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 September 30, 2003
                               ------------------

                                       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 November 11, 2003:

Common Stock, $.10 Par Value -  126,878,839 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
              September 30, 2003 and December 31, 2002                         1

           Condensed Consolidated Statements of Income for the
              Three and Nine Months Ended September 30, 2003 and 2002          2

           Condensed Consolidated Statement of Shareholders' Equity
              for the Nine Months Ended September 30, 2003                     3

           Condensed Consolidated Statements of Cash Flows
              for the Nine Months Ended September 30, 2003 and 2002         4 -5

           Notes to Condensed Consolidated Financial Statements            6 -37

Item 2.    Management's Discussion and Analysis of
              Financial Condition and Results of Operations              38 - 65

Item 2A.   Risk Factors                                                  65 - 69

Item 3.    Quantitative and Qualitative Disclosures about Market Risk         69

Item 4.    Controls and Procedures                                            69

PART II.   OTHER INFORMATION (Items 2 through 5 are not applicable)
           -----------------

Item 1.    Legal Proceedings                                                  70

Item 6.    Exhibits and Reports on Form 8-K                              70 - 77


<PAGE>




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

<TABLE>
<CAPTION>

                                                                                        September 30,        December 31,
                                                                                            2003                 2002
                                                                                      ----------------    ---------------
                                                                                         (Unaudited)
                                       ASSETS

<S>                                                                                     <C>                <C>
Cash and cash equivalents....................................................           $      45,303      $    103,124
Real estate facilities, at cost:
   Land......................................................................               1,318,085         1,304,881
   Buildings.................................................................               3,745,517         3,683,645
                                                                                      ----------------    ---------------
                                                                                            5,063,602         4,988,526
   Accumulated depreciation..................................................              (1,107,744)         (987,546)
                                                                                      ----------------    ---------------
                                                                                            3,955,858         4,000,980
   Construction in process...................................................                  90,094            87,516
   Land held for development.................................................                  12,236            17,807
   Real estate facilities held for sale, net of accumulated depreciation.....                  15,829               -
                                                                                      ----------------    ---------------
                                                                                            4,074,017         4,106,303

Investment in real estate entities...........................................                 335,972           329,679
Goodwill.....................................................................                  78,204            78,204
Intangible assets, net.......................................................                 112,940           117,893
Notes receivable, including amounts due from related parties.................                     914            24,324
Other assets.................................................................                  94,895            84,135
                                                                                      ----------------    ---------------
              Total assets...................................................           $   4,742,245      $  4,843,662
                                                                                      ================    ===============
                       LIABILITIES AND SHAREHOLDERS' EQUITY

Notes payable................................................................           $      82,302      $    115,867
Accrued and other liabilities................................................                 151,992           129,327
                                                                                      ----------------    ---------------
         Total liabilities...................................................                 234,024           245,194
Minority interest:
   Preferred partnership interests...........................................                 285,000           285,000
   Other partnership interests...............................................                 143,262           154,499
Commitments and contingencies
Shareholders' equity:
   Cumulative Preferred Stock, $0.01 par value, 50,000,000 shares authorized,
     5,758,486 shares issued (in series) and outstanding, (9,258,486 at
     December 31, 2002) at liquidation preference............................
                                                                                            1,729,525         1,817,025
   Common Stock, $0.10 par value, 200,000,000 shares authorized, 125,973,318
     shares issued and outstanding (116,991,455 at December 31, 2002)........                  12,597            11,699
   Equity Stock, Series A, $0.01 par value, 200,000,000 shares authorized,
     8,776.102 shares issued and outstanding.................................                       -                 -
   Class B Common Stock, $0.10 par value, no shares are issued and outstanding
     (7,000,000 at December 31, 2002)........................................                       -               700
   Paid-in capital...........................................................               2,421,624         2,371,194
   Cumulative net income.....................................................               2,280,690         2,030,007
   Cumulative distributions paid.............................................              (2,364,477)       (2,071,656)
                                                                                      ----------------    ---------------
         Total shareholders' equity..........................................               4,079,959         4,158,969
                                                                                      ----------------    ---------------
              Total liabilities and shareholders' equity.....................           $   4,742,245      $  4,843,662
                                                                                      ================    ===============

</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>
                                                                       For the Three Months Ended          For the Nine Months Ended
                                                                              September 30,                      September 30,
                                                                     -------------------------------   -----------------------------
                                                                         2003              2002             2003             2002
                                                                     ---------------  --------------   --------------  -------------
Revenues:
     Rental income:
<S>                                                                   <C>             <C>              <C>             <C>
         Self-storage facilities..............................        $     206,856   $     195,907    $     593,345   $    572,588
         Commercial properties................................                2,812           2,894            8,601          8,917
         Containerized storage facilities.....................               10,355           8,935           27,713         23,351
     Tenant reinsurance premiums..............................                5,755           5,112           16,551         14,843
     Interest and other income................................                2,847           2,538            7,425          7,005
                                                                     ---------------  --------------   --------------  -------------
                                                                            228,625         215,386          653,635        626,704
                                                                     ---------------  --------------   --------------  -------------
Expenses:
     Cost of operations:
         Self-storage facilities..............................               70,981          62,734          206,655        180,898
         Commercial properties................................                1,253           1,074            3,491          3,272
         Containerized storage facilities.....................                6,197           7,043           17,201         16,756
         Tenant reinsurance...................................                2,917           2,387            8,631          7,203
     Depreciation and amortization............................               46,041          44,732          137,657        133,186
     General and administrative...............................                4,642           3,968           13,321         12,273
     Interest expense.........................................                  296             969            1,121          3,284
                                                                     ---------------  --------------   --------------  -------------
                                                                            132,327         122,907          388,077        356,872
                                                                     ---------------  --------------   --------------  -------------
Income before equity in earnings of real estate entities, minority
   interest in income, discontinued operations and gain
   (loss) on disposition of real estate investments...........               96,298          92,479          265,558        269,832
Equity in earnings of real estate entities (Note 6)...........                5,770           7,483           19,456         23,739
Minority interest in income:
     Preferred partnership interests..........................               (6,726)         (6,726)         (20,179)       (20,179)
     Other partnership interests..............................               (4,418)         (4,782)         (12,403)       (13,284)
                                                                     ---------------  --------------   --------------  -------------
Income before discontinued operations and gain (loss) on
   disposition of real estate investments.....................               90,924          88,454          252,432        260,108
Discontinued operations (Note 4)..............................               (1,224)         (5,103)          (2,556)        (6,745)
Gain (loss) on disposition of real estate investments.........                   47               -              807         (1,839)
                                                                     ---------------  --------------   --------------  -------------
Net income....................................................        $      89,747   $      83,351    $     250,683   $    251,524
                                                                     ===============  ==============   ==============  =============
Net income allocation:
---------------------
     Allocable to preferred shareholders:
        Based on distributions paid...........................        $      35,193   $      37,928    $     107,914   $    111,704
        Based on redemptions of preferred stock (Note 2)......                    -           6,888            3,397          6,888
     Allocable to Equity Stock, Series A......................                5,375           5,375           16,126         16,126
     Allocable to common shareholders (Restated - Note 2).....               49,179          33,160          123,246        116,806
                                                                     ---------------  --------------   --------------  -------------
                                                                      $      89,747   $      83,351    $     250,683   $    251,524
                                                                     ===============  ==============   ==============  =============
Per common share:
     Net income per share - Basic (Restated - Note 2) (Note 4)        $        0.39   $        0.27    $        0.99   $       0.95
                                                                     ===============  ==============   ==============  =============
     Net income per share - Diluted  (Restated - Note 2) (Note 4)     $        0.39   $        0.27    $        0.98   $       0.94
                                                                     ===============  ==============   ==============  =============
     Net income per depositary share of Equity Stock, Series A -
       Basic and Diluted......................................        $        0.61   $        0.61    $        1.84   $       1.84
                                                                     ===============  ==============   ==============  =============
     Weighted average common shares - Basic...................              125,528         123,341          124,740        122,707
                                                                     ===============  ==============   ==============  =============
     Weighted average common shares - Diluted.................              126,802         124,784          125,987        124,539
                                                                     ===============  ==============   ==============  =============
     Weighted average depositary shares of Equity Stock, Series A
       - Basic and Diluted....................................                8,776           8,776            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>


                                                              Preferred Stock    Common Stock         Stock        Paid-in Capital
                                                              ----------------   --------------   ---------------  ---------------

<S>                                                             <C>               <C>              <C>               <C>
Balances at December 31, 2002.............................      $  1,817,025      $     11,699     $        700      $  2,371,194

Redemption of cumulative preferred stock, including redemption costs:
   Series B (2,300,000 shares)............................           (57,500)                -                -               (17)
   Series C (1,200,000 shares)............................           (30,000)                -                -               (18)

Issuance of common stock:
   Exercise of Employee Stock Options (1,730,004 shares)..                 -               173                -            42,687
   Stock option expense (Note 12) ........................                 -                 -                -               294
   Conversion of Class B shares into Common Stock
     (7,000,000 shares)...................................                 -               700             (700)                -
   To acquire minority interests (426,859 shares).........                 -                43                -            13,467

Repurchase of common stock (175,000 shares)...............                 -               (18)               -            (5,983)

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

Cash distributions:
   Cumulative preferred stock (Note 10)...................                 -                 -                -                 -
   Equity Stock, Series A ($1.84 per depositary share)....                 -                 -                -                 -
   Common Stock ($1.35 per share).........................                 -                 -                -                 -
                                                              ----------------   --------------   ---------------  ---------------
Balances at September 30, 2003............................      $  1,729,525      $     12,597     $          -      $  2,421,624
                                                              ================   ==============   ===============  ===============

</TABLE>


<TABLE>
<CAPTION>

                                                                                                         Total
                                                                 Cumulative Net      Cumulative      Shareholders'
                                                                     Income        Distributions        Equity
                                                                 --------------    --------------    --------------

<S>                                                               <C>               <C>               <C>
Balances at December 31, 2002.............................        $  2,030,007      $ (2,071,656)     $  4,158,969

Redemption of cumulative preferred stock, including redemption costs:
   Series B (2,300,000 shares)............................                   -                 -           (57,517)
   Series C (1,200,000 shares)............................                   -                 -           (30,018)

Issuance of common stock:
   Exercise of Employee Stock Options (1,730,004 shares)..                   -                 -            42,860
   Stock option expense (Note 12) ........................                   -                 -               294
   Conversion of Class B shares into Common Stock
     (7,000,000 shares)...................................                   -                 -                 -
   To acquire minority interests (426,859 shares).........                   -                 -            13,510

Repurchase of common stock (175,000 shares)...............                   -                 -            (6,001)

Net income................................................             250,683                 -           250,683

Cash distributions:
   Cumulative preferred stock (Note 10)...................                   -          (107,914)         (107,914)
   Equity Stock, Series A ($1.84 per depositary share)....                   -           (16,126)          (16,126)
   Common Stock ($1.35 per share).........................                   -          (168,781)         (168,781)
                                                                 --------------    --------------    --------------
Balances at September 30, 2003............................        $  2,280,690      $ (2,364,477)     $  4,079,959
                                                                 ==============    ==============    ==============
</TABLE>

                            See accompanying notes.
                                       3
<PAGE>


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

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                         For the Nine Months Ended
                                                                                               September 30,
                                                                                   -------------------------------------
                                                                                         2003                 2002
                                                                                   ----------------     ----------------
Cash flows from operating activities:
<S>                                                                                <C>                  <C>
  Net income..............................................................         $      250,683       $      251,524
   Adjustments to reconcile net income to net cash provided by operating
     activities:
     (Gain) loss on asset sales included in equity in earnings of real estate
       investments (Note 6)...............................................                   (453)              (2,724)
     (Gain) loss on sale of real estate investments.......................                   (807)               1,839
     Depreciation and amortization........................................                137,657              133,186
     Depreciation included in equity in earnings of real estate entities..                 20,353               19,717
     Minority interest in income..........................................                 32,582               33,463
     Depreciation, impairment charges and adjustments associated with
       discontinued operations (Note 4) ..................................                  3,316                8,103
     Other................................................................                 11,855               14,997
                                                                                   ----------------     ----------------
              Total adjustments...........................................                204,503              208,581
                                                                                   ----------------     ----------------
                  Net cash provided by operating activities...............                455,186              460,105
                                                                                   ----------------     ----------------
Cash flows from investing activities:
     Principal payments received on mortgage notes receivable.............                 23,410               35,210
     Capital improvements to real estate facilities.......................                (20,470)             (16,041)
     Construction in process and acquisition of land held for development.                (70,576)             (77,408)
     Acquisition of minority interests....................................                 (9,867)             (26,519)
     Proceeds from the disposition of land and real estate facilities.....                 12,655                5,322
     Proceeds from the disposition of investments in real estate entities.                    851                    -
     Investment in real estate entities...................................                (26,728)             (25,550)
     Business combinations (Note 3).......................................                      -             (139,680)
     Acquisition of real estate facilities................................                      -              (29,899)
     Other investments....................................................                 (7,821)             (11,452)
                                                                                   ----------------     ----------------
                  Net cash used in investing activities...................                (98,546)            (286,017)
                                                                                   ----------------     ----------------
Cash flows from financing activities:
     Repayments on revolving line of credit...............................                      -              (25,000)
     Principal payments on notes payable..................................                (33,835)             (21,970)
     Net proceeds from the issuance of common stock.......................                 42,860               21,509
     Net proceeds from the issuance of preferred stock....................                      -              457,016
     Repurchase of common stock...........................................                 (6,001)                (381)
     Redemption of preferred stock........................................                (87,535)             (45,643)
     Distributions paid to shareholders...................................               (292,821)            (293,517)
     Distributions paid to holders of preferred partnership interests.....                (20,179)             (20,179)
     Distributions paid to other partnership interests....................                (17,143)             (19,015)
     Investment by minority interests.....................................                    193                    -
                                                                                   ----------------     ----------------
                  Net cash (used in) provided by financing activities.....               (414,461)              52,820
                                                                                   ----------------     ----------------
Net (decrease) increase in cash and cash equivalents......................                (57,821)             226,908
Cash and cash equivalents at the beginning of the period..................                103,124               49,347
                                                                                   ----------------     ----------------
Cash and cash equivalents at the end of the period........................         $       45,303       $      276,255
                                                                                   ================     ================
</TABLE>

                            See accompanying notes.
                                       4

<PAGE>


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

                                   (Continued)

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                         For the Nine Months Ended
                                                                                             September 30,
                                                                                   -------------------------------------
                                                                                         2003                 2002
                                                                                   ----------------     ----------------
Supplemental schedule of non-cash investing and financing activities:

   Acquisition of minority interest for consideration including common stock:
<S>                                                                                <C>                  <C>
     Real estate facilities.............................................           $      (16,687)      $    (39,318)
     Minority Interest..................................................                   (6,690)           (25,105)
   Issuance of common stock to acquire minority interest................                   13,510             37,904

    Business combinations (Note 3):
     Real estate facilities...............................................                      -           (330,426)
     Other assets.........................................................                      -            (16,728)
     Accrued and other liabilities........................................                      -             23,891
     Minority interest....................................................                      -             14,806
     Reduction in investment in real estate entities......................                      -            160,236
     Reduction in other assets............................................                      -              8,541

   Disposition of minority interests in exchange for other assets at a loss of
     $1,839 (Note 9):
        Other assets......................................................                      -             (1,450)
        Minority interest.................................................                      -              3,289

   Note received in exchange for sale of real estate......................                      -               (210)
   Real estate sold in exchange for note..................................                      -                210

    Exchange of Series B Preferred Stock for Series T Preferred Stock:
     Reduction in Series B Preferred Stock outstanding....................                      -             (2,150)
     Increase in Series T Preferred Stock outstanding.....................                      -              2,150

    Series J preferred Stock called for redemption :
     Cumulative Preferred Stock...........................................                      -           (150,018)
     Accrued and other liabilities........................................                      -            150,018

</TABLE>

                            See accompanying notes.
                                       5
<PAGE>


                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (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.

              At September 30, 2003, we had direct and indirect equity interests
     in 1,411  storage  facilities  with 85.2 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 16.4 million net
     rentable  square feet of  commercial  and  industrial  space  located in 12
     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 and nine months ended  September  30, 2003
     are not necessarily  indicative of the results that may be expected for the
     year  ended  December  31,  2003.  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, 2002.

              The consolidated  financial statements include the accounts of the
     Company  and  33  controlled   entities  (the   "Consolidated   Entities").
     Collectively,  the Company  and the  Consolidated  Entities  own a total of
     1,384 real estate facilities,  consisting of 1,375 self-storage facilities,
     six containerized storage facilities and three commercial  properties.  All
     intercompany  transactions  between the Company and any of the Consolidated
     Entities are eliminated in consolidation.

              At September 30, 2003, 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 September 30, 2003, we own  approximately
     44% of the common equity of PS Business Parks, Inc. ("PSB"), which owns and
     operates  approximately 14.8 million net rentable square feet of commercial
     space at September 30, 2003. 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  September  30, 2003  presentation,  including  Discontinued
     Operations (see Note 4), and the application of the Securities and Exchange
     Commission ("SEC")  Observer's  clarification of Emerging Issues Task Force
     Topic D-42 (see "Net Income per Common Share" below).

                                       6
<PAGE>
                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (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 2003 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  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  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
     mortgage  notes  receivable  approximates  fair value because the aggregate
     mortgage notes receivable's  applicable  interest rates approximate current
     market rates for similar loans.

              Financial assets that are exposed to credit risk consist primarily
     of cash and cash equivalents,  accounts  receivable,  and notes receivable.
     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.

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

              Real estate facilities are recorded at cost. Costs associated with
     the  acquisition,  development,  construction and improvement of properties
     are capitalized.  Interest, property taxes, and other costs associated with
     development 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.

                                       7

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

     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 carrying  amount is less than the fair value of the reporting
     unit,  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.  Our evaluation  identified no such  impairments in our last annual
     evaluation at December 31, 2002.

              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 or their
     carrying  value.  Our  evaluations  identified  one such  impairment in our
     discontinued  operations  during the second  quarter of 2003,  for which we
     recorded a $750,000 real estate impairment charge in the quarter ended June
     30, 2003 (see Note 4). We recorded an  additional  $1,274,000 in impairment
     charges relative to certain  containerized  facilities that were identified
     for  closure  in the third  quarter  of 2003  (See  Note 4). No  additional
     impairments were identified from our evaluations as of September 30, 2003.

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

              We utilize the Fair Value Method  (described  below) of accounting
     for our employee  stock options issued after December 31, 2001, and utilize
     the APB 25 Method (described below) for employee stock options issued prior
     to January 1, 2002. For the three and nine months ended September 30, 2003,
     a total of $95,000 and  $294,000,  respectively,  in  compensation  expense
     ($39,000  and  $97,000 for the three and nine months  ended  September  30,
     2002)  with   respect  to  stock   options  was  included  in  general  and
     administrative expense. During the three months ended September 30, 2003, a
     total of $371,000 in restricted stock  compensation was included in general
     and  administrative  expense.  See  Note  12 for a full  discussion  of our
     accounting  policies with respect to employee  stock options and restricted
     stock units.

                                       8

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

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

              Other assets primarily consist of furniture,  fixtures, equipment,
     and other such assets associated with the containerized storage operations,
     system development and computer software costs,  assets associated with the
     truck  rental  business,   accounts   receivable,   and  prepaid  expenses.
     Expenditures with respect to the containerized  storage operations,  system
     development  and computer  software  costs,  and truck rental  business are
     included in "other  investments" on the statements of cash flows.  Accounts
     receivable from customers are net of allowances for doubtful accounts.

              Included in other assets with respect to the containerized storage
     business  is  furniture,   fixtures,  and  equipment  (net  of  accumulated
     depreciation)  of  $13,479,000  and  $20,275,000  at September 30, 2003 and
     December 31, 2002, respectively.

              Included  in  depreciation   and   amortization   expense  and  in
     discontinued  operations  -  depreciation  and  amortization  for the three
     months ended  September  30, 2003 and 2002 is  $2,288,000  and  $2,049,000,
     respectively,  and  $6,891,000  and  $5,276,000,  for the nine months ended
     September  30,  2003 and  2002,  respectively,  related  to  other  assets.

              We  reevaluated  the  historical  results with respect to wear and
     functional  obsolescence  of the  containers  and other  assets used in the
     containerized  storage business.  Based upon the results of this review, we
     decreased the estimated useful lives with respect to these assets effective
     January 1, 2003. As a result of this change,  depreciation  with respect to
     the continuing containerized storage assets increased $378,000 and $978,000
     for the three and nine months ended  September  30, 2003 as compared to the
     same periods in 2002.

