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 June 30, 2002
                               -------------

                                       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
     incorporation or organization)                       Identification Number)

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 the number of shares outstanding of each of the issuer's classes of
common stock, as of August 8, 2002:

Common Stock, $.10 Par Value - 116,227,414 shares
-------------------------------------------------

Class B Common Stock, $.10 Par Value - 7,000,000 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
              June 30, 2002 and December 31, 2001                              1

          Condensed Consolidated Statements of Income for the
              Three and Six Months Ended June 30, 2002 and 2001                2

          Condensed Consolidated Statements of Shareholders' Equity
              for the Six Months Ended June 30, 2002                           3

          Condensed Consolidated Statements of Cash Flows
              for the Six Months Ended June 30, 2002 and 2001             4  - 5

          Notes to Condensed Consolidated Financial Statements            6 - 26

Item 2.   Management's Discussion and Analysis of
              Financial Condition and Results of Operations              27 - 46

Item 2A.  Risk Factors                                                   47 - 49

Item 3.   Quantitative and Qualitative Disclosures about Market Risk          50

PART II. OTHER INFORMATION (Items 2 and 3 are not applicable)
         -----------------

Item 1.   Legal Proceedings                                                   51

Item 4.   Submission of Matters to a Vote of Security Holders                 51

Item 5.   Other Items                                                         52

Item 6.   Exhibits and Reports on Form 8-K                               53 - 59




<PAGE>

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

<TABLE>
<CAPTION>
                                                                                               June 30,           December 31,
                                                                                                 2002                 2001
                                                                                             --------------       --------------
                                                                                              (Unaudited)
                                     ASSETS
                                     ------
<S>                                                                                          <C>                  <C>
Cash and cash equivalents...........................................................         $     172,164        $      49,347
Real estate facilities, at cost:
     Land...........................................................................             1,284,959            1,165,111
     Buildings......................................................................             3,601,859            3,265,943
                                                                                             --------------       --------------
                                                                                                 4,886,818            4,431,054
     Accumulated depreciation.......................................................              (903,452)            (819,932)
                                                                                             --------------       --------------
                                                                                                 3,983,366            3,611,122
     Construction in process........................................................                88,978              121,181
     Land held for development......................................................                21,548               30,001
                                                                                             --------------       --------------
         Total real estate..........................................................             4,093,892            3,762,304

Investment in real estate entities..................................................               323,323              479,300
Goodwill............................................................................                78,204               78,204
Intangible assets, net..............................................................               121,195              124,497
Mortgage notes receivable from affiliates...........................................                24,361               59,344
Other assets........................................................................                72,639               72,883
                                                                                             --------------       --------------
              Total assets..........................................................         $   4,885,778        $   4,625,879
                                                                                             ==============       ==============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
Notes payable.......................................................................         $     122,399        $     143,552
Line of credit borrowings...........................................................                     -               25,000
Accrued and other liabilities.......................................................                99,375               93,143
                                                                                             --------------       --------------
              Total liabilities.....................................................               221,774              261,695
Minority interest:
     Preferred partnership interests................................................               285,000              285,000
     Other partnership interests....................................................               170,657              169,601

Commitments and contingencies

Shareholders' equity:

     Cumulative Preferred Stock, $0.01 par value, 50,000,000 shares authorized,
       11,168,500 shares issued in series and outstanding (11,156,500 at
       December 31, 2001), at liquidation preference................................             1,840,150            1,540,150
     Common Stock, $0.10 par value, 200,000,000 shares authorized, 116,105,843
       shares issued and outstanding (114,961,915 at December 31, 2001).............                11,611               11,496
     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, 7,000,000 shares authorized
       and outstanding..............................................................                   700                  700

     Paid-in capital................................................................             2,351,024            2,325,898
     Cumulative net income..........................................................             1,879,442            1,711,269
     Cumulative distributions paid..................................................            (1,874,580)          (1,679,930)
                                                                                             --------------       --------------
          Total shareholders' equity................................................             4,208,347            3,909,583
                                                                                             --------------       --------------
              Total liabilities and shareholders' equity............................         $   4,885,778        $   4,625,879
                                                                                             ==============       ==============
</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 Six Months Ended
                                                                   June 30,                             June 30,
                                                        --------------------------------     --------------------------------
                                                            2002               2001              2002               2001
                                                        -------------      -------------     -------------      -------------
Revenues:
<S>                                                     <C>                <C>               <C>                <C>
   Rental income:
       Self-storage facilities..................        $    188,687       $    179,086      $    377,594       $    350,915
       Commercial properties....................               3,181              3,215             6,252              6,272
       Containerized storage facilities.........              12,758             12,183            24,457             22,256
  Tenant reinsurance............................               5,156                  -             9,731                  -
  Interest and other income.....................               2,759              3,130             4,467              6,738
                                                        -------------      -------------     -------------      -------------
                                                             212,541            197,614           422,501            386,181
                                                        -------------      -------------     -------------      -------------

Expenses:
  Cost of operations:
       Self-storage facilities..................              59,905             54,599           118,500            111,073
       Commercial properties....................               1,130                882             2,244              1,832
       Containerized storage facilities.........              11,243             11,055            20,561             20,528
       Tenant reinsurance.......................               2,523                  -             4,816                  -
   Depreciation and amortization................              46,052             41,323            90,049             80,945
   General and administrative...................               4,305              5,000             8,305             10,584
   Interest expense.............................               1,213              1,124             2,315              2,095
                                                        -------------      -------------     -------------      -------------
                                                             126,371            113,983           246,790            227,057
                                                        -------------      -------------     -------------      -------------

Income before equity in earnings of real estate
  entities, minority interest and gain on
  disposition of real estate....................              86,170             83,631           175,711            159,124

Equity in earnings of real estate entities
  (including the Company's pro-rata share of gain                                 9,814            16,256
  on sale of real estate totaling $2,241 for the
  six months ended June 30, 2002)...............               7,000                                                  19,086
Minority interest in income:
  Preferred partnership interests...............              (6,727)            (8,505)          (13,453)           (17,010)
  Other partnership interests...................              (3,886)            (3,167)           (8,502)            (6,360)
                                                        -------------      -------------     -------------      -------------
Income before gain (loss) on disposition of real
  estate........................................              82,557             81,773           170,012            154,840
   Gain (loss) on disposition of real estate
   investments..................................              (1,839)                 -            (1,839)             1,568
                                                        -------------      -------------     -------------      -------------

Net income......................................        $     80,718       $     81,773      $    168,173       $    156,408
                                                        =============      =============     =============      =============

Net income allocation:
  Allocable to preferred shareholders...........        $     37,936       $     28,736      $     73,776       $     56,772
  Allocable to Equity Stock, Series A...........               5,376              5,314            10,751              8,766
  Allocable to common shareholders..............              37,406             47,723            83,646             90,870
                                                        -------------      -------------     -------------      -------------
                                                        $     80,718       $     81,773      $    168,173       $    156,408
                                                        =============      =============     =============      =============
Per common share:
  Net income per share - Basic..................              $0.30              $0.40             $0.68              $0.73
                                                        =============      =============     =============      =============
  Net income per share - Diluted................              $0.30              $0.39             $0.67              $0.73
                                                        =============      =============     =============      =============
  Net income per depositary share of Equity Stock,
     Series A - Basic and Diluted...............              $0.61              $0.61             $1.23              $1.23
                                                        =============      =============     =============      =============
  Weighted average common shares - Basic........             122,821            120,734           122,386            124,403
                                                        =============      =============     =============      =============
  Weighted average common shares - Diluted......             124,824            121,639           124,417            125,130
                                                        =============      =============     =============      =============
  Weighted average depositary shares of Equity
     Stock, Series A - Basic and Diluted........               8,776              8,676             8,776              7,156
                                                        =============      =============     =============      =============
</TABLE>
                            See accompanying notes.
                                       2

<PAGE>

                              PUBLIC STORAGE, INC.
            CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                          (Dollar amounts in thousands)

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              Cumulative                       Class B
                                                              Preferred      Common Stock    Common Stock      Paid-in
                                                                Stock                                          Capital
                                                             -------------    -------------  -------------   -------------
<S>                                                          <C>              <C>            <C>             <C>
Balances at December 31, 2001..........................      $  1,540,150     $    11,496    $       700     $  2,325,898

Issuance of preferred stock, net of issuance costs:
   Series T (6,000 shares).............................           150,000               -              -           (4,925)
   Series U (6,000 shares).............................           150,000               -              -           (4,925)

Issuance of Common Stock:
   Options exercised (621,132 shares)..................                 -              63              -           15,355
   Acquisition of minority interest (533,796 shares -
     Note 7)...........................................                                53                          20,001

Repurchase of common stock (11,000 shares).............                 -              (1)             -             (380)

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

Cash distributions:
   Cumulative Senior Preferred Stock...................                 -               -              -                -
   Equity Stock, Series A ($1.225 per share)...........                 -               -              -                -
   Class B Common Stock ($0.873 per share).............                 -               -              -                -
   Common Stock ($0.90 per share)......................                 -               -              -                -
                                                             -------------    -------------  -------------   -------------
Balances at June 30, 2002..............................      $  1,840,150     $    11,611    $       700     $  2,351,024
                                                             =============    =============  =============   =============
</TABLE>

<TABLE>
<CAPTION>
                                                                                                  Total
                                                             Cumulative       Cumulative      Shareholders'
                                                             Net Income     Distributions         Equity
                                                             -------------  --------------    --------------
<S>                                                          <C>            <C>                <C>
Balances at December 31, 2001..........................      $ 1,711,269    $  (1,679,930)     $  3,909,583

Issuance of preferred stock, net of issuance costs:
   Series T (6,000 shares).............................                -                -           145,075
   Series U (6,000 shares).............................                -                -           145,075

Issuance of Common Stock:
   Options exercised (621,132 shares)..................                -                -            15,418
   Acquisition of minority interest (533,796 shares -
     Note 7)...........................................                                              20,054

Repurchase of common stock (11,000 shares).............                -                -              (381)

Net income.............................................          168,173                -           168,173

Cash distributions:
   Cumulative Senior Preferred Stock...................                -          (73,776)          (73,776)
   Equity Stock, Series A ($1.225 per share)...........                -          (10,751)          (10,751)
   Class B Common Stock ($0.873 per share).............                -           (6,111)           (6,111)
   Common Stock ($0.90 per share)......................                -         (104,012)         (104,012)
                                                             -------------  --------------    --------------
Balances at June 30, 2002..............................      $ 1,879,442    $  (1,874,580)     $  4,208,347
                                                             =============  ==============    ==============
</TABLE>
                            See accompanying notes.
                                       3

<PAGE>

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

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                            For the Six Months Ended
                                                                                                    June 30,
                                                                                        ---------------------------------
                                                                                            2002               2001
                                                                                        --------------     --------------
<S>                                                                                     <C>                <C>
Cash flows from operating activities:
   Net income..................................................................         $     168,173      $     156,408
   Adjustments to reconcile net income to net cash provided by operating
     activities:
     Gain included in equity in earnings of real estate investments............                (2,241)                 -
     (Gain) loss on sale of real estate investments............................                 1,839             (1,568)
     Depreciation and amortization.............................................                90,049             80,945
     Depreciation included in equity earnings of real estate entities..........                12,896             11,214
     Minority interest in income...............................................                21,955             23,370
     Other.....................................................................                 2,696              2,469
                                                                                        --------------     --------------
         Total adjustments.....................................................               127,194            116,430
                                                                                        --------------     --------------
             Net cash provided by operating activities.........................               295,367            272,838
                                                                                        --------------     --------------

Cash flows from investing activities:
     Principal payments received on mortgage notes receivable..................                35,193              1,999
     Business combinations (Note 3)............................................              (152,327)                 -
     Capital improvements to real estate facilities............................               (12,526)           (12,132)
     Construction in process and acquisition of land held for development......               (49,112)           (92,720)
     Acquisition of minority interests.........................................               (13,055)           (11,053)
     Proceeds from the disposition of real estate facilities...................                 5,322              9,102
     Acquisition of investment in real estate entities.........................               (14,914)           (21,909)
     Acquisition of real estate facilities.....................................                (7,936)                 -
     Other investments.........................................................                (1,054)            (5,097)
                                                                                        --------------     --------------
             Net cash used in investing activities.............................              (210,409)          (131,810)
                                                                                        --------------     --------------

