partnership
interest in one of our Consolidated Entities, at an estimated acquisition cost
of approximately $24 million.

         In November 1999, we formed a second joint venture partnership for the
development of approximately $100 million of self-storage facilities. The
venture is funded solely with equity capital consisting of 51% from us and 49%
from the joint venture partner. The term of the joint venture is 15 years. After
six years, the joint venture partner has the right to cause the Company to
purchase the joint venture partner's interest for an amount necessary to provide
the joint venture partner with a maximum return of 10.75% or less in certain
circumstances. Our estimate of the purchase price of this interest is
approximately $105 million.

         We currently have a development "pipeline" of 42 self-storage
facilities, combination facilities, and expansions to existing self-storage
facilities with an aggregate estimated cost of approximately $148.7 million.
Approximately $51.2 million of development cost has been incurred as of March
31, 2004. We have acquired the land for 38 of these projects, which have an
aggregate estimated cost of approximately $126.8 million, and costs incurred as
of March 31, 2004 of approximately $50.8 million. The remaining four facilities
represent identified sites where we have an agreement in place to acquire the
land, generally within one year. We anticipate that the development of these
projects will be funded solely by the Company.

         The development and fill-up of these storage facilities is subject to
significant contingencies such as obtaining appropriate governmental approvals.
We estimate that the amount remaining to be spent of approximately $97.5 million
will be incurred over the next 24 months. The following table sets forth certain
information with respect to our development pipeline.

DEVELOPMENT PIPELINE SUMMARY

<TABLE>
<CAPTION>
                                                                             Total
                                                    Number     Net         estimated     Costs incurred
                                                      of     rentable     development        through         Costs to
                                                   projects   sq. ft.        costs           3/31/04         complete
                                                  ---------  ---------  ---------------  --------------- ---------------
                                                                               (Amounts in thousands)
  Facilities currently under construction:
  <S>                                                 <C>         <C>      <C>              <C>              <C>
    Self-storage facilities                            4          251      $   29,588       $   22,918       $    6,670
    Expansions and other enhancements to
     existing self-storage facilities                 12          545          30,511           17,242           13,269
                                                 ---------  ---------  ---------------  ---------------  ---------------
                                                      16          796          60,099           40,160           19,939

  Facilities awaiting  construction,  where land
     is acquired:
    Self-storage facilities                            3          224          23,785            9,684           14,101
    Expansions and other enhancements to
     existing self-storage facilities                 19        1,033          42,904              912           41,9992
                                                 ---------  ---------  ---------------  ---------------  ---------------
                                                      22        1,257          66,689           10,596           56,093

  Self-storage facilities awaiting
    construction, where land has not yet been
    acquired                                           4          243          21,936              443           21,493
                                                 ---------  ---------  ---------------  ---------------  ---------------
  Total Development Pipeline                          42        2,296      $  148,724       $   51,199       $   97,525
                                                 =========  =========  ===============  ===============  ===============

</TABLE>


                                       58


<PAGE>

         Included in the 31 "expansions and other enhancements of existing
self-storage facilities" are 16 projects associated with the conversion of
industrial space, previously used by the discontinued containerized facility
operations, into self-storage space. The total amount of self-storage space to
come on line from these 16 conversions is approximately 1,048,000 net rentable
square feet of traditional self-storage space at a cost of $34,294,000. Also
included are enhancements which, while they do not add significant incremental
square footage, improve the visual and structural appeal of our existing
self-storage facilities.

         In addition to the above projects, we have five parcels of land held
for development with total costs of approximately $12,236,000 at March 31, 2004.
These parcels will either be developed or sold.

         REPURCHASES OF THE COMPANY'S COMMON STOCK: The Company's Board of
Directors authorized the repurchase from time to time of up to 25,000,000 shares
of our common stock on the open market or in privately negotiated transactions.
For the three months ended March 31, 2004, we repurchased 85,000 shares of our
common stock for approximately $3,967,000. In addition, during April 2004, we
repurchased an additional 324,700 shares of our common stock, for approximately
$14,267,000.

         From the initial authorization through May 6, 2004, we have repurchased
a total of 22,081,720 shares of common stock at an aggregate cost of
approximately $560.1 million.

ITEM 2A.   RISK FACTORS
-----------------------

         In addition to the other information in our Form 10-Q and our Form 10-K
for the year ended December 31, 2003, you should consider the following factors
in evaluating the Company:

THE HUGHES FAMILY COULD CONTROL US AND TAKE ACTIONS ADVERSE TO OTHER
SHAREHOLDERS.

         At March 31, 2004, the Hughes family owned approximately 36% of our
outstanding shares of common stock. Consequently, the Hughes family could
control matters submitted to a vote of our shareholders, including electing
directors, amending our organizational documents, dissolving and approving other
extraordinary transactions, such as a takeover attempt, even though such actions
may be favorable to the other common shareholders.

PROVISIONS IN OUR ORGANIZATIONAL DOCUMENTS MAY PREVENT CHANGES IN CONTROL.

         Restrictions in our organizational documents may further limit changes
in control. Unless our board of directors waives these limitations, no
shareholder may own more than (1) 2.0% of our outstanding shares of our common
stock or (2) 9.9% of the outstanding shares of each class or series of our
preferred or equity stock. Our organizational documents in effect provide,
however, that the Hughes family may continue to own the shares of our common
stock held by them at the time of the 1995 reorganization. These limitations are
designed, to the extent possible, to avoid a concentration of ownership that
might jeopardize our ability to qualify as a real estate investment trust or
REIT. These limitations, however, also may make a change of control
significantly more difficult (if not impossible) even if it would be favorable
to the interests of our public shareholders. These provisions will prevent
future takeover attempts not approved by our board of directors even if a
majority of our public shareholders deem it to be in their best interests
because they would receive a premium for their shares over the shares' then
market value or for other reasons.

WE WOULD INCUR ADVERSE TAX CONSEQUENCES IF WE FAIL TO QUALIFY AS A REIT.

         You will be subject to the risk that we may not qualify as a REIT.
REITs are subject to a range of complex organizational and operational
requirements. As a REIT, we must distribute at least 90% of our REIT taxable
income to our shareholders, including not only holders of our common stock and
equity stock but also holders of our preferred stock. Failure to pay full
dividends on the preferred stock would prevent us from paying dividends on our
common stock and could jeopardize our qualification as a REIT. Other
restrictions apply to our income and assets. Our REIT status also depends upon
the ongoing qualification of PS Business Parks, Inc. as a REIT, as a result of
our substantial ownership interest in that company.