              Other  assets  at  September  30,  2003 also  include  $27,206,000
     ($13,801,000  at December  31,  2002) in held to maturity  debt  securities
     owned by STOR-Re Mutual Insurance  Company,  Inc.  ("STOR-Re") (see Note 3)
     stated at amortized cost.

     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.

              STOR-Re  (described  in  Note 3)  provides  limited  property  and
     liability  insurance coverage to the Company and affiliates of the Company.
     This entity accrues  liabilities  for losses and loss  adjustment  expense,
     which at September 30, 2003 totaled  $27,336,000  ($22,911,000  at December
     31, 2002).  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. This entity accrues liabilities for
     losses and loss  adjustment  expense,  which at September  30, 2003 totaled
     $1,335,000 ($2,135,000 at December 31, 2002).

                                       9

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

              These 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  and requires  considerable  judgment.  While we believe that the
     amount provided for is adequate, the ultimate liability may be in excess of
     or less than the amounts provided.

     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 are amortized on a  straight-line  basis
     over a 25 year period.

              Goodwill is net of  accumulated  amortization  of  $16,515,000  at
     September 30, 2003 and December 31, 2002.  At September 30, 2003,  property
     management  contracts are net of  accumulated  amortization  of $52,060,000
     ($47,107,000  at  December  31,  2002).   Included  in   depreciation   and
     amortization  expense for each of the three and nine months ended September
     30, 2003 and 2002 is $1,651,000 and $4,953,000,  respectively, 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.  Tenant
     reinsurance  premiums are  recognized as premiums are  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,  our property tax
     expense could be misstated.

              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.

     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.

                                       10

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

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

              Dividends paid to our preferred  shareholders totaling $35,193,000
     and  $37,928,000  for the three months ended  September  30, 2003 and 2002,
     respectively,  have been  deducted  from net income to arrive at net income
     allocable  to our  common  shareholders.  Dividends  paid to our  preferred
     shareholders  totaling  $107,914,000  and  $111,704,000 for the nine months
     ended  September 30, 2003 and 2002,  respectively,  have been deducted from
     net income to arrive at net income allocable to our common shareholders. In
     addition,  during  the third  quarter  of 2003,  we  implemented  the SEC's
     clarification of Emerging Issues Task Force Topic D-42, as described below.
     As a result of this implementation,  we allocated an additional  $3,397,000
     for the  nine  months  ended  September  30,  2003  for the  excess  of the
     redemption  amount over the  carrying  amount of our  Cumulative  Preferred
     Stock,  Series B and C and  $6,888,000  for the three and nine months ended
     September  30,  2002 for such  excess of our  Cumulative  Preferred  Stock,
     Series A and J. This  implementation  had no impact upon our  reported  net
     income;  however,  the  implementation did result in a reallocation of such
     net income between our preferred and common shareholders.

              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" 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.

              During 2001, 2002 and the nine months ended September 30, 2003, we
     redeemed  various series of our cumulative  perpetual  preferred stock. Our
     interpretation of EITF Topic D-42, prior to the clarification, was that the
     carrying  amount of our preferred  stock was equivalent to the  liquidation
     preference  as  recorded  on our  balance  sheet.  Each  of the  series  of
     preferred  stock  that  was  redeemed,  was  redeemed  at  the  liquidation
     preference.  Accordingly, based upon our interpretation,  the fair value of
     the consideration given at redemption was equivalent to the carrying amount
     on our balance sheet,  resulting in no impact to 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 the 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.  In our case,  issuance  costs were recorded as a reduction to
     Paid-in  Capital on our balance  sheet at the time the  related  securities
     were issued and were not considered as a reduction to the carrying value of
     the preferred stock at the time of redemption.

              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  approximately  $5,375,000  for each of the three
     months ended  September 30, 2003 and 2002 and  $16,126,000  for each of the
     nine months ended  September 30, 2003 and 2002.  The remaining  $49,179,000
     and  $33,160,000  (as  restated  for the impact of EITF Topic D-42) for the
     three months ended September 30, 2003 and 2002, respectively, was allocated
     to the regular common shares.  For the nine months ended September 30, 2003
     and 2002, $123,246,000 and $116,806,000 (as restated for the impact of EITF
     Topic D42), respectively, was allocated to the regular common shares.

              Basic net income per share is computed using the weighted  average
     common shares (prior to the dilutive impact of stock options  outstanding).
     Diluted net income per common share is computed using the weighted  average
     common shares outstanding  (adjusted for stock options and restricted stock
     units outstanding). Weighted average common shares excludes shares owned by
     the Consolidated Entities for the three and nine months ended September 30,
     2003  and  2002,  as  these  shares  of  common  stock  are  eliminated  in
     consolidation (see Note 10).

                                       11
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

              Distributions  per share of Class B common  stock are equal to 97%
     of the  per  share  distribution  paid  to  the  Company's  regular  common
     shareholders.  As  a  result  of  this  participation  in  distribution  of
     earnings,  for  purposes  of  computing  net income per common  share,  the
     Company includes  6,790,000  (7,000,000 x 97%) Class B common shares in the
     weighted average common  equivalent shares for the three months ended March
     31, 2002.

              As of March 31, 2002, the remaining contingency for the conversion
     of the Class B common stock into regular  common stock was  satisfied  (see
     Note 10) and the Class B common stock  converted into  7,000,000  shares of
     common  stock on  January 1, 2003.  As a result,  beginning  April 1, 2002,
     7,000,000 Class B common shares are included in the weighted average common
     equivalent shares.

3.       Business Combinations

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

              On January 16, 2002, we acquired the remaining 70% interest we did
     not own in a partnership (the "Development  Joint Venture").  The aggregate
     cost of this  business  combination  was  $268,209,000,  consisting  of our
     pre-existing  investment in the  Development  Joint Venture of $115,131,000
     and cash of $153,078,000. This acquisition was completed in order to expand
     the Company's real estate  investments.  The Development  Joint Venture was
     formed in April 1997 and was funded with equity  capital  consisting of 30%
     from  the  Company  and 70%  from an  institutional  investor  and  owns 47
     self-storage  facilities.  Prior to January 16, 2002,  we accounted for our
     investment  in the  Development  Joint  Venture  using the equity method of
     accounting.

     STOR-Re Mutual Insurance Company, Inc. ("STOR-Re")
     --------------------------------------------------

              As  a  result  of  obtaining  a  controlling  ownership  interest,
     effective July 1, 2002 we began  consolidating  STOR-Re.  Accordingly,  the
     assets and liabilities and operating results  subsequent to July 1, 2002 of
     STOR-Re  are  included  on our  financial  statements.  Our  investment  in
     STOR-Re,   which  was  previously   classified  as  an  Other  Asset,   was
     consolidated  and the cash,  other assets,  and  liabilities of STOR-Re are
     included in our financial statements.

              STOR-Re  was formed in 1994 as an  association  captive  insurance
     company owned by the Company and its affiliates.  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 coverage in excess of STOR-Re's limitations.

              Prior to July 1, 2002, the insurance premiums paid to STOR-Re were
     included in property operating  expenses.  After June 30, 2002, the insured
     liability  costs  incurred by STOR-Re with respect to the Company's and the
     Consolidated  Entities'  facilities  are  presented  as property  operating
     expenses. The insured liability costs incurred by STOR-Re are substantially
     equivalent  to  the  premiums  paid  by the  Company  and  its  affiliates;
     accordingly,  the  consolidation of STOR-Re had no material impact upon the
     Company's  income  statement.  The net  operating  results of STOR-Re  with
     respect to its insurance services provided to the  Unconsolidated  Entities
     are included in "Interest and other income."

              Each of the  transactions  indicated  above has been accounted for
     using the purchase method. Accordingly, allocations of our acquisition cost
     (consisting  of our  preexisting  investment and the cost of acquisition of
     interests acquired in connection with the transaction) was allocated to the
     net  assets  acquired  based  upon  the  fair  value  of  such  assets  and
     liabilities   assumed  with  respect  to  the  transactions.   Accordingly,
     allocations of the total  acquisition  cost to the net assets acquired were
     made based upon the fair value of such assets and liabilities assumed.

                                       12

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

              The historical  operating results of the above  acquisitions prior
     to each respective acquisition date have not been included in the Company's
     historical  operating  results.  Pro forma  data  (unaudited)  for the nine
     months ended September 30, 2002 as though the business  combinations  above
     had been  effective  as of  January  1,  2002 are as  follows  (amounts  in
     thousands):

                                              For the nine months ended
                                                  September 30, 2002
                                              -------------------------
Revenues.................................       $        627,894
Net income...............................       $        251,300
Net income per common share (Basic)......       $           0.95
Net income per common share (Diluted)....       $           0.94

              The pro forma  data does not  purport to be  indicative  either of
     results  of  operations  that  would  have  occurred  had the  transactions
     occurred  at  January 1, 2002 or the future  results of  operations  of the
     Company. Certain pro forma adjustments were made to the combined historical
     amounts to reflect (i) expected  reductions  in general and  administrative
     expenses, (ii) estimated increased interest expense from bank borrowings to
     finance  the cash  portion  of the  acquisition  cost and  (iii)  estimated
     increase in depreciation expense.

4.       Discontinued Operations

              SFAS No. 144, which was adopted by the Company on January 1, 2002,
     addresses  accounting for discontinued  operations.  The Statement 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 several  non-strategic  containerized  storage  facilities  (the "Closed
     Facilities"),   representing   components  of  our  containerized   storage
     business. During the nine months ended September 30, 2003, we identified an
     additional six facilities for closure, of which five were identified in the
     three months ended September 30, 2003. These 28 facilities are collectively
     referred to as the "Closed  Facilities".  The related  assets of the Closed
     Facilities  (consisting  primarily of storage  containers)  were deemed not
     recoverable  from future  operations,  and as a result an asset  impairment
     charge  for the  excess of these  assets'  net book  value  over  their net
     realizable  value was recorded during the third and fourth quarters of 2002
     totaling $6,187,000. In addition, lease termination costs, representing the
     expected  remaining  lease liability  following  closure of the facilities,
     were recorded in the amount of  $2,447,000  during the latter half of 2002.
     In the three months ended September 30, 2003, we recorded asset  impairment
     charges in the amount of  $1,274,000  relating  to the  closure of the five
     facilities  during  this  period.   There  are  no  significant  assets  or
     liabilities  of the  Closed  Facilities,  other  than the  remaining  lease
     liabilities.

              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  will be  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.

               In  addition,  during  the  fourth  quarter  of  2002,  we sold a
     commercial facility.

                                       13

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

              In accordance with SFAS No. 144, the historical  operations of the
     Closed  Facilities  (including the asset  impairment and lease  termination
     costs), the Sold Self-Storage Facilities,  and the sold commercial facility
     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  income  statement.  In  addition,  the net book  value
     ($15,829,000,  which is net of $6,341,000 in accumulated depreciation and a
     $750,000  impairment  charge recorded in the second quarter of 2003) of the
     Sold Self-Storage  Facilities and an industrial facility previously used by
     our containerized  storage  operations have been classified as "Real estate
     facilities held for sale" on our September 30, 2003 balance sheet.

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


Discontinued Operations:

<TABLE>
<CAPTION>
                                     For the three months ended September 30,  For the nine months ended September 30,
                                      ----------------------------------------  ----------------------------------------
                                          2003         2002          Change        2003           2002         Change
                                      ------------   -----------   -----------  -----------    ----------    -----------
                                                                    (Amounts in thousands)
Rental income (a):
<S>                                     <C>           <C>          <C>           <C>            <C>          <C>
  Sold Self-storage Facilities....      $     504     $    479     $      25     $   1,448      $  1,392     $      56
  Closed Facilities...............          1,281        5,651        (4,370)        5,862        15,692        (9,830)
  Sold commercial facility........              -           39           (39)            -           268          (268)
                                      ------------   -----------   -----------  -----------    ----------    -----------
       Total rental income........          1,785        6,169        (4,384)        7,310        17,352       (10,042)
                                      ------------   -----------   -----------  -----------    ----------    -----------
Cost of operations (a):
  Sold Self-Storage Facilities....            209          185            24           603           521            82
  Closed Facilities...............          1,094        5,456        (4,362)        5,947        16,304       (10,357)
  Sold commercial facility........              -           21           (21)            -            67           (67)
                                      ------------   -----------   -----------  -----------    ----------    -----------
       Total cost of operations...          1,303        5,662        (4,359)        6,550        16,892       (10,342)
                                      ------------   -----------   -----------  -----------    ----------    -----------
Depreciation expense (a):
  Sold Self-Storage Facilities....            142          140             2           424           422             2
  Closed Facilities...............            290          652          (362)          868         1,905        (1,037)
  Sold commercial facility........              -           27           (27)            -            87           (87)
                                      ------------   -----------   -----------  -----------    ----------    -----------
       Total depreciation ........            432          819          (387)        1,292         2,414        (1,122)
                                      ------------   -----------   -----------  -----------    ----------    -----------
Asset impairment and lease termination
 reserves (b):
  Closed Facilities...............          1,274        4,791        (3,517)        2,024         4,791        (2,767)
                                      ------------   -----------   -----------  -----------    ----------    -----------
Net discontinued operations (c)...      $  (1,224)    $ (5,103)    $   3,879     $  (2,556)     $ (6,745)    $   4,189
                                      ============   ===========   ===========  ===========    ==========    ===========
</TABLE>


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

(b)  An impairment charge of $750,000 was recorded in the second quarter of 2003
     with respect to a real estate facility held for sale at September 30, 2003,
     which  was  previously  used  by  the  discontinued  containerized  storage
     operations.  Asset  impairment  charges with  respect to the  containerized
     storage  assets in the amount of $1,274,000  were recorded in the three and
     nine months ended September 30, 2003,  respectively.  Asset  impairment and
     lease termination reserves in the amount of $4,791,000 were recorded in the
     three and nine months ended  September  30, 2002.  In addition,  during the
     nine months ended  September 30, 2002,  $898,000 in container  obsolescence
     expense were charged to cost of operations.

                                       14
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

(c)  The net discontinued  operations resulted in a reduction in our diluted and
     basic  earnings  per share of  approximately  $0.01 and $0.04 per share for
     each of the three months ended  September 30, 2003 and 2002,  respectively.
     For  each of the  nine  months  ended  September  30,  2003  and  2002  net
     discontinued  operations  resulted in a reduction  in our diluted and basic
     earnings   per  share  of   approximately   $0.02  and  $0.05  per   share,
     respectively.

5.   Real Estate Facilities

              Activity in real estate facilities during the nine months ended
September 30, 2003 is as follows:

                                                                 In thousands
                                                               ---------------
Operating facilities, at cost:
   Balance at December 31, 2002........................        $    4,988,526
   Transfer from construction in process...............                69,111
   Disposition of real estate facilities...............                (8,272)
   Transfer to real estate held for sale (Note 4)......               (22,920)
   Acquisition of minority interest....................                16,687
   Capital improvements................................                20,470
                                                               ---------------
   Balance at September 30, 2003.......................             5,063,602
                                                               ---------------
Accumulated depreciation:
   Balance at December 31, 2002........................              (987,546)
   Additions during the year...........................              (127,105)
   Transfer to real estate held for sale (Note 4)......                 6,341
   Disposition of real estate facilities...............                   566
                                                               ---------------
   Balance at September 30, 2003.......................            (1,107,744)
                                                               ---------------
Construction in process:
   Balance at December 31, 2002........................                87,516
   Current development.................................                70,576
   Transfer to operating facilities....................               (69,111)
   Transfer from land held for development.............                 1,113
                                                               ---------------
   Balance at September 30, 2003.......................                90,094
                                                               ---------------
Land held for development:
   Balance at December 31, 2002........................                17,807
   Disposition of land.................................                (4,458)
   Transfers to construction in progress...............                (1,113)
                                                               ---------------
   Balance at September 30, 2003.......................                12,236
                                                               ---------------
Real estate facilities held for sale (Note 4):
   Balance at December 31, 2002........................                     -
   Transfer from land and buildings....................                22,920
   Impairment charge...................................                  (750)
   Transfer from accumulated depreciation..............                (6,341)
                                                               ---------------
   Balance at September 30, 2003.......................                15,829
                                                               ---------------
Total real estate facilities...........................        $    4,074,017
                                                               ===============

              During the nine months  ended  September  30,  2003,  we opened 10
     newly  developed  facilities  (682,000  net  rentable  square feet) with an
     aggregate cost of $65,796,000,  and incurred  additional  development costs
     amounting to $1,906,000 with respect to existing real estate facilities (of
     which $602,000 related to expansion facilities).  In addition, we completed
     a conversion  of  industrial  space,  previously  used by the  discontinued
     containerized  storage operations,  into 55,000 net rentable square feet of
     self-storage space at an existing self-storage facility for a total cost of
     $1,409,000.

                                       15
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

              During the nine  months  ended  September  30,  2003,  we sold two
     self-storage  facilities for  $7,330,000,  two parcels of land for $528,000
     and three  parcels of land held for  development  for  $4,797,000.  The two
     self-storage  facilities had been operated by the buyer pursuant to a lease
     arrangement,  with the  lease  income  with  respect  to  these  facilities
     included in "Interest and other  income." An aggregate gain of $491,000 was
     recorded from these sales.

              Construction  in process at September 30, 2003 consists  primarily
     of 13  self-storage  facilities  (934,000 net rentable  square feet) and 31
     expansion projects to existing  self-storage  facilities.  In addition,  we
     have  six  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 and nine months ended  September  30, 2003 was  $1,411,000
     and  $4,386,000,   respectively  compared  to  $1,374,000  and  $4,646,000,
     respectively for the same periods in 2002.

6.       Investment in Real Estate Entities

              At September  30, 2003,  our  investment  in real estate  entities
     consists  of  our  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  and nine  months  ended  September  30,  2003,  we
     recognized  earnings from our  investments of $5,770,000  and  $19,456,000,
     respectively,  as compared to $7,483,000 and $23,739,000,  respectively for
     the same  periods  in 2002.  Equity in  earnings  of real  estate  entities
     includes  our  pro-rata  share of the net  impact  of gains on sale of real
     estate assets and impairment charges relating to the impending sale of real
     estate  assets  recorded  by PSB.  Our net  pro-rata  impact of these items
     totaled net income of $453,000 for the nine months ended September 30, 2003
     (none for the three months ended  September 30,  2003),  as compared to net
     income of  $483,000  and  $2,724,000  for the three and nine  months  ended
     September 30, 2002,  respectively.  See the condensed financial information
     with  respect to PSB below for further  information  regarding  these items
     recorded by PSB.

              For  the  nine  months  ended  September  30,  2003,  we  acquired
     investments in the real estate  entities  totaling  $272,000 as compared to
     $338,000  for the  nine  months  ended  September  30,  2002.  We  received
     distributions  from our investments for the nine months ended September 30,
     2003 and 2002, in the amount of $12,900,000 and $15,520,000, respectively.

              The  following  table sets forth our  investments  in real  estate
     entities at September  30, 2003 and  December  31, 2002,  and our equity in
     earnings  of real  estate  entities  for the  three and nine  months  ended
     September 30, 2003 and 2002 (amounts in thousands):

                                       16
<PAGE>


                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)



<TABLE>
<CAPTION>

                                                              Equity in Earnings of Real      Equity in Earnings of Real
                               Investments in Real Estate       Estate Entities for the      Estate Entities for the Nine
                                      Entities at          Three Months Ended September 30,    Months Ended September 30,

                             September 30,    December 31,
                                  2003            2002           2003            2002            2003            2002
                             -------------    ------------ ---------------   --------------  ------------    ------------
<S>                           <C>             <C>             <C>            <C>             <C>             <C>
PSB (a)..................     $   278,458     $   273,790     $     4,559    $     5,900     $    15,717     $    19,000
Disposed Investments (b).               -             525               -              8              10             247
Other Investments........          57,514          55,364           1,211          1,575           3,729           4,492
                             -------------    ------------ ---------------   --------------  ------------    ------------
  Total..................     $   335,972       $ 329,679     $     5,770    $     7,483     $    19,456     $    23,739
                             =============    ============ ===============   ==============  ============    ============
</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  recorded  by PSB.  Our net
     pro-rata  impact  from these items  totaled net income of $453,000  for the
     nine months ended September 30, 2003, as compared to income of $483,000 and
     $2,724,000  for the  three  and  nine  months  ended  September  30,  2002,
     respectively.

(b)  As described in Note 3, in the first quarter of 2002 we began consolidating
     the results of the Development Joint Venture and as a result eliminated our
     investment in the three months ended March 31, 2002. In addition, in the
     second quarter of 2003, we disposed of an investment for cash of $851,000,
     recognizing a gain on sale of approximately $316,000.