Cash flows from financing activities:
     Net paydowns on revolving line of credit..................................               (25,000)                 -
     Principal payments on notes payable.......................................               (21,153)            (6,207)
     Net proceeds from the issuance of common stock............................                15,418              2,253
     Net proceeds from the issuance of preferred stock.........................               290,150            166,966
     Net proceeds from the issuance of Equity Stock, Series A..................                     -             72,130
     Issuance of Put Option (Note 8)...........................................                     -                910
     Repurchase of common stock................................................                  (381)          (275,483)
     Distributions paid to shareholders........................................              (194,650)          (119,949)
     Distributions paid to minority interests..................................               (26,493)           (26,938)
     Net (divestment) reinvestment of minority interests.......................                   (32)             6,584
                                                                                        --------------     --------------
             Net cash provided by (used in) financing activities...............                37,859           (179,734)
                                                                                        --------------     --------------

Net increase (decrease) in cash and cash equivalents...........................               122,817            (38,706)
Cash and cash equivalents at the beginning of the period.......................                49,347             89,467
                                                                                        --------------     --------------
Cash and cash equivalents at the end of the period.............................         $     172,164      $      50,761
                                                                                        ==============     ==============
</TABLE>
                            See accompanying notes.
                                       4

<PAGE>

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

                                   (Unaudited)

                                   (Continued)

<TABLE>
<CAPTION>
Supplemental schedule of non-cash investing and financing activities:                       For the Six Months Ended
                                                                                                    June 30,
                                                                                        ---------------------------------
                                                                                            2002               2001
                                                                                        --------------     --------------

<S>                                                                                     <C>                <C>
   Business combinations (Note 3):
     Real estate facilities....................................................         $    (330,426)     $           -
     Other assets..............................................................                (2,175)                 -
     Accrued and other liabilities.............................................                 5,232                  -
     Minority interest.........................................................                14,806                  -
     Reduction in investment in real estate entities...........................               160,236                  -

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

   Acquisition of minority interest for consideration including common stock:
     Real estate facilities....................................................               (20,640)                 -
     Minority Interest.........................................................               (12,469)                 -

   Issuance of common stock to acquire interest in consolidated real estate
     entity....................................................................                20,054                  -

   Disposition of minority interests in exchange for other assets at a loss of
   $1,839 (Note 7)
    Other assets...............................................................                (1,450)                 -
    Minority interest..........................................................                 3,289                  -

</TABLE>
                            See accompanying notes.
                                       5

<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002

                                  (Unaudited)

1.   Description of the business
     ---------------------------

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

              We invest in real estate facilities by acquiring wholly owned
     facilities or by acquiring interests in real estate entities which own
     facilities. At June 30, 2002, we had direct and indirect equity interests
     in 1,397 self-storage facilities located in 37 states and operating under
     the "Public Storage" name. We also have direct and indirect equity
     interests in approximately 15.2 million net rentable square feet of
     commercial space.

2.   Summary of significant accounting policies
     ------------------------------------------

     Basis of presentation
     ---------------------

              The consolidated financial statements include the accounts of the
     Company and 35 controlled entities (the "Consolidated Entities").
     Collectively, the Company and the Consolidated Entities own a total of
     1,366 real estate facilities, consisting of 1,361 self-storage facilities
     and five commercial properties.

              At June 30, 2002, we had equity investments in eight 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, we own approximately 44% of the common equity
     of PS Business Parks, Inc. ("PSB"), which owns and operates 14.8 million
     net rentable square feet of commercial space at June 30, 2002. We do not
     control these entities. Accordingly, our investments in these limited
     partnerships and PSB are accounted for using the equity method.

              Certain amounts previously reported have been reclassified to
     conform to the June 30, 2002 presentation.

     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 2002 and,
     accordingly, no provision for income taxes has been made in the
     accompanying financial statements.

                                       6

<PAGE>

     Financial instruments
     ---------------------

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

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

              Due to the short period to maturity of our cash and cash
     equivalents, accounts receivable, other 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 market
     rates for these loans.

              Financial assets that are exposed to credit risk consist primarily
     of cash and cash equivalents, accounts receivable, and notes receivable.
     Cash and cash equivalents, which consist of short-term investments,
     including commercial paper, are only invested in entities with an
     investment grade rating. Notes receivable are substantially all secured by
     real estate facilities that we believe are valued in excess of the related
     note receivable. 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.

     Evaluation of asset impairment
     ------------------------------

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

              We evaluate our long-lived assets on a quarterly basis for
     indicators of impairment. When indicators of impairment are detected in our
     evaluation, we evaluate the recoverability of such long-lived assets. We
     determine the assets' recoverable amount based upon a) the fair value of
     our goodwill or b) the estimated undiscounted cash flows of our other
     long-lived assets. An impairment charge is booked for the excess of book
     value (if any) over the asset's recoverable amount. We determine the
     recoverability of our goodwill in this manner on a quarterly basis
     regardless of the existence of indicators of impairment. The Company has
     determined at June 30, 2002 that no such impairments existed and,
     accordingly, no impairment charges have been recorded.

                                       7
<PAGE>

              Statement No. 144 also addresses the accounting for long-lived
     assets that are likely to be disposed of before the end of their previously
     estimated useful life. Such assets are to be reported at the lower of their
     carrying amount or fair value, less cost to sell. Our evaluations have
     determined that there are no such impairments at June 30, 2002.

     Other assets
     ------------

              Other assets primarily consist of furniture, fixtures, equipment,
     and other such assets associated with the containerized storage facilities
     business as well as accounts receivable, prepaid expenses, and other such
     assets of the Company. Included in other assets with respect to the
     containerized storage business is furniture, fixtures, and equipment (net
     of accumulated depreciation) of $29,986,000 and $30,699,000 at June 30,
     2002 and December 31, 2001, respectively. Included in depreciation and
     amortization expense for the three months ended June 30, 2002 and 2001 is
     $1,614,000 and $1,550,000, respectively, and $3,227,000 and $2,889,000 for
     the six months ended June 30, 2002 and 2001, respectively, of depreciation
     of furniture, fixtures, and equipment of the containerized storage
     business.

     Intangible assets and goodwill
     ------------------------------

              The Company conforms to SFAS 142 in accounting for its goodwill
     and other intangibles. 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.

              Prior to December 31, 2001, the Company amortized its goodwill
     using the straight-line method over a 25 year life. The Company's goodwill
     has an indeterminate life and, in accordance with the provisions of SFAS
     142, amortization of goodwill ceased effective January 1, 2002. Our other
     intangibles continue to be amortized over a 25 year period.

              Goodwill is net of accumulated amortization of $16,515,000 at June
     30, 2002 and December 31, 2001. At June 30, 2002, property management
     contracts are net of accumulated amortization of $43,805,000 ($40,503,000
     at December 31, 2001). Included in depreciation and amortization expense
     for the three and six months ended June 30, 2002 and 2001 is $1,651,000 and
     $3,302,000, respectively, with respect to the amortization of property
     management contracts. In addition, included in depreciation and
     amortization expense for the three and six months ended June 30, 2001, is
     $677,000 and $1,354,000, respectively, relating to the amortization of
     goodwill.

     Revenue and expense recognition
     -------------------------------

              Property rents are 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. Advertising
     costs are expensed as incurred. As described more fully in Note 10,
     compensation expense with respect to stock options granted after December
     31, 2001 is recorded based upon the options' estimated fair value on the
     date of grant and their vesting period.

                                       8

<PAGE>

     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 costs can be reasonably estimated. Our current practice is to
     conduct environmental investigations in connection with property
     acquisitions. Although there can be no assurance, we are not aware of any
     environmental contamination of any of our facilities which individually or
     in the aggregate would be material to our overall business, financial
     condition, or results of operations.

     Net income per common share
     ---------------------------

              Dividends paid to our preferred shareholders totaling $37,936,000
     and $28,736,000 for the three months ended June 30, 2002 and 2001,
     respectively, and $73,776,000 and $56,772,000 for the six months ended
     June 30, 2002 and 2001, respectively, have been deducted from net income to
     arrive at net income allocable to our common shareholders.

              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 $5,376,000 and $10,751,000, for the
     three and six months ended June 30, 2002, respectively, as compared to
     $5,314,000 and $8,766,000, respectively, for the same period in 2001. The
     remaining $37,406,000 and $83,646,000 for the three and six months ended
     June 30, 2002, respectively, and $47,723,000 and $90,870,000, for the three
     and six months ended June 30, 2001, 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). Distributions per
     share of Class B common stock are equal to 97% of the per share
     distribution paid to the Company's regular common shares. 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 and six months ended June 30, 2001 and 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 has been satisfied
     (see Note 8) and the Class B common stock will convert into 7,000,000
     shares of common stock on January 1, 2003. As a result, beginning April 1,
     2002, the Company includes 7,000,000 Class B common shares in the weighted
     average common equivalent shares.

                                       9

<PAGE>

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
     storage facilities. Prior to January 16, 2002, we accounted for our
     investment in the Development Joint Venture using the equity method of
     accounting.

     Other Partnerships
     ------------------

              As a result of obtaining a controlling ownership interest, we
     began to consolidate the accounts of two publicly-held limited partnerships
     owning 31 self-storage facilities in which we are the general partner,
     effective January 1, 2002. Our $45,105,000 investment at December 31, 2001
     was allocated first to the $751,000 cash held by these entities, with the
     remaining $44,354,000 allocated to the other assets, liabilities, and
     minority interests of these entities as described in the table below.
     Previously, we accounted for our investment in these entities using the
     equity method of accounting.

     PS Insurance Company
     --------------------

              On December 31, 2001, we acquired all of the capital stock of PS
     Insurance Company, Ltd. ("PS Insurance Company"), which reinsures policies
     against losses to goods stored by tenants in our self-storage facilities
     and which owned, and continues to own, 301,032 shares of the Company's
     common stock. The 301,032 shares owned by this entity are eliminated in
     consolidation.

              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. The
     allocations were as follows with respect to the business combinations
     completed in the first quarter of 2002:

<TABLE>
<CAPTION>
                                                Development        Other
                                               Joint Venture    Partnerships        Total
                                               -------------    ------------     -----------
                                                          (amounts in thousands)
<S>                                             <C>              <C>             <C>
2002 BUSINESS COMBINATIONS:
    Real estate facilities...............       $  269,898       $   60,528      $  330,426
    Minority interests...................                -          (14,806)        (14,806)
    Other assets.........................            1,122            1,053           2,175
    Accrued and other liabilities........           (2,811)          (2,421)         (5,232)
                                               -------------    ------------     -----------
                                                $  268,209       $   44,354      $  312,563
                                               =============    ============     ===========
</TABLE>

                                       10

<PAGE>

              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 six months
     ended June 30, 2002 and 2001 as though the business combinations above had
     been effective at the beginning of fiscal 2001 are as follows:

                                                     For the Six Months
                                                       Ended June 30,
                                              ------------------------------
                                                 2002                2001
                                              ----------          ----------
                                            (in thousands except per share data)
Revenues...................................    $423,625           $415,708
Net income.................................    $167,950           $158,021
Net income per common share (Basic)........     $0.68              $0.74
Net income per common share (Diluted)......     $0.67              $0.73

              The pro forma data does not purport to be indicative either of
     results of operations that would have occurred had the transactions
     occurred at the beginning of fiscal 2001 or 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.

                                       11

<PAGE>

4.   Real estate facilities
     ----------------------

              Activity in real estate facilities during 2002 is as follows:

                                                              In thousands
                                                            ---------------
Operating facilities, at cost:
  Balance at December 31, 2001....................          $    4,431,054
  Developed facilities............................                  84,236
  Property acquisitions:
     Business combinations (Note 3)...............                 330,426
     From third parties...........................                   7,936
  Acquisition of minority interests (Note 7)......                  20,640
  Capital improvements............................                  12,526
                                                            ---------------
  Balance at June 30, 2002........................               4,886,818
                                                            ---------------

Accumulated depreciation:
  Balance at December 31, 2001....................                (819,932)
  Additions during the year.......................                 (83,520)
                                                            ---------------
  Balance at June 30, 2002........................                (903,452)
                                                            ---------------

Construction in process:
  Balance at December 31, 2001....................                 121,181
  Current development.............................                  49,112
  Transfers from land held for development........                   2,921
  Developed facilities............................                 (84,236)
                                                            ---------------
  Balance at June 30, 2002........................                  88,978
                                                            ---------------

Land held for development:
  Balance at December 31, 2001....................                  30,001
  Dispositions....................................                  (5,532)
  Transfer to construction in progress............                  (2,921)
                                                            ---------------
  Balance at June 30, 2002........................                  21,548
                                                            ---------------
  Total real estate facilities....................          $    4,093,892
                                                            ===============

              During the six months ended June 30, 2002, we opened 10 newly
     developed facilities with approximately 864,000 aggregate net rentable
     square feet with an aggregate cost of $68,227,000, and expansions of
     storage facilities with an aggregate cost of $16,009,000. In addition,
     during the six months ended June 30, 2002, we acquired three self-storage
     facilities, in separate transactions, having an aggregate of approximately
     157,000 net rentable square feet for $7,936,000 cash.