                                       59
<PAGE>

         For any taxable year that we fail to qualify as a REIT and the relief
provisions do not apply, we would be taxed at the regular corporate rates on all
of our taxable income, whether or not we make any distributions to our
shareholders. Those taxes would reduce the amount of cash available for
distribution to our shareholders or for reinvestment. As a result, our failure
to qualify as a REIT during any taxable year could have a material adverse
effect upon us and our shareholders. Furthermore, unless certain relief
provisions apply, we would not be eligible to elect REIT status again until the
fifth taxable year that begins after the first year for which we fail to
qualify.

WE MAY PAY SOME TAXES,  REDUCING CASH AVAILABLE FOR SHAREHOLDERS.

         Even if we qualify as a REIT for Federal income tax purposes, we are
required to pay some federal, state and local taxes on our income and property.
Several corporate subsidiaries of the Company have elected to be treated as
"taxable REIT subsidiaries" of the Company for federal income tax purposes since
January 1, 2001. A taxable REIT subsidiary is a fully taxable corporation and is
limited in its ability to deduct interest payments made to us. In addition, we
will be subject to a 100% penalty tax on some payments that we receive if the
economic arrangements among our tenants, our taxable REIT subsidiaries and us
are not comparable to similar arrangements among unrelated parties. To the
extent that the Company or any taxable REIT subsidiary is required to pay
federal, state or local taxes, we will have less cash available for distribution
to shareholders.

WE WOULD INCUR A CORPORATE LEVEL TAX IF WE SELL CERTAIN ASSETS.

         We will generally be subject to a corporate level tax on any net
built-in gain if, before November 2005, we sell any of the assets we acquired in
the November 1995 reorganization.

WE AND OUR SHAREHOLDERS ARE SUBJECT TO FINANCING RISKS.

         Debt increases the risk of loss. In making real estate investments, we
may borrow money, which increases the risk of loss. At March 31, 2004, our debt
of $49.3 million was less than 1.0% of our total assets.

         Certain securities have a liquidation preference over our common stock
and Equity Stock, Series A. If we liquidated, holders of our preferred
securities would be entitled to receive liquidating distributions, plus any
accrued and unpaid distributions, before any distribution of assets to the
holders of our common stock and Equity Stock, Series A. Holders of preferred
securities are entitled to receive, when declared by our board of directors,
cash distributions in preference to holders of our common stock and Equity
Stock, Series A.

SINCE OUR BUSINESS CONSISTS PRIMARILY OF ACQUIRING AND OPERATING REAL ESTATE, WE
ARE SUBJECT TO REAL ESTATE OPERATING RISKS.

         The value of our investments may be reduced by general risks of real
estate ownership. Since we derive substantially all of our income from real
estate operations, we are subject to the general risks of owning real
estate-related assets, including:

o        lack of demand for rental spaces or units in a locale;

o        changes in general economic or local conditions;

o        potential terrorist attacks;

o        changes in supply of or demand for similar or competing  facilities  in
         an area;

o        the impact of environmental protection laws;

o        changes in interest rates and availability of permanent  mortgage funds
         which may  render the sale or  financing  of a  property  difficult  or
         unattractive; and

o        changes in tax, real estate and zoning laws.

                                       60
<PAGE>

         There is significant competition among self-storage facilities and from
other storage alternatives. Most of our properties are self-storage facilities,
which generated 93% of our revenue for the three months ended March 31, 2004.
Local market conditions will play a significant part in how competition will
affect us. Competition in the market areas in which many of our properties are
located from other self-storage facilities and other storage alternatives is
significant and has affected the occupancy levels, rental rates and operating
expenses of some of our properties. Any increase in availability of funds for
investment in real estate may accelerate competition. Further development of
self-storage facilities may intensify competition among operators of
self-storage facilities in the market areas in which we operate. As discussed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Self-Storage Operations, the gross margin before depreciation of
the Consistent Group of facilities declined 3.6% in the three months ended March
31, 2004 as compared to the same period in 2003. Such competition could have
been a factor in this decline.

         We may incur significant environmental costs and liabilities. As an
owner and operator of real properties, under various federal, state and local
environmental laws, we are required to clean up spills or other releases of
hazardous or toxic substances on or from our properties. Certain environmental
laws impose liability whether or not the owner knew of, or was responsible for,
the presence of the hazardous or toxic substances. In some cases, liability may
not be limited to the value of the property. The presence of these substances,
or the failure to properly remediate any resulting contamination, whether from
environmental or microbial issues, also may adversely affect the owner's or
operator's ability to sell, lease or operate its property or to borrow using its
property as collateral.

         We have conducted preliminary environmental assessments of most of our
properties (and intend to conduct these assessments in connection with property
acquisitions) to evaluate the environmental condition of, and potential
environmental liabilities associated with, our properties. These assessments
generally consist of an investigation of environmental conditions at the
property (not including soil or groundwater sampling or analysis), as well as a
review of available information regarding the site and publicly available data
regarding conditions at other sites in the vicinity. In connection with these
property assessments, our operations and recent property acquisitions, we have
become aware that prior operations or activities at some facilities or from
nearby locations have or may have resulted in contamination to the soil or
groundwater at these facilities. In this regard, some of our facilities are or
may be the subject of federal or state environment investigations or remedial
actions. We have obtained, with respect to recent acquisitions, and intend to
obtain with respect to pending or future acquisitions, appropriate purchase
price adjustments or indemnifications that we believe are sufficient to cover
any related potential liability. Although we cannot provide any assurance, based
on the preliminary environmental assessments, we believe we have funds available
to cover any liability from environmental contamination or potential
contamination and we are not aware of any environmental contamination of our
facilities material to our overall business, financial condition or results of
operation.

         There has been an increasing number of claims and litigation against
owners and managers of rental properties relating to moisture infiltration,
which can result in mold or other property damage. When we receive a complaint
concerning moisture infiltration, condensation or mold problems and/or become
aware that an air quality concern exists, we implement corrective measures in
accordance with guidelines and protocols we have developed with the assistance
of outside experts. We seek to work proactively with our tenants to resolve
moisture infiltration and mold-related issues, subject to our contractual
limitations on liability for such claims. However, we can make no assurance that
material legal claims relating to moisture infiltration and the presence of, or
exposure to, mold will not arise in the future.

         Delays in development and fill-up of our properties would reduce our
profitability: Since January 1, 2000, we have opened 61 newly developed self
storage facilities and 17 facilities that combine self-storage and containerized
storage space at the same location, with aggregate development costs of $540.4
million. In addition, at March 31, 2004 the Company had 42 projects in
development that are expected to begin construction generally by December 31,
2004. These 42 projects have total estimated costs of $148.7 million.
Construction delays due to weather, unforeseen site conditions, personnel
problems, and other factors, as well as cost overruns, would adversely affect
the Company's profitability. Delays in the rent-up of newly developed facilities
as a result of competition or other factors would also adversely impact the
Company's profitability.