         Investment in PSB
         -----------------

              On  January  2,  1997,  we  reorganized  our  commercial  property
     operations  into an entity now known as PS  Business  Parks,  Inc.,  a REIT
     traded  on  the  American  Stock  Exchange,  and an  operating  partnership
     controlled  by PS  Business  Parks,  Inc.  (collectively,  the REIT and the
     operating  partnership  are referred to as "PSB").  The Company and certain
     partnerships  in which the Company has a  controlling  interest  have a 44%
     common  equity  interest in PSB as of September  30, 2003.  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  September  30,  2003  ($37.74 per share of PSB
     common  stock),  the shares and units had a market  value of  approximately
     $480.2 million as compared to a book value of $278.5 million.

              At September 30, 2003, PSB owned and operated  approximately  14.8
     million net rentable  square feet of  commercial  space.  In addition,  PSB
     manages  approximately  1,196,000  net rentable  square feet of  commercial
     space  owned  by  the  Company,   the   Consolidated   Entities,   and  the
     Unconsolidated Entities pursuant to property management agreements.

              The  following  table  sets  forth  the  condensed  statements  of
     operations  for the nine months ended  September  30, 2003 and for the same
     period in 2002,  and the condensed  balance  sheets of PSB at September 30,
     2003 and December  31,  2002.  The amounts  below  represent  100% of PSB's
     balances and not our pro-rata share.

                                       17

<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

<TABLE>
<CAPTION>

                                                        For the nine months ended September 30,
                                                       -----------------------------------------
                                                               2003                  2002
                                                       ------------------    -------------------
                                                               (Amounts in thousands)
<S>                                                      <C>                 <C>
   Total revenue prior to gains on sale.............     $      146,126      $      144,956
   Gain on disposition of assets....................              5,541               7,448
   Impairment charges with respect to impending
      sales of real estate..........................             (5,907)               (900)
   Cost of operations and other expenses............            (46,225)            (46,114)
   Depreciation and amortization....................            (43,186)            (41,164)
   Discontinued operations (a)......................              5,636               4,048
   Minority interest................................            (23,494)            (24,256)
                                                       ------------------    -------------------
    Net income.....................................      $       38,491      $       44,018
                                                       ==================    ===================

                                                       September 30, 2003     December 31, 2002
                                                       ------------------    -------------------
                                                            (Amounts in thousands)
   Total assets (primarily real estate).............     $    1,162,327      $    1,156,802
   Total debt.......................................             69,844              70,279
   Other liabilities................................             36,666              36,902
   Minority interest................................            387,476             385,219
   Shareholders' equity.............................     $      668,341      $      664,402

</TABLE>

(a)  Includes  income  from  discontinued  operations  totaling  $3,340,000  and
     $3,661,000  for  the  nine  months  ended  September  30,  2003  and  2002,
     respectively,  and equity in income of discontinued  joint venture totaling
     $2,296,000  and $387,000 for the nine months ended  September  30, 2003 and
     2002,  respectively.  Included  in  discontinued  operations  is a gain  on
     disposition of assets of $1,376,000 for the nine months ended September 30,
     2003 (none for the same period in 2002).

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

              The other  investments  consist primarily of an average 41% common
     equity  ownership,  which we owned during each of the three and nine months
     ended   September  30,  2003  and  2002,  in  seven  limited   partnerships
     (collectively,  the "Other  Investments") owning an aggregate of 36 storage
     facilities.  For the nine months  ended  September  30,  2003,  we acquired
     additional  equity  interests in these  entities  from third  parties for a
     total of $272,000, as compared to $338,000 for the same period in 2002.

              In the second  quarter of 2003, we disposed of an  investment  for
     net proceeds of $851,000,  and recognized a gain of $316,000,  representing
     the  difference  between  the  gross  proceeds  and the book  value of this
     investment.

              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:

                                       18

<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                             For the nine months ended September 30,
                                                             ---------------------------------------
                                                                     2003               2002
                                                             ------------------   ------------------
                                                                 (Amounts in thousands)
<S>                                                           <C>                 <C>
   Total revenue........................................      $       19,897      $       19,960
   Cost of operations and other expenses................              (6,862)             (7,027)
   Depreciation and amortization........................              (1,868)             (1,903)
                                                             ------------------   ------------------
     Net income.........................................      $       11,167      $       11,030
                                                             ==================   ==================

                                                             September 30, 2003   December 31, 2002
                                                             ------------------   ------------------
                                                                  (Amounts in thousands)

   Total assets (primarily storage facilities)..........      $       56,671      $       56,731
   Total debt...........................................               2,355               5,450
   Other liabilities....................................              10,308               1,121
   Partners' equity.....................................      $       44,008      $       50,160

</TABLE>


7.       Revolving Line of Credit

              We have a $200  million  revolving  line of  credit  (the  "Credit
     Agreement")  that has a  maturity  date of  October  31,  2004 and bears an
     annual  interest  rate  ranging  from the  London  Interbank  Offered  Rate
     ("LIBOR")  plus 0.45% to LIBOR plus 1.50%  depending on our credit  ratings
     (currently  LIBOR  plus  0.45%).  In  addition,  we are  required  to pay a
     quarterly  commitment  fee ranging  from 0.20% per annum to 0.30% per annum
     depending on our credit ratings  (currently the fee is 0.20% per annum). At
     September  30,  2003  and at  November  12,  2003,  we  had no  outstanding
     borrowings on our line of credit.

              The  Credit  Agreement  includes  various   covenants,   the  more
     significant  of which  requires us to (i) maintain a balance sheet leverage
     ratio of less than 0.50 to 1.00, (ii) maintain certain  quarterly  interest
     and fixed-charge coverage ratios (as defined therein) of not less than 2.50
     to 1.0 and 1.75 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
     two times our unsecured  recourse debt). We were in compliance with all the
     covenants of the Credit Agreement at September 30, 2003.

8.       Notes Payable

              Notes payable at September 30, 2003 and December 31, 2002 consist
     of the following:

                                       19
<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                         Carrying Amount
                                                                 -------------------------------
                                                                 September 30,     December 31,
                                                                       2003             2002
                                                                 -------------     -------------
                                                                     (Amounts in thousands)
Unsecured senior notes:
<S>                                                               <C>               <C>
  7.08% note due November 2003............................        $     5,000       $    10,000
  7.47% note due January 2004.............................             14,600            29,300
  7.66% note due January 2007.............................             44,800            56,000

Mortgage notes payable:
  10.55% mortgage notes secured by real estate facilities,
      principal and interest payable monthly, due August 2004          15,721            18,167
  7.134% to 10.5% mortgage notes secured by real estate
      facilities, principal and interest payable monthly, due
      at varying dates between May 2004 and September 2028              1,911             2,400
                                                                 -------------     -------------
         Total notes payable..............................        $    82,032       $   115,867
                                                                 =============     =============

</TABLE>

              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 September
     30, 2003 and December 31, 2002.  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 24 real
     estate facilities having an aggregate net book value of approximately $59.1
     million at September 30, 2003 and $56.4 million at December 31, 2002.


              At September 30, 2003, approximate principal maturities of notes
payable are as follows:

                               Unsecured
                              Senior Notes       Mortgage Notes      Total
                              ------------       --------------   ----------
                                               (in thousands)
2003 (remainder of).......... $      5,000       $        947      $   5,947
2004.........................       25,800             15,065         40,865
2005.........................       11,200                156         11,356
2006.........................       11,200                170         11,370
2007.........................       11,200                185         11,385
Thereafter...................            -              1,109          1,109
                              ------------       --------------   ----------
                              $     64,400         $   17,632      $  82,032
                              ============       ==============   ==========
Weighted average rate........         7.6%              10.3%           8.2%
                              ============       ==============   ==========

9.       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.

                                       20
<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

              For each of the three and nine months ended September 30, 2003 and
     2002,  the  holders  of  the  preferred   units  were  paid   distributions
     aggregating  approximately  $6,726,000 and $20,179,000,  respectively,  and
     received an equivalent allocation of minority interest in earnings.

              The following  table  summarizes the preferred  partnership  units
     outstanding at September 30, 2003 and December 31, 2002:

<TABLE>
<CAPTION>

                               Earliest        Distribution       Units            Carrying
         Series           Redemption Date (a)      Rate        Outstanding          Amount
         ------           -------------------  ------------    -----------         ----------
                                                                   (Amounts in thousands)
<S>                           <C>                   <C>              <C>             <C>
Series N............          March 17, 2005        9.500%           9,600           $240,000
Series O............          March 29, 2005        9.125%           1,800             45,000
                                                               -----------         ----------
Total...............                                                11,400           $285,000
                                                               ===========         ==========
</TABLE>

(a)  These preferred units are not redeemable during the first 5 years after
     issuance; thereafter, 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 9.5% Series N Cumulative  Preferred  Stock, and
     the Series O preferred units are convertible into shares of 9.125% Series O
     Cumulative Preferred Stock of the Company.

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

              The following table sets forth the minority  interest at September
     30,  2003  and  December  31,  2002 as well  as the  distributions  paid to
     minority  interest  for the nine months ended  September  30, 2003 and 2002
     with respect to the other partnership interests (amounts in thousands):

<TABLE>
<CAPTION>

                                                                                          Distributions to minority
                                                                                        interests for the nine months
                                                      Minority interest at                   ended September 30,
                                                ------------------------------         ------------------------------
                                                September 30,     December 31,
                 Description                        2003              2002                  2003             2002
                -------------                   -------------     ------------         -------------     ------------
<S>                                               <C>              <C>                   <C>              <C>
Consolidated Development Joint Venture......      $   70,951       $    75,432           $     7,386      $    7,384
Convertible Partnership Units..............            6,400             6,274                   320             321
Other consolidated partnerships.............          65,911            72,793                 9,244          11,310
                                                -------------     ------------         -------------     ------------
Total other partnership interests...........      $  143,262       $   154,499           $    16,950      $   19,015
                                                =============     ============         =============     ============

</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 and
     nine months ended September 30, 2003 and 2002 (amounts in thousands):

                                       21

<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

<TABLE>
<CAPTION>

                                                Minority interest in income for        Minority interest in income for
                                                     the three months ended            the nine months ended September
                                                         September 30,                               30,
                                                --------------------------------       -------------------------------
                 Description                         2003             2002                  2003             2002
                -------------                   --------------    --------------       --------------    -------------
<S>                                               <C>              <C>                   <C>              <C>
Consolidated Development Joint Venture......      $     1,292      $      938            $     2,905      $    1,574
Convertible Partnership Units...............               86              81                    233             243
Other consolidated partnerships.............            3,040           3,763                  9,265          11,467
                                                --------------    --------------       --------------    -------------
Total other partnership interests...........      $     4,418      $    4,782            $    12,403      $   13,284
                                                ==============    ==============       ==============    =============
</TABLE>


     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 an  institutional
     investor and B. Wayne Hughes ("Mr.  Hughes"),  chairman of the Company,  to
     develop  approximately  $100  million  of  self-storage  facilities  and to
     purchase $100 million of the Company's  Equity Stock,  Series AAA (see Note
     10). In consolidation, the Equity Stock Series AAA and the related dividend
     income have been eliminated.

              At September 30, 2003, the Consolidated  Development Joint Venture
     was  fully  committed  having  completed  construction  on 22  self-storage
     facilities for a total cost of approximately $108 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 has the right
     to cause an early termination of the partnership. If PSAC Storage Investors
     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' interest,  the partnership's assets will be
     sold to third parties and the proceeds  distributed to the Company and PSAC
     Storage  Investors in accordance  with the partnership  agreement.  If PSAC
     Storage Investors 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 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 September 30,
     2003).  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.

                                       22
<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

              See Note 14, "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.

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

              As of  September  30,  2003  and  December  31,  2002,  one of our
     Consolidated  Entities had approximately  237,935  convertible  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 common shares of
     the Company at the option of the  unitholder.  Minority  interest in income
     with respect to the Convertible  Units reflects an allocation of net income
     on a per unit basis equal to diluted earnings per common share.

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

               At  September  30,  2003,  the  Other  Consolidated  Partnerships
     reflect  common  equity  interests  that  the  Company  does  not own in 25
     entities owning an aggregate of 172 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 approximately $23,377,000,  consisting of
     the issuance of 426,859 shares of our common stock  ($13,510,000)  and cash
     of  approximately  $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.

              During 2002, we acquired  minority  interests in the  Consolidated
     Entities for an aggregate cash cost of $26,519,000  and issued an aggregate
     of 1,091,608 shares  ($37,904,000) of our common stock;  these acquisitions
     had the effect of  reducing  minority  interest  by  $25,105,000,  with the
     excess of cost over underlying book value  ($39,318,000)  allocated to real
     estate.

              In addition,  during the second  quarter of 2002,  we recorded the
     pending sale of a partnership interest in the Consolidated  Entities for an
     aggregate of $1,450,000.  We recorded a loss on sale of the interest in the
     amount of $1,839,000.  As a result of this pending sale,  minority interest
     increased by $3,289,000. This sale is subject to litigation; see Note 15.

              The partnership agreements for 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  14,  "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.

10.      Shareholders' Equity

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

              At September 30, 2003 and December 31, 2002, we had the following
series of Cumulative Preferred Stock outstanding:

                                       23
<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)
<TABLE>
<CAPTION>

                                                              At September 30, 2003            At December 31, 2002
                                                           ---------------------------   ------------------------------
                            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 B               March 31, 2003 (b)        9.200%               -    $         -       2,300,000    $    57,500
Series C                June 30, 2003 (b)    Adjustable               -              -       1,200,000         30,000
Series D               September 30, 2004        9.500%       1,200,000         30,000       1,200,000         30,000
Series E                 January 31, 2005       10.000%       2,195,000         54,875       2,195,000         54,875
Series F                   April 30, 2005        9.750%       2,300,000         57,500       2,300,000         57,500
Series K                 January 19, 2004        8.250%           4,600        115,000           4,600        115,000
Series L                   March 10, 2004        8.250%           4,600        115,000           4,600        115,000
Series M                  August 17, 2004        8.750%           2,250         56,250           2,250         56,250
Series Q                 January 19, 2006        8.600%           6,900        172,500           6,900        172,500
Series R               September 28, 2006        8.000%          20,400        510,000          20,400        510,000
Series S                 October 31, 2006        7.875%           5,750        143,750           5,750        143,750
Series T                 January 18, 2007        7.625%           6,086        152,150           6,086        152,150
Series U                February 19, 2007        7.625%           6,000        150,000           6,000        150,000
Series V               September 30, 2007        7.500%           6,900        172,500           6,900        172,500
                                                           -------------  ------------   -------------    -------------
Total Cumulative
Preferred Stock                                               5,758,486    $ 1,729,525       9,258,486    $ 1,817,025
                                                           =============  ============   =============    =============
</TABLE>


(a)  Except under certain conditions relating to the Company's  qualification as
     a REIT, the Senior Preferred Stock outstanding at September 30, 2003 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 per share (or depositary
     share in the case of the  Series K through  Series  V),  plus  accrued  and
     unpaid dividends.

(b)  Series was redeemed on the date indicated.

              On March 31, 2003, we redeemed all outstanding shares of our 9.20%
     Cumulative Preferred Stock, Series B at a redemption price of $25 per share
     for a total of $57,517,000  (including  related  redemption costs). On June
     30, 2003, we redeemed all  outstanding  shares of our Cumulative  Preferred
     Stock,  Series  C at a  redemption  price of $25 per  share  for a total of
     $30,018,000 (including related redemption costs).

              In addition, on October 6, 2003, we issued $132.5 million of 6.50%
     Cumulative  Preferred  Stock,  Series W. On November  13,  2003,  we issued
     $120.0 million of our 6.45% Cumulative  Preferred Stock, Series X (see Note
     16).

              During  2002,  we  issued  our  Series  T,  Series U and  Series V
     Cumulative  Preferred  Stock:  Series T - issued on January 18,  2002,  net
     proceeds of  $145,075,000,  Series U - issued on  February  19,  2002,  net
     proceeds of  $145,075,000  and Series V - issued  September  30, 2002,  net
     proceeds of $166,866,000.

              During  2002,  we  redeemed  our Series A and Series J  Cumulative
     Preferred  Stock, at par, at a total cost of $45,643,000  and  $150,018,000
     (including related redemption costs), respectively.

              On August 30,  2002,  in a privately  negotiated  transaction,  we
     exchanged an aggregate of 86,000  shares (par value of  $2,150,000)  of our
     Preferred Stock,  Series B for 86 shares  (representing  86,000  depositary
     shares with a par value of $2,150,000) of our Preferred Stock, Series T.

                                       24
<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

              The  Series  D  through  Series  X  Cumulative   Preferred   Stock
     (collectively  the  "Cumulative   Senior  Preferred  Stock")  have  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 September  30, 2003,  there were no dividends in arrears and the
     Debt Ratio was 1.4%.

     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  September  30,  2003,  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 Senior 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 the 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 our
     holders of 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.

              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.

                                       25
<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

     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 stockholders.

              Upon liquidation of the Consolidated Development Joint Venture, at
     the Company's option either a) each share of Equity Stock, Series AAA shall
     convert  into 1.2 shares of our common  stock or b) the  Company can redeem
     the Equity  Stock,  Series 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,  Series  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,  Series AAA
     has no voting rights.

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

              At September  30,  2003,  entities  consolidated  with the Company
     owned  723,732  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 September 30, 2003 and December 31, 2002:

Reconciliation of Common Shares
--------------------------------         At september 30,    At December 31,
Outstanding                                    2003                2002
-----------                              ----------------    ---------------

Legally issued and outstanding shares       126,697,050         117,540,187
Less - Shares owned by the
    Consolidated Entities that are
    eliminated in consolidation.....           (723,732)           (548,732)
                                         ----------------    ---------------
Reported issued and outstanding shares      125,973,318         116,991,455
                                         ================    ===============

              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 second
     quarter of 2003, we repurchased,  through one of the Consolidated Entities,
     175,000  shares for a total of $6,001,000.  From the initial  authorization
     through  September  30, 2003,  we have  repurchased  a total of  21,672,020
     shares  of  common  stock  at an  aggregate  cost of  approximately  $541.9
     million.


                                       26
<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

     Class B Common Stock
     --------------------

              The Class B Common Stock was converted  into regular  common stock
     on January 1, 2003.  For 2002,  the Class B Common  Stock  participated  in
     distributions  at the  rate of 97% of the per  share  distributions  on the
     Common Stock.

     Dividends

              The following table summarizes  dividends declared and paid during
     the nine months ended September 30, 2003:

                                             Distributions Per
                                            Share or Depositary       Total
                                                   Share          Distributions
                                           -------------------- ---------------
Preferred Stock:
Series B..............................             $0.554       $   1,323,000
Series C..............................             $0.844           1,012,000
Series D..............................             $1.782           2,137,000
Series E..............................             $1.875           4,116,000
Series F..............................             $1.828           4,205,000
Series K..............................             $1.547           7,116,000
Series L .............................             $1.547           7,116,000
Series M..............................             $1.640           3,690,000
Series Q..............................             $1.613          11,126,000
Series R..............................             $1.500          30,600,000
Series S..............................             $1.477           8,490,000
Series T..............................             $1.430           8,700,000
Series U..............................             $1.430           8,580,000
Series V..............................             $1.406           9,703,000
                                                                ---------------
                                                                  107,914,000
Common Stock:
Equity Stock, Series A................             $1.838          16,126,000
Common ...............................             $1.350         168,781,000
                                                                ---------------
   Total dividends....................                          $ 292,821,000
                                                                ===============

              The  dividend  rate on the Series C Preferred  Stock for the first
     six months of 2003 was equal to 6.75% per annum.  The Series B and Series C
     were redeemed entirely on March 31, 2003 and June 30, 2003, respectively.

              The  dividend  rate on the Common Stock was $0.45 per common share
     for each of the quarters ended March 31, 2003, June 30, 2003, and September
     30, 2003.  The dividend rate on the Equity Stock,  Series A was $0.6125 per
     depositary  share for each of the quarters  ended March 31, 2003,  June 30,
     2003, and September 30, 2003.

11.      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.

                                       27
<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

              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 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.

       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 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 performance of each segment, in
     terms of segment revenues, to our consolidated revenues.

                                       28
<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                      Three months ended                    Nine months ended
                                                         September 30,                         September 30,
                                                    -----------------------              ----------------------
                                                       2003        2002        Change       2003         2002       Change
                                                    ----------  -----------  ----------  -----------  ---------   ----------
                                                                          (Dollar amounts in thousands)
Reconciliation of Revenues by Segment:

<S>                                                  <C>        <C>          <C>          <C>         <C>         <C>
Self-storage property rentals................        $ 206,856  $  195,907   $  10,949    $ 593,345   $ 572,588   $  20,757
Commercial property rentals..................            2,812       2,894         (82)       8,601       8,917        (316)
Containerized storage........................           10,355       8,935       1,420       27,713      23,351       4,362
Tenant re-insurance..........................            5,755       5,112         643       16,551      14,843       1,708
Other items not allocated to segments:
  Interest and other income..................            2,847       2,538         309        7,425       7,005         420
                                                    ----------  -----------  ----------  -----------  ---------   ----------
      Total revenues.........................        $ 228,625  $  215,386   $  13,239    $ 653,635   $ 626,704   $  26,931
                                                    ==========  ===========  ==========  ===========  =========   ==========
</TABLE>


              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."