              During the six months ended June 30, 2002, we sold one plot of
     land for $5,532,000, consisting of $5,322,000 of cash and a note receivable
     in the amount of $210,000. No gain or loss was recorded on this sale.

              Construction in process at June 30, 2002 consists primarily of 19
     storage facilities and 7 expansion projects to existing self-storage
     facilities. In addition, we have nine parcels of land held for development
     with total costs of approximately $21,548,000.

              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 six months ended June 30, 2002 was $1,426,000 and
     $3,272,000, respectively compared to $2,109,000 and $4,219,000,
     respectively for the same periods in 2001.

                                       12

<PAGE>

5.   Investment in real estate entities
     ----------------------------------

              At June 30, 2002, our investment in real estate entities consist
     of ownership interests in eight partnerships, which principally own
     self-storage facilities, and our ownership interest in PSB (defined below).
     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.

               The following table sets forth the Company's equity in earnings
     of real estate entities for the three and six months ended June 30, 2002
     (amounts in thousands):

<TABLE>
<CAPTION>
                                            Equity in Earnings of Real     Equity in Earnings of Real Estate
                                          Estate Entities for the Three    Entities for the Six Months Ended
                                              Months ended June 30,                     June 30,
                                          ------------------------------   ---------------------------------
                                              2002            2001              2002               2001
                                          --------------  --------------   --------------     --------------

<S>                                          <C>             <C>             <C>                 <C>
 PSB (a)............................         $   5,215       $   5,876       $    12,329         $  11,661
 Newly Consolidated Investments (b)                  -           2,512               223             4,634
 Other Investments..................             1,785           1,426             3,704             2,791
                                          --------------  --------------   --------------     --------------
     Total..........................         $   7,000       $   9,814       $    16,256         $  19,086
                                          ==============  ==============   ==============     ==============
</TABLE>

(a)  Included in equity in earnings for the six months ended June 30, 2002 is
     our pro rata share of PSB's gain on sale of real estate in the amount of
     $2,241,000.

(b)  As described in Note 3, in the first quarter of 2002 we began consolidating
     the results of the Development Joint Venture and two other partnerships,
     and as a result eliminated our preexisting investment in the three months
     ended March 31, 2002.

              The following table sets forth our investments in real estate
     entities at June 30, 2002 and December 31, 2001 (amounts in thousands), and
     our distributions received from the real estate entities in the six months
     ended June 30, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                           Distributions  from real  estate
                                           Investments in Real Estate      entities   for  the  six  months
                                                  Entities at                       ended June 30,
                                          ------------------------------   ---------------------------------
                                             June 30,      December 31,
                                               2002            2001              2002             2001
                                          --------------  --------------   --------------     --------------
<S>                                        <C>             <C>              <C>                <C>
 PSB                                       $  270,238      $ 267,472        $     9,563        $   7,326
 Newly Consolidated Investments (a)                 -        160,013                  -            2,132
 Other Investments.................            53,085         51,815              2,676              659
                                          --------------  --------------   --------------     --------------
     Total.........................        $  323,323      $ 479,300        $    12,239        $  10,117
                                          ==============  ==============   ==============     ==============
</TABLE>

(a)  As described in Note 3, in the first quarter of 2002 we began consolidating
     the results of the Development Joint Venture and two other partnerships,
     and as a result eliminated our preexisting investment in the three months
     ended June 30, 2002.

              In addition to the income recognized and distributions noted
     above, during the six months ended June 30, 2002, we invested a total of
     $242,000 in the Other Investments.

                                       13

<PAGE>

              Following is a description of PSB, the Newly Consolidated
     Investments, and the Other Investments.

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

              At June 30, 2002, the Company and the Consolidated Entities have a
     44% common equity interest in 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"). 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 PSB's trading price at
     June 30, 2002 ($34.95), the shares and units had a market value of
     approximately $444.7 million.

              At June 30, 2002, PSB owned and operated 14.8 million net rentable
     square feet of commercial space located in nine states. PSB also manages
     the commercial space owned by the Company and the Consolidated Entities.

              Our pro-rata share of earnings and distributions from PSB, as well
     as our investment balance, are denoted in the tables above. The following
     table sets forth the condensed consolidated statements of operations and
     the condensed consolidated balance sheets of PSB. These amounts below
     represent 100% of PSB's balances and not our pro-rata share.

<TABLE>
<CAPTION>
PSB                                                                For the six months ended
---                                                                        June 30,
                                                              ----------------------------------
                                                                  2002                2001
                                                              ---------------    ---------------
                                                                  (Amounts in thousands)

<S>                                                           <C>                <C>
   Total revenue........................................      $      102,578     $      80,557
   Gain on disposition of real estate investments.......               5,391                15
   Cost of operations and other expenses................             (33,017)          (23,746)
   Depreciation and amortization........................             (28,290)          (19,379)
   Minority interest....................................             (16,488)          (13,152)
                                                              ---------------    ---------------
     Net income.........................................      $       30,174     $      24,295
                                                              ===============    ===============

                                                               At June 30,      At December 31,
                                                                   2002               2001
                                                              ---------------    ---------------
   Total assets (primarily real estate).................      $    1,146,403     $   1,169,955
   Total debt...........................................              87,932           165,145
   Other liabilities....................................              36,852            45,188
   Preferred equity and preferred minority interests....             368,738           318,750
   Common equity and common minority interest...........             652,881           640,872

</TABLE>

     Newly Consolidated Investments
     ------------------------------

              As described in Note 3, effective in the first quarter of 2002, we
     began consolidating the results of the Development Joint Venture and two
     other partnerships, and as a result eliminated our preexisting investment
     of $160,236,000 ($160,013,000 at December 31, 2001). Prior to their
     respective dates of consolidation, these entities were accounted for on the
     equity method of accounting. The Company's operating results and
     investments with respect to these entities are included as the "Newly
     Consolidated Investments" in the tables above.

                                       14

<PAGE>

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

              At June 30, 2002, the Other Investments consists primarily of an
     average 38% common equity ownership in eight limited partnerships
     (collectively, the "Other Investments") owning an aggregate of 36 storage
     facilities. During the six months ended June 30, 2002, we invested a total
     of $242,000 in the Other Investments.

              Our pro-rata share of earnings and distributions from these
     entities as well as our investment balances are denoted in the tables
     above. The following table sets forth certain condensed financial
     information (representing 100% of these entities' balances and not our
     pro-rata share) with respect to the Other Investments:

<TABLE>
<CAPTION>
        Other Investments                                For the six months ended
        -----------------                                       June 30,
                                                    --------------------------------
                                                         2002               2001
                                                    -------------      -------------
                                                         (Amounts in thousands)
<S>                                                 <C>                <C>
    Total revenue...........................        $     13,428       $     12,509
    Cost of operations and other expenses...              (4,893)            (4,644)
    Depreciation and amortization...........              (1,267)            (1,276)
                                                    -------------      -------------
      Net income............................        $      7,268       $      6,589
                                                    =============      =============

Other Investments                                    At June 30,      At December 31,
-----------------                                        2002               2001
                                                    -------------      -------------
                                                          (Amounts in thousands)
    Total assets (primarily storage facilities)     $     61,731       $     61,046
    Total debt..............................               8,323             11,357
    Other liabilities.......................               1,267              1,233
    Partners' equity........................              52,141             48,456

</TABLE>

6.   Revolving line of credit
     ------------------------

              Our $200 million revolving line of credit (the "Credit Agreement")
     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 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 June 30, 2002, we had no
     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) 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). 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 June 30, 2002.

                                       15

<PAGE>

7.   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
     an aggregate $365.0 million of preferred partnership units: March 17, 2000,
     - $240.0 million of 9.5% Series N Cumulative Redeemable Perpetual Preferred
     Units, March 29, 2000 - $75.0 million of 9.125% Series O Cumulative
     Redeemable Perpetual Preferred Units, and August 11, 2000 - $50.0 million
     of 8.75% Series P Cumulative Redeemable Perpetual Preferred Units.

              In August 2001, we repurchased $30 million of the 9.125% Series O
     Cumulative Redeemable Perpetual Preferred Units and in October 2001, we
     repurchased all of the 8.75% Series P Cumulative Redeemable Perpetual
     Preferred Units. The units were repurchased at an amount equal to the
     original issuance price.

              For the six months ended June 30, 2002 and 2001, the holders of
     these preferred units were paid an aggregate of approximately $13,453,000
     and $17,010,000, respectively, in distributions and received an equivalent
     allocation of minority interest in earnings. The decrease in distributions
     paid to the holders of these preferred units is attributable to repurchases
     of these units by the Company in August and October of 2001.

              The following table summarizes the preferred partnership units
     outstanding at June 30, 2002 and December 31, 2001:

                          Distribution        Units           Carrying
         Series               Rate         Outstanding         Amount
----------------------    -------------   -------------     -----------
                                             (Amounts in thousands)
Series N                        9.500%           9,600      $   240,000
Series O                        9.125%           1,800           45,000
                                          -------------     -----------
Total                                           11,400      $   285,000
                                          =============     ===========

              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 June 30,
     2002 and December 31, 2001, as well as the distributions paid to minority
     interest for the six months ended June 30, 2002 and 2001 with respect to
     the other partnership interests (amounts in thousands):

                                       16

<PAGE>

<TABLE>
<CAPTION>
                                                                                          Distributions to minority
                                                                                         interests for the six months
                                                      Minority interest at                      ended June 30,
                                                  ----------------------------           ----------------------------
                                                    June 30,       December 31,
                 Description                          2002             2001                  2002             2001
--------------------------------------------      -----------      -----------           -----------      -----------
<S>                                               <C>              <C>                   <C>              <C>
Consolidated Development Joint Venture......      $   78,592       $    82,879           $     4,923      $    3,865
Convertible OP Units........................           6,367             6,418                   213             104
Newly consolidated partnerships.............          18,371                 -                 1,355               -
Other consolidated partnerships.............          67,327            80,304                 6,581           6,855
                                                  -----------      -----------           -----------      -----------
Total other partnership interests...........      $  170,657       $   169,601           $    13,072      $   10,824
                                                  ===========      ===========           ===========      ===========
</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 six months
     ended June 30, 2002 and 2001 (amounts in thousands):

<TABLE>
<CAPTION>
                                                Minority interest in income for        Minority interest in income for
                                                the three months ended June 30,         the six months ended June 30,
                                                  ----------------------------           ----------------------------
                 Description                         2002             2001                  2002             2001
--------------------------------------------      -----------      -----------           -----------      -----------
<S>                                               <C>              <C>                   <C>              <C>
Consolidated Development Joint Venture......      $       329      $      113            $       636      $      225
Convertible OP Units.......................                73              99                    162             187
Newly consolidated partnerships.............              775               -                  1,631               -
Other consolidated partnerships.............            2,709           2,955                  6,073           5,948
                                                  -----------      -----------           -----------      -----------

Total other partnership interests...........      $     3,886      $    3,167            $     8,502      $    6,360
                                                  ===========      ===========           ===========      ===========
</TABLE>

              Following is a description of each of the Other Partnership
     Interests and a description of the other transactions affecting the
     minority interests in these entities.

     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 and chief executive
     officer 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 8). In consolidation, the Equity Stock,
     Series AAA and the related dividend income have been eliminated.

              At June 30, 2002, the Consolidated Development Joint Venture had
     completed construction on 22 storage facilities for a total cost of
     approximately $108 million.

                                       17

<PAGE>

              The Consolidated Development Joint Venture is funded solely with
     equity capital consisting of 51% from the Company and 49% from PSAC Storage
     Investors. The accounts of the Consolidated Development Joint Venture are
     included in the Company's consolidated financial statements. The accounts
     of PSAC Storage Investors 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, net of cumulative
     distributions. The amounts included in our financial statements with
     respect to the minority interests 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 June 30,
     2002). In addition, Mr. Hughes can receive up to 1% of cash flow of PSAC
     Storage Investors, LLC (estimated to be less than $50,000 per year) if PSAC
     Storage Investors, LLC elects an early termination during the sixth year.
     If PSAC Storage Investors, LLC does not elect to cause an early
     termination, Mr. Hughes' 1% interest can increase to up to 10%.

     Convertible OP Units
     --------------------

              As of June 30, 2002, one of our Consolidated Entities had
     approximately 237,935 operating partnership units ("Convertible OP Units")
     outstanding, representing a limited partnership interest in one of the
     Consolidated Entities. The Convertible OP 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 Convertible OP Units reflects the Convertible OP Units'
     share of the net income of the Company, with net income allocated to
     minority interests with respect to weighted average outstanding Convertible
     OP Units on a per unit basis equal to diluted earnings per common share.
     During the six months ended June 30, 2002, no units were converted. The
     amounts included in our financial statements with respect to the minority
     interests with respect to the Convertible OP Units are denoted in the
     tables above.