                                       61
<PAGE>

         Property taxes can increase and cause a decline in yields on
investments. Each of our properties is subject to real property taxes. These
real property taxes may increase in the future as property tax rates change and
as our properties are assessed or reassessed by tax authorities. Such increases
could adversely impact the Company's profitability.

         We must comply with the Americans with Disabilities Act and fire and
safety regulations, which can require significant expenditures: All our
properties must comply with the Americans with Disabilities Act and with related
regulations (the "ADA"). The ADA has separate compliance requirements for
"public accommodations" and "commercial facilities," but generally requires that
buildings be made accessible to persons with disabilities. Various state laws
impose similar requirements. A failure to comply with the ADA or similar state
laws could result in government imposed fines on us and the award of damages to
individuals affected by the failure. In addition, we must operate our properties
in compliance with numerous local fire and safety regulations, building codes,
and other land use regulations. Compliance with these requirements can require
us to spend substantial amounts of money, which would reduce cash otherwise
available for distribution to shareholders. Failure to comply with these
requirements could also affect the marketability of our real estate facilities.

WE HAVE NO  INTEREST  IN CANADIAN  SELF-STORAGE  FACILITIES  OWNED BY THE HUGHES
FAMILY

         B. Wayne Hughes, Chairman of the Board, and his family (the "Hughes
Family") have ownership interests in, and operate, approximately 38 self-storage
facilities in Canada under the name "Public Storage." We currently do not own
any interests in these facilities nor do we own any facilities in Canada. The
Hughes Family owns approximately 36% of our common stock outstanding at March
31, 2004. We have a right of first refusal to acquire the stock or assets of the
corporation engaged in the operation of the 38 self-storage facilities in Canada
if the Hughes family or the corporation agrees to sell them. However, we have no
interest in the operations of this corporation, have no right to acquire this
stock or assets unless the Hughes family decides to sell, and receive no benefit
from the profits and increases in value of the Canadian self-storage facilities.

         Company personnel have been engaged in the supervision and the
operation of these 38 properties and have provided certain administrative
services for the Canadian owners, and certain other services, primarily tax
services, with respect to certain other Hughes Family interests. The Hughes
Family and the Canadian owners have reimbursed us at cost for these services in
the amount of US$ 542,499 with respect to the Canadian operations and US$151,063
for other services during 2003. There have been conflicts of interest in
allocating time of our personnel between Company properties, the Canadian
properties, and certain other Hughes Family interests. The sharing of Company
personnel with the Canadian entities was substantially eliminated by December
31, 2003.

OUR CONTAINERIZED STORAGE BUSINESS HAS INCURRED OPERATING LOSSES.

         Public Storage Pickup & Delivery ("PSPUD") was organized in 1996 to
operate a containerized storage business. We own all of the economic interest of
PSPUD. Since PSPUD will operate profitably only if it can succeed in the
relatively new field of containerized storage, we cannot provide any assurance
as to its profitability. PSPUD incurred operating losses of $10,058,000 in 2002,
generated an operating profit of $2,543,000 in 2003 and $724,000 for the three
months ended March 31, 2004. PSPUD closed 32 of 55 facilities that were deemed
not strategic to the Company's business plan since 2002.

TERRORIST ATTACKS AND THE POSSIBILITY OF WIDER ARMED CONFLICT MAY HAVE AN
ADVERSE IMPACT ON OUR BUSINESS AND OPERATING RESULTS AND COULD DECREASE THE
VALUE OF OUR ASSETS.

         Terrorist attacks and other acts of violence or war, such as those that
took place on September 11, 2001, could have a material adverse impact on our
business and operating results. There can be no assurance that there will not be
further terrorist attacks against the United States or its businesses or
interests. Attacks or armed conflicts that directly impact one or more of our
properties could significantly affect our ability to operate those properties
and thereby impair our operating results. Further, we may not have insurance
coverage for losses caused by a terrorist attack. Such insurance may not be
available, or if it is available and we decide to obtain such terrorist
coverage, the cost for the insurance may be significant in relationship to the
risk overall. In addition, the adverse effects that such violent acts and
threats of future attacks could have on the U.S. economy could similarly have a
material adverse effect on our business and results of operations. Finally,
further terrorist acts could cause the United States to enter into a wider armed
conflict which could further impact our business and operating results.

                                       62

<PAGE>

RECENTLY ENACTED TAX LEGISLATION COULD ADVERSELY AFFECT THE PRICE OF OUR STOCK.

         Recently enacted tax legislation generally reduces the maximum tax rate
for dividends payable to individuals to 15% through 2008. Dividends payable by
REITs, however, generally continue to be taxed at the normal rate applicable to
the individual recipient, rather than the preferential rates applicable to other
dividends. Although this legislation does not adversely affect the taxation of
REITs or dividends paid by REITs, the more favorable rates applicable to regular
corporate dividends could cause investors who are individuals to perceive
investments in REITs to be relatively less attractive than investments in the
stocks of non-REIT corporations that pay dividends, which could adversely affect
the value of the stock of REITs, including our common stock.

DEVELOPMENTS IN CALIFORNIA MAY HAVE AN ADVERSE IMPACT ON OUR BUSINESS.

         We are headquartered in, and approximately one-quarter of our
properties are located in, California. California is facing serious budgetary
problems. Action that may be taken in response to these problems, such as an
increase in property taxes on commercial properties, could adversely impact our
business and results of operations. In addition, we could be adversely impacted
by the recently enacted legislation mandating medical insurance for employees of
California businesses and members of their families beginning in 2006.

ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------

         To limit our exposure to market risk, we principally finance our
operations and growth with permanent equity capital, consisting of either common
or preferred stock. At March 31, 2004, our debt as a percentage of total
shareholders' equity (based on book values) was 1.1%.

         Our preferred stock is not redeemable at the option of the holders.
Except under certain conditions relating to the Company's qualification as a
REIT, the Preferred Stock is not redeemable by the Company prior to the
following dates: Series D - September 30, 2004, Series E - January 31, 2005,
Series F - April 30, 2005, Series M - August 17, 2004, Series Q - January 19,
2006, Series R - September 28, 2006, Series S - October 31, 2006, Series T -
January 18, 2007, Series U - February 19, 2007, Series V - September 30, 2007,
Series W - October 6, 2008, Series X - November 13, 2008, Series Y - January 2,
2009, Series Z - March 5, 2009, and Series A - March 31, 2009. On or after the
respective dates, each of the series of Preferred Stock will be redeemable at
the option of the Company, in whole or in part, at $25 per share (or depositary
share in the case of the Series M through Series X, Series Z and Series A), plus
accrued and unpaid dividends through the redemption date.