                                       29

<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

<TABLE>
<CAPTION>

                                                  Three months ended                    Nine months ended
                                                     September 30,                        September 30,
                                                -----------------------              -----------------------
                                                    2003        2002       Change        2003        2002       Change
                                                -----------  ----------  ----------  -----------  ----------  ----------
                                                 (Amounts in thousands)
  Reconciliation of Net Income by Segment:

  Self-storage
<S>                                              <C>         <C>          <C>         <C>         <C>          <C>
  Self-storage net operating income.........     $ 135,875   $ 133,173    $  2,702    $386,690    $ 391,690    $ (5,000)
  Self-storage depreciation.................       (43,613)    (42,848)       (765)   (130,332)    (127,234)     (3,098)
  Equity in earnings - self-storage property
     operations.............................         1,607       1,600           7       4,724        5,081        (357)
  Equity in earnings - depreciation
     (self-storage) ........................          (436)       (409)        (27)     (1,265)        (958)       (307)
  Discontinued operations (Note 4) .........           153         154          (1)        421          449         (28)
                                                -----------  ----------  ----------  -----------  ----------  ----------
      Total self-storage segment net income.        93,586      91,670       1,916     260,238      269,028      (8,790)
                                                -----------  ----------  ----------  -----------  ----------  ----------
  Commercial  properties
  Commercial properties.....................         1,559       1,820        (261)      5,110        5,645        (535)
  Depreciation and amortization - commercial
     properties.............................          (590)       (622)         32      (1,889)      (1,991)        102
  Equity in earnings - commercial property
     operations.............................        16,148      16,394        (246)     48,339       49,050        (711)
  Equity in earnings - depreciation
     (commercial properties) ...............        (6,779)     (6,412)       (367)    (19,088)     (18,759)       (329)
  Discontinued operations (Note 4) .........             -          (9)          9           -          114        (114)
                                                -----------  ----------  ----------  -----------  ----------  ----------
     Total commercial property segment net
       income...............................        10,338      11,171        (833)     32,472       34,059      (1,587)
                                                -----------  ----------  ----------  -----------  ----------  ----------
  Containerized storage
  Containerized storage net operating income         4,158       1,892       2,266      10,512        6,595       3,917
  Containerized storage depreciation........        (1,838)     (1,262)       (576)     (5,436)      (3,961)     (1,475)
  Discontinued operations (Note 4) .........        (1,377)     (5,248)      3,871      (2,977)      (7,308)      4,331
                                                -----------  ----------  ----------  -----------  ----------  ----------
      Total containerized storage segment net
       income (loss)........................           943      (4,618)      5,561       2,099       (4,674)      6,773
                                                -----------  ----------  ----------  -----------  ----------  ----------
  Tenant Reinsurance
   Tenant reinsurance net income............         2,838       2,725         113       7,920        7,640         280
                                                -----------  ----------  ----------  -----------  ----------  ----------
  Other items not allocated to segments
  -------------------------------------
  Equity in earnings - general and
     administrative and other...............        (4,770)     (3,690)     (1,080)    (13,254)     (10,675)     (2,579)
  Interest and other income.................         2,847       2,538         309       7,425        7,005         420
  General and administrative................        (4,642)     (3,968)       (674)    (13,321)     (12,273)     (1,048)
  Interest expense..........................          (296)       (969)        673      (1,121)      (3,284)      2,163
  Minority interest in income...............       (11,144)    (11,508)        364     (32,582)     (33,463)        881
  Gain (loss) on disposition of real estate.            47           -          47         807       (1,839)      2,646
                                                -----------  ----------  ----------  -----------  ----------  ----------
      Total other items not allocated to segments  (17,958)    (17,597)       (361)    (52,046)     (54,529)      2,483
                                                -----------  ----------  ----------  -----------  ----------  ----------
       Total consolidated net income........     $  89,747   $  83,351    $  6,396    $250,683    $ 251,524    $   (841)
                                                ===========  ==========  ==========  ===========  ==========  ==========

</TABLE>

                                       30
<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

12.  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").

              In any fiscal year beginning  before December 15, 2003,  companies
     can change their accounting method from the APB 25 Method to the Fair Value
     Method,  and in doing so can  elect  between  three  different  methods  of
     transition.  The  first is the  prospective  method,  whereby  the  Company
     applies the  recognition  provisions  of the Fair Value Method to all stock
     options granted after the beginning of the fiscal year in which the company
     adopts the Fair Value  Method.  The second is the  retroactive  restatement
     method,  whereby the company  restates  all  periods  presented  to reflect
     compensation  cost  utilizing  the fair value method for all  periods.  The
     third is the modified  prospective  method,  where the company  applies the
     Fair Value  Method  from the  beginning  of the  current  fiscal  year with
     respect to all options  that vest during the year  regardless  of when they
     were granted.

              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   described   above.   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  and nine  months  ended  September  30,  2003,  we
     recorded $95,000 and $294,000,  respectively,  in stock option compensation
     expense  ($39,000 and $97,000 for the three and nine months ended September
     30, 2002) 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  nine  months  of 2003  was  based  upon an
     estimated life of 5 years,  a risk-free rate of 4.0%, an expected  dividend
     yield of 7%, and expected volatility of 0.176.

                                       31
<PAGE>


                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

              If we had recorded  stock option  expense  applying the Fair Value
     Method to all awards,  we would have recognized an additional  $714,000 and
     $1,041,000  for the  three  months  ended  September  30,  2003  and  2002,
     respectively,  and $2,123,000  and $3,080,000 in stock option  compensation
     expense  for  the  nine  months   ended   September   30,  2003  and  2002,
     respectively.  Diluted  earnings  per share would have been $0.96 and $0.91
     for the nine months ended September 30, 2003 and 2002, respectively.  Basic
     earnings  per share  would  have been  $0.97 and $0.93 for the nine  months
     ended September 30, 2003 and 2002, respectively. Diluted earnings per share
     would have been $0.38 and $0.26 for the three  months ended  September  30,
     2003 and 2002, respectively.  Basic earnings per share for the same periods
     would have been $0.39 and $0.26.

     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 is entitled to
     receive per-unit dividends on the outstanding  restricted stock units equal
     to the per-share dividends received by the common shares. Upon vesting, the
     employee  receives  either  regular  common  shares  equal to the number of
     vested  restricted  stock  units  in  exchange  for the  units  or,  at the
     employee's  option,  the  equivalent  in  cash.  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,  is amortized over the vesting period as
     compensation  expense.  Any  changes in the market  price of the  Company's
     common  stock  price  are  reflected   prospectively   as   adjustments  to
     compensation  expense with respect to unvested  restricted stock units over
     the applicable remaining service period. Dividends paid on restricted stock
     units  are  accounted  for  as  dividends  on  common  stock.   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.

              During the third  quarter of 2003,  the  Company  granted  197,000
     shares of  restricted  stock units to employees  of the  Company.  The fair
     market  value of the grant was  approximately  $7.4  million  based  upon a
     closing  price of $37.74 per common share on the date of grant.  A total of
     $371,000 in restricted stock expense was recorded in the three months ended
     September 30, 2003, representing the applicable amortization of the 197,000
     share grant.

13.      Related Party Transactions

     Relationships and transactions with 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  37% of our
     common stock  outstanding  at September  30, 2003. 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 reimburse us at
     cost for these  services.  There may be conflicts of interest in allocating
     the time of our personnel between our properties,  the Canadian properties,
     and  certain  other  Hughes  Family  interests.  We are in the  process  of
     eliminating the sharing of Company personnel with the Canadian entities and
     expect this process to be completed by December 31, 2003.

                                       32

<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

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

              Ronald L.  Havner  Jr.,  our  vice-chairman  and  chief  executive
     officer,  is also  chairman of PSB and was CEO until August 12,  2003.  Mr.
     Havner's  compensation  is  allocated  between the  Company  and PSB.  This
     allocation  was approved by the audit  committee of the Company's  Board of
     Directors.

              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 September 30, 2003 and 2002 and $255,000 for each of the nine
     months ended  September 30, 2003 and 2002,  and were computed in accordance
     with a methodology intended to fairly allocate these costs.

              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 $140,000  and  $439,000,  for the
     three and nine months ended September 30, 2003,  respectively,  as compared
     to $152,000 and  $454,000,  respectively,  for the same periods in 2002, in
     management fees with respect to PSB's property management services.

              STOR-Re,  an entity that is  consolidated  with the Company and is
     partially owned by PSB,  provides limited property and liability  insurance
     to PSB 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.

               In June 2002,  we sold an  undeveloped  parcel of land at cost to
     PSB for an aggregate of $1,100,000 cash.

     Consolidated Development Joint Venture with a partner including Mr. Hughes
     --------------------------------------------------------------------------

              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 9.

14.      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  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 this
     Statement on July 1, 2003,  and the adoption had no impact on our financial
     statements.

              The provisions of SFAS 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 150 as it relates to these minority interests.

                                       33

<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (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 September  30, 2003 would have been to  reclassify  the  Company's
     minority  interests  described in Note 9 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   $136,862,000,   and   increase   liabilities   by
     $305,290,000, representing the estimated settlement value of these minority
     interests at September 30, 2003.

     FASB Interpretation No. 46 - Consolidation of Variable Interest Entities

              In January 2003, the Financial  Accounting  Standards Board 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.
     This  statement is applicable  at the  beginning of the  Company's  quarter
     ended  December 31, 2003. We are in the process of evaluating the impact of
     the  adoption  of this  Interpretation  but do not  believe  it will have a
     significant impact on our financial statements.

15.      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.  The Company is vigorously  contesting
     the claims upon which this lawsuit is based.

     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
     purported  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.  This maximum potential  liability cannot be estimated,  but can
     only be increased if a class is certified or if claims are  permitted to be
     brought  on  behalf of the  others  under the  California  Unfair  Business
     Practices Act. The plaintiffs' motion for class certification was denied in
     August 2002; the plaintiffs have appealed this denial. This denial does not
     deal with the claim under the California Unfair Business Practices Act.

                                       34
<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

              The Company is continuing to vigorously contest the claims in this
     case and intends to resist any expansion beyond the named plaintiffs on the
     grounds of lack of commonality  of claims.  The Company's  resistance  will
     include  opposing  the  plaintiffs'  appeal of the court's  denial of class
     certification  and  opposing  the  claim 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.

     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.  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).

                                       35
<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

     Sale of Partnership Units
     -------------------------

              In  February  2000,  the  Company  entered  into a  settlement  of
     litigation arising out of a 1997 tender offer for limited partnership units
     in two affiliated partnerships. Under the settlement agreement, the Company
     agreed to sell to the plaintiff units representing a 4% interest in each of
     the  partnerships  for a total  payment of  approximately  $1,523,000.  The
     plaintiff  failed  to  tender  the full  purchase  price  at the  scheduled
     closing, and the settlement collapsed.

              In September  2000,  the plaintiff  amended its complaint to add a
     claim for breach of the settlement  agreement seeking specific  enforcement
     and a claim  seeking  damages for unfair and deceptive  trade  practices in
     connection with the alleged  breach.  By amending the complaint the Company
     believes  the  plaintiff  elected to abandon its  underlying  claims in the
     litigation.   The  Company  asserted  affirmative  defenses  including  the
     material breach by the plaintiff.  Cross motions for summary  judgment were
     filed by the parties.  In July 2002, the court granted  plaintiff's  motion
     for summary judgment as to its claim for breach of the settlement agreement
     and  granted  the  Company's   motion  for  summary   judgment  to  dismiss
     plaintiff's claim for unfair and deceptive trade practices.

              In March 2003, the court granted  plaintiff's motion to compel the
     sale of the units to the  plaintiff.  The Company is appealing  the court's
     decision.  If the Company is compelled to sell the units to plaintiff,  the
     Company  would  incur a loss of  approximately  $1,839,000,  which has been
     accrued  as a loss  on sale of real  estate  investments  in the  Company's
     income statement for the nine months ended September 30, 2002.

     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,  including  emplyment  and tenant  claims  that are not  described
     above.  We believe  that it is  unlikely  that the  outcome of these  other
     pending legal proceedings,  in the aggregate,  will have a material adverse
     effect upon the operations or financial position of the Company.

     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 insures portions of these
     risks  through  nationally  recognized  insurance  carriers.  STOR-Re  also
     insures affiliates of the Company.

               We believe that 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 $30,000,000.  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.

              PSIC reinsures  policies against claims for losses to goods stored
     by tenants at our  self-storage  facilities.  PSIC reinsures its risks with
     third-party  insures  from any  individual  event  that  exceeds  a loss of
     $500,000 up to the policy limit of $10,000,000. Losses that are not covered
     by the third-party insurers are accrued as cost of operations of the tenant
     reinsurance operations.

                                       36

<PAGE>

                             PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

                                   (Unaudited)

     Development of Real Estate Facilities
     -------------------------------------

              We  currently  have  44  projects  in  our  development  pipeline,
     including 13 newly  developed  self-storage  facilities,  expansions  to 15
     existing  self-storage  facilities and 16 conversions from industrial space
     into  self-storage  space,  with  total  estimated   development  costs  of
     $167,252,000,  of which  $90,094,000  has been spent at September 30, 2003.
     Development of these facilities is subject to contingencies.

16.      Subsequent Events

              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 on these  properties.  The note  receivable  was  collected in full in
     October 2003, and a gain of  approximately  $4.5 million will be recognized
     from the sale of these properties in the fourth quarter of 2003.

              On October 16, 2003, we sold a  self-storage  facility  located in
     Perrysburg,  Ohio for $2.3 million.  A gain of  approximately  $1.1 million
     will be recognized  from the sale of this property in the fourth quarter of
     2003.

              On October 6, 2003,  we  completed a public  offering of 5,300,000
     depositary shares ($25 stated value per depositary share) each representing
     1/1,000 of a share of 6.500% Cumulative  Preferred Stock, Series W, raising
     net proceeds of approximately  $128.3 million. The Series W Preferred Stock
     has  general  preference  rights  over the  Common  Stock  with  respect to
     distributions  and  liquidation  proceeds.  Except  in  certain  conditions
     relating to the Company's  qualification  as a REIT, the Series W preferred
     stock is not  redeemable  prior to October 6, 2008.  After October 6, 2008,
     the  Series W  preferred  stock  will be  redeemable  at the  option of the
     Company, in whole or in part, at $25 per depository share, plus accrued and
     unpaid dividends.

              On November 13,  2003, we issued in a public  offering  4,800,000
     (which  includes  the  underwriters'  exercise  of  an  additional  400,000
     depositary shares to cover  over-allotments)  depositary shares ($25 stated
     value per depositary share) each representing  1/1,000 of a share of 6.450%
     Cumulative  Preferred  Stock,  Series X. Total net proceeds of the offering
     were  $116.2  million.  The  Series X  preferred  stock  will have  general
     preference  rights over the Common Stock with respect to distributions  and
     liquidation  proceeds.   Except  in  certain  conditions  relating  to  the
     Company's qualification as a REIT, the Series X preferred stock will not be
     redeemable  prior to November 13, 2008. After November 13, 2008, the Series
     X preferred stock will be redeemable at the option of the Company, in whole
     or in part, at $25 per depository share, plus accrued and unpaid dividends.

                                       37

<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 21F 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 PLICIES

         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 our 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 one such impairment during the
second  quarter of 2003 and no  additional  impairments  were  identified  as of
September 30, 2003, see Note 4 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.

                                       38
<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 15 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 15 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.

                                       39

<PAGE>


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

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003

         Net  income  for  the  three  months  ended   September  30,  2003  was
$89,747,000 compared to $83,351,000 for the same period in 2002, representing an
increase of $6,396,000 or 7.7%.  This increase is primarily due to the reduction
in losses from discontinued  operations combined with increased  operations from
our newly developed self-storage  facilities and containerized storage business.
These  effects  were  partially  offset by a reduction in our  Consistent  Group
operating  results  (as  discussed  below) and  increased  depreciation  expense
resulting primarily from new property additions.

         Net  income  allocable  to  our  regular  common   shareholders  (after
allocating net income to our preferred and equity  shareholders) was $49,179,000
or $0.39 per common  share on a diluted  basis  (based on  126,802,000  weighted
average diluted common  equivalent  shares) for the three months ended September
30, 2003 compared to $33,160,000  (as restated for the application of EITF Topic
D-42) or $0.27 per  common  share (as  restated)  on a diluted  basis  (based on
124,784,000  weighted  average  diluted common  equivalent  shares) for the same
period in 2002,  representing  an  increase of 44.4% on a per share  basis.  The
increase 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,  combined  with a reduction in the amount of income  allocated to
our preferred shareholders.

         During the three months ended September 30, 2003 and 2002, we allocated
$35,193,000  and $37,928,000 of our net income,  respectively,  to our preferred
shareholders based on actual  distributions paid. In addition,  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  for the third  quarter of 2002 and a
corresponding  reduction  of net income  allocation  to our common  shareholders
totaling $6,888,000.  Prior year allocations of net income have been restated to
reflect this change. The $6,888,000  additional  allocation of net income to our
preferred  shareholders  represents the excess of the redemption amount over the
carrying  amount of the preferred  stock  securities that we redeemed during the
period.

         EITF Topic D-42  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. During 2001, 2002 and for
the nine months ended  September  30, 2003,  we redeemed  various  series of our
perpetual  preferred stock. Our  interpretation  of EITF Topic D-42 was that the
carrying  amount  of our  preferred  stock  was  equivalent  to the  liquidation
preference  as recorded on our balance  sheet.  Each of the series of  preferred
stock  that  was  redeemed,   was  redeemed  at  the   liquidation   preference.
Accordingly, based upon our interpretation,  the fair value of the consideration
given at redemption was  equivalent to the carrying  amount on our balance sheet
resulting in no impact to 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 the 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.  In the case of the
Company,  issuance costs were recorded as a reduction to Paid-in  Capital on our
balance  sheet at the time  the  related  securities  were  issued  and were not
considered as a reduction to the carrying  value of the  preferred  stock at the
time  of  redemption.  As  indicated  above,  the  clarification  and  resulting
implementation  resulted in a  $6,888,000  reduction  to our reported net income
allocable to our common  shareholders  for the three months ended  September 30,
2002.

         In addition,  during each of the three months ended  September 30, 2003
and 2002, we allocated  $5,375,000 of our net income to our Equity Stock, Series
A shareholders.

                                       40

<PAGE>

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003

         Net  income  for  the  nine  months  ended   September   30,  2003  was
$250,683,000 compared to $251,524,000 for the same period in 2002,  representing
a decrease  of  $841,000 or 0.3%.  This  decrease  in net income is  primarily a
result of a reduction in our Same Store operating  results (as discussed below),
increased  depreciation expense resulting primarily from new property additions,
and a decrease in equity in earnings of real estate  entities.  The  decrease in
equity in earnings of real estate  entities is  primarily  due to a reduction in
our pro rata share of the earnings of PS Business Parks,  Inc.  ("PSB"),  caused
primarily  by the net  impact of a gain on sale  offset  by an asset  impairment
charge with respect to impending  real estate sales  recorded by PSB in the nine
months ended  September  30, 2003, as compared to a gain on sale recorded by PSB
in the nine months  ended  September  30,  2002.  Our net pro rata share of such
items recorded by PSB for the nine months ended  September 30, 2003 was $453,000
as compared to $2,724,000 in the same period in 2002, representing a decrease of
$2,271,000.  These  decreases were offset  partially by improved  results of our
containerized  storage  operations,  a  reduction  in losses  from  discontinued
operations,  the impact of a loss on sale of real estate assets  recorded in the
nine months  ended  September  30,  2002 and lower  interest  expense  resulting
primarily from lower average debt balances.

         Net  income  allocable  to  our  regular  common   shareholders  (after
allocating   net  income  to  our  preferred  and  equity   shareholders),   was
$123,246,000  or $0.98 per common share on a diluted basis (based on 125,987,000
weighted  average  diluted common  equivalent  shares) for the nine months ended
September 30, 2003 compared to $116,806,000 (as restated for the  aforementioned
application  of EITF Topic D-42) or $0.94 per common  share (as  restated)  on a
diluted basis (based on 124,539,000  weighted average diluted common  equivalent
shares) for the same period in 2002,  representing  an increase of 4.3% on a per
share basis.  The increase in net income  allocable to common  shareholders  and
diluted  earnings  per share is due to a reduction  in income  allocated  to our
preferred  shareholders,  as described below, offset partially by a reduction in
net income as described above.