     Newly Consolidated Partnerships
     -------------------------------

              As described in Note 3, we began consolidating the results of two
     other partnerships owning 31 properties, and as a result, minority interest
     increased by $14,806,000 in the first quarter of 2002. The amounts included
     in our financial statements with respect to the minority interests in the
     Newly Consolidated Partnerships are denoted in the tables above.

                                       18

<PAGE>

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

              The minority interests in the Other Consolidated Partnerships at
     June 30, 2002 reflect the common equity interests that the Company doesn't
     own in 32 entities owning an aggregate of 500 real estate facilities. The
     amounts included in our financial statements with respect to the minority
     interests in the Other Consolidated Partnerships are denoted in the tables
     above.

              On April 19, 2002, we acquired through a merger all of the
     remaining minority interest we did not own in PS Partners V, Ltd. The
     acquisition cost consisted of 533,796 shares ($20,054,000) of Public
     Storage common stock and cash of approximately $12,815,000. This
     acquisition had the effect of reducing minority interest by $12,342,000,
     with the excess of cost over underlying book value ($20,527,000) allocated
     to real estate.

              In addition, during the six months ended June 30, 2002, we
     acquired minority interests in the Other Consolidated Partnerships for an
     aggregate cash cost of $240,000. These acquisitions had the effect of
     reducing minority interest by $127,000, with the excess of cost over
     underlying book value ($113,000) allocated to real estate.

              In the second quarter of 2002, we recorded the pending sale of a
     partnership interest in one of our 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.

8.   Shareholders' equity
     --------------------

     Preferred stock
     ---------------

              At June 30, 2002 and December 31, 2001, we had the following
     series of Preferred Stock outstanding:

<TABLE>
<CAPTION>
                                          At June 30, 2002                At December 31, 2001
                                     ----------------------------      ----------------------------
                       Dividend         Shares          Carrying          Shares          Carrying
      Series            Rate         Outstanding         Amount        Outstanding         Amount
----------------    --------------   ------------    ------------      ------------    ------------
                                                     (Dollar amount in thousands)
<S>                      <C>           <C>           <C>                 <C>           <C>
Series A                 10.000%       1,825,000     $     45,625        1,825,000     $     45,625
Series B                  9.200%       2,386,000           59,650        2,386,000           59,650
Series C              Adjustable       1,200,000           30,000        1,200,000           30,000
Series D                  9.500%       1,200,000           30,000        1,200,000           30,000
Series E                 10.000%       2,195,000           54,875        2,195,000           54,875
Series F                  9.750%       2,300,000           57,500        2,300,000           57,500
Series J                  8.000%           6,000          150,000            6,000          150,000
Series K                  8.250%           4,600          115,000            4,600          115,000
Series L                  8.250%           4,600          115,000            4,600          115,000
Series M                  8.750%           2,250           56,250            2,250           56,250
Series Q                  8.600%           6,900          172,500            6,900          172,500
Series R                  8.000%          20,400          510,000           20,400          510,000
Series S                  7.875%           5,750          143,750            5,750          143,750
Series T                  7.625%           6,000          150,000                -                -
Series U                  7.625%           6,000          150,000                -                -
                                     ------------    ------------      ------------    ------------
Total Senior Preferred Stock          11,168,500     $  1,840,150       11,156,500     $  1,540,150
                                     ============    ============      ============    ============
</TABLE>
                                       19

<PAGE>

              We issued the Series T preferred stock on January 18, 2002,
     resulting in net proceeds from the issuance of approximately $145,075,000,
     and the Series U preferred stock on February 19, 2002, resulting in net
     proceeds from the issuance of approximately $145,075,000.

              The Series A through Series U preferred stock (collectively the
     "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 above, 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 June 30, 2002, there were no
     dividends in arrears and the Debt Ratio was 2.1%.

              Except under certain conditions relating to the Company's
     qualification as a REIT, the Senior Preferred Stock is not redeemable prior
     to the following dates: Series A - September 30, 2002, Series B - June 30,
     2003, Series C - June 30, 1999, Series D - September 30, 2004, Series E -
     January 31, 2005, Series F - April 30, 2005, Series J - August 31, 2002,
     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 and Series U -
     February 19, 2007. On or after the respective dates, each of the series of
     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 J through Series U), plus accrued and unpaid dividends.

     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 June 30, 2002, 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 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:
     a) five times the per share dividend on the Common Stock or b) $2.45 per
     annum. Except in order to preserve the Company's federal income tax status
     as a REIT, we may not redeem the depositary shares before June 30, 2010. On
     or after June 30, 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 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. We have no obligation to pay distributions on
     the depositary shares if no distributions are paid to common shareholders.

                                       20

<PAGE>

     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 Common Stock
     and junior to the Senior 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 Common Stock or (ii) $2.20. We have no obligation to pay
     distributions if no distributions are paid to common shareholders.

     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 common stock and
     junior to the Senior Preferred Stock (as defined below) 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 if no
     distributions are paid to common shareholders.

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

              As previously announced, 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. From the initial authorization through June 30, 2002, the
     Company has repurchased a total of 21,497,020 shares of common stock at an
     aggregate cost of approximately $535.9 million.

              During April 2001, we entered into an arrangement with a financial
     institution whereby we sold to the institution the right to require us to
     purchase from the institution on certain dates up to 1,000,000 shares of
     our common stock at a price of $26.26. In exchange, the financial
     institution paid us $910,000, the amount of which has been reflected as an
     increase to our paid-in capital. The Put Option expired in 2001 without
     being exercised.

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

              The Class B Common Stock participates in distributions at the rate
     of 97% of the per share distributions on the Common Stock, provided that
     cumulative distributions of at least $0.22 per quarter per share have been
     paid on the Common Stock. The Class B Common Stock will not participate in
     liquidating distributions, not be entitled to vote (except as expressly
     required by California law) and automatically converts into Common Stock,
     on a share for share basis, upon the later to occur of FFO per common share
     aggregating $3.00 during any period of four consecutive calendar quarters
     or January 1, 2003. The financial condition of attaining FFO per common
     share was met on March 31, 2002, accordingly, on January 1, 2003, the Class
     B Common Stock will automatically convert into Common Stock on a share for
     share basis.

                                       21

<PAGE>

     Dividends
     ---------

              The following summarizes dividends during the six months ended
     June 30, 2002:

                                            Distributions Per
                                            Share or Depositary       Total
                                                  Share           Distributions
                                            -------------------  --------------
Preferred Stock:
Series A..............................             $1.250         $ 2,280,000
Series B..............................             $1.150           2,744,000
Series C..............................             $0.844           1,012,000
Series D..............................             $1.188           1,426,000
Series E..............................             $1.250           2,744,000
Series F..............................             $1.219           2,802,000
Series J..............................             $1.000           6,000,000
Series K..............................             $1.031           4,744,000
Series L .............................             $1.031           4,744,000
Series M..............................             $1.094           2,460,000
Series Q..............................             $1.075           7,418,000
Series R..............................             $1.000          20,400,000
Series S..............................             $0.984           5,660,000
Series T..............................             $0.868           5,211,000
Series U..............................             $0.688           4,131,000
                                                                 --------------
                                                                   73,776,000
Common Stock:
Equity Stock, Series A................             $1.225          10,751,000
Common................................             $0.900         104,012,000
Class B Common .......................             $0.873           6,111,000
                                                                 --------------
   Total dividends....................                           $194,650,000
                                                                 ==============

              The dividend rate on the Series T and the Series U preferred stock
     was prorated from January 18, 2002 and February 19, 2002, the respective
     dates of issuance, through June 30, 2002. The dividend rate on the Series C
     Preferred Stock for the second quarter of 2002 was equal to 6.75% per
     annum. The dividend rate per annum will be adjusted quarterly and will be
     equal to the highest of one of three U.S. Treasury indices (Treasury Bill
     Rate, Ten Year Constant Maturity Rate, or Thirty Year Constant Maturity
     Rate) multiplied by 110%. However, the dividend rate for any dividend
     period will neither be less than 6.75% per annum nor greater than 10.75%.
     The dividend rate for the quarter ending September 30, 2002 will be equal
     to 6.75% per annum.

9.   Segment Information
     -------------------

              In July 1997, the FASB issued Statement of Financial Accounting
     Standards No. 131, "Disclosures about Segments of an Enterprise and Related
     Information," which establishes standards for the way that public business
     enterprises report information about operating segments. This statement is
     effective for financial statements for periods beginning after December 15,
     1997. We adopted this standard effective for the year ended December 31,
     1998. For information regarding the description of each reportable segment,
     policies relating to the measurement of segment profit or loss, and segment
     assets, 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, 2001.

                                       22

<PAGE>

              The following table reconciles the performance of each segment, in
     terms of segment revenues, of our consolidated revenues.

<TABLE>
<CAPTION>
                                                      Three months ended                     Six months ended
                                                           June 30,                              June 30,
                                                    -----------------------              ------------------------
                                                       2002        2001        Change       2002         2001       Change
                                                    ----------- -----------  -----------  ----------- ----------- -----------
                                                                          (Dollar amounts in thousands)
RECONCILIATION OF REVENUES BY SEGMENT:
<S>                                                  <C>        <C>          <C>          <C>         <C>         <C>
Self-storage property rentals.....................   $ 188,687  $  179,086   $   9,601    $ 377,594   $ 350,915   $  26,679
Containerized storage.............................      12,758      12,183         575       24,457      22,256       2,201
Tenant re-insurance...............................       5,156           -       5,156        9,731           -       9,731
Commercial property rentals.......................       3,181       3,215         (34)       6,252       6,272         (20)
Other items not allocated to segments:
  Interest and other income.......................       2,759       3,130        (371)       4,467       6,738      (2,271)
                                                    ----------- -----------  -----------  ----------- ----------- -----------
      Total revenues.............................   $ 212,541   $  197,614   $  14,927    $ 422,501   $ 386,181   $  36,320
                                                    =========== ===========  ===========  =========== =========== ===========
</TABLE>

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

                                       23

<PAGE>

<TABLE>
<CAPTION>
                                                      Three months ended                     Six months ended
                                                           June 30,                              June 30,
                                                    -----------------------              ------------------------
                                                       2002        2001        Change        2002        2001       Change
                                                    ----------- -----------  -----------  ----------- ----------- -----------
                                                                          (Dollar amounts in thousands)

<S>                                                  <C>        <C>          <C>          <C>         <C>         <C>
RECONCILIATION OF NET INCOME BY SEGMENT:
Self-storage
------------
  Self-storage property net operating income......   $ 128,782  $  124,487   $   4,295    $ 259,094   $ 239,842   $  19,252
  Depreciation and amortization - self-storage....     (43,300)    (38,923)     (4,377)     (84,668)    (76,309)     (8,359)
  Equity in earnings - self-storage property
     operations...................................       1,806       5,691      (3,885)       3,900      10,848      (6,948)
  Equity in earnings - depreciation (self-storage)        (279)     (1,827)      1,548         (549)     (3,379)      2,830
                                                    ----------- -----------  -----------  ----------- ----------- -----------
      Total self-storage segment net income.......      87,009      89,428      (2,419)     177,777     171,002       6,775
                                                    ----------- -----------  -----------  ----------- ----------- -----------

Containerized storage
---------------------
  Containerized storage operations................       1,515       1,128         387        3,896       1,728       2,168
  Containerized storage depreciation..............      (2,051)     (1,739)       (312)      (3,952)     (3,266)       (686)
                                                    ----------- -----------  -----------  ----------- ----------- -----------
      Total containerized storage segment net
        income....................................        (536)       (611)         75          (56)     (1,538)      1,482
                                                    ----------- -----------  -----------  ----------- ----------- -----------
Tenant re-insurance...............................       2,633           -       2,633        4,915           -       4,915
-------------------                                 ----------- -----------  -----------  ----------- ----------- -----------

Commercial  properties
----------------------
  Commercial property net operating income........       2,051       2,333        (282)       4,008       4,440        (432)
  Depreciation and amortization - commercial
     properties...................................        (701)       (661)        (40)      (1,429)     (1,370)        (59)
  Equity in earnings - commercial property
     operations...................................      16,135      12,392       3,743       31,558      24,038       7,520
  Equity in earnings - depreciation (commercial
     property operations).........................      (6,246)     (4,112)     (2,134)     (12,347)     (7,835)     (4,512)
                                                    ----------- -----------  -----------  ----------- ----------- -----------
      Total commercial property segment net income      11,239       9,952       1,287       21,790      19,273       2,517
                                                    ----------- -----------  -----------  ----------- ----------- -----------

Other items not allocated to segments
-------------------------------------
  Equity in earnings - general and administrative
     and other....................................      (4,416)     (2,330)     (2,086)      (8,547)     (4,586)     (3,961)
  Interest and other income.......................       2,759       3,130        (371)       4,467       6,738      (2,271)
  General and administrative......................      (4,305)     (5,000)        695       (8,305)    (10,584)      2,279
  Interest expense................................      (1,213)     (1,124)        (89)      (2,315)     (2,095)       (220)
  Gain (loss) on sale of real estate investments,
     including the Company's share of
     PSB's gain on sale...........................      (1,839)          -      (1,839)         402       1,568      (1,166)
  Minority interest in income.....................     (10,613)    (11,672)      1,059      (21,955)    (23,370)      1,415
                                                    ----------- -----------  -----------  ----------- ----------- -----------
      Total other items not allocated to segments.     (19,627)    (16,996)     (2,631)     (36,253)    (32,329)     (3,924)
                                                    ----------- -----------  -----------  ----------- ----------- -----------
      Total net income ..........................    $  80,718  $   81,773   $  (1,055)   $ 168,173   $ 156,408   $  11,765
                                                    =========== ===========  ===========  =========== =========== ===========
</TABLE>

                                       24

<PAGE>

10.    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 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; no shares of restricted stock have been granted.