         Our market risk sensitive instruments include notes payable, which
totaled $49.3 million at March 31, 2004. Substantially all of the Company's
notes payable bear interest at fixed rates. See Note 7 to the consolidated
financial statements at March 31, 2004 for approximate principal maturities of
the notes payable at March 31, 2004.

ITEM 4.  CONTROLS AND PROCEDURES
--------------------------------

         The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in reports the
Company files and submits under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified in accordance with SEC
guidelines and that such information is communicated to the Company's
management, including its Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure based on the definition
of "disclosure controls and procedures" in Rules 13a-15(e) of the Exchange Act.
In designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures in
reaching that level of reasonable assurance. Also, the Company has investments
in certain unconsolidated entities. As the Company does not control or manage
these entities, its disclosure controls and procedures with respect to such
entities are substantially more limited than those it maintains with respect to
its consolidated subsidiaries.

                                       63
<PAGE>

         As of the end of the fiscal quarter covered by this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
the Company's Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as such term is
defined in Rules 13a - 15(e) and 15d - 15(e) under the Securities Act of 1934 as
amended as of the end of the period covered by this report). Based upon this
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
concluded that, as of the end of such period, the Company's disclosure controls
and procedures were effective.

         There have not been any changes in our internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter to which this report relates that has
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

                                       64

<PAGE>


PART II.   OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS
           -----------------

         The Company is a party to the actions described under "Item 3. Legal
Proceedings" in the Company's 2003 annual report on Form 10-K There have been no
material developments in the actions described in the Company's 2003 annual
report on Form 10-K (see Note 14 to the Company's consolidated financial
statements).

         The Company is a party to various claims, complaints, and other legal
actions that have arisen in the normal course of business from time to time. The
Company believes that the outcome of these other pending legal proceedings, in
the aggregate, will not have a material adverse effect upon the operations or
financial portion of the Company.

ITEM 2.    CHANGES IN  SECURITIES,  USE OF PROCEEDS  AND ISSUER  PURCHASES OF
           ------------------------------------------------------------------
           EQUITY SECURITIES
           -----------------

         On June 12, 1998, we announced that the Board of Directors (the
"Directors") authorized the repurchase from time to time of up to 10,000,000
shares of the Company's common stock on the open market or in privately
negotiated transactions. On subsequent dates the Directors increased the
repurchase authorization, the last being April 13, 2001, when the Board of
Directors increased the repurchase authorization to 25,000,000 shares.

         The following table contains information regarding the company's
repurchase of its common stock during the quarter.

ISSUER PURCHASES OF EQUITY SECURITIES

<TABLE>
<CAPTION>
                                                                         Total Number of      Maximum Number of
                                                                       Shares Purchased as     Shares that May
                                        Total Number   Average Price     Part of Publicly     Yet Be Purchased
                                         of Shares        Paid per      Announced Plans or   Under the Plans or
Period Covered                         Purchased (1)     Share (2)           Programs             Programs
------------------------------------  ---------------  --------------- -------------------   -------------------
<S>                                           <C>        <C>                  <C>                  <C>
January 1 through January 31, 2004            25,000     $    44.05           21,697,020           3,302,980

February 1 through February 29, 2004               -           -              21,697,020           3,302,980

March 1 through March 31, 2004                60,000          47.75           21,757,020           3,242,980
                                      ---------------  ---------------
    Total                                     85,000     $    46.66

</TABLE>

(1)      All shares were open market purchases and purchased under the company's
         publicly announced stock repurchase program.

(2)      Average price per share is inclusive of commissions totaling $3,400, or
         4% per share.

         In addition to the repurchases listed in the table above, we redeemed
two of our preferred series during the quarter. On January 20, 2004, we redeemed
all 4,600,000 depositary shares of our 8.25% Cumulative Preferred Stock, Series
K ($115.0 million) at a redemption price of $25.00 per share, plus a sum equal
to all accrued and unpaid dividends from January 1, 2004 through the redemption
date. On March 10, 2004, we redeemed all 4,600,000 depositary shares of our
8.25% Cumulative Preferred Stock, Series L ($115.0 million) at a redemption
price of $25.00 per share, plus a sum equal to all accrued and unpaid dividends
from January 1, 2004 through the redemption date.

         On March 22, 2004, certain investors who hold $200 million of our 9.5%
Series N Cumulative Redeemable Perpetual Preferred Units agreed, in exchange for
a special distribution of $8,000,000, to a reduction in the distribution rate on
their preferred units from 9.50% per year to 6.40% per year. The investors also
received their distribution that accrued from January 1, 2004 through the
effective date of the exchange. As a result of this agreement, the holders of
these units exchanged $200,000,000 9.5% Series N units for $200,000,000 6.4%
Series NN units.

         See Notes 8, 9 and 15 for additional information on repurchases and
redemptions of equity securities.

                                       65
<PAGE>

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

3.1      Restated   Articles   of   Incorporation.   Filed   with   Registrant's
         Registration   Statement  No.  33-54557  and  incorporated   herein  by
         reference.

3.2      Certificate of  Determination  for the 10% Cumulative  Preferred Stock,
         Series A. Filed with Registrant's  Registration  Statement No. 33-54557
         and incorporated herein by reference.

3.3      Amendment  to  Certificate  of  Determination  for the  10%  Cumulative
         Preferred Stock, Series A. Filed herewith.

3.4      Certificate of Determination for the 9.20% Cumulative  Preferred Stock,
         Series B. Filed with Registrant's  Registration  Statement No. 33-54557
         and incorporated herein by reference.

3.5      Amendment to  Certificate  of  Determination  for the 9.20%  Cumulative
         Preferred  Stock,  Series  B.  Filed  with  Registrant's   Registration
         Statement No. 33-56925 and incorporated herein by reference.

3.6      Certificate of Determination for the 8.25% Convertible Preferred Stock.
         Filed  with  Registrant's   Registration  Statement  No.  33-54557  and
         incorporated herein by reference.

3.7      Certificate  of  Determination   for  the  Adjustable  Rate  Cumulative
         Preferred  Stock,  Series  C.  Filed  with  Registrant's   Registration
         Statement No. 33-54557 and incorporated herein by reference.

3.8      Certificate of Determination for the 9.50% Cumulative Preferred Stock,
         Series D. Filed with Registrant's Form 8-A/A Registration Statement
         relating to the 9.50% Cumulative Preferred Stock, Series D and
         incorporated herein by reference.

3.9      Certificate of Determination for the 10% Cumulative Preferred Stock,
         Series E. Filed with Registrant's Form 8-A/A Registration Statement
         relating to the 10% Cumulative Preferred Stock, Series E and
         incorporated herein by reference.

3.10     Certificate of Determination for the 9.75% Cumulative Preferred Stock,
         Series F. Filed with Registrant's Form 8-A/A Registration Statement
         relating to the 9.75% Cumulative Preferred Stock, Series F and
         incorporated herein by reference.