         During the nine months ended  September 30, 2003 and 2002, we allocated
$107,914,000 and  $111,704,000 of our net income (based on distributions  paid),
respectively,  to our preferred  shareholders,  representing a decrease of 3.4%.
This decrease is due to the  redemption  of several  series of our higher coupon
preferred stock in 2002 and 2003, offset partially by the issuance of additional
preferred  securities  throughout  2002. In addition,  for the nine months ended
September  30,  2003  and  2002,  we  allocated  an  additional  $3,397,000  and
$6,888,000,  respectively,  in net income to our preferred shareholders relating
to the  application  of EITF Topic  D-42.  The  allocation  of net income to our
preferred and common  shareholders for the nine month periods have been restated
to reflect the application of EITF Topic D-42 during the third quarter of 2003.

         In addition,  during each of the nine months ended  September  30, 2003
and 2002, we allocated $16,126,000 of our net income to our Equity Stock, Series
A shareholders.

Real Estate Operations
----------------------

         SELF-STORAGE  OPERATIONS:  Our  self-storage  operations are by far the
largest component of our operations, representing approximately 91% of our total
revenues  generated for the nine months ended September 30, 2003. 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)  1,164
self-storage  facilities  that are  reflected in the  financial  statements on a
stabilized  basis  since  January  1, 2001  (the  "Consistent  Group"),  (ii) 95
facilities   that  were   acquired   since  January  1,  2000  (  the  "Acquired
Facilities"),  (iii) 35 facilities  that were owned prior to January 1, 2001 but
were not  stabilized  due primarily to  expansions in their net rentable  square
footage (the "Expansion Facilities") and (iv) 76 newly-developed facilities that
were opened after January 1, 1999 (the "Developed Facilities"):

                                       41

<PAGE>


<TABLE>
<CAPTION>



Self - storage operations summary:              Three months ended September 30,         Nine months ended September 30,
----------------------------------            --------------------------------------  --------------------------------------
                                                                         Percentage                               Percentage
                                                 2003          2002        Change        2003           2002        Change
                                              ------------   ----------  -----------  -----------    -----------  ----------
                                                                      (Dollar amounts in thousands)
Rental income (a):
<S>                                            <C>           <C>             <C>       <C>           <C>               <C>
   Consistent Group (b)................        $  173,242    $ 168,175       3.0%      $ 500,959     $  496,826        0.8%
   Acquired Facilities (c).............            17,005       15,420      10.3%         48,611         42,749       13.7%
   Expansion Facilities (d)............             5,678        5,349       6.2%         15,942         15,169        5.1%
   Developed Facilities (e)............            10,931        6,963      57.0%         27,833         17,844       56.0%
                                              ------------   ----------  -----------  -----------    -----------  ----------
     Total rental income...............           206,856      195,907       5.6%        593,345        572,588        3.6%
                                              ------------   ----------  -----------  -----------    -----------  ----------
Cost of operations:
   Consistent Group....................            58,867       52,338      12.5%        171,118        152,816       12.0%
   Acquired Facilities.................             5,522        4,641      19.0%         15,726         12,565       25.2%
   Expansion Facilities................             1,919        2,035      (5.7)%         6,244          5,602       11.5%
   Developed Facilities................             4,673        3,720      25.6%         13,567          9,915       36.8%
                                              ------------   ----------  -----------  -----------    -----------  ----------
   Total cost of operations............            70,981       62,734      13.1%        206,655        180,898       14.2%
                                              ------------   ----------  -----------  -----------    -----------  ----------
Net operating income (before depreciation):
   Consistent Group....................           114,375      115,837      (1.3)%       329,841        344,010       (4.1)%
   Acquired Facilities.................            11,483       10,779       6.5%         32,885         30,184        8.9%
   Expansion Facilities................             3,759        3,314      13.4%          9,698          9,567        1.4%
   Developed Facilities................             6,258        3,243      93.0%         14,266          7,929       79.9%
                                              ------------   ----------  -----------  -----------    -----------  ----------
   Total net operating income..........           135,875      133,173       2.0%        386,690        391,690       (1.3)%

 Depreciation..........................           (43,613)     (42,848)      1.8%       (130,332)      (127,234)       2.4%
                                              ------------   ----------  -----------  -----------    -----------  ----------
   Operating Income....................         $  92,262    $  90,325       2.1%      $ 256,358     $  264,456       (3.1%)
                                              ============   ==========  ===========  ===========    ===========  ==========
Number of self-storage facilities (at end
of period):.............................            1,370        1,360       0.7%          1,370         1,360        0.7%
Net rentable square feet (at end of period
- in thousands):........................           82,716       81,908       1.0%         82,716        81,908        1.0%

</TABLE>

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

(b)  The Consistent Group includes 1,164 facilities containing 67,666,000 net
     rentable square feet that have been owned prior to January 1, 2001, and
     operated at a mature, stabilized occupancy level since December 31, 2000.

(c)  The Acquired Facilities includes 95 facilities containing 5,642,000 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 35 facilities containing 3,805,000 net
     rentable square feet (of which 817,000 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. Such
     construction activities can cause a drop in revenue levels, as existing
     capacity is made unavailable in order to accommodate construction
     activities. During the three years ended December 31, 2002 and the nine
     months ended September 30, 2003, we completed construction on expansion
     projects to these facilities with a total cost of $121.5 million.

(e)  The Developed Facilities includes 76 facilities containing 5,603,000 net
     rentable square feet (of which 840,000 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, 1999 at a total cost of $489.7
     million.

                                       42

<PAGE>


         For the nine months ended  September  30, 2003,  we have  increased the
number of facilities  included in the Consistent  Group pool of facilities  from
1,152 at December 31, 2002 to 1,164  facilities.  The increase in the Consistent
Group's pool of facilities  is due to (i) the  inclusion of 18  facilities  that
were in the Acquired  Facilities  pool at December 31, 2002,  offset by (ii) the
reduction of the four  facilities  in  Knoxville,  Tennessee and the facility in
Perrysburg,  Ohio  that  are  in  discontinued  operations  (see  Note  4 to the
consolidated   financial   statements  for  more   information  on  discontinued
operations),  and (iii) one facility  that was removed  because its net rentable
square feet was being significantly expanded.

         As a result of the change in the  Consistent  Group pool,  the relative
weighting of markets has changed.  Accordingly,  comparisons  should not be made
between  information  presented in 2002 for the  Consistent  Group pool of 1,152
facilities and this current pool of 1,164 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, 2001. This group of facilities
contains  approximately   67,666,000  net  rentable  square  feet,  representing
approximately  82% 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:

<TABLE>
<CAPTION>


CONSISTENT GROUP                                       Three Months Ended September 30,           Nine Months Ended September 30,
----------------                                   ---------------------------------------   ---------------------------------------
                                                                                Percentage                                Percentage
                                                      2003            2002        Change          2003          2002        Change
                                                   -----------    -----------   ----------   -------------   ------------ ----------
                                                              (Dollar amounts in thousands, except rents per square foot)
<S>                                                <C>            <C>                 <C>      <C>           <C>                <C>
Base rental income.........................        $  178,164     $  167,247          6.5%     $  515,689    $  491,918         4.8%
Promotional discounts......................           (11,844)        (4,720)       150.9%        (34,779)      (11,122)      212.7%
                                                   -----------    -----------   ----------   -------------   ------------ ----------
   Adjusted base rental income.............           166,320        162,527          2.3%        480,910       480,796         0.0%
Late charges and administrative fees
collected..................................             6,922          5,649         22.5%         20,049        16,030        25.1%
                                                   -----------    -----------   ----------   -------------   ------------ ----------
   Total rental income.....................           173,242        168,175          3.0%        500,959       496,826         0.8%

Cost of operations:
     Property taxes........................            15,951         15,229          4.7%         47,414        45,181         4.9%
     Direct property payroll...............            14,305         12,744         12.2%         42,977        37,633        14.2%
     Cost of managing facilities...........             5,291          4,620         14.5%         15,303        14,262         7.3%
     Advertising and promotion.............             5,747          4,138         38.9%         15,071        10,956        37.6%
     Utilities.............................             4,136          4,072          1.6%         11,850        11,485         3.2%
     Repairs and maintenance...............             4,462          3,788         17.8%         12,666        10,768        17.6%
     Telephone reservation center..........             2,592          2,509          3.3%          7,232         6,972         3.7%
     Property insurance....................             2,054          1,342         53.1%          5,904         4,293        37.5%
     Other.................................             4,329          3,896         11.1%         12,701        11,266        12.7%
                                                   -----------    -----------   ----------   -------------   ------------ ----------
   Total cost of operations................            58,867         52,338         12.5%        171,118       152,816        12.0%
                                                   -----------    -----------   ----------   -------------   ------------ ----------
Net operating income before depreciation...           114,375        115,837        (1.3)%        329,841       344,010       (4.1)%
Depreciation...............................           (34,841)       (34,619)         0.6%       (106,802)     (106,494)        0.3%
                                                   -----------    -----------   ----------   -------------   ------------ ----------
Operating income...........................        $   79,534     $   81,218        (2.1)%     $  223,039    $  237,516       (6.1)%
                                                   ===========    ===========   ==========   =============   ============ ==========
Gross margin (before depreciation).........            66.0%          68.9%         (4.2)%        65.8%          69.2%       (54.9)%

Weighted average for the period:
   Square foot occupancy (a)...............            91.9%          85.7%           7.2%         88.6%         85.2%          4.0%
   Realized annual rent per occupied
     square foot (b).......................        $   10.70      $   11.21         (4.5)%     $   10.70     $   11.12        (3.8)%
   REVPAR (c)..............................        $    9.83      $    9.61           2.3%     $    9.48     $    9.47          0.1%

 Weighted average at September 30:
   Square foot occupancy...................                                                        91.9%         85.7%          7.2%
   In place annual rent per occupied
      square foot (d)......................                                                    $    11.57    $    11.66       (0.8)%
   Posted annual rent per square foot (e)..                                                    $    11.98    $    11.59         3.4%
Total net rentable square feet (in
thousands).................................                                                        67,666        67,666         0.0%

</TABLE>
                                       43

<PAGE>

(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 ("REVPAR") 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.

         During  the  three  and nine  months  ended  September  30,  2003,  net
operating  income (prior to  depreciation)  for the Consistent  Group facilities
decreased 1.3% and 4.1%, respectively,  as compared to the same periods in 2002.
These decreases are primarily  attributable to increased  promotional  discounts
combined with increased cost of operations.

         During fiscal 2002, we struggled to regain  occupancy  levels that were
below the levels that were  experienced  in the prior year. The reduction in our
occupancy  levels  resulted in a reduction in our rental income that  negatively
impacted  property  net  operating  income  and the  overall  net  income of the
Company.

         At the end of July 2002, the average occupancy level for the Consistent
Group of  facilities  was 85.7% as  compared  to 91.2% at the end of July  2001,
representing a reduction of 6.0%.  Beginning in mid-August  2002 and through the
remainder of 2002, we reinstated a promotional  discount  program and advertised
on television in selected  markets in an effort to enhance move-in  activity and
improve occupancy levels. This program had a positive impact on move-in activity
throughout  the third and fourth  quarters of 2002 and  stabilized our occupancy
levels.  By the end of  December  2002,  the  average  occupancy  level  for the
Consistent  Group of  facilities  was 84.3% as  compared  to 85.3% at the end of
December 2001,  representing a reduction of 1.2% and improvement in the negative
spread from July 2002.

         During  the  first  quarter  of  2003,  we  continued   advertising  on
television  and  offering  promotional  discounts to new  incoming  tenants.  In
addition, we reduced rental rates charged to new incoming tenants in many of our
markets.   These  activities   continued  to  have  a  positive  impact  on  our
occupancies.  At the end of March  2003,  the  average  occupancy  level for the
Consistent  Group of  facilities  was 85.3% as  compared  to 83.4% at the end of
March 2002,  representing  an increase of 2.3%.  Although our average  occupancy
level was now higher than 2002, the level at March 31, 2003 was still well below
levels we had  experienced  in years  prior to 2002.  In order to  maintain  the
positive  occupancy spread over 2002 and to regain to higher levels  experienced
in years prior to 2002, we continued to enhance move-in  activity by advertising
on  television  and  offering  promotional  discounts  to new  incoming  tenants
throughout the third quarter of 2003. At the end of September  2003, the average
occupancy level for the Consistent  Group of facilities was 91.9% as compared to
85.7% at the end of September 2002, representing an increase of 7.2%.

         The  increase  in  occupancy  levels  has come at a  significant  cost.
Television  advertising  expense for the third quarter of 2003 was $2,880,000 as
compared to $1,933,000  in the third  quarter of 2002. In addition,  promotional
discounts  totaled  $11,844,000  for the third  quarter of 2003 as  compared  to
$4,720,000 for the third quarter of 2002.

         Total rental income increased 3.0% for the three months ended September
30, 2003 as compared to the same period in 2002, which is attributable to a 2.3%
increase  in  REVPAR  combined  with  a  22.5%  increase  in  late  charges  and
administrative  fees  collected.  REVPAR  increased  due to a 7.2%  increase  in
average square foot occupancy,  offset partially by a 4.5% reduction in realized
annual rent per occupied  square foot due primarily to increases in  promotional
discounts.

                                       44
<PAGE>


         Total rental income  increased 0.8% for the nine months ended September
30,  2003 as  compared  to the same  period ,  which is  attributable  to a 0.1%
increase  in  REVPAR  combined  with  a  25.1%  increase  in  late  charges  and
administrative  fees  collected.  REVPAR  increased  due to a 4.0%  increase  in
average square foot occupancy,  offset partially by a 3.8% reduction in realized
annual rent per occupied  square foot due primarily to increases in  promotional
discounts.

         Total  operating  expenses  increased  12.5% for the three months ended
September 30, 2003 as compared to the same period in 2002. This increase was due
primarily to increases in payroll, advertising and promotion,  property tax, and
repairs and maintenance  costs.  Direct property payroll  increased 12.2% in the
three months ended September 30, 2003 as compared to the same period in 2002 due
primarily to increased incentives paid to and hours worked by property operating
personnel.  Advertising and promotion  increased 38.9% in the three months ended
September  30, 2003 as compared to the same period in 2002  primarily  due to an
increase in television  advertising  expense from $1,933,000 in the three months
ended September 30, 2002 to $2,880,000 for the same period in 2003.  Repairs and
maintenance  cost have increased  17.8% for the three months ended September 30,
2003,  as compared  to the same  period in 2002,  as a result of costs to remedy
mold issues at several  facilities  in Southern  states  combined with a general
increase in cost that we expect  will  continue at least over the next 12 months
to address deferred maintenance at our facilities.

         Total  operating  expenses  increased  12.0% for the nine months  ended
September 30, 2003 as compared to the same period in 2002. This increase was due
to increases in payroll,  advertising  and promotion,  property tax, and repairs
and maintenance costs.  Direct property payroll increased 14.2% due primarily to
increased  incentives paid to and hours worked by property operating  personnel.
Advertising  and  promotion  increased  37.6%  primarily  due to an  increase in
television  advertising  from  $3,876,000 in the nine months ended September 30,
2002 to $7,102,000  for the same period in 2003.  Repairs and  maintenance  have
increased  17.6% in the nine months ended  September 30, 2003 as compared to the
same period in 2002 due to costs to remedy mold issues in several  facilities in
Southern states,  increased snow removal expenses, as well as a general increase
in costs  that we  expect  will  continue  at least  over the next 12  months to
address deferred maintenance at our facilities.

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

                                       45

<PAGE>

<TABLE>
<CAPTION>

                                            For the 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:
<C>                   <C>                <C>                 <C>                 <C>               <C>
2003............      $   161,133        $   166,584         $  173,242
2002............      $   165,371        $   163,279         $  168,175          $  161,314        $   658,140

Promotional discounts given:
2003............      $     9,970        $    12,965         $   11,844
2002............      $     1,024        $     5,378         $    4,720          $    7,301        $    18,423

Total cost of operations:
2003............      $    54,274        $    58,010         $   58,867
2002............      $    50,062        $    50,416         $   52,338          $   57,711        $   210,527

Television advertising expense:
2003............      $     1,503        $     2,719         $    2,880
2002............      $       540        $     1,403         $    1,933          $    3,912        $     7,788

REVPAR:
2003............      $     9.15         $     9.45         $     9.83
2002............      $     9.47         $     9.34         $     9.61          $     9.19         $     9.40

Weighted  average  realized  annual  rent  per  occupied
square foot for the period:
2003............      $    10.79         $    10.61         $    10.70
2002............      $    11.34         $    10.83         $    11.21          $    10.81         $    11.05

Weighted average occupancy levels for the period:
2003............          84.8%              89.1%               91.9%
2002............          83.5%              86.3%               85.7%               85.0%              85.1%

Weighted average occupancy at October 31,
2003............                                                 91.5%
2002............                                                 85.8%

</TABLE>

         We are pleased with the occupancy  gains that we have achieved thus far
this year. In particular,  we were pleased that we had an increase in tenants in
the third quarter of about 400 customers, a quarter which typically results in a
decline  in  tenants  due  to  seasonal  trends.  For  comparison,  we had a net
reduction  of  tenants  of 9,015 in the third  quarter  of 2002 and 8,998 in the
third quarter of 2001.

         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.  Our current  occupancy
levels  have  been  achieved  in large  part by the  elevated  move-in  activity
experienced over the past two quarters. As a result, during the third quarter of
2003, a total of 162,000 tenants moved out of our consistent group of facilities
as compared to 140,000 tenants for the third quarter of 2002. We expect that our
move-out activity will continue at these higher levels,  putting pressure on our
occupancy levels. Compounding the pressure on our occupancies will be the normal
seasonal increase in move-out activity that we have historically  experienced in
the fourth quarter.

         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
have  not been  able to  demonstrate  that we can  generate  the  high  level of
move-ins  necessary to sustain high  occupancy  levels  without the use of media
and/or promotional discounts.  Accordingly,  we expect to remain aggressive with
promotional  and media programs at least through the fourth quarter of 2003 and,
as a result, the up front costs of these marketing activities, and the increases
in discounts,  are expected to continue to adversely impact our operating income
during at least the remainder of 2003.

         We are working towards a goal of a high level of sustainable occupancy,
characterized  by a less  volatile  tenant base that is not as heavily  weighted
towards recent move-ins,  thereby  mitigating the level of move-outs.  If we can
achieve this goal, it will allow for fewer promotional discounts and a reduction
in advertising  and other customer  acquisition  costs.  In furtherance of these
goals, we are continuously evaluating 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. There can be no assurance that we will achieve our goals.