                In October 1995, the Financial Accounting Standards Board issued
       Statement No. 123 "Accounting for Stock-Based Compensation" ("FAS 123")
       which encourages, but does 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 could also elect the method prescribed by APB Opinion
       No. 25 (APB 25). APB Opinion No. 25 generally does not require the
       recognition of 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"). Companies that elected the APB 25 Method
       must make pro-forma disclosures of what net income and earnings per share
       would have been had the Fair Value Method been used.

                Until December 31, 2001, we elected to adopt the disclosure
       requirements of FAS 123 but continued to account for stock-based
       compensation under APB 25. As of January 1, 2002, we have adopted the
       Fair Value Method of accounting for stock options. As required by the
       transition requirements of FAS 123, we will recognize compensation
       expense in our income statement using the Fair Value Method only with
       respect to stock options issued after January 1, 2002, but continue to
       disclose the pro-forma impact of utilizing the Fair Value Method on stock
       options issued prior to January 1, 2002.

                Included in the Company's income statement for the six months
       ended June 30, 2002 is approximately $58,000 in stock option compensation
       expense related to options granted after January 1, 2002. With respect to
       stock options granted prior to December 31, 2001, the Company would have
       reported net income of approximately $166,134,000 and $154,401,000 for
       the six months ended June 30, 2002 and 2001, respectively, and reported
       diluted earnings per share of $0.66 and $0.71, respectively, had we
       utilized the Fair Value Method for options granted prior to December 31,
       2001.

                                       25

<PAGE>

11.    Legal Matters
       -------------

                HENRIQUEZ V. PUBLIC STORAGE, INC. (FILED JUNE 2002). The
       plaintiff in this case is suing the Company on behalf of a purported
       class of renters who rented self-storage units from the Company.
       Plaintiff alleges that the Company misrepresents the size of its units
       and seeks damages and injunctive and declaratory relief under California
       statutory and common law relating to consumer protection, unfair
       competition, fraud and deceit and negligent misrepresentation. The
       Company does not currently believe that the outcome of this litigation
       will have any material adverse effect. However, the Company cannot
       presently determine the potential total damages, if any, or the ultimate
       outcome of the litigation. The Company intends to vigorously contest the
       claims in this case.

                                       26

<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 described herein in Item 2A, "Risk
Factors", include the impact of competition from new and existing storage and
commercial facilities which could impact rents and occupancy levels at the
Company's facilities; the risk of terrorist attacks; the Company's ability to
evaluate, finance, and integrate acquired and developed properties into the
Company's existing operations; the Company's ability to effectively compete in
the markets in which it does business; 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; the acceptance by
consumers of the containerized storage concept; the impact of general economic
conditions upon rental rates and occupancy levels at the Company's facilities;
and the availability of permanent capital at attractive rates.

         CRITICAL ACCOUNTING POLICIES

         QUALIFICATION AS A REIT -INCOME TAX EXPENSE: We believe that we have
been organized and operated, and we intend to continue to operate, as a
qualifying 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 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 the Company's
assets consist of long-lived assets, including real estate, the assets
associated with the containerized storage business, goodwill, and other
intangible assets. We quarterly evaluate our long-lived assets for impairment.
The Company has determined at December 31, 2001 that no such impairments existed
and, accordingly, no impairment charges have been recorded. No further
indicators of impairment have been detected since December 31, 2001. Future
events could cause us to conclude that our long-lived assets are impaired. Any
resulting impairment loss could have a material adverse impact on our financial
condition and results of operations.

         ESTIMATED USEFUL LIVES OF LONG-LIVED ASSETS: Substantially all of the
Company's 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 obsolescense or other factors, could have a material
adverse impact on our financial condition or results of operations.

                                       27

<PAGE>

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

         Net income for the three months ended June 30, 2002 was $80,718,000
compared to $81,773,000 for the same period in 2001, representing a decrease of
$1,055,000 or 1.3%. The decrease in net income was primarily the result of a
decrease in property operations for the stabilized facilities in which the
Company had an interest, a loss on disposition of real estate investments, and
increased depreciation expense resulting primarily from newly developed and
acquired facilities. The impact of these items was partially offset by earnings
generated by the acquisition of additional real estate investments during 2001
and 2002, the earnings generated by the acquisition of the tenant reinsurance
business, and a decrease in income allocated to minority interests due to the
repurchase of preferred operating partnership units during 2001.

         Net income allocable to our regular common shareholders (after
allocating net income to our preferred and Equity Stock, Series A shareholders),
was $37,406,000 or $0.30 per common share on a diluted basis (based on
124,824,000 weighted average diluted common equivalent shares) for the three
months ended June 30, 2002 compared to $47,723,000 or $0.39 per common share on
a diluted basis (based on 121,639,000 weighted average diluted common equivalent
shares) for the same period in 2001, representing a decrease of 21.6% in the
aggregate or 23.1% on a per share basis.

         Weighted average diluted shares increased from 121,639,000 for the
three months ended June 30, 2001 to 124,824,000 for the three months ended June
30, 2002 due primarily to a share increase of approximately 1,098,000 in the
dilutive impact of employee stock options outstanding computed using the
treasury stock method, the issuance of approximately 1,138,733 shares on
December 31, 2001 in connection with the acquisition of the tenant reinsurance
business and the issuance of 533,796 shares in April 2002 in connection with the
acquisition of partnership interests.

         During the three months ended June 30, 2002 and 2001, we allocated
$37,936,000 and $28,736,000 of our net income (based on distributions paid),
respectively, to our preferred shareholders, representing an increase of 32.0%.
This increase is due to additional issuances of preferred stock in both the
first quarter of 2002 and throughout 2001, offset partially by the retirement of
several series of our higher coupon preferred stock in 2001. In addition, during
the three months ended June 30, 2002 and 2001, we allocated $5,376,000 and
$5,314,000 of our net income, respectively, to our Equity Stock, Series A
shareholders, representing an increase of 1.2%.

         Net income for the six months ended June 30, 2002 was $168,173,000
compared to $156,408,000 for the same period in 2001, representing an increase
of $11,765,000 or 7.5%. The increase in net income was primarily the result of
the earnings generated by the acquisition of additional real estate investments
during 2001 and 2002, the earnings generated by the acquisition of the tenant
reinsurance business in 2001, reduced general and administrative expense, and a
decrease in income allocated to minority interests due to the repurchase of
preferred operating partnership units during 2001. The impact of these items was
partially offset a decrease in property operations for the stabilized facilities
in which the Company had an interest 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 Stock, Series A shareholders),
was $83,646,000 or $0.67 per common share on a diluted basis (based on
124,417,000 weighted average diluted common equivalent shares) for the six
months ended June 30, 2002 compared to $90,870,000 or $0.73 per common share on
a diluted basis (based on 125,130,000 weighted average diluted common equivalent
shares) for the same period in 2001, representing a decrease of 7.9% in the
aggregate or 8.2% on a per share basis.

         Weighted average diluted shares outstanding decreased from 125,130,000
for the six months ended June 30, 2001 to 124,417,000 for the six months ended
June 30, 2002, which includes the impact of share repurchases offset partially
by an increase in the dilutive impact of stock options outstanding, the issuance
of approximately 1,138,733 shares on December 31, 2001 in connection with the
acquisition of the tenant reinsurance business and the issuance of 533,796
shares in April 2002 in connection with the acquisition of partnership
interests.

                                       28

<PAGE>

         During the six months ended June 30, 2002 and 2001, we allocated
$73,776,000 and $56,772,000 of our net income (based on distributions paid),
respectively, to our preferred shareholders, representing an increase of 30.0%.
This increase is due to additional issuances of preferred stock in both the
first quarter of 2002 and throughout 2001, offset partially by the retirement of
several series of our higher coupon preferred stock in 2001. In addition, during
the six months ended June 30, 2002 and 2001, we allocated $10,751,000 and
$8,766,000 of our net income, respectively, to our Equity Stock, Series A
shareholders, representing an increase of 22.6%. This increase is due to
additional issuance of Equity Stock, Series A in 2001.

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

         SELF - STORAGE OPERATIONS: Our self-storage operations are by far the
largest component of our operations, representing approximately 89% of our total
revenues generated during the first six months of 2002. As a result of
significant 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) 1,154
self-storage facilities that are reflected in the financial statements on a
stabilized basis since January 1, 2000 (the "Consistent Group"), (ii) 107
facilities that were acquired after January 1, 2000 and were owned at June 30,
2002 (the "Acquired Facilities"), (iii) 38 facilities that were owned prior to
January 1, 2000 but were not stabilized (the "Expansion Facilities"), (iv) 62
development facilities that were opened after January 1, 1998 (the "Developed
Facilities") and (v) a facility that was disposed of since January 1, 2001 (the
"Disposed Facility"):

<TABLE>
<CAPTION>
Self - storage operations summary:                      Three months ended June 30,              Six months ended June 30,
----------------------------------                   ------------------------------------   ------------------------------------
                                                                              Percentage                              Percentage
                                                        2002          200       Change         2002          2001       Change
                                                     -----------   ---------- -----------   -----------   ---------- -----------
                                                                            (Dollar amounts in thousands)
<S>                                                  <C>           <C>           <C>        <C>            <C>             <C>
Rental income (a):
   Consistent Group (b)................              $  160,302    $ 166,941     (4.0)%     $ 322,815      $ 327,449       (1.4)%
   Acquired Facilities (c).............                  18,231        4,685    289.1%         34,880           9,215     278.5%
   Expansion Facilities (d)............                   4,498        4,107      9.5%          9,076           8,582       5.8%
   Developed Facilities (e)............                   5,656        3,176     78.1%         10,823           5,319     103.5%
   Disposed Facility (f)...............                       -          177   (100.0)%             -             350    (100.0)%
                                                     -----------   ---------- -----------   -----------   ---------- -----------
     Total rental income...............                 188,687      179,086      5.4%        377,594         350,915       7.6%
                                                     -----------   ---------- -----------   -----------   ---------- -----------

Cost of operations:
   Consistent Group....................                  49,740       47,607      4.5%         98,765          97,619       1.2%
   Acquired Facilities.................                   5,572        1,002    456.1%         10,493           3,094     239.1%
   Expansion Facilities................                   1,653        2,784    (40.6)%         3,317           4,839     (31.5)%
   Developed Facilities................                   2,940        3,116     (5.6)%         5,925           5,341      10.9%
   Disposed Facility...................                       -           90   (100.0)%             -             180    (100.0)%
                                                     -----------   ---------- -----------   -----------   ---------- -----------
   Total cost of operations............                  59,905       54,599      9.7%        118,500         111,073       6.7%
                                                     -----------   ---------- -----------   -----------   ---------- -----------

Net operating income (before depreciation):
   Consistent Group....................                 110,562      119,334     (7.4)%       224,050         229,830      (2.5)%
   Acquired Facilities.................                  12,659        3,683    243.7%         24,387           6,121     298.4%
   Expansion Facilities................                   2,845        1,323    115.0%          5,759           3,743      53.9%
   Developed Facilities................                   2,716           60     NA             4,898             (22)     NA
   Disposed Facility...................                       -           87   (100.0)%             -             170    (100.0)%
                                                     -----------   ---------- -----------   -----------   ---------- -----------
   Total net operating income..........                 128,782      124,487      3.5%        259,094         239,842       8.0%

 Depreciation..........................                  43,300       38,923     11.2%         84,668          76,309      11.0%
                                                     -----------   ---------- -----------   -----------   ---------- -----------
   Operating Income....................               $  85,482    $  85,564     (0.1)%     $ 174,426      $ 163,533        6.7%
                                                     ===========   ========== ===========   ===========   ========== ===========

Number of self-storage facilities (at end of
period):...............................                   1,361        1,262      7.8%          1,361          1,262       7.8%
Net rentable square feet (at end of period - in
thousands):............................
                                                         82,597       76,365      8.2%         82,597         76,365       8.2%
</TABLE>
                                       29

<PAGE>

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

(b)  The Consistent Group includes 1,154 facilities with 67,126,000 net rentable
     square feet that were owned and operated at a mature, stabilized occupancy
     level since January 1, 2000. See below for discussion of Consistent Group
     operating results.