3.11     Certificate  of   Determination   for  the  Convertible   Participating
         Preferred Stock.  Filed with  Registrant's  Registration  Statement No.
         33-63947 and incorporated herein by reference.

3.12     Certificate  of  Amendment  of  Articles of  Incorporation.  Filed with
         Registrant's  Registration  Statement  No.  33-63947  and  incorporated
         herein by reference.

3.13     Certificate of Determination for the 8-7/8% Cumulative Preferred Stock,
         Series G. Filed with Registrant's Form 8-A/A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 8-7/8% Cumulative Preferred Stock, Series G and incorporated herein
         by reference.

3.14     Certificate of Determination for the 8.45% Cumulative Preferred Stock,
         Series H. Filed with Registrant's Form 8-A/A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 8.45% Cumulative Preferred Stock, Series H and incorporated herein
         by reference.

3.15     Certificate  of  Determination  for the  Convertible  Preferred  Stock,
         Series CC. Filed with Registrant's Registration Statement No. 333-03749
         and incorporated herein by reference.

                                       66


<PAGE>

3.16     Certificate  of  Correction of  Certificate  of  Determination  for the
         Convertible  Participating  Preferred  Stock.  Filed with  Registrant's
         Registration   Statement  No.  333-08791  and  incorporated  herein  by
         reference.

3.17     Certificate of Determination for 8-5/8% Cumulative Preferred Stock,
         Series I. Filed with Registrant's Form 8-A/A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 8-5/8% Cumulative Preferred Stock, Series I and incorporated herein
         by reference.

3.18     Certificate  of  Amendment  of  Articles of  Incorporation.  Filed with
         Registrant's  Registration  Statement No.  333-18395  and  incorporated
         herein by reference.

3.19     Certificate  of  Determination  for Equity Stock,  Series A. Filed with
         Registrant's Form 10-Q for the quarterly period ended June 30, 1997 and
         incorporated herein by reference.

3.20     Certificate of  Determination  for Equity Stock,  Series AA. Filed with
         Registrant's  Form 10-Q for the  quarterly  period ended  September 30,
         1999 and incorporated herein by reference.

3.21     Certificate  Decreasing  Shares  Constituting  Equity Stock,  Series A.
         Filed  with  Registrant's  Form  10-Q for the  quarterly  period  ended
         September 30, 1999 and incorporated herein by reference.

3.22     Certificate  of  Determination  for Equity Stock,  Series A. Filed with
         Registrant's  Form 10-Q for the  quarterly  period ended  September 30,
         1999 and incorporated herein by reference.

3.23     Certificate of Determination for 8% Cumulative Preferred Stock, Series
         J. Filed with Registrant's Form 8-A/A Registration Statement relating
         to the Depositary Shares Each Representing 1/1,000 of a Share of 8%
         Cumulative Preferred Stock, Series J and incorporated herein by
         reference.

3.24     Certificate of Correction of Certificate of Determination for the 8.25%
         Convertible  Preferred  Stock.  Filed  with  Registrant's  Registration
         Statement No. 333-61045 and incorporated herein by reference.

3.25     Certificate of Determination for 8-1/4% Cumulative Preferred Stock,
         Series K. Filed with Registrant's Form 8-A/A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 8-1/4% Cumulative Preferred Stock, Series K and incorporated herein
         by reference.

3.26     Certificate of Determination for 8-1/4% Cumulative Preferred Stock,
         Series L. Filed with Registrant's Form 8-A/A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 8-1/4% Cumulative Preferred Stock, Series L and incorporated herein
         by reference.

3.27     Certificate of Determination for 8.75% Cumulative Preferred Stock,
         Series M. Filed with Registrant's Form 8-A/A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 8.75% Cumulative Preferred Stock, Series M and incorporated herein
         by reference.

3.28     Certificate of Determination for Equity Stock, Series AAA. Filed with
         Registrant's Current Report on Form 8-K dated November 15, 1999 and
         incorporated herein by reference.

3.29     Certificate of Determination for 9.5% Cumulative Preferred Stock,
         Series N. Filed with Registrant's Annual Report on Form 10-K for the
         year ended December 31, 1999 and incorporated herein by reference.

3.30     Certificate of Determination for 9.125% Cumulative Preferred Stock,
         Series O. Filed with Registrant's Quarterly Report on Form 10-Q for the
         quarterly period ended June 30, 2000 and incorporated herein by
         reference.

3.31     Certificate of Determination for 8.75% Cumulative Preferred Stock,
         Series P. Filed with Registrant's Quarterly Report on Form 10-Q for the
         quarterly period ended June 30, 2000 and incorporated herein by
         reference.

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<PAGE>

3.32     Certificate of Determination for 8.600% Cumulative Preferred Stock,
         Series, Q. Filed with Registrant's Form 8-A/A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 8.600% Cumulative Preferred Stock, Series Q and incorporated herein
         by reference.

3.33     Amendment to Certificate of Determination for Equity Stock, Series A.
         Filed with Registrant's Quarterly Report on Form 10-Q for the quarterly
         period ended June 30, 2001 and incorporated herein by reference.

3.34     Certificate of Determination for 8.000% Cumulative Preferred Stock,
         Series R. Filed with Registrant's Form 8-A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 8.000% Cumulative Preferred Stock, Series R and incorporated herein
         by reference.

3.35     Certificate of Determination for 7.875% Cumulative Preferred Stock,
         Series S. Filed with Registrant's Form 8-A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 7.875% Cumulative Preferred Stock, Series S and incorporated herein
         by reference.

3.36     Certificate of Determination for 7.625% Cumulative Preferred Stock,
         Series T. Filed with Registrant's Form 8-A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 7.625% Cumulative Preferred Stock, Series T and incorporated herein
         by reference.

3.37     Certificate of Determination for 7.625% Cumulative Preferred Stock,
         Series U. Filed with Registrant's Form 8-A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 7.625% Cumulative Preferred Stock, Series U and incorporated herein
         by reference.

3.38     Amendment to Certificate of Determination for 7.625% Cumulative
         Preferred Stock, Series T. Filed with Registrant's Quarterly Report on
         Form 10-Q for the quarterly period ended September 30, 2002 and
         incorporated herein by reference.

3.39     Certificate of Determination for 7.500% Cumulative Preferred Stock,
         Series V. Filed with Registrant's Form 8-A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 7.500% Cumulative Preferred Stock, Series V and incorporated herein
         by reference.

3.40     Certificate of Determination for 6.500% Cumulative Preferred Stock,
         Series W. Filed with Registrant's Form 8-A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 6.500% Cumulative Preferred Stock, Series W and incorporated herein
         by reference.