                                       46
<PAGE>

         Analysis of Regional Trends
         ---------------------------

         The following table sets forth regional trends in our consistent group
of facilities:

<TABLE>
<CAPTION>


CONSISTENT GROUP OPERATING TRENDS BY REGION:

                                                Three months ended September 30,         Nine months ended September 30,
                                             ---------------------------------------  ---------------------------------------
                                                                         Percentage                               Percentage
                                                 2003          2002        Change        2003          2002         Change
                                             ------------   -----------  -----------  -----------    -----------  -----------
                                                                      (Dollar amounts in thousands)
Rental income:
<S>                                            <C>          <C>              <C>       <C>           <C>               <C>
   Southern California  (120 facilities)       $   29,002   $   26,822       8.1%      $  84,293     $   79,270        6.3%
   Northern California  (108 facilities)           19,984       19,346       3.3%         58,585         57,853        1.3%
   Texas  (140 facilities)..........               16,051       15,779       1.7%         46,569         47,152       (1.2)%
   Florida  (108 facilities)........               14,618       13,863       5.4%         42,160         41,300        2.1%
   Illinois  (82 facilities)........               13,134       13,552      (3.1)%        37,934         39,969       (5.1)%
   Georgia  (56 facilities).........                6,158        5,981       3.0%         17,725         17,689        0.2%
   All other states  (550 facilities)              74,295       72,832       2.0%        213,693        213,593        0.0%
                                             ------------   -----------  -----------  -----------    -----------  -----------
Total rental income.................              173,242      168,175       3.0%        500,959        496,826        0.8%
                                             ------------   -----------  -----------  -----------    -----------  -----------
Cost of operations:
   Southern California..............                6,543        6,530       0.2%         19,982         18,116       10.3%
   Northern California..............                5,178        4,882       6.1%         15,462         13,876       11.4%
   Texas............................                7,519        6,510      15.5%         20,981         18,604       12.8%
   Florida..........................                5,883        4,966      18.5%         16,679         14,200       17.5%
   Illinois.........................                5,288        4,778      10.7%         16,302         15,135        7.7%
   Georgia..........................                2,180        1,876      16.2%          6,455          5,536       16.6%
   All other states.................               26,276       22,796      15.3%         75,257         67,349       11.7%
                                             ------------   -----------  -----------  -----------    -----------  -----------
Total cost of operations............               58,867       52,338      12.5%        171,118        152,816       12.0%
                                             ------------   -----------  -----------  -----------    -----------  -----------

Net operating income (before depreciation):
   Southern California..............               22,459       20,292      10.7%         64,311         61,154        5.2%
   Northern California..............               14,806       14,464       2.4%         43,123         43,977       (1.9)%
   Texas............................                8,532        9,269      (8.0)%        25,588         28,548      (10.4)%
   Florida..........................                8,735        8,897      (1.8)%        25,481         27,100       (6.0)%
   Illinois.........................                7,846        8,774     (10.6)%        21,632         24,834      (12.9)%
   Georgia..........................                3,978        4,105      (3.1)%        11,270         12,153       (7.3)%
   All other states.................               48,019       50,036      (4.0)%       138,436        146,244       (5.3)%
                                             ------------   -----------  -----------  -----------    -----------  -----------
Total net operating income..........           $  114,375   $  115,837      (1.3)%     $ 329,841     $  344,010       (4.1)%
                                             ------------   -----------  -----------  -----------    -----------  -----------
Weighted average occupancy:
   Southern California..............              91.9%        86.6%         6.1%        90.3%         86.7%           4.2%
   Northern California..............              90.7%        84.7%         7.1%        88.7%         85.1%           4.2%
   Texas............................              92.2%        84.5%         9.1%        88.8%         84.6%           5.0%
   Florida..........................              92.5%        85.1%         8.7%        89.9%         85.2%           5.5%
   Illinois.........................              92.0%        85.5%         7.6%        87.5%         84.3%           3.8%
   Georgia..........................              92.6%        85.2%         8.7%        89.7%         84.2%           6.5%
   All other states.................              92.0%        86.5%         6.4%        88.0%         85.5%           2.9%
                                             ------------   -----------  -----------  -----------    -----------  -----------
Total weighted average occupancy....              91.9%        85.7%         7.2%        88.6%         85.2%           4.0%
                                             ------------   -----------  -----------  -----------    -----------  -----------

</TABLE>
                                       47

<PAGE>

<TABLE>
<CAPTION>

CONSISTENT GROUP OPERATING TRENDS BY REGION: (Continued)

                                                Three months ended September 30,         Nine months ended September 30,
                                             ---------------------------------------  ---------------------------------------
                                                                         Percentage                               Percentage
                                                 2003          2002        Change        2003          2002         Change
                                             ------------   -----------  -----------  -----------    -----------  -----------
                                                                      (Dollar amounts in thousands)
REVPAR:
<S>                                                <C>          <C>         <C>           <C>           <C>           <C>
   Southern California..............               $14.93       $13.83      8.0%          $14.45        $13.66        5.8%
   Northern California..............                13.20        12.81      3.0%           12.89         12.79        0.8%
   Texas............................                 7.13         7.05      1.1%            6.89          7.02       (1.9)%
   Florida..........................                 9.01         8.59      4.9%            8.63          8.53        1.2%
   Illinois.........................                10.20        10.64     (4.1)%           9.85         10.46       (5.8)%
   Georgia..........................                 7.26         7.19      1.0%            6.95          7.11       (2.3)%
   All other states.................                 9.08         8.98      1.1%            8.72          8.79       (0.8)%
                                             ------------   -----------  -----------  -----------    -----------  -----------
Total REVPAR:.......................                $9.83        $9.61      2.3%           $9.48         $9.47        0.1%
                                             ------------   -----------  -----------  -----------    -----------  -----------
Realized annual rent per occupied square foot:
   Southern California..............               $16.24       $15.96      1.8%          $16.00        $15.75       1.6%
   Northern California..............                14.56        15.13     (3.8)%          14.53         15.03      (3.3)%
   Texas............................                 7.73         8.34     (7.3)%           7.76          8.30      (6.5)%
   Florida..........................                 9.74        10.10     (3.6)%           9.60         10.01      (4.1)%
   Illinois.........................                11.09        12.44    (10.9)%          11.26         12.41      (9.3)%
   Georgia..........................                 7.84         8.44     (7.1)%           7.74          8.44      (8.3)%
   All other states.................                 9.87        10.38     (4.9)%           9.91         10.29      (3.7)%
                                             ------------   -----------  -----------  -----------    -----------  -----------
Total realized annual rent per occupied
  square foot:......................               $10.70       $11.21     (4.5)%         $10.70        $11.12      (3.8)%
                                             ------------   -----------  -----------  -----------    -----------  -----------
</TABLE>


         Self-Storage Operations - Acquired Facilities

         The "Acquired  Facilities,"  at September 30, 2003, are comprised of 95
self-storage  facilities containing 5,642,000 net rentable square feet that were
acquired in 2000,  2001,  and 2002.  These  facilities  were  substantially  all
mature,  stabilized  facilities at the time of their acquisition.  The following
table summarizes operating data with respect to these 95 facilities:


                                       48

<PAGE>

<TABLE>
<CAPTION>

ACQUIRED FACILITIES
-------------------
                                                      Three Months Ended September 30,       Nine Months Ended September 30,
                                                    -------------------------------------  ------------------------------------
                                                       2003          2002        Change       2003         2002        Change
                                                    ------------ ------------   ---------  -----------  ----------  -----------
                                                                           (Dollar amounts in thousands)
Rental income (a):
<S>                                                  <C>          <C>           <C>         <C>          <C>         <C>
   Self-storage facilities acquired in 2002 (a)      $   15,615   $   14,246    $  1,369    $  44,776   $  39,356    $  5,420
   Self-storage facility acquired in 2001 (b)..             149          121          28          418         322          96
   Self-storage facilities acquired in 2000 (c)           1,241        1,053         188        3,417       3,071         346
                                                    ------------ ------------   ---------  -----------  ----------  -----------
     Total rental income.......................          17,005       15,420       1,585       48,611      42,749       5,862
                                                    ------------ ------------   ---------  -----------  ----------  -----------
Cost of operations:
   Self-storage facilities acquired in 2002 (a)           4,866        4,118         748       13,938      11,085       2,853
   Self-storage facility acquired in 2001 (b)..              47           39           8          130         118          12
   Self-storage facilities acquired in 2000 (c)             609          484         125        1,658       1,362         296
                                                    ------------ ------------   ---------  -----------  ----------  -----------
     Total cost of operations..................           5,522        4,641         881       15,726      12,565       3,161
                                                    ------------ ------------   ---------  -----------  ----------  -----------
Net operating income before depreciation:
----------------------------------------
   Self-storage facilities acquired in 2002 (a)          10,749       10,128         621       30,838      28,271       2,567
   Self-storage facility acquired in 2001 (b)..             102           82          20          288         204          84
   Self-storage facilities acquired in 2000 (c)             632          569          63        1,759       1,709          50
                                                    ------------ ------------   ---------  -----------  ----------  -----------
     Net operating income......................          11,483       10,779         704       32,885      30,184       2,701
 Depreciation..................................          (3,549)      (3,252)       (297)      (9,004)     (8,401)       (603)
                                                    ------------ ------------   ---------  -----------  ----------  -----------
   Operating Income............................      $    7,934   $    7,527    $    407    $  23,881   $  21,783    $  2,098
                                                    ============ ============   =========  ===========  ==========  ===========
Weighted average square foot occupancy during the
period:
   Self-storage facilities acquired in 2002 (a)           92.6%        86.2%         7.4%       89.4%       85.0%        5.2%
   Self-storage facility acquired in 2001 (b)..           96.7%        74.1%        30.5%       91.4%       62.0%       47.4%
   Self-storage facilities acquired in 2000 (c)           91.3%        70.9%        28.8%       82.6%       67.7%       22.0%
                                                    ------------ ------------   ---------- -----------  ----------  -----------
                                                          92.5%        84.6%         9.3%       88.8%       83.0%        7.0%
                                                    ============ ============   ========== ===========  ==========  ===========
Number of self-storage facilities (at end of
period)........................................             95           95            -          95          95           -
Net rentable square feet (in thousands, at end of
   period).....................................          5,642        5,642            -       5,642       5,642           -
Cumulative acquisition cost (at end of period).      $ 405,684    $ 405,684     $      -    $405,684    $405,684     $     -

</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,  31 properties acquired on January 1, 2002 in connection with
     business  combinations with two affiliated  partnerships at a total cost of
     $60,528,000,  and nine  facilities  acquired  from third parties at a total
     cost of $30,117,000.

(b)  The  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.

         Rental income and cost of operations for the Acquired  Facilities  have
increased significantly in the three and nine months ended September 30, 2003 as
compared to the same periods in 2002,  due primarily to the  acquisition  of new
facilities in 2002.

         Similar to our Consistent Group of facilities,  the Acquired Facilities
have  experienced  operating  difficulties  over the past  year.  Marketing  and
promotional strategies, as described above with respect to our Consistent Group,
were employed in 2003 to enhance the  occupancy  levels and rental income of the
Acquired Facilities.

         Self-Storage Operations - Expansion Facilities

         Since  January 1, 2000,  we  expanded  35  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 operating
results  are not  comparable.  At  September  30,  2003,  the  weighted  average
occupancy level was approximately  86% as compared to 70% one year earlier.  The
operating  results  for  these  facilities  are  presented  in the  Self-Storage
Operations table above under the caption, "Expansion Facilities."

                                       49
<PAGE>


         Depreciation  expense  with  respect to the  expansion  facilities  was
$1,626,000  and  $4,667,000  for the three and nine months ended  September  30,
2003, respectively, as compared to $1,566,000 and $4,616,000,  respectively, for
the same periods in 2002. These 35 facilities  contain  approximately  3,805,000
net  rentable  square feet at  September  30, 2003 (which  includes the expanded
space, and 817,000 square feet of industrial  space developed for  containerized
storage activities - see "Containerized Storage" and "Discontinued Operations").
The  aggregate   construction   costs  to  complete  these  expansions   totaled
approximately $121,510,000.

         A portion of the 817,000 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, 1999, we have opened 59 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 5,603,000 net rentable square
feet (of which 840,000 net rentable  square feet is industrial  space  initially
developed for containerized storage activities - see "Containerized Storage" and
"Discontinued  Operations").  Aggregate development cost for these 76 facilities
was  approximately  $489,690,000.  The  operating  results  of the  self-storage
facilities  and  Combination   Facilities  are  reflected  in  the  Self-Storage
Operations table under the caption, "Developed Facilities."

                                       50

<PAGE>


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

<TABLE>
<CAPTION>

DEVELOPED FACILITIES
--------------------
                                              Three Months Ended September 30,       Nine Months Ended September 30,
                                           -------------------------------------   -----------------------------------
                                              2003          2002        Change        2003        2002        Change
                                           -----------  ------------  ----------   ----------- -----------  ----------
                                                                  (Dollar amounts in thousands)
Rental income:
<S>                                         <C>          <C>           <C>          <C>         <C>          <C>
   Self-storage facilities............      $   7,990    $   5,087     $  2,903     $  20,261   $  13,106    $  7,155
   Combination Facilities.............          2,941        1,876        1,065         7,572       4,738       2,834
                                           -----------  ------------  ----------   ----------- -----------  ----------
     Total rental income..............         10,931        6,963        3,968        27,833      17,844       9,989
                                           -----------  ------------  ----------   ----------- -----------  ----------
Cost of operations:
   Self-storage facilities............          3,650        2,439        1,211         9,972       6,501       3,471
   Combination Facilities.............          1,023        1,281         (258)        3,595       3,414         181
                                           -----------  ------------  ----------   ----------- -----------  ----------
     Total cost of operations.........          4,673        3,720          953        13,567       9,915       3,652
                                           -----------  ------------  ----------   ----------- -----------  ----------
Net operating income before depreciation:
----------------------------------------
   Self-storage facilities............          4,340        2,648        1,692        10,289       6,605       3,684
   Combination Facilities.............          1,918          595        1,323         3,977       1,324       2,653
                                           -----------  ------------  ----------   ----------- -----------  ----------
     Net operating income.............          6,258        3,243        3,015        14,266       7,929       6,337
 Depreciation.........................         (3,557)      (3,371)        (186)       (9,859)     (7,723)     (2,136)
                                           -----------  ------------  ----------   ----------- -----------  ----------
   Operating Income...................      $   2,701    $    (128)    $  2,829     $   4,407   $     206    $  4,201
                                           ===========  ============  ==========   =========== ===========  ==========
Weighted average square foot occupancies
for the period:
   Self-storage facilities............         79.3%        57.5%         37.9%        69.1%       55.8%        23.8%
   Combination Facilities.............         86.7%        54.3%         59.7%        75.4%       47.3%        59.4%
                                           -----------  ------------  ----------   ----------- -----------  ----------
     Total............................         85.4%        56.7%         50.6%        74.0%       53.5%        38.3%
                                           ===========  ============  ==========   =========== ===========  ==========
Self-storage facilities, at end of
   period:
   Number of facilities...............                                                     59          47          12
   Net rentable square feet...........                                                  3,742       2,951         791
   Total development cost.............                                              $ 334,104   $ 255,194    $ 78,910
Combination Facilities, at end of period:
   Number of facilities...............                                                     17          17           -
   Net rentable square feet (a).......                                                  1,861       1,844          17
   Total development cost (a).........                                              $ 155,586   $ 154,177    $  1,409

</TABLE>


(a)  During the second quarter of 2003, we completed the conversion of a
     facility used in our containerized storage operations to a self-storage
     facility, at an aggregate cost of $1,409,000. As a result of this
     conversion a total of 38,000 net rentable square feet of industrial space
     was converted into 55,000 net rentable square feet of traditional
     self-storage space.

         The  following  table  summarizes  operating  data  for  the  59  newly
developed self-storage facilities that opened since January 1, 1999:

                                       51

<PAGE>

<TABLE>
<CAPTION>

DEVELOPED SELF-STORAGE FACILITIES
---------------------------------
                                                      Three Months Ended September 30,       Nine Months Ended September 30,
                                                    --------------------------------------  -----------------------------------
                                                       2003          2002        Change       2003         2002       Change
                                                    ------------ ------------  -----------  -----------  ------------ ---------
                                                                           (Dollar Amounts in thousands)
Rental income:
--------------
<S>                                                  <C>          <C>           <C>         <C>          <C>          <C>
   Self-storage facilities opened in 2003......      $      533   $        -    $     533   $     726    $      -     $    726
   Self-storage facilities opened in 2002......           1,960          475        1,485       4,611          620       3,991
   Self-storage facilities opened in 2001......           1,822        1,256          566       4,618        3,252       1,366
   Self-storage facilities opened in 2000 and 1999        3,675        3,356          319      10,306        9,234       1,072
                                                    ------------ ------------  -----------  -----------  ------------ ---------
     Total rental income.......................           7,990        5,087        2,903      20,261       13,106       7,155
                                                    ------------ ------------  -----------  -----------  ------------ ---------
Cost of operations:
-------------------
   Self-storage facilities opened in 2003......             364            -          364         674            -         674
   Self-storage facilities opened in 2002......             966          465          501       2,642          748       1,894
   Self-storage facilities opened in 2001......             962          759          203       2,676        2,139         537
   Self-storage facilities opened in 2000 and 1999        1,358        1,215          143       3,980        3,614         366
                                                    ------------ ------------  -----------  -----------  ------------ ---------
     Total cost of operations..................           3,650        2,439        1,211       9,972        6,501       3,471
                                                    ------------ ------------  -----------  -----------  ------------ ---------
Net operating income before depreciation:
-----------------------------------------
   Self-storage facilities opened in 2003......             169            -          169          52            -          52
   Self-storage facilities opened in 2002......             994           10          984       1,969         (128)      2,097
   Self-storage facilities opened in 2001......             860          497          363       1,942        1,113         829
   Self-storage facilities opened in 2000 and 1999        2,317        2,141          176       6,326        5,620         706
                                                    ------------ ------------  -----------  -----------  ------------ ---------
   Net operating income........................           4,340        2,648        1,692      10,289        6,605       3,684
 Depreciation..................................          (2,447)      (2,206)        (241)     (6,549)      (4,761)     (1,788)
                                                    ------------ ------------  -----------  -----------  ------------ ---------
   Operating income............................      $    1,893   $      442    $   1,451   $   3,740    $   1,844    $  1,896
                                                    ============ ============  ===========  ===========  ============ =========
Weighted average square foot occupancy during the
-------------------------------------------------
period:
-------
   Self-storage facilities opened in 2003......           44.9%          -            -         31.1%         -           -
   Self-storage facilities opened in 2002......           72.6%        22.9%        46.8%       55.7%       17.3%       45.1%
   Self-storage facilities opened in 2001......           84.6%        47.0%        80.0%       68.5%       41.7%       64.3%
   Self-storage facilities opened in 2000 and 1999        93.5%        82.2%        13.7%       88.4%       76.9%       15.0%
                                                    ------------ ------------  ----------  -----------  ------------ ---------
                                                          79.3%        57.5%        37.9%       69.1%       55.8%       23.8%
                                                    ------------ ------------  ----------  -----------  ------------ ---------
Number of facilities:
---------------------
   Self-storage facilities opened in 2003......                                                   8            -           8
   Self-storage facilities opened in 2002......                                                  16           12           4
   Self-storage facilities opened in 2001......                                                  12           12           -
   Self-storage facilities opened in 2000 and 1999                                               23           23           -
                                                                                           -----------  ------------ ---------
                                                                                                 59           47          12
                                                                                           ===========  ============ =========
Cumulative Development Cost:
----------------------------
   Self-storage facilities opened in 2003......                                             $   65,796   $       -   $  65,796
   Self-storage facilities opened in 2002......                                                 93,413       80,299     13,114
   Self-storage facilities opened in 2001......                                                 66,905       66,905          -
   Self-storage facilities opened in 2000 and 1999                                             107,990      107,990          -
                                                                                           -----------  ------------ ---------
                                                                                            $  334,104   $ 255,194   $  78,910
                                                                                           ===========  ============ =========

</TABLE>

                                       52

<PAGE>

         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. Historically, we estimated that on
average it took  approximately 24 months for a newly developed  facility to fill
up and reach a targeted  occupancy level of  approximately  90%. We believe that
the current  economic  environment  has  extended the fill-up  period  beyond 24
months notwithstanding our marketing efforts to enhance the fill-up process.

         Similar to our  Consistent  Group of  facilities,  the newly  developed
self-storage  facilities participated in promotional discounting and advertising
activities to enhance occupancy levels.  During the three months ended September
30, 2003, the newly  developed  self-storage  facilities had a weighted  average
occupancy level of approximately 79.3%.

         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 reach an
occupancy level of approximately 30% to 34%.  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  $24,009,000  and
$22,549,000, in the nine months ended September 30, 2003 and 2002, respectively,
as a result of the  difference  between the revenues  generated by the Developed
Facilities and the operating  expenses,  depreciation,  and cost of capital with
respect  to  these  facilities  as  described   above.   These  amounts  include
approximately $9,859,000 and $7,723,000,  in the nine months ended September 30,
2003 and 2002, 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,  however, to
a much lesser degree than  experienced  in 2002.  We have a current  development
pipeline of 44 projects,  including  new  developments,  expansions  to existing
self-storage  facilities and remodeling projects primarily to improve the visual
appeal of  certain  properties,  with  total  estimated  costs of  $167,300,000.
Following  completion  of  our  development  pipeline,  we  expect  our  ongoing
development  expenditures to approximate $75,000,000 per year. We expect to open
10 newly developed storage  facilities in the fourth quarter of 2003, at a total
cost of proximately  $82.2 million.  Our earnings will continue to be negatively
impacted by these 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 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 992,000 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 195,000 net rentable
square feet. In addition, we own an industrial building with 67,000 net rentable
square feet that was opened in 2001.  This facility was  previously  used by the
containerized  storage  operations,  and  is  now  classified  as  "real  estate
facilities held for sale" on our September 30, 2003 balance sheet.