(c)  The Acquired Facilities includes 107 facilities with 6,305,000 net rentable
     square feet that were acquired through business combinations or from third
     parties after January 1, 2000 and still owned as of June 30, 2002.
     Substantially all of these facilities were mature, stabilized facilities at
     the time of their acquisition.

(d)  The Expansion Facilities includes 38 facilities with 4,425,000 net rentable
     square feet that, while owned for the periods presented, had operating
     results that were not comparable due 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. We completed construction on projects with a total cost of
     $16,009,000 in the first six months of 2002, $84,948,000 in the year ended
     December 31, 2001, and $12,206,000 in the year ended December 31, 2000 with
     respect to these expansions

(e)  The Developed Facilities includes 62 facilities with 4,741,000 net rentable
     square feet that were developed and opened since January 1, 1998 at a total
     cost of $394.8 million. These facilities were all still owned as of June
     30, 2002.

(f)  The Disposed Facility includes a facility that was disposed of during 2001,
     after being condemned by a government agency.

SELF - STORAGE OPERATIONS - CONSISTENT GROUP OF FACILITIES

         At June 30, 2002, we owned 1,154 facilities with approximately
67,126,000 net rentable square feet that operated at a stabilized level of
operations since January 1, 2000.

         We have increased the number of facilities included in the Consistent
Group of Facilities from 909 at December 31, 2001 to 1,154 facilities. As a
result of the change in the Consistent Group of Facilities, the relative
weighting of markets has changed. Accordingly, comparisons should not be made
between information presented prior to 2002 for the Consistent Group of
Facilities of 909 facilities and this current pool of 1,154 facilities in order
to identify trends in occupancies, realized rents per square foot, or operating
results.

         Revenues and expenses with respect to the Consistent Group properties
are set forth in the above Self-Storage Operations table. The following table
sets forth additional operating data with respect to the Consistent Group of
facilities:

<TABLE>
<CAPTION>
SELECTED OPERATING DATA FOR THE
CONSISTENT GROUP OF FACILITIES (1,154
FACILITIES):                                  Three months ended June 30,         Six months ended June 30,
------------                                 -------------------------------    -------------------------------
                                                                 Percentage                         Percentage
                                               2002       2001     Change         2002       2001     Change
                                             --------   -------- ----------     --------   -------- ----------
                                                (Dollar amounts in thousands, except rents per square foot)
<S>                                            <C>        <C>        <C>          <C>       <C>         <C>
Weighted average:
   Occupancy (a).........................      86.3%      90.0%      (3.7)%       84.9%     89.0%       (4.1)%
   Realized annual rent per square foot      $ 11.07    $ 11.05       0.2%      $ 11.32   $ 10.96        3.3%
(b)......................................

Late charges and administrative fees.....    $ 5,161    $ 5,774     (10.6)%     $10,222   $ 11,572     (11.7)%
Promotional Discounts....................    $ 5,226    $ 1,835     184.8%      $ 6,225   $  4,468      39.3%

Gross margin.............................      69.0%      71.5%      (2.5)%       69.4%     70.2%       (0.8)%

</TABLE>

(a)  Occupancies in the above table represent weighted average occupancy levels
     over the entire three and six month periods. Comparisons should not be made
     between the occupancies of this Consistent Group of Facilities of 1,154
     facilities and the occupancies for the 909 Consistent Group of Facilities
     presented previously in order to evaluate trends in occupancies.

(b)  Realized annual rent per square foot is computed by dividing annualized
     rental income, including late charges and administrative fees, by the
     weighted average occupied square footage for the period.

                                       30

<PAGE>

         The Consistent Group's net operating income decreased 7.4% in the
quarter ended June 30, 2002 as compared to the same period in 2001. The decrease
was due to a decrease of 4.0% in rental income combined with an increase of 4.5%
in cost of operations. The 4.0% decrease in rental income for the second quarter
is attributable to a 3.7% decrease in the weighted average occupancy level
offset partially by a 0.2% increase in realized annual rent per square foot.

         During each of 1999 and 2000, the Consistent Group of facilities'
occupancy levels averaged approximately 92% and 91%, respectively. These
relatively high occupancy levels were attained and sustained through a variety
of promotional activities offering new tenants move-in discounts aggregating
approximately $18 million per year. During 2001, the Company changed its
marketing strategy to aggressively increase rental rates and reduce the amount
of discounts offered at the risk of lower occupancy levels. As a result of this
strategy, rental income for 2001 was approximately 6.9% higher than the prior
year. However, this improvement in rental income came at the expense of
declining occupancy levels in 2001. During the first nine months of 2001,
average occupancy levels were approximately 1.9% below those of 2000 for the
same period, which we believed to be a manageable reduction. However, during the
fourth quarter of 2001 and through February 2002 there was a rapid decline in
occupancy levels which caused the year-over-year reduction to increase to 4.7%
as of the end of February 2002. This reduction in occupancy level coincided with
a reduction in call volume to our national telephone reservation center. We
believe that these reductions were attributable to the absence of any
significant discounts offered to tenants, as well as to general economic
conditions.

         In the second half of March 2002, we reduced rental rates charged to
new incoming tenants and began a national television campaign. The national
television campaign, which offered a significant promotional discount, was run
from the second half of March 2002 through the first half of May 2002, resulting
in increased move-in activity during April and May 2002 compared to the prior
year. However, in the absence of significant promotional discounts from mid-May
through the end of July 2002, rental activity during June and July decreased and
the occupancy level at July 31, 2002 for the Consistent Group of facilities was
approximately 5.5% less than at July 31, 2001.

         During the third quarter of 2002, we have reinstated a discount program
and we are advertising on television in selected markets in an effort to enhance
move-in activity and improve occupancy levels. The up front cost of these
marketing activities are expected to adversely impact the Company's net
operating income during the third quarter of 2002. No assurance can be provided
as to the impact of these efforts on our realized rents, occupancy levels, or
net income of the Company.

         Cost of operations includes all direct and indirect costs of operating,
marketing and managing the facilities. The following table summarizes major
operating expenses with respect to the Consistent Group (dollar amounts in
thousands):

<TABLE>
<CAPTION>
                                            Three months ended June 30,                Six months ended June 30,
                                        ------------------------------------      ---------------------------------------
                                                                  Percentage                                   Percentage
                                           2002          2001       Change          2002            2001         Change
                                        ----------     ---------- ----------      ----------     ----------    ----------
<S>                                     <C>            <C>             <C>        <C>             <C>              <C>
Property payroll expense..........      $  14,385      $ 13,180        9.1%       $   28,639      $  27,021        6.0%
Property taxes....................         13,880        13,350        4.0%           29,307         28,223        3.8%
Repairs and maintenance...........          3,501         3,943      (11.2)%           6,224          7,412      (16.0)%
Advertising and promotion.........          4,088         3,956        3.3%            6,715          6,554        2.5%
Telephone reservation center costs          2,343         2,395       (2.2)%           4,410          5,143      (14.3)%
Management, office, insurance,
utilities, and other expenses ....         11,543        10,783        7.0%           23,470         23,266        0.9%
                                        ----------     ---------- ----------      ----------     ----------    ----------
  Total cost of operations .......      $  49,740      $ 47,607        4.5%       $   98,765      $  97,619        1.2%
                                        ==========     ========== ==========      ==========     ==========    ==========
</TABLE>

         Increases in property payroll expense for the three and six months
ended June 30, 2002 as compared to the same periods in 2001 are due primarily to
increased compensation to property managers and supervisory personnel. Included
in advertising and promotion is $1,383,000 and $904,000 in television
advertising for the three months ended June 30, 2002 and 2001, respectively; and
$1,930,000 and $904,000 in television advertising for the six months ended June
30, 2002 and 2001, respectively.

                                       31

<PAGE>

SELF-STORAGE OPERATIONS - ACQUIRED FACILITIES

         As of June 30, 2002, we had 107 facilities with 6,305,000 net rentable
square feet that we acquired in 2000, 2001 and the first half of 2002 in
connection with third-party acquisitions and business combinations. The
operations of these facilities are included in the above table under the caption
"Acquired Facilities."

         In August 2001, we acquired one operating self-storage facility for an
aggregate cost of $3,503,000. Included in the table above, is rental income and
cost of operations of $105,000 and $35,000, respectively, for the three months
ended June 30, 2002 and $200,000 and $74,000, respectively, for the six months
ended June 30, 2002, with respect to this facility.

         During 2002, we acquired 47 self-storage facilities in connection with
the acquisition of the Development Joint Venture (described in Note 3 to the
Company's financial statements). Included in the table above, is rental income
and cost of operations of $8,588,000 and $2,874,000, respectively, for the three
months ended June 30, 2002 and $15,344,000 and $5,016,000, respectively, for the
six months ended June 30, 2002, with respect to these facilities, representing
the operating results of these properties from January 16, 2002 through June 30,
2002.

         Effective January 1, 2002, we began consolidating the accounts of two
partnerships (described in Note 3 to the Company's financial statements) owning
31 self-storage facilities. Included in the table above, is rental income and
cost of operations of $4,514,000 and $1,000,000, respectively, for the three
months ended June 30, 2002 and $9,395,000 and $2,178,000, respectively, for the
six months ended June 30, 2002, with respect to these facilities.

         During the first half of 2002, we acquired three additional
self-storage facilities, in separate transactions, for an aggregate cost of
$7,936,000. Included in the table above, is rental income and cost of operations
of $176,000 and $78,000, respectively, for the three months ended June 30, 2002
and $282,000 and $135,000, respectively, for the six months ended June 30, 2002,
with respect to these facilities.

         Rental income and cost of operations for the Acquired Facilities
increased significantly in the first half of 2002 as compared to the same period
in 2001 due to the aforementioned acquisitions of facilities.

SELF-STORAGE OPERATIONS - EXPANSION FACILITIES

         Throughout the three-year period ended December 31, 2001, the Company
has expanded certain real estate facilities that it previously owned or
converted them to facilities that combine self-storage and containerized storage
at the same location ("Combination Facilities"). Such construction activities
can cause a drop in revenue levels, as existing capacity is made unavailable in
order to accommodate construction activities. Primarily as a result of these
expansion activities, 38 of these facilities with 4,425,000 net rentable square
feet at June 30, 2002 (which includes the expanded space that has been
completed) had results that were not comparable. The operating results for these
facilities are presented in the Self-Storage Operations table above under the
caption, "Expansion Facilities." We completed construction on projects with a
total cost of $16,009,000 in the first half of 2002, $84,948,000 in the year
ended December 31, 2001, and $12,206,000 in the year ended December 31, 2000
with respect to these expansions.

SELF-STORAGE OPERATIONS - DEVELOPED FACILITIES

         Since January 1, 1998, we have opened 62 newly developed self-storage
facilities with 4,741,000 net rentable square feet and a total cost of
approximately $394.8 million. These facilities' operating results are reflected
in the Self-storage Operations table under the caption, "Developed Facilities."

         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 operation the facility is
entirely vacant generating no rental income. It has generally taken
approximately 24 months for a newly developed facility to fill up and reach a
targeted occupancy level of approximately 90% (the "Stabilization Period").
However, we believe that for the same reasons that our consistent group of
facilities' occupancies have declined in the first six months of 2002 relative
to the prior year, the rate of fill-up of our newly developed facilities has
likewise declined. At June 30, 2002, the Developed Facilities had an average
occupancy level of approximately 56%.

                                       32

<PAGE>

         Property operating expenses are substantially fixed. The rental revenue
of a newly developed facility will generally not cover its property operating
expenses (excluding depreciation) until the facility has reached an occupancy
level of approximately 30%. However, at that occupancy level, the rental
revenues from the facility are still not sufficient to cover related
depreciation expense and cost of capital with respect to the facility's
development cost (our blended cost of capital is approximately 9.0%). During
construction of the 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 operation 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 as a
result of our development activities by approximately $13,593,000 and
$12,221,000 for the six months ended June 30, 2002 and 2001 and $7,415,000 and
$5,487,000 for the three months ended June 30, 2002 and 2001, primarily
representing the difference between the revenues of the Developed Facilities and
the related costs denoted above. These amounts include depreciation expense of
approximately $3,585,000 and $2,683,000 for the six months ended June 30, 2002
and 2001, respectively and $1,971,000 and $1,167,000 for the three months ended
June 30, 2002 and 2001, respectively.