3.41     Certificate of Determination for 6.450% Cumulative Preferred Stock,
         Series X. Filed with Registrant's Form 8-A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 6.450% Cumulative Preferred Stock, Series X and incorporated herein
         by reference.

3.42     Certificate of Determination for the 6.85% Cumulative  Preferred Stock,
         Series Y. Filed herewith.

3.43     Certificate of Determination for 6.250% Cumulative Preferred Stock,
         Series Z. Filed with Registrant's Form 8-A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 6.250% Cumulative Preferred Stock, Series Z and incorporated herein
         by reference.

3.44     Certificate of Determination for 6.125% Cumulative Preferred Stock,
         Series A. Filed with Registrant's Form 8-A Registration Statement
         relating to the Depositary Shares Each Representing 1/1,000 of a Share
         of 6.125% Cumulative Preferred Stock, Series A and incorporated herein
         by reference.

3.45     Certificate of  Determination  for 6.40%  Cumulative  Preferred  Stock,
         Series NN. Filed herewith.

3.46     Bylaws, as amended. Filed with Registrant's  Registration Statement No.
         33-64971 and incorporated herein by reference.

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<PAGE>

3.47     Amendment  to Bylaws  adopted on May 9, 1996.  Filed with  Registrant's
         Registration   Statement  No.  333-03749  and  incorporated  herein  by
         reference.

3.48     Amendment to Bylaws adopted on June 26, 1997.  Filed with  Registrant's
         Registration   Statement  No.  333-41123  and  incorporated  herein  by
         reference.

3.49     Amendment to Bylaws adopted on January 6, 1998. Filed with Registrant's
         Registration   Statement  No.  333-41123  and  incorporated  herein  by
         reference.

3.50     Amendment to Bylaws adopted on February 10, 1998. Filed with
         Registrant's Current Report on Form 8-K dated February 10, 1998 and
         incorporated herein by reference.

3.51     Amendment to Bylaws adopted on March 4, 1999. Filed with Registrant's
         Current Report on Form 8-K dated March 4, 1999 and incorporated herein
         by reference.

3.52     Amendment to Bylaws adopted on May 6, 1999. Filed with Registrants'
         Form 10-Q for the quarterly period ended June 30, 1999 and incorporated
         herein by reference.

3.53     Amendment to Bylaws adopted on November 7, 2002. Filed with
         Registrant's Quarterly Report on Form 10-Q for the quarterly period
         ended September 30, 2002 and incorporated herein by reference.

3.54     Amendment to Bylaws adopted on May 8, 2003. Filed with Registrant's
         Quarterly Report on Form 10-Q for the quarterly period ended March 31,
         2003 and incorporated herein by reference.

3.55     Amendment to Bylaws adopted on August 5, 2003. Filed with Registrant's
         Quarterly Report on Form 10-Q for the quarterly period ended June 30,
         2003 and incorporated herein by reference.

3.56     Amendment to Bylaws adopted on March 11, 2004. Filed with Registrant's
         Annual Report on Form 10-K for the year ended December 31, 2003 and
         incorporated herein by reference.

10.1     Second Amended and Restated Management Agreement by and among
         Registrant and the entities listed therein dated as of November 16,
         1995. Filed with PS Partners, Ltd.'s Annual Report on Form 10-K for the
         year ended December 31, 1996 and incorporated herein by reference.

10.2     Amended Management Agreement between Registrant and Public Storage
         Commercial Properties Group, Inc. dated as of February 21, 1995. Filed
         with Registrant's Annual Report on Form 10-K for the year ended
         December 31, 1994 and incorporated herein by reference.

10.3     Loan Agreement between Registrant and Aetna Life Insurance Company
         dated as of July 11, 1988. Filed with Registrant's Current Report on
         Form 8-K dated July 14, 1988 and incorporated herein by reference.

10.4     Amendment to Loan Agreement between Registrant and Aetna Life Insurance
         Company dated as of September 1, 1993. Filed with Registrant's Annual
         Report on Form 10-K for the year ended December 31, 1993 and
         incorporated herein by reference.

10.5     Second Amended and Restated Credit Agreement by and among Registrant,
         Wells Fargo Bank, National Association, as agent, and the financial
         institutions party thereto dated as of February 25, 1997. Filed with
         Registrant's Registration Statement No. 333-22665 and incorporated
         herein by reference.

10.6     Note  Assumption  and Exchange  Agreement  by and among Public  Storage
         Management,  Inc., Public Storage,  Inc., Registrant and the holders of
         the notes  dated as of  November  13,  1995.  Filed  with  Registrant's
         Registration   Statement  No.  33-64971  and  incorporated   herein  by
         reference.

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<PAGE>

10.7     Registrant's  1990 Stock Option Plan.  Filed with  Registrant's  Annual
         Report  on  Form  10-K  for  the  year  ended  December  31,  1994  and
         incorporated herein by reference.

10.8*    Registrant's 1994 Stock Option Plan. Filed with Registrant's Annual
         Report on Form 10-K for the year ended December 31, 1997 and
         incorporated herein by reference.

10.9*    Registrant's 1996 Stock Option and Incentive Plan. Filed with
         Registrant's Annual Report on Form 10-K for the year ended December 31,
         2000 and incorporated herein by reference.

10.10    Deposit Agreement dated as of December 13, 1995, among Registrant, The
         First National Bank of Boston, and the holders of the depositary
         receipts evidencing the Depositary Shares Each Representing 1/1,000 of
         a Share of 8-7/8% Cumulative Preferred Stock, Series G. Filed with
         Registrant's Form 8-A/A Registration Statement relating to the
         Depositary Shares Each Representing 1/1,000 of a Share of 8-7/8%
         Cumulative Preferred Stock, Series G and incorporated herein by
         reference.

10.11    Deposit Agreement dated as of January 25, 1996, among Registrant, The
         First national Bank of Boston, and the holders of the depositary
         receipts evidencing the Depositary Shares Each Representing 1/1,000 of
         a Share of 8.45% Cumulative Preferred Stock, Series H. Filed with
         Registrant's Form 8-A/A Registration Statement relating to the
         Depositary Shares Each Representing 1/1,000 of a Share of 8.45%
         Cumulative Preferred Stock, Series H and incorporated herein by
         reference.

10.12**  Employment Agreement between Registrant and B. Wayne Hughes dated as of
         November 16, 1995. Filed with Registrant's Annual Report on Form 10-K
         for the year ended December 31,1995 and incorporated herein by
         reference.

10.13    Deposit Agreement dated as of November 1, 1996, among Registrant, The
         First National Bank of Boston, and the holders of the depositary
         receipts evidencing the Depositary Shares Each Representing 1/1,000 of
         a Share of 8-5/8% Cumulative Preferred Stock, Series I. Filed with
         Registrant's Form 8-A/A Registration Statement relating to the
         Depositary Shares Each Representing 1/1,000 of a Share of 8-5/8%
         Cumulative Preferred Stock, Series I and incorporated herein by
         reference.