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

                                       53
<PAGE>

<TABLE>
<CAPTION>

Commercial Property Operations
------------------------------
(excluding discontinued operations):
------------------------------------
                                              Three Months Ended September 30,       Nine Months Ended September 30,
                                           -------------------------------------   -----------------------------------
                                              2003          2002        Change        2003        2002        Change
                                           -----------   ----------   ----------   -----------  ----------  ----------

<S>                                         <C>          <C>           <C>          <C>         <C>          <C>
Rental income                               $   2,812    $   2,894     $    (82)    $   8,601   $   8,917    $   (316)
 Cost of operations...................         (1,253)      (1,074)         179        (3,491)     (3,272)       (219)
                                           -----------   ----------   ----------   -----------  ----------  ----------
   Net operating income...............          1,559        1,820         (261)        5,110       5,645        (535)

 Depreciation.........................           (590)        (622)          32        (1,889)     (1,991)        102
                                           -----------   ----------   ----------   -----------  ----------  ----------
   Operating income...................      $     969    $   1,198     $   (229)     $  3,221   $   3,654    $   (433)
                                           ===========   ==========   ==========   ===========  ==========  ==========
</TABLE>

         The decrease in rental  income for the nine months ended  September 30,
2003 as compared to the same period in 2002 is due primarily to a vacancy in one
of the three  stand-alone  commercial  facilities,  which  caused a reduction in
rental income of approximately $217,000.

         During 2002, we sold one of our commercial  facilities to a third party
for an aggregate $3.9 million in cash. The historical operations with respect to
this  facility  are  classified  as  "Discontinued  Operations"  in  our  income
statement and are not included in the above table.

         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 September 30, 2003, PSPUD operated 27
facilities  in 11 states,  which are  located in major  markets in which we have
significant  market  presence  with  respect  to  our  traditional  self-storage
facilities.  During 2002, we reevaluated our operational  strategy and closed 22
of the 55 containerized storage facilities that were open at January 1, 2002. As
of September 30, 2003, all of the 22 facilities  have been closed.  In addition,
during  2003,  we  decided  to close an  additional  six  containerized  storage
facilities.   These  28  facilities  are  herein  referred  to  as  the  "Closed
Facilities."  As of September  30, 2003 five of the Closed  Facilities  remained
open, but are expected to close by January 31, 2004. 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.   PSPUD's   operations,   which  exclude  the  Closed
Facilities, are reflected on the table below:

<TABLE>
<CAPTION>

Containerized Storage
(excluding discontinued operations)
                                              For the three months ended           For the nine months ended
                                                     September 30,                       September 30,
                                         -------------------------------------- --------------------------------
                                            2003           2002       Change      2003        2002      Change
                                         ------------   ----------  ----------- ---------  ---------- ----------
                                                                  (Amounts in thousands)
<S>                                          <C>           <C>         <C>       <C>         <C>         <C>
Rental and other income ............         $10,355       $8,935      $1,420    $27,713     $23,351     $4,362
                                         ------------   ----------  ----------- ---------  ---------- ----------
Cost of operations:
    Direct operating costs..........           5,834        6,644        (810)    16,093      15,633        460
    Facility lease expense..........             363          399         (36)     1,108       1,123        (15)
                                         ------------   ----------  ----------- ---------  ---------- ----------
       Total cost of operations.....           6,197        7,043        (846)    17,201      16,756        445
                                         ------------   ----------  ----------- ---------  ---------- ----------
    Operating income prior to
      depreciation..................           4,158        1,892       2,266     10,512       6,595      3,917
Depreciation expense (a)............          (1,838)      (1,262)       (576)    (5,436)     (3,961)    (1,475)
                                         ------------   ----------  ----------- ---------  ---------- ----------
Operating income....................         $ 2,320       $  630      $1,690    $ 5,076     $ 2,634     $2,442
                                         ============   ==========  =========== =========  ========== ==========

</TABLE>

(a)  Depreciation expense principally relates to the depreciation related to the
     containers;  however,  depreciation  expense  for the three and nine months
     ended September 30, 2003 includes  $573,000 and  $1,427,000,  respectively,
     with respect to real estate facilities.  Depreciation expense for the three
     and nine months ended  September 30, 2002  includes  $375,000 and $930,000,
     respectively, with  respect to real estate facilities.

                                       54
<PAGE>


         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.  Rental  income  increased to  $6,998,000  and
$19,798,000   for  the  three  and  nine  months  ended   September   30,  2003,
respectively,  from  $6,177,000  and  $17,023,000,  respectively,  for the  same
periods  in 2002  primarily  as a result of higher  per  container  rents and an
increase in the number of occupied containers,  which is attributable  partially
to the effect of certain closures of facilities that represented  consolidations
of  facilities  in  existing   markets.   At  September  30,  2003,  there  were
approximately 41,747 occupied containers in the 27 facilities that are reflected
in these "ongoing" operations.

         Direct operating costs principally  includes  payroll,  equipment lease
expense, utilities and vehicle expenses (fuel and insurance).

         Depreciation  expense with respect to the containers and other non-real
estate assets of the containerized storage operations increased $978,000 for the
nine months ended  September 30, 2003 as compared to the same period in 2002 due
primarily to reduced  estimated  useful lives of the containers and other assets
of the containerized  storage operations.  We reevaluated the historical results
with respect to wear and functional obsolescence of these assets. Based upon the
results of this review,  we decreased the estimated useful lives with respect to
these assets effective January 1, 2003.

         At September 30, 2003, five of the 27 containerized  storage facilities
are leased from third  parties.  The  remaining 22  facilities  were operated in
facilities owned by the Company,  comprised of 17 Combination Facilities with an
aggregate of 894,000  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."

<TABLE>
<CAPTION>

TENANT REINSURANCE OPERATIONS
                                              Three Months Ended September 30,       Nine Months Ended September 30,
                                            ------------------------------------   -----------------------------------
                                              2003          2002        Change        2003        2002        Change
                                            ----------   ----------    ---------   -----------  ----------   ---------
                                                                     (Amounts in thousands)

<S>                                         <C>          <C>           <C>          <C>         <C>          <C>
Tenant reinsurance revenues...........      $   5,755    $   5,112     $    643     $  16,551   $  14,843    $  1,708
 Cost of operations...................         (2,917)      (2,387)        (530)       (8,631)     (7,203)     (1,428)
                                            ----------   ----------    ---------   -----------  ----------   ---------
   Operating income...................      $   2,838    $   2,725     $    113     $   7,920   $   7,640    $    280
                                            ==========   ==========    =========   ===========  ==========   =========
</TABLE>


         The level of tenant reinsurance  revenues is largely dependent upon our
occupancy level and move-in activity.  At September 30, 2003,  approximately 38%
of our tenant base has such policies.  New insurance business comes from tenants
who sign up for insurance as they move into our self-storage facilities.

         Cost of operations for the tenant reinsurance  operations has increased
in the three and nine months  ended  September  30, 2003 as compared to the same
periods in 2002, due primarily to increased  customer  claims  attributable to a
larger tenant base as well as an increase in claims.

                                       55

<PAGE>

         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  September  30, 2003 (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, and account for such investments using the equity method.

         Equity  in  earnings  of real  estate  entities  for the three and nine
months ended  September  30, 2003 and 2002 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:

<TABLE>
<CAPTION>

                                                    For the three months ended               For the nine months ended
                                                          September 30,                            September 30,
                                                ----------------------------------     --------------------------------------
                                                  2003         2002        Change         2003          2002         Change
                                                ---------    ---------    --------     ----------    ----------    ----------
                                                                         (Amounts in thousands)
Property operations:
<S>                                             <C>           <C>           <C>         <C>           <C>             <C>
  PSB                                           $16,148       $16,394       $(246)      $48,339       $49,050         $(711)
  Disposed investments (1)...............             -             8          (8)           10           312          (302)
  Other investments (2)..................         1,607         1,592          15         4,714         4,769           (55)
                                                ---------    ---------    --------     ----------    ----------    ----------
                                                 17,755        17,994        (239)       53,063        54,131        (1,068)
                                                ---------    ---------    --------     ----------    ----------    ----------
Depreciation:
  PSB....................................        (6,779)       (6,412)       (367)      (19,088)      (18,759)         (329)
  Disposed investments (1)...............             -             -           -             -           (65)           65
  Other investments (2)..................          (436)         (409)        (27)       (1,265)         (893)         (372)
                                                ---------    ---------    --------     ----------    ----------    ----------
                                                 (7,215)       (6,821)       (394)      (20,353)      (19,717)         (636)
                                                ---------    ---------    --------     ----------    ----------    ----------
Other: (3)
  PSB (4)................................        (4,810)       (4,082)       (728)      (13,534)      (11,291)       (2,243)
  Disposed investments (1)...............             -             -           -             -             -             -
  Other investments (2)..................            40           392        (352)          280           616          (336)
                                                ---------    ---------    --------     ----------    ----------    ----------
                                                 (4,770)       (3,690)     (1,080)      (13,254)      (10,675)       (2,579)
                                                ---------    ---------    --------     ----------    ----------    ----------
Total equity in earnings of real estate
entities..................................       $5,770        $7,483     $(1,713)      $19,456       $23,739       $(4,283)
                                                =========    =========    ========     ==========    ==========    ==========

</TABLE>


(1)  Amounts  include  our pro-rata share of the  earnings  for the  Development
     Joint Venture.  On January 16, 2002, we acquired a controlling  interest in
     this   partnership   and  began  to  consolidate  the  operations  of  this
     partnership,  and no longer  account for our  interest in this  partnership
     using  the  equity  method  (see  Note  3  to  the  consolidated  financial
     statements). Amounts also include income with respect to an investment that
     was disposed of in the second quarter of 2003.

(2)  Amounts include equity in earnings recorded for investments that have been
     held consistently throughout each of the three and nine months ended
     September 30, 2003 and 2002.

(3)  "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.

(4)  "Other" with respect to PSB also includes our pro-rata share of gains on
     sale of real estate assets and impairment charges relating to impending
     sales of real estate. Our net pro-rata share of these items totaled income
     of $483,000 and $2,724,000 for the three and nine months ended September
     30, 2002, respectively, and $453,000 for the nine months ended September
     30, 2003 (none for the three months ended September 30, 2003).

         The  decrease in equity in earnings  of real  estate  entities  for the
three months ended  September 30, 2003 as compared to 2002 is primarily due to a
reduction in our  pro-rata  share of PSB's  earnings.  PSB's  earnings  declined
primarily due to gains recorded in the three months ended September 30, 2002, of
which our pro rata share was  $483,000,  as compared to no such gain recorded in
the three months ended  September 30, 2003,  representing a reduction in our net
income of $483,000.

                                       56
<PAGE>


         The decrease in equity in earnings of real estate entities for the nine
months  ended  September  30,  2003 as  compared  to the same  period in 2002 is
primarily  due to a reduction in our pro-rata  share of PSB's  earnings,  caused
primarily  by the net  impact of a gain on sale  offset  by an asset  impairment
charge with respect to impending  real estate sales  recorded by PSB in the nine
months ended  September  30, 2003, as compared to a gain on sale recorded by PSB
in the nine months  ended  September  30, 2002.  Our net pro-rata  share of such
items recorded by PSB for the nine months ended  September 30, 2003 was $453,000
as compared to $2,724,000 in the same period in 2002,  representing  a reduction
in our net income of $2,271,000.

         Equity in earnings of PSB  represents our pro-rata share (an average of
approximately  44% for the three and nine months  ended  September  30, 2003 and
2002) of the  earnings of PSB. As of  September  30,  2003,  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 September 30,
2003, PSB owned and operated 14.8 million net rentable square feet of commercial
space  located in nine states.  PSB also  manages  approximately  1,222,000  net
rentable square feet of commercial space owned by the Company,  the Consolidated
Entities,  and the  Unconsolidated  Entities at September  30, 2003  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.

         On January 16, 2002, we acquired the  remaining 70% ownership  interest
in the Development Joint Venture for cash totaling  approximately  $153,078,000.
As a result,  we began  consolidating  the operating  results of the Development
Joint Venture and no further equity in earnings will be recorded with respect to
this entity for periods  after  January 16, 2002.  Our earnings  with respect to
this  entity  is  included  in  the  table  above  in  the  line-item  "Disposed
Investments."

         The "Other Investments" includes our equity in earnings with respect to
our pro-rata share of earnings with respect to seven limited  partnerships,  for
which we held an  approximately  consistent level of equity interest during each
of the nine months ended September 30, 2003 and 2002. 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
(2,186,000  net rentable  square feet) 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 6 to
the  consolidated  financial  statements  for the  operating  results  of  these
entities for the nine months ended September 30, 2003 and 2002.

Other Income and Expense Items
------------------------------

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

         Interest and other income has  increased to $2,847,000  and  $7,425,000
for the three and nine months  ended  September  30,  2003,  respectively,  from
$2,538,000  and  $7,005,000,  respectively,  for the same periods in 2002.  This
increase reflects improved operating results on our merchandise and truck rental
operations,  offset  partially by reduced  interest on notes  receivable  due to
principal payments and a reduction in average interest rates on outstanding cash
balances.  In  addition,  interest  and other  income for the nine months  ended
September  30, 2003  reflects a reduction  from the same period in 2002 due to a
reduction in property  management  operations  due to the  consolidation  of the
Development Joint Venture, as described in Note 3 to the consolidated  financial
statements.

                                       57
<PAGE>


         DEPRECIATION AND  AMORTIZATION:  Depreciation and amortization  expense
was $46,041,000 and  $137,657,000  for the three and nine months ended September
30,  2003,   respectively,   as  compared  to  $44,732,000   and   $133,186,000,
respectively  for the  same  periods  in  2002.  Depreciation  and  amortization
included in discontinued  operations amounted to $432,000 and $1,292,000 for the
three and nine months  ended  September  30,  2003 as  compared to $819,000  and
$2,414,000 for the same periods in 2002.

         Included  in  depreciation   expense  and  in  depreciation  expense  -
discontinued   operations  with  respect  to  our  real  estate  facilities  was
$42,534,000 and  $127,105,000  for the three and nine months ended September 30,
2003,  respectively,  as compared to $41,851,000 and  $125,371,000  for the same
periods in 2002, respectively.  The increase in such depreciation is principally
the result of property  acquisitions and newly developed  facilities  opened for
operation. Included in depreciation and amortization expense and in depreciation
expense - discontinued  operations for the three and nine months ended September
30, 2003 is $2,288,000 and $6,891,000,  respectively,  as compared to $2,049,000
and $5,276,000 for the same periods in 2002, respectively, with respect to other
assets, principally depreciation of equipment and containers associated with the
containerized   storage   operations,   which  has  increased  as  discussed  in
Containerized   Storage   Operations   above.   Included  in  depreciation   and
amortization  expense  for  each of the  three  and  nine  month  periods  ended
September 30, 2003 and 2002 is $1,651,000  and  $4,953,000,  respectively,  with
respect to the amortization of property management contracts.

         GENERAL AND ADMINISTRATIVE:  General and administrative expense for the
three months ended  September 30, 2003 increased 17.0% to $4,642,000 as compared
to $3,968,000 for the same period in 2002.  General and  administrative  expense
for the nine months ended  September 30, 2003  increased  8.5% to $13,321,000 as
compared to $12,273,000 for the same period in 2002.  General and administrative
expense principally consists of state income taxes,  investor relation expenses,
certain overhead  associated with the acquisition and development of real estate
facilities,  corporate payroll,  and overhead  associated with the containerized
storage  business.  The increase in general and  administrative  expense for the
three and nine-month  periods is due primarily to the impact of stock option and
restricted stock expense, as described below.

         Beginning  January 1, 2002, we began to expense the fair value of stock
options in accordance with Statement of Financial  Accounting Standards No. 123,
"Accounting  for  Stock-Based  Compensation"  ("SFAS 123"). As indicated by SFAS
123, the estimated fair value of stock options issued after January 1, 2002 will
be expensed over their  vesting  period.  The total of such expense  included in
general and  administrative  expense was approximately  $95,000 and $294,000 for
the three and nine months ended  September 30, 2003,  respectively  ($39,000 and
$97,000 for the three and nine months ended  September 30, 2002,  respectively).
Based upon stock options granted between January 1, 2002 and September 30, 2003,
the  total  expected  annual  expense  for 2003 is  approximately  $400,000.  In
addition,  pro-forma  disclosures of the impact of stock options issued prior to
January 1, 2002 (which are not expensed per the  transition  provisions  of SFAS
123) are  presented in Note 12 to the  consolidated  financial  statements.  The
impact of stock option  expense  will  continue to increase in the future to the
extent that additional stock options are granted.

         In addition,  in the three months ended September 30, 2003, the Company
granted 197,000  restricted stock units,  and recognized  $371,000 in restricted
stock unit  compensation  expense  during the three months ended  September  30,
2003.  Based upon the price of the  Company's  common stock at the date of grant
($37.74),   the  Company   expects   restricted   stock  expense  to  amount  to
approximately  $371,000 per quarter  throughout the remaining  vesting period of
this grant (five years).  To the extent that additional  restricted  stock units
are granted, restricted stock unit compensation expense may increase. Changes in
the  market  price  of the  Company's  common  stock  price  will  be  reflected
prospectively as compensation  expense with respect to unvested restricted stock
units over the applicable  remaining service period;  accordingly,  increases or
decreases in the Company's  common stock price will increase or decrease  future
restricted stock unit compensation expense.

         INTEREST  EXPENSE:  Interest  expense was $296,000 and $969,000 for the
three months ended September 30, 2003 and 2002,  respectively.  Interest expense
was $1,121,000  and $3,284,000 for the nine months ended  September 30, 2003 and
2002, respectively.  Interest capitalized during the three and nine months ended
September 30, 2003 was  $1,411,000  and  $4,386,000,  respectively,  compared to
$1,374,000  and  $4,646,000,  respectively,  for the same  periods in 2002.  The
decrease in interest  expense in 2003 compared to 2002 is principally the result
of  lower  interest  expense  on  notes  payable  due  to  scheduled   principal
repayments.

                                       58
<PAGE>

         MINORITY INTEREST IN INCOME: Minority interest in income represents the
income allocable to equity interests in the Consolidated Entities, which are not
owned by the Company. The following table summarizes minority interest in income
for the three and nine months  ended  September  30,  2003 and 2002  (amounts in
thousands):


<TABLE>
<CAPTION>

                                              For the three months ended September 30,   For the nine months ended September 30,
                                             -----------------------------------------   ---------------------------------------
                Description                      2003          2002          Change        2003          2002          Change
                -----------                  ------------   ----------      --------    ---------     ---------      ---------
<S>                                             <C>          <C>            <C>         <C>           <C>             <C>
Preferred partnership interests.........        $  6,726     $  6,726       $     -     $  20,179     $  20,179       $    -
Consolidated Development Joint Venture (a)         1,292          938           354         2,905         1,574        1,331
Convertible Partnership Units (b).......              86           81             5           233           243          (10)
Acquired minority interests (c) ........               -          340          (340)          415         2,318       (1,903)
Other minority interests (d)............           3,040        3,423          (383)        8,850         9,149         (299)
                                             ------------   ----------      --------    ---------     ---------      ---------
    Total minority interests in income..        $ 11,144     $ 11,508       $  (364)    $  32,582     $  33,463       $ (881)
                                             ============   ==========      ========    =========     =========      =========
</TABLE>


(a)  These amounts  reflect  income  allocated to the minority  interests in the
     Consolidated  Development  Joint Venture.  Included in minority interest in
     income is $889,000 and $2,554,000 in depreciation expense for the three and
     nine months ended September 30, 2003, respectively, as compared to $836,000
     and   $2,386,000,   respectively,   for   the   same   periods   in   2002.

(b)  These amounts reflect the minority interests represented by the Convertible
     Partnership  Units (see Note 9 to the consolidated  financial  statements).
     Included  in  minority  interest  in  income is  $66,000  and  $253,000  in
     depreciation  expense for the three and nine  months  ended  September  30,
     2003, respectively, as compared to $71,000 and $250,000,  respectively, for
     the same periods in 2002.

(c)  These  amounts  reflect  income  allocated to minority  interests  that the
     Company  acquired since December 31, 2001 and are no longer  outstanding at
     September 30, 2003.  Included in minority interest in income is $216,000 in
     depreciation expense for the nine months ended September 30, 2003 (none for
     the three months ended  September  30,  2003),  as compared to $403,000 and
     $1,781,000, respectively, for the three and nine months ended September 30,
     2002.

(d)  These amounts  reflect  income  allocated to minority  interests  that were
     outstanding  consistently  throughout  the  three  and  nine  months  ended
     September  30, 2003 and 2002.  Included  in minority  interest in income is
     $552,000  and  $1,717,000  in  depreciation  expense for the three and nine
     months ended September 30, 2003, respectively,  as compared to $450,000 and
     $1,881,000 for the same periods in 2002.