         We continue to develop facilities, despite the short-term earnings
dilution experienced during the Stabilization Period and recent occupancy
declines in 2002 relative to 2001, because we believe that the ultimate returns
on developed facilities are favorable. In addition, we believe that it is
advantageous for us to continue to expand our asset base and benefit from the
resultant increased critical mass, with facilities that will improve our
portfolio's overall average construction and location quality.

         We expect that over at least the next 24 months, the Developed
Facilities will continue to have a negative impact to our earnings. Furthermore,
the 37 facilities in our development pipeline described in "Liquidity and
Capital Resources - Acquisition and Development of Facilities" that will be
opened for operation over the next 12 - 24 months will also negatively impact
our earnings until they reach a stabilized occupancy level.

         COMMERCIAL PROPERTY OPERATIONS: Commercial property operations included
in the consolidated financial statements include commercial space owned by the
Company and Consolidated Entities, comprised of five wholly-owned commercial
facilities, as well as a portion of certain facilities that combine self-storage
and commercial space at the same location. 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" in our
condensed consolidated statements of income.

         The following table sets forth the historical commercial property
amounts included in the financial statements. We have owned substantially all of
these facilities on a stabilized basis since January 1, 2001.

<TABLE>
<CAPTION>
COMMERCIAL PROPERTY OPERATIONS              Three months ended June 30,             Six months ended June 30,
------------------------------           ---------------------------------      ---------------------------------
                                                                Percentage                             Percentage
                                           2002         2001      Change          2002         2001      Change
                                         ---------    --------  ----------      ---------    --------  ----------
                                                                 (Amounts in thousands)
<S>                                      <C>          <C>           <C>         <C>           <C>          <C>
Rental income....................        $  3,181     $  3,215      (1.1)%      $  6,252      $ 6,272     (0.3)%
Cost of operations...............           1,130          882      28.1%          2,244        1,832     22.5%
Net operating income prior to
  depreciation...................           2,051        2,333     (12.1)%         4,008        4,440     (9.7)%
Depreciation.....................           (701)         (661)      6.1%         (1,429)      (1,370)     4.3%
                                         ---------    --------  ----------      ---------    --------  ----------
Net income.......................        $  1,350     $  1,672     (19.3)%      $  2,579      $ 3,070    (16.0)%
                                         =========    ========  ==========      =========    ========  ==========
</TABLE>

         CONTAINERIZED STORAGE FACILITIES OPERATIONS: At June 30, 2002, Public
Storage Pickup and Delivery ("PSPUD") operated 51 facilities. PSPUD incurred
operating losses of $536,000 and $56,000 in the three and six months ended June
30, 2002, respectively, as compared to operating losses of $611,000 and
$1,538,000 in the same period in 2001, summarized as follows:

                                       33

<PAGE>

<TABLE>
<CAPTION>
CONTAINERIZED STORAGE FACILITIES          Three months ended June 30,             Six months ended June 30,
--------------------------------         ---------------------------------      ---------------------------------
                                           2002         2001      Change          2002         2001      Change
                                         ---------    --------  ----------      ---------    --------  ----------
                                                                 (Amounts in thousands)
<S>                                      <C>          <C>         <C>           <C>           <C>       <C>
Rental and other income                  $ 12,758     $ 12,183    $   575       $ 24,457      $22,256   $  2,201
Cost of Operations:
  Direct operating costs.........          10,279        9,460        819         18,520        17,141     1,379
  Facility lease expense.........             964        1,595       (631)         2,041         3,387     1,346
                                         ---------    --------  ----------      ---------    --------  ----------
     Total cost of operations....          11,243       11,055        188         20,561        20,528        33
Operating income prior to
  depreciation...................           1,515        1,128        387          3,896         1,728     2,168
Depreciation (a).................         (2,051)      (1,739)       (312)       (3,952)       (3,266)      (686)
                                         ---------    --------  ----------      ---------    --------  ----------
Operating income (loss)..........        $  (536)     $  (611)    $    75       $   (56)      $(1,538)  $  1,482
                                         =========    ========  ==========      =========    ========  ==========
</TABLE>

 (a) Depreciation for the three and six months ended June 30, 2002 includes
     $437,000 and $725,000, respectively, as compared to $189,000 and $377,000
     for the same periods in 2001, with respect to real estate assets.

         For the three months ended June 30, 2002 PSPUD's operating loss
decreased to $536,000 from $611,000 for the same period in 2001. For the six
months ended June 30, 2002, PSPUD's operating loss decreased to $56,000 from
$1,538,000 for the same period in 2001. These improvements primarily include
lower facility lease expense and higher rental and other income as denoted in
the table above, offset by $1,020,000 in direct operating expenses relating to
container obsolescence for the three months ended June 30, 2002.

         The decrease in facility lease expense for the three and six months
ended June 30, 2002 as compared to the same periods in 2001 is attributable to
our development of facilities that combine self-storage and containerized
storage space in the same location ("Combination Facilities"), with certain
leased facilities being replaced by wholly-owned facilities. As a result of the
opening of these newly developed combination facilities throughout 2001 and
2002, the number of leased facilities decreased from 25 at December 31, 2000 to
15 at June 30, 2002.

         No assurance can be made regarding PSPUD's level of gross rentals,
level of move-outs, or ongoing profitability.

         TENANT REINSURANCE OPERATIONS: As previously announced, on December 31,
2001, the Company acquired PS Insurance Company, Ltd. ("PS Insurance").
Effective January 1, 2002, the operations of PS Insurance are included in the
income statement under "Revenues - tenant reinsurance" and "Cost of operations -
tenant reinsurance." The tenant reinsurance business earned $5,156,000 and
$9,731,000 in revenues for the three and six months ended June 30, 2002,
respectively, and incurred $2,523,000 and 4,816,000 in expenses, respectively,
for a net operating profit of $2,633,000 and $4,915,000, respectively.

         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 eight limited partnerships at June 30, 2002. PSB and the limited
partnerships are collectively referred to as the "Unconsolidated Entities." Due
to our limited ownership interest and 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 consists of our pro rata
share of the Unconsolidated Entities net income based upon our ownership
interest for the period. Similar to the Company, the Unconsolidated Entities
(other than PSB) generate substantially all of their income from their ownership
of self-storage facilities, which we manage. PSB is an equity real estate
investment trust specializing in the ownership, management, acquisition,
development and redevelopment of business parks containing principally office
"flex" space. In the aggregate, at June 30, 2002 the Unconsolidated Entities own
a total of 36 storage facilities and PSB has interest 14.8 million net rentable
square feet of commercial space located in nine states. See Note 5 to the
Company's June 30, 2002 financial statements for further discussion of the
nature and operating results of the Unconsolidated Entities. The following table
sets forth the significant components of equity in earnings of real estate
entities:

                                       34

<PAGE>

<TABLE>
<CAPTION>
HISTORICAL SUMMARY
------------------                   Three months ended                       Six months ended
                                          June 30,                                June 30,
                                   ------------------------    Dollar      -----------------------    Dollar
                                      2002         2001        Change        2002         2001        Change
                                   ----------    ----------  -----------   ----------   ----------   ----------
                                                             (Amounts in thousands)
<S>                                <C>           <C>          <C>          <C>          <C>          <C>
Property operations:
  PSB........................      $  16,135     $  12,392    $   3,743    $  31,558    $  24,038    $   7,520
  Other investments held at
     June 30, 2002, primarily
     self-storage............          1,806         1,681          125        3,612        3,166          446
   Newly Consolidated
   Investments (1)...........              -         4,010       (4,010)         288        7,682       (7,394)
                                   ----------    ----------  -----------   ----------   ----------   ----------
                                      17,941        18,083         (142)      35,458       34,886          572
                                   ----------    ----------  -----------   ----------   ----------   ----------

Depreciation:
  PSB........................         (6,246)       (4,112)      (2,134)     (12,347)      (7,835)      (4,512)
  Other investments held at
     June 30, 2002, primarily
     self-storage............           (279)         (427)         148         (484)        (567)          83
   Newly Consolidated
   Investments (1)...........              -        (1,400)       1,400          (65)      (2,812)       2,747
                                   ----------    ----------  -----------   ----------   ----------   ----------
                                      (6,525)       (5,939)        (586)     (12,896)     (11,214)      (1,682)
                                   ----------    ----------  -----------   ----------   ----------   ----------

Other: (2)
  PSB (3)....................         (4,674)       (2,404)      (2,270)      (6,882)      (4,542)      (2,340)
  Other investments held at
     June 30, 2002, primarily
     self-storage............            258           172           86          576          192          384
   Newly Consolidated
   Investments (1)...........              -           (98)          98            -         (236)         236
                                   ----------    ----------  -----------   ----------   ----------   ----------
                                      (4,416)       (2,330)      (2,086)      (6,306)      (4,586)      (1,720)
                                   ----------    ----------  -----------   ----------   ----------   ----------

Total equity in earnings of
real estate entities.........      $   7,000     $   9,814   $   (2,814)   $  16,256    $  19,086    $  (2,830)
                                   ==========    ==========  ===========   ==========   ==========   ==========
</TABLE>


(1)  Amounts include equity in earnings recorded for the Development Joint
     Venture and two additional partnerships prior to their respective dates of
     consolidation (see Note 3 to the Company's June 30, 2002 Financial
     Statements for further discussion).

(2)  "Other" reflects our share of general and administrative expense, interest
     expense, interest income, and other non-property, non-depreciation related
     operating results of these entities.

(3)  Amounts for the six months ended June 30, 2002 for PSB include our pro-rata
     share of a gain on sale recorded by PSB in the amount of $2,241,000.

         The decrease in equity in earnings of real estate entities is due
primarily to a decrease of $2,512,000 and $4,411,000 for the three and six
months ended June 30, 2002, respectively, caused by the consolidation of the
Development Joint Venture and two additional partnerships (as discussed in Note
3 to the Company's financial statements), partially offset by our pro-rata share
of PSB's gain on sale of real estate investments totaling $2,241,000.

         On January 16, 2002, we acquired our Partner's 70% ownership interest
in the Development Joint Venture. 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. Effective January 1, 2002 (see Note 3 to the Company's financial
statements), we began consolidating the operating results of two other
partnerships and no longer record equity in these entity's earnings with respect
to our investments in these partnerships. Our earnings with respect to these
investments is included in the table above in the line "Disposed Investments."
No further equity in earnings will be recorded with respect to these
partnerships for periods after their respective dates of consolidation.

                                       35

<PAGE>

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 decreased in the three and six months
ended June 30, 2002 as compared to the same period in 2001 primarily as a result
of lower interest rates earned on outstanding invested cash balances.

         This decrease also includes a reduction in property management
operations. Beginning in the first quarter of 2002, the Company began
consolidating the operations of the Development Joint Venture and two other
partnerships, as described in Note 3 to the Company's financial statements. As a
result, property management operations with respect to the 78 self-storage
properties owned by these entities will no longer be recorded after their
respective dates of consolidation. At June 30, 2002, the Company manages 31
facilities for third parties and 36 facilities on behalf of the Unconsolidated
Entities for a fee, and the net results of these operations are included in
"Interest and Other Income."

         DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense
has increased $4,729,000 to $46,052,000 for the three months ended June 30, 2002
as compared to $41,323,000 for the same period in 2001. Depreciation and
amortization expense has increased $9,104,000 to $90,049,000 for the six months
ended June 30, 2002 as compared to $80,945,000 for the same period in 2001.
These increases are principally due to the acquisition and development of
additional real estate facilities during 2001 and 2002. Amortization expense
with respect to intangible assets and goodwill totaled $1,651,000 and $2,328,000
for the three months ended June 30, 2002 and 2001, respectively. Amortization
expense with respect to intangible assets totaled $3,302,000 and $4,656,000 for
the six months ended June 30, 2002 and 2001, respectively. Included in
depreciation and amortization expense for the three months ended June 30, 2002
and 2001 is $1,614,000 and $1,550,000, respectively, and $3,227,000 and
$2,889,000 for the six months ended June 30, 2002 and 2001, respectively, of
depreciation of furniture, fixtures, and equipment of the containerized storage
business.

         GENERAL AND ADMINISTRATIVE: General and administrative expense for the
three months ended June 30, 2002 decreased to $4,305,000 as compared to
$5,000,000 for the same period in 2001. General and administrative expense for
the six months ended June 30, 2002 decreased to $8,305,000 as compared to
$10,584,000 for the same period in 2001. 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, and overhead associated with the containerized storage business. The
decrease in general and administrative expense is due to decreased expenses
associated with lease terminations on leased containerized storage facilities
which were replaced by newly-developed facilities, decreased severance costs,
and decreased overhead relating to the development of self-storage facilities,
offset by increases in other areas. These three areas accounted for an
approximately $746,000 and $2,683,000 decrease in general and administrative
costs for the three and six months ended June 30, 2002, respectively as compared
to the same period last year.