10.14    Limited Partnership Agreement of PSAF Development Partners, L.P.
         between PSAF Development, Inc. and the Limited Partner dated as of
         April 10, 1997. Filed with Registrant's Form 10-Q for the quarterly
         period ended June 30, 1997 and incorporated herein by reference.

10.15    Deposit Agreement dated as of August 28, 1997 among Registrant, The
         First National Bank of Boston, and the holders of the depositary
         receipts evidencing the Depositary Shares Each Representing 1/1,000 of
         a Share of 8% Cumulative Preferred Stock, Series J. Filed with
         Registrant's Form 8-A/A Registration Statement relating to the
         Depositary Shares Each Representing 1/1,000 of a Share of 8% Cumulative
         Preferred Stock, Series J and incorporated herein by reference.

10.16    Agreement of Limited Partnership of PS Business Parks, L.P. dated as of
         March 17, 1998. Filed with PS Business Parks, Inc.'s Quarterly Report
         on Form 10-Q for the quarterly period ended June 30, 1998 and
         incorporated herein by reference.

10.17    Deposit Agreement dated as of January 19, 1999 among Registrant,
         BankBoston, N.A. and the holders of the depositary receipts evidencing
         the Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4%
         Cumulative Preferred Stock, Series K. Filed with Registrant's Form
         8-A/A Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock,
         Series K and incorporated herein by reference.

10.18    Agreement and Plan of Merger among Storage Trust Realty, Registrant and
         Newco Merger Subsidiary, Inc. dated as of November 12, 1998. Filed with
         Registrant's  Registration  Statement No.  333-68543  and  incorporated
         herein by reference.

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<PAGE>

10.19    Amendment  No. 1 to Agreement  and Plan of Merger among  Storage  Trust
         Realty,  Registrant,  Newco  Merger  Subsidiary,  Inc.  and STR  Merger
         Subsidiary,  Inc. dated as of January 19, 1999. Filed with registrant's
         Registration   Statement  No.  333-68543  and  incorporated  herein  by
         reference.

10.20    Amended and Restated Agreement of Limited  Partnership of Storage Trust
         Properties,  L.P., dated as of March 12, 1999. Filed with  Registrant's
         Form 10-Q for the quarterly period ended June 30, 1999 and incorporated
         herein by reference.

10.21*   Storage Trust Realty 1994 Share Incentive Plan. Filed with Storage
         Trust Realty's Annual Report on Form 10-K for the year ended December
         31, 1997 and incorporated herein by reference.

10.22    Amended  and  Restated   Storage  Trust  Realty  Retention  Bonus  Plan
         effective as of November 12, 1998. Filed with Registrant's Registration
         Statement No. 333-68543 and incorporated herein by reference.

10.23    Deposit Agreement dated as of March 10, 1999 among Registrant,
         BankBoston, N.A. and the holders of the depositary receipts evidencing
         the Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4%
         Cumulative Preferred Stock, Series L. Filed with Registrant's Form
         8-A/A Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock,
         Series L and incorporated herein by reference.

10.24    Note Purchase Agreement and Guaranty Agreement with respect to
         $100,000,000 of Senior Notes of Storage Trust Properties, L.P. Filed
         with Storage Trust Realty's Annual Report on Form 10-K for the year
         ended December 31, 1996 and incorporated herein by reference.

10.25    Deposit Agreement dated as of August 17, 1999 among Registrant,
         BankBoston, N.A. and the holders of the depositary receipts evidencing
         the Depositary Shares Each Representing 1/1,000 of a Share of 8.75%
         Cumulative Preferred Stock, Series M. Filed with Registrant's Form
         8-A/A Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 8.75% Cumulative Preferred Stock,
         Series M and incorporated herein by reference.

10.26    Limited Partnership Agreement of PSAC Development Partners, L.P. among
         PS Texas Holdings, Ltd., PS Pennsylvania Trust and PSAC Storage
         Investors, L.L.C. dated as November 15, 1999. Filed with Registrant's
         Current Report on Form 8-K dated November 15, 1999 and incorporated
         herein by reference.

10.27    Agreement of Limited Liability Company of PSAC Storage Investors,
         L.L.C. dated as of November 15, 1999. Filed with Registrant's Current
         Report on Form 8-K dated November 15, 1999 and incorporated herein by
         reference.

10.28    Deposit Agreement dated as of January 14, 2000 among Registrant,
         BankBoston, N.A. and the holders of the depositary receipts evidencing
         the Depositary Shares Each Representing 1/1,000 of a Share of Equity
         Stock, Series A. Filed with Registrant's Form 8-A/A Registration
         Statement relating to the Depositary Shares Each Representing 1/1,000
         of a Share of Equity Stock, Series A and incorporated herein by
         reference.

10.29    Amended and Restated Agreement of Limited Partnership of PSA
         Institutional Partners, L.P. among PS Texas Holdings, Ltd. and the
         Limited Partners dated as of March 29, 2000. Filed with Registrant's
         Annual Report on Form 10-K for the year ended December 31, 1999 and
         incorporated herein by reference.

10.30    Amended and Restated Agreement of Limited Partnership of PSA
         Institutional Partners, L.P. among PS Texas Holdings, Ltd. and the
         Limited Partners dated as of August 11, 2000. Filed with Registrant's
         Quarterly Report on Form 10-Q for the quarterly period ended June 30,
         2000 and incorporated herein by reference.

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<PAGE>

10.31*   Registrant's 2000 Non-Executive/Non-Director Stock Option and Incentive
         Plan. Filed with Registrant's Registration Statement No, 333-52400 and
         incorporated herein by reference.

10.32    Deposit Agreement dated as of January 19, 2001 among Registrant, Fleet
         National Bank and the holders of the depositary receipts evidencing the
         Depositary Shares Each Representing 1/1,000 of a Share of 8.600%
         Cumulative Preferred Stock, Series Q. Filed with Registrant's Form
         8-A/A Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 8.600% Cumulative Preferred Stock,
         Series Q and incorporated herein by reference.

10.33*   Registrant's 2001 Non-Executive/Non-Director Stock Option and Incentive
         Plan. Filed with Registrant's  Registration Statement No. 333-59218 and
         incorporated herein by reference.

10.34*   Registrant's   2001  Stock  Option  and  Incentive  Plan.   Filed  with
         Registrant's  Registration  Statement No.  333-59218  and  incorporated
         herein by reference.

10.35    Deposit Agreement dated as of September 28, 2001 among Registrant,
         Fleet National Bank and the holders of the depositary receipts
         evidencing the Depositary Shares Each Representing 1/1,000 of a Share
         of 8.000% Cumulative Preferred Stock, Series R. Filed with Registrant's
         Form 8-A Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 8.000% Cumulative Preferred Stock,
         Series R and incorporated herein by reference.