         Minority   interest  in  income  -  preferred   partnership   interests
represents the income allocable to holders of our preferred  partnership  units.
Throughout  the periods ending  September 30, 2003 and 2002, we had  outstanding
$240,000,000  of our 9.5% Series N  Cumulative  Redeemable  Perpetual  Preferred
Units which were issued on March 17, 2000, and  $45,000,000 of our 9.125% Series
O Cumulative Redeemable Perpetual Preferred Units which were issued on March 29,
2000.  For each of the three and nine months ended  September 30, 2003 and 2002,
the  holders of these  preferred  units  were paid  aggregate  distributions  of
approximately   $6,726,000  and  $20,179,000,   respectively,   and  received  a
corresponding  allocation  of minority  interest in earnings.  We estimate  that
during the year ended  December 31, 2003 the  preferred  units will be allocated
$26,906,000 in income. These preferred units are not redeemable during the first
5 years; thereafter,  at our option, we can call the units for redemption at the
issuance amount plus any unpaid distributions.

         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
increase  their  occupancy  to a  stabilized  occupancy  level and  increase the
earnings of this entity.

         The acquired minority  interests reflects interests in the consolidated
entities  that the Company  acquired  since January 1, 2002 and are therefore no
longer  outstanding.  There  will  be  no  further  income  allocated  to  these
interests.

                                       59
<PAGE>

         Other minority interests reflect income allocated to minority interests
that have  maintained a consistent  level of interest  throughout  the three and
nine months ended  September 30, 2003 and 2002,  comprised of investments in the
Consolidated Entities and the Convertible  Partnership Units described in Note 9
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. Accordingly, the current and prior period operations for these
five facilities (collectively,  the "Sold Self-Storage  Facilities"),  have been
reclassified  into  the  line-item  "Discontinued   Operations"  on  our  income
statement.  For additional  information on the disposal of the Sold Self-Storage
Facilities, please see Note 16 to the consolidated financial statements.

         During 2002,  we adopted a business  plan that  included the closure of
several   non-strategic    containerized   storage   facilities   (the   "Closed
Facilities"), representing components of our containerized storage business. The
related  assets  of the  Closed  Facilities  (consisting  primarily  of  storage
containers) were deemed not recoverable from future operations,  and as a result
an asset  impairment  charge for the excess of these assets' net book value over
their fair value was recorded in the latter half of 2002 totaling $6,187,000. In
addition,  lease termination  costs,  representing the expected  remaining lease
liability  following  closure of the facilities,  were recorded in the amount of
$2,447,000 during the latter half of 2002. Also, during 2002, we sold one of our
commercial facilities to a third party.

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

<TABLE>
<CAPTION>

DISCONTINUED OPERATIONS:
                                      For the three months ended September 30,  For the nine months ended September 30,
                                      ----------------------------------------  ---------------------------------------
                                          2003         2002         Change         2003          2002          Change
                                      ------------   ----------    --------     -----------    ---------     ----------
                                                                   (Amounts in thousands)
Rental income (a):
<S>                                     <C>           <C>          <C>         <C>             <C>           <C>
  Sold Self-Storage Facilities....      $     504     $    479     $    25     $   1,448       $  1,392      $     56
  Closed Facilities...............          1,281        5,651      (4,370)        5,862         15,692        (9,830)
  Sold commercial facility........              -           39         (39)            -            268          (268)
                                      ------------   ----------    --------     -----------    ---------     ----------
       Total rental income........          1,785        6,169      (4,384)        7,310         17,352       (10,042)
                                      ------------   ----------    --------     -----------    ---------     ----------
Cost of operations (a):
  Sold Self-Storage Facilities....            209          185          24           603            521            82
  Closed Facilities...............          1,094        5,456      (4,362)        5,947         16,304       (10,357)
  Sold commercial facility........              -           21         (21)            -             67           (67)
                                      ------------   ----------    --------     -----------    ---------     ----------
       Total cost of operations...          1,303        5,662      (4,359)        6,550         16,892       (10,342)
                                      ------------   ----------    --------     -----------    ---------     ----------
Depreciation expense (a):
  Sold Self-Storage Facilities....            142          140           2           424            422             2
  Closed Facilities...............            290          652        (362)          868          1,905        (1,037)
  Sold commercial facility........              -           27         (27)            -             87           (87)
                                      ------------   ----------    --------     -----------    ---------     ----------
       Total depreciation ........            432          819        (387)        1,292          2,414        (1,122)
                                      ------------   ----------    --------     -----------    ---------     ----------
Asset impairment and lease termination charges (b):

  Closed Facilities...............          1,274        4,791      (3,517)        2,024          4,791        (2,767)
                                      ------------   ----------    --------     -----------    ---------     ----------
Net discontinued operations.......      $  (1,224)    $ (5,103)    $ 3,879     $  (2,556)      $ (6,745)     $  4,189
                                      ============   ==========    ========     ===========    =========     ==========

</TABLE>

(a)  These amounts represent the historical  operations of the Sold Self-Storage
     Facilities,  the Closed  Facilities and the sold commercial  facility,  and
     include amounts previously classified as rental income, cost of operations,
     and depreciation expense in the financial statements in prior periods. Cost
     of  operations  for the nine  months  ended  September  30,  2002  includes
     $898,000 in container obsolescence charges.

                                       60
<PAGE>

(b)  An impairment charge of $750,000 was recorded in the second quarter of 2003
     with respect to a real estate facility held for sale at September 30, 2003,
     which  was  previously  used  by  the  discontinued  containerized  storage
     operations.  An  impairment  charge of $750,000  was recorded in the second
     quarter of 2003 with  respect to a real  estate  facility  held for sale at
     September  30,  2003,   which  was  previously  used  by  the  discontinued
     containerized storage operations. Asset impairment charges in the amount of
     $1,274,000  were recorded in the three and nine months ended  September 30,
     2003.  Asset  impairment  and lease  termination  reserves in the amount of
     $4,791,000  were recorded in the three and nine months ended  September 30,
     2002.

         As of September 30, 2003, 23 of the 28 Closed  Facilities  were closed.
We expect that the remaining  facilities will be closed by December 31, 2003 and
will continue to generate  operating  losses until final  closure.  These losses
will include the remaining lease obligations on the closed facilites,  which, at
September 30, 2003, amount to approximately $672,000.

         GAIN (LOSS) IN 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.  During  the second  quarter of 2003,  we  disposed  of two  additional
parcels  of  land  for  an  aggregate  of  $4,147,000,  recognizing  a  gain  on
disposition of $430,000,  and disposed of an investment in real estate  entities
for an aggregate of $851,000, for a gain of approximately  $316,000.  During the
third quarter of 2003, we disposed of a parcel of land for $795,000 in cash, and
recognized  a gain on  disposition  of  $47,000.  During the nine  months  ended
September  30,  2002,  we recorded a loss of  $1,839,000  on the pending sale of
minority interests.

         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 on these  properties.  The
note  receivable  was  collected  in  full  in  October  2003,  and  a  gain  of
approximately  $4.5 million will be recognized from the sale of this property in
the  fourth  quarter  of 2003.  In  addition,  on October  16,  2003,  we sold a
self-storage  facility located in Perrysburg,  Ohio for $2.3 million.  A gain of
approximately  $1.1 million will be recognized from the sale of this property in
the fourth quarter of 2003.

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 fund principal  payments on debt and reinvestment
opportunities.

                                       61

<PAGE>

<TABLE>
<CAPTION>

                                                                      For the nine months ended
                                                                            September 30,
                                                                   --------------------------------
                                                                        2003                2002
                                                                   -------------      -------------
                                                                       (amounts in thousands)
<S>                                                                <C>                <C>
Net cash provided by operating activities..................        $    455,186       $    460,105

Allocable to minority interest (Preferred Units)...........             (20,179)           (20,179)
Allocable to minority interest (common equity).............             (17,143)           (19,015)
                                                                   -------------      -------------
Cash from operations allocable to our shareholders.........             417,864            420,911

Capital improvements to maintain our facilities............             (20,470)           (16,041)
 Add back:  minority interest share of capital improvements
    to maintain facilities.................................                 504                659
                                                                   -------------      -------------
 Remaining operating cash flow available for distributions to
    our shareholders.......................................             397,898            405,529

Distributions paid:
  Preferred stock dividends................................            (107,914)          (111,704)
  Equity Stock, Series A dividends.........................             (16,126)           (16,126)
  Distributions to Common and Class B shareholders (a).....            (168,781)          (165,687)
                                                                   -------------      -------------
Cash available for principal payments on debt and reinvestment     $    105,077       $    112,012
                                                                   =============      =============
</TABLE>


(a)  The  7,000,000  shares of Class B common  stock  converted  into  7,000,000
     regular common shares on January 1, 2003.

         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 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  borrowings  with
internally  generated  cash flows and proceeds  from the  placement of permanent
capital. At September 30, 2003, we had no borrowings on our line of credit.

         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
by each of the three  major  credit  agencies  are "Baa2" by Moody's and BBB+ by
both Standard & Poor's and Fitch IBCA.

         Our  portfolio  of  real  estate   facilities   remains   substantially
unencumbered.  At September 30, 2003, we had mortgage debt  outstanding of $17.6
million and unsecured  long-term  debt in the amount of $64.4  million,  and had
unencumbered  real estate  facilities  with a book value of  approximately  $4.0
billion.

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

                                       62
<PAGE>


         RECENT  ISSUANCE  OF  PREFERRED  STOCK  AND  PROJECTED   REDEMPTION  OF
PREFERRED STOCK: On October 6, 2003, we completed a public offering of 5,300,000
depositary  shares ($25 stated  value per  depositary  share) each  representing
1/1,000 of a share of 6.500% Cumulative  Preferred Stock,  Series W, raising net
proceeds of approximately  $128.3 million.  On November 13, 2003, we issued in a
public  offering  4,800,000  (which  includes the  underwriters'  exercise of an
additional 400,000 depositary shares to cover over-allotments) depositary shares
($25 stated value per depositary share), each representing 1/1,000 of a share of
6.45% Cumulative  Preferred Stock,  Series X. Total net proceeds of the offering
were $116.2 million.

         We expect to use the net  proceeds of these two  issuances  to fund the
redemption our 8.25% Series K Cumulative Preferred Stock ($115 million) which is
redeemable  on January 19, 2004,  and our 8.25%  Series L  Cumulative  Preferred
Stock ($115 million) which is redeemable on March 10, 2004. .

         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 time 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  prior to filing of the Company's tax return.  We have
satisfied the REIT distribution requirement since 1980.

         During the nine months ended  September 30, 2003 and 2002, we paid cash
dividends totaling $107,914,000 and $111,704,000,  respectively,  to the holders
of  our  Cumulative   Preferred   Stock.  We  estimate  that  the   distribution
requirements with respect to our Preferred Stock outstanding at October 31, 2003
for the  remainder of 2003 (after  redemption  of the Series C Senior  Preferred
Stock  and  issuance  of  the  Series  W and X  Senior  Preferred  Stock)  to be
approximately $39.3 million.

         During each of the nine months ended  September  30, 2003 and 2002,  we
paid  cash  dividends  totaling  $20,179,000  to the  holders  of our  preferred
partnership units. We estimate that the remaining  distribution  requirement for
2003 with respect to the preferred  partnership  units  outstanding at September
30, 2003 to be approximately $6.7 million.

         During each of the nine months ended  September  30, 2003 and 2002,  we
paid cash  dividends  totaling  $16,126,000  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 noncumulative,  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 September 30, 2003, we estimate the total
regular  distribution for the remainder of 2003 to be approximately $5.4 million
assuming  that  dividends  of at least  $0.49 per share per year are paid to the
common shareholders.

         During the nine months  ended  September  30, 2003,  we paid  dividends
totaling  $168,781,000  ($1.35  per common  share) to the  holders of our common
stock.  Based upon  shares  outstanding  at  September  30, 2003 and a quarterly
distribution of $0.45 per share, which was declared by the Board of Directors on
November 6, 2003 and payable on December 31, 2003, we estimate dividend payments
with respect to our common stock of  approximately  $56.7 million for the fourth
quarter of 2003.

         CAPITAL   IMPROVEMENT   REQUIREMENTS:   For  2003,   we  have  budgeted
approximately $30 million for capital improvements. During the nine months ended
September 30, 2003, we incurred  capital  improvements  of  approximately  $20.5
million.  We expect  that the level of  capital  improvement  requirements  will
increase substantially in 2004 and over the next few years, to take advantage of
potential opportunities to improve the visual and functional  characteristics of
our facilities.

                                       63
<PAGE>

         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  September  30,  2003,  we had  total  outstanding  notes  payable  of
approximately $82.0 million. See Note 8 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.

         ACQUISITIONS  OF INTERESTS IN SELF-STORAGE  FACILITIES:  On January 16,
2002, we acquired the remaining  70% interest in the  Development  Joint Venture
for approximately $153,078,000 in cash. The Development Joint Venture was formed
in April 1997 with  equity  capital  consisting  of 30% from the Company and 70%
from an institutional  investor,  which owns 47 storage  facilities opened since
1997. This transaction was principally  financed with the capital raised through
the issuance of our 7.625% Cumulative Preferred Stock, Series T.

         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 approximately $23,377,000, consisting of the issuance of 426,859 shares
of our common stock ($13,510,000) and cash of approximately $9,867,000 million.

         DEVELOPMENT OF SELF-STORAGE FACILITIES:  We anticipate that the cost of
development   of  new   self-storage   facilities  and  expansions  to  existing
self-storage  facilities for the year ended December 31, 2003 and beyond will be
approximately  $75 million per year.  We have  utilized  two  development  joint
ventures in the past 5 years; we acquired our partner's interest in January 2002
for one of the development joint ventures,  and the other joint venture is fully
committed.  However,  we  believe  that  it is  unlikely  that  we  will  form a
development joint venture to fund our current pipeline described below.

         We  currently  have  a  development   "pipeline"  of  44   self-storage
facilities,  combination  facilities,  and  expansions to existing  self-storage
facilities  with an aggregate  estimated cost of  approximately  $167.3 million.
Approximately  $90.1  million  of  development  cost  has  been  incurred  as of
September 30, 2003. We have  acquired the land for 41 of these  projects,  which
have an aggregate  estimated cost of  approximately  $155.4  million,  and costs
incurred as of September 30, 2003 of approximately $89.2 million.  The remaining
three 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 $77.2 million
will be incurred over the next 24 months. The following table sets forth certain
information with respect to our development pipeline.

<TABLE>
<CAPTION>

                                            DEVELOPMENT PIPELINE SUMMARY
----------------------------------------------------------------------------------------------------------------------
                                                                           Total
                                                 Number      Net         estimated     Costs incurred
                                                   of      rentable     development        through         Costs to
                                                 projects  sq. ft.         costs           9/30/03         complete
                                                --------  ---------     ------------   --------------     -----------
                                                                            (Amounts in thousands)
   Facilities currently under construction:
<S>                                                <C>         <C>      <C>              <C>              <C>
    Self-storage facilities                        10          748      $   87,278       $   72,581       $   14,697
    Expansions to existing self-storage
     facilities                                    11          407          32,237           12,681           19,556
    Conversion of industrial space                  7          318          10,528            3,177            7,351
                                                --------  ---------     ------------   --------------     -----------
                                                   28        1,473         130,043           88,439           41,604
    Expansions of existing self-storage
     facilities awaiting construction              13          558          25,381              755           24,626

    Self storage facilities awaiting
     construction and land has not yet been         3          186          11,828              900           10,928
     acquired
                                                --------  ---------     ------------   --------------     -----------
         Total Development Pipeline                44        2,217      $  167,252       $   90,094       $   77,158
                                                ========  =========     ============   ==============     ===========
</TABLE>

                                       64
<PAGE>

         Included in the 24 "expansions 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  876,000 net rentable square feet of traditional  self-storage
space.

         In addition to the above  projects,  we have five  parcels of land held
for development with total costs of  approximately  $12,236,000 at September 30,
2003. These parcels will either be developed or sold.

         REPURCHASE  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.
From the initial authorization through September 30, 2003, we have repurchased a
total of 21,672,020 shares of common stock at an aggregate cost of approximately
$541.9 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, 2002, you should consider the following factors
in evaluating the Company:

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

         At September 30, 2003, the Hughes family owned approximately 37% 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. 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.

         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.

                                       65
<PAGE>

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 September 30, 2003, our
debt of $82.0 million was approximately 1.7% 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.

                                       66
<PAGE>


         There is significant competition among self-storage facilities and from
other storage alternatives.  Most of our properties are self-storage facilities,
which generated 91% of our revenue for the nine months ended September 30, 2003.
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 realized rent per occupied square foot
of the  Consistent  Group of  facilities  declined 3.8% in the nine months ended
September  30, 2003 as compared  to the same  period in 2002.  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 have 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
becomeaware 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
assurancethat  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, 1999, we have opened 59 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 $489.7
million.  In  addition,  at  September  30,  2003 the Company had 44 projects in
development  that are expected to begin  construction  generally by December 31,
2003. These 44 projects have total estimated costs of $167,252,000. 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.

                                       67
<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 accomodations" 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 AND HAVE POTENTIAL CONFLICTS OF INTEREST WITH RESPECT TO SERVICES
PROVIDED TO 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  37%  of our  common  stock  outstanding  at
September  30,  2003.  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 are engaged in the supervision and the operation of these
38 self-storage  facilities and in providing 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 reimburse us at cost for these services.  There may be conflicts
of interest in allocating the time of our personnel between our properties,  the
Canadian properties,  and certain other Hughes Family interests.  The Company is
in the process of eliminating the sharing of Company personnel with the Canadian
entities.

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
and  generated a profit of  $2,099,000  for the nine months ended  September 30,
2003. PSPUD closed 28 facilities that were deemed not strategic to the Company's
business plan during 2002 and 2003.

         The operating loss for 2002 includes a write-down  for impaired  assets
totaling  $6,937,000  ($750,000 of which relates to continuing  operations)  and
lease  termination  charges of  $2,447,000.  The  operating  profit for the nine
months ended  September 30, 2003,  includes  shut-down  cost and  write-down for
impaired real estate assets totaling $2,024,000.

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.

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.

                                       68
<PAGE>

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.  Actions that may be taken in response to these  problems,  such as an
increae 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 California
businesses.

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 September  30, 2003,  our debt as a percentage of total
shareholders' equity (based on book values) was 2.0%.

         Our  preferred  stock is not  redeemable  by the holders.  Except under
certain  conditions  relating to our  qualification as a REIT, we may not redeem
the Senior  Preferred  Stock prior to the following  dates:  Series D - June 30,
2004, Series E - January 31, 2005, Series F - April 30, 2005, Series K - January
19,  2004,  Series L - March 10, 2004,  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,  and Series X - November 13, 2008.  On or
after the respective dates, each of the series of Senior Preferred Stock will be
redeemable at our option,  in whole or in part, at $25 per share (or  depositary
share in the case of the Series K through  Series X),  plus  accrued  and unpaid
dividends.

         Our market risk  sensitive  instruments  include notes  payable,  which
totaled $82.0 million at September 30, 2003.  Substantially all of the Company's
notes  payable  bear  interest at fixed  rates.  See Note 8 to the  consolidated
financial statements at September 30, 2003 for approximate  principal maturities
of the notes payable at September 30, 2003.

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.

         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.

                                       69

<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 2002 annual report on Form 10-K and Part II - Item
1 to the Form 10-Q for the  quarters  ended  March 31,  2003 and June 30,  2003.
There  have  been no  material  developments  in the  actions  described  in the
Company's  2002 annual report on Form 10-K and Part II - Item 1 to the Form 10-Q
for the quarter ended March 31, 2003 and June 30, 2003.

         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 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      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.

3.4      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.

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

3.6      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.

3.7      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.

3.8      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.

3.9      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.

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

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

                                       70
<PAGE>

3.12     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.

3.13     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.

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

3.15     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.

3.16     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.

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

3.18     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.

3.19     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.

3.20     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.

3.21     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.

3.22     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.

3.23     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.

3.24     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.

3.25     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.

3.26     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.

3.27     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.

                                       71
<PAGE>

3.28     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.

3.29     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.

3.30     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.

3.31     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.

3.32     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.

3.33     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.

3.34     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.

3.35     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.

3.36     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.

3.37     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.

3.38     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.

3.39     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.

3.40     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.

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

                                       72
<PAGE>

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

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

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

3.45     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.

3.46     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.

3.47     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.

3.48     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.

3.49     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.

3.50     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.

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.

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.

                                       73
<PAGE>

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.

                                       74
<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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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

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

         The  Company  furnished  a  Current  Report on from 8-K dated and filed
         November 6, 2003,  pursuant to Item 7 with its press release announcing
         its results for the quarter ended September 30, 2003.

         The Company  filed a Current  Report on Form 8-K,  dated  September 25,
         2003 (filed September 26, 2003), pursuant to Item 5, in connection with
         the Company's  public  offering in October 2003 of  depositary  shares,
         each representing 1/1,000 of a share of the Company's 6.500% Cumulative
         Preferred Stock, Series W.

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<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: November 13, 2003

                            PUBLIC STORAGE, INC.

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


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