10.36    Deposit Agreement dated as of October 31, 2001 among Registrant, Fleet
         National Bank and the holder of the depositary receipts evidencing the
         Depositary Shares Each Representing 1/1,000 of a Share of 7.875%
         Cumulative Preferred Stock, Series S. Filed with Registrant's Form 8-A
         Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 7.875% Cumulative Preferred Stock,
         Series S and incorporated herein by reference.

10.37    Credit Agreement by and among Registrant, Wells Fargo Bank, National
         Association, as agent, and the financial institutions party thereto
         dated as of November 1, 2001. Filed with Registrant's Quarterly Report
         on Form 10-Q for the quarterly period ended September 30, 2001 and
         incorporated herein by reference.

10.38    Deposit Agreement dated as of January 18, 2002 among Registrant, Fleet
         National Bank and the holders of the depositary receipts evidencing the
         Depositary Shares Each Representing 1/1,000 of a Share of 7.625%
         Cumulative Preferred Stock, Series T. Filed with Registrant's Form 8-A
         Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 7.625% Cumulative Preferred Stock,
         Series T and incorporated herein by reference.

10.39    Deposit Agreement dated as of February 19, 2002 among Registrant, Fleet
         National Bank and the holders of the depositary receipts evidencing the
         Depositary Shares Each Representing 1/1,000 of a Share of 7.625%
         Cumulative Preferred Stock, Series U. Filed with Registrant's Form 8-A
         Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 7.625% Cumulative Preferred Stock,
         Series U and incorporated herein by reference.

10.40    Deposit Agreement dated as of September 30, 2002 among Registrant,
         Fleet National Bank and the holders of the depositary receipts
         evidencing the Depositary Shares Each Representing 1/1,000 of a Share
         of 7.500% Cumulative Preferred Stock, Series V. Filed with Registrant's
         Form 8-A Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 7.500% Cumulative Preferred Stock,
         Series V and incorporated herein by reference.

10.41**  Employment Agreement between Registrant and Harvey Lenkin dated as of
         August 5, 2003. Filed with Registrant's Quarterly Report on Form 10-Q
         for the quarterly period ended June 30, 2003 and incorporated herein by
         reference.

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<PAGE>

10.42    Deposit Agreement dated as of October 6, 2003 among Registrant, Fleet
         National Bank and the holders of the depositary receipts evidencing the
         Depositary Shares Each Representing 1/1,000 of a Share of 6.500%
         Cumulative Preferred Stock, Series W. Filed with Registrant's Form 8-A
         Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 6.500% Cumulative Preferred Stock,
         Series W and incorporated herein by reference.

10.43    Deposit Agreement dated as of November 13, 2003 among Registrant, Fleet
         National Bank and the holders of the depositary receipts evidencing the
         Depositary Shares Each Representing 1/1,000 of a Share of 6.450%
         Cumulative Preferred Stock, Series X. Filed with Registrant's Form 8-A
         Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 6.450% Cumulative Preferred Stock,
         Series X and incorporated herein by reference.

10.44    Deposit Agreement dated as of March 5, 2004 among Registrant, Fleet
         National Bank and the holders of the depositary receipts evidencing the
         Depositary Shares Each Representing 1/1,000 of a Share of 6.250%
         Cumulative Preferred Stock, Series Z. Filed with Registrant's Form 8-A
         Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 6.250% Cumulative Preferred Stock,
         Series Z and incorporated herein by reference.

10.45    Limited Partnership Agreement of PSAF Acquisition Partners, L.P.
         between PS Texas Holdings, Ltd. and the Limited Partner dated as of
         December 18, 2003. Filed with Registrant's Annual Report on Form 10-K
         for the year ended December 31, 2003 and incorporated herein by
         reference.

10.46    Second   Amendment  to  Amended  and  Restated   Agreement  of  Limited
         Partnership  of  PSA  Institutional   Partners,  L.P.  among  PS  Texas
         Holdings,  Ltd.  and the Limited  Partners  dated as of March 22, 2004.
         Filed herewith.

10.47    Second Amendment to Credit Agreement by and among Registrant, Wells
         Fargo Bank, National Association, as agent, and the financial
         institutions party thereto dated as of March 25, 2004. Filed herewith.

10.48    Deposit Agreement dated as of March 31, 2004 among Registrant, Fleet
         National Bank and the holders of the depositary receipts evidencing the
         Depositary Shares Each Representing 1/1,000 of a Share of 6.125%
         Cumulative Preferred Stock, Series A. Filed with Registrant's Form 8-A
         Registration Statement relating to the Depositary Shares Each
         Representing 1/1,000 of a Share of 6.125% Cumulative Preferred Stock,
         Series A and incorporated herein by reference.

11       Statement  Re:  Computation  of  Ratio of  Earnings  Per  Share.  Filed
         herewith.

12       Statement Re: Computation of Ratio of Earnings to Fixed Charges.  Filed
         herewith.

31.1     Certification  pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
         2002. Filed herewith.

31.2     Certification  pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
         2002. Filed herewith.

31.3     Certification  pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
         2002. Filed herewith.

32       Certification  pursuant  to Section  906 of the  Sarbanes-Oxley  Act of
         2002. Filed herewith.

         *        Compensatory benefit plan.

         **       Management contract.

(b) Reports on Form 8-K

                                       73

<PAGE>

         The Company filed a Current Report on Form 8-K, dated February 25, 2004
         (filed February 27, 2004), pursuant to Item 5, in connection with the
         Company's public offering in March 2004 of depositary shares, each
         representing 1/1,000 of a share of the Company's 6.250% Cumulative
         Preferred Stock, Series Z.

         The Company furnished a Current Report on from 8-K dated February 26,
         2004 (filed February 27, 2004), pursuant to Item 7 with its press
         release announcing its results for the quarter ended December 31, 2003.

         The Company furnished a Current Report on from 8-K dated February 27,
         2004 (filed March 4, 2004), pursuant to Item 5 announcing the
         resignation of Marvin M. Lotz.

         The Company filed a Current Report on Form 8-K, dated March 19, 2004
         (filed March 22, 2004), pursuant to Item 5, in connection with the
         Company's public offering in March 2004 of depositary shares, each
         representing 1/1,000 of a share of the Company's 6.1250% Cumulative
         Preferred Stock, Series A.


                                       74

<PAGE>


                                   SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                    DATED:     May 7, 2004

                    PUBLIC STORAGE, INC.

                    By:        /s/  John Reyes
                               John Reyes
                               Senior Vice President and Chief Financial Officer
                               (Principal financial officer and duly authorized
                               officer)

                                       75