         Beginning January 1, 2002, the Company expenses the fair value of stock
options in accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("FAS 123"). As indicated by FAS 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 the
Company's general and administrative expense was approximately $58,000 for the
three and six months ended June 30, 2002. Based upon stock options granted
between January 1, 2002 and June 30, 2002, the total expected annual expense is
approximately $166,000. In addition, pro-forma disclosures of the impact of
stock options issued prior to January 1, 2002 (which are not expensed on the
Company's income statement per the transition provisions of FAS 123) are
presented in the Company's notes to the financial statements.

                                       36

<PAGE>

         INTEREST EXPENSE: Interest expense was $1,213,000 and $1,124,000 for
the three months ended June 30, 2002 and 2001, respectively, and $2,315,000 and
$2,095,000 for the six months ended June 30, 2002 and 2001, respectively.
Capitalized interest expense $1,426,000 and $2,109,000 for the three months
ended June 30, 2002 and 2001, respectively, and $3,272,000 and $4,219,000 for
the six months ended June 30, 2002 and 2001, respectively. In addition, the
Company incurred $412,000 in interest on borrowing on its line of credit in the
six months ended June 30, 2002 as compared to $189,000 for the same period in
2001. The increase in interest expense in 2002 compared to 2001 is principally
the result of a reduction in the amount of capitalized interest and an increase
in interest expense on the Company's line of credit, offset by lower interest
expense on notes payable due to principal payments.

         MINORITY INTEREST IN INCOME - PREFERRED PARTNERSHIP INTERESTS: Minority
interest in income - preferred partnership interests represents the income
allocable to holders of our preferred partnership units. During 2000, one of our
operating partnerships issued $365 million of preferred operating partnership
units. For the three and six months ended June 30, 2002, the holders of these
preferred units were paid in aggregate approximately $6,727,000 and $13,453,000,
respectively, as compared to $8,505,000 and $17,010,000, respectively, for the
same periods in 2001, in distributions and received a corresponding allocation
of minority interest in earnings. The decrease in the three months ended June
30, 2002 as compared to the same period in 2001 is due to our repurchase, during
the latter half of 2001, of $80 million of these preferred operating partnership
units.

         MINORITY INTEREST IN INCOME - OTHER PARTNERSHIP INTERESTS: Minority
interest in income - common equity represents the income allocable to equity
interests in the Consolidated Entities which are not owned by the Company, other
than preferred unitholders. Minority interest in income - common equity
increased from $3,167,000 for the three months ended June 30, 2001 to $3,886,000
for the three months ended June 30, 2002. Minority interest in income - common
equity increased from $6,360,000 for the six months ended June 30, 2001 to
$8,502,000 for the six months ended June 30, 2002. These minority interests
include depreciation of $2,283,000 and $4,538,000 for the three and six months
ended June 30, 2002 as compared to $1,810,000 and $3,568,000 for the same
periods in 2001. Income allocated to the minority interests is summarized as
follows (in thousands):

<TABLE>
<CAPTION>
                                                Minority interest in income for        Minority interest in income for
                                                the three months ended June 30,         the six months ended June 30,
                                                --------------------------------       --------------------------------
                 Description                         2002             2001                  2002             2001
--------------------------------------------    --------------     -------------       --------------     -------------
<S>                                               <C>              <C>                   <C>              <C>
Consolidated Development Joint Venture......      $       329      $      113            $       636      $      225
Convertible OP Units........................               73              99                    162             187
Newly consolidated partnerships.............              775               -                  1,631               -
Other consolidated partnerships.............            2,709           2,955                  6,073           5,948
                                                --------------     -------------       --------------     -------------
Total other partnership interests...........      $     3,886      $    3,167            $     8,502      $    6,360
                                                ==============     =============       ==============     =============
</TABLE>

         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. Included in minority interest in
income for the Consolidated Development Joint Venture is depreciation expense of
$804,000 and $1,550,000, for the three and six months ended June 30, 2002,
respectively, as compared to $481,000 and $858,000, respectively, for the same
periods in 2001. 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 increase in minority interest in income is also attributable to the
consolidation of two partnerships (described in Note 3 to the Company's
financial statements) effective January 1, 2002. For the three and six months
ended June 30, 2002, a total of $775,000 and $1,631,000 in income was allocated
to the minority interests with respect to these two newly consolidated
partnerships as noted in the table above under "Newly Consolidated Partnerships"
(including $210,000 and $330,000, respectively, in depreciation expense).

                                       37

<PAGE>

         On April 19, 2002, the Company acquired through a merger all of the
remaining limited partnership interest not currently owned by the Company in PS
Partners V, Ltd., a partnership which is consolidated with the Company. The
acquisition cost consisted of approximately 533,796 shares of ($20,054,000)
Public Storage common stock and approximately $12,815,000 in cash. Minority
interest in income for the six months ended June 30, 2002 with respect to these
interests was approximately $161,000 and $625,000, respectively, (including
$73,000 and $345,000, respectively, in depreciation expense), representing their
share of the earnings from January 1, 2002 through the date of acquisition.
These amounts are included in the table above under "Other Consolidated
Partnerships".

Supplemental Property Data and Trends
--------------------------------------------------------------------------------

         At June 30, 2002, there were approximately 43 ownership entities owning
in aggregate 1,397 storage facilities, including the facilities which we own
and/or operate. At June 30, 2002, 36 of these facilities were owned by the
Unconsolidated Entities, entities in which we have an ownership interest and use
the equity method for financial statement presentation. The remaining 1,361
facilities are owned by the Company and the Consolidated Entities.

         The following table summarizes our investment in real estate facilities
as of June 30, 2002:

<TABLE>
<CAPTION>
                                                                       Net Rentable Square
                                                                        Footage of Storage
                                                       Number of            Facilities
                                                     Storage Facilities   (in thousands)
                                                     ------------------ ------------------
<S>                                                           <C>                <C>
Consolidated facilities:
   Wholly-owned by the company.................               808                50,314
   Owned by Controlled Entities................               553                32,283
                                                     ------------------ ------------------
                                                            1,361                82,597
Facilities owned by Unconsolidated Entities....                36                 2,186
                                                     ------------------ ------------------
 Total  facilities  in which  the  Company  has an
   ownership interest..........................             1,397                84,783
                                                     ================== ==================
</TABLE>

         In addition to the Company's interest in storage facilities noted
above, the Company and the Consolidated Entities own five commercial facilities
with an aggregate of 385,000 net rentable square feet. The Company and the
entities it controls also have a 44% common interest in PSB, which at June 30,
2002 owned and operated 14.8 million net rentable square feet of commercial
space.

SAME STORE OPERATING RESULTS

         The Company derives substantially all of its revenues from the
ownership and management of self-storage facilities. In order to evaluate the
performance of the Company's overall storage facility portfolio, management
analyzes the operating performance of a consistent group of self-storage
facilities.

         We have increased the number of facilities included in the "Same Store"
pool from 945 at December 31, 2001 to 1,260 facilities (which at June 30, 2002
includes 32 facilities that are owned by unconsolidated entities in which the
Company has an interest).

         As a result of the change in the Same Store pool, the relative
weighting of markets has changed. Accordingly, comparisons should not be made
between information presented previously for the Same Store pool of 945
facilities and this current pool of 1,260 facilities in order to identify trends
in occupancies, realized rents per square foot, or operating results.

                                       38

<PAGE>

         The following table summarizes the pre-depreciation historical
operating results of the Same Store self-storage facilities:

SAME STORE SELF-STORAGE FACILITIES (1,260 FACILITIES, 73.1 MILLION NET RENTABLE
SQUARE FEET) (historical property operations)


<TABLE>
<CAPTION>
                                       Three months ended                     Six months ended
                                            June 30,                              June 30,
                                    -------------------------  Percentage ------------------------   Percentage
                                       2002          2001        Change      2002         2001         Change
                                    ----------     ----------  ---------- ----------     ----------  ----------
                                                (Amounts in thousands, except rent per square foot)

<S>                                  <C>           <C>            <C>      <C>           <C>           <C>
Rental income (1) (2)............    $ 178,911     $ 185,482      (3.5)%   $ 359,897     $ 364,211     (1.2)%
Cost of operations  (2)..........       54,935        52,466       4.7%      108,939       107,622      1.2%
                                    ----------     ----------  ---------- ----------     ----------  ----------
Net operating income (2).........    $ 123,976     $ 133,016      (6.8)%   $ 250,958     $ 256,589     (2.2)%
                                    ==========     ==========  ========== ==========     ==========  ==========

Gross profit margin..............        69.3%        71.7%       (2.4)%       69.7%        70.5%      (0.8)%

Weighted Average:
  Occupancy (3)..................        86.4%        90.0%       (3.6)%       85.0%        89.1%      (4.1)%
  Annualized realized rent per
     sq. ft for the period (4)...    $   11.34    $   11.30        0.4%    $   11.59    $   11.21       3.4%
</TABLE>

1.   Rental income includes late charges and administrative fees of $5,669,000
     and $6,338,000 for the three months ended June 30, 2002 and 2001,
     respectively, and $11,233,000 and $12,709,000 for the six months ended June
     30, 2002 and 2001, respectively. Rental income is net of discounts offered
     to new tenants. Discounts totaled $5,824,000 and $2,063,000 for the three
     months ended June 30, 2002 and 2001, respectively. Discounts totaled
     $6,926,000 and $5,006,000 for the six months ended June 30, 2002 and 2001,
     respectively.

2.   Historical property operations excludes the sale of locks, boxes, and
     packing supplies, tenant re-insurance revenues and truck rental revenues.

3.   Occupancies indicated in the above table represent the weighted average
     physical occupancy levels over the entire three and six month periods.

4.   Realized annual rent per square foot is computed by annualizing rental
     income including late charges and administrative fees divided by weighted
     average occupied square footage for the period.

         The Same Store net operating income decreased 6.8% in the quarter ended
June 30, 2002 as compared to the same period in 2001. This decrease in Same
Store net operating income is the first quarterly decrease that we have had for
at least the past 10 years. The decrease was due to a decrease of 3.5% in rental
income combined with an increase of 4.7% in cost of operations. The 3.5%
decrease in rental income for the second quarter is attributable to a 3.6%
decrease in the weighted average occupancy level partially offset by a 0.4%
increase in realized rent per occupied square foot during the period.

         During each of 1999 and 2000, the Same Store facilities' occupancy
levels averaged approximately 92%. These relatively high occupancy levels were
attained and sustained through a variety of promotional activities offering new
tenants move-in discounts aggregating approximately $20 million per year. During
2001, the Company changed its marketing strategy to aggressively increase rental
rates and reduce the amount of discounts offered at the risk of lower occupancy
levels. As a result of this strategy, rental income for 2001 was approximately
7.4% higher than the prior year. However, this improvement in rental income came
at the expense of declining occupancy levels in 2001. During the first nine
months of 2001, average occupancy levels were approximately 1.8% below those of
2000 for the same period, which we believed to be a manageable reduction.
However, during the fourth quarter of 2001 and through February 2002 there was a
rapid decline in occupancy levels which caused the year-over-year reduction to
increase to 4.7% as of the end of February 2002. This reduction in occupancy
level coincided with a reduction in call volume to our national telephone
reservation center. We believe that these reductions were attributable to the
absence of any significant discounts offered to tenants, as well as to general
economic conditions.

                                       39

<PAGE>

         In the second half of March 2002, we reduced rental rates charged to
new incoming tenants and began a national television campaign. The national
television campaign, which offered a significant promotional discount, was run
from the second half of March 2002 through the first half of May 2002, resulting
in increased move-in activity during April and May 2002 compared to the prior
year. However, in the absence of significant promotional discounts from mid-May
through the end of July 2002, rental activity during June and July decreased and
the occupancy level at July 31, 2002 for our Same Store facilities was
approximately 5.5% less than at July 31, 2001.

         During the third quarter of 2002, we have reinstated a discount program
and we are advertising on television in selected markets in an effort to enhance
move-in activity and improve occupancy levels. The up front cost of these
marketing activities are expected to adversely impact the Company's net
operating income during the third quarter of 2002. No assurance can be provided
as to the impact of these efforts on our realized rents, occupancy levels, or
net income of the Company.

         Cost of operations includes all direct and indirect costs of operating,
marketing and managing the facilities, and is analyzed as follows:

<TABLE>
<CAPTION>
                                            Three months ended June 30,                Six months ended June 30,
                                       --------------------------------------    -----------------------------------------
                                                                  Percentage                                   Percentage
                                         2002          2001         Change          2002           2001         Change
                                       -----------    ----------- -----------    -----------     -----------   -----------
                                                                    (Amounts in thousands)
<S>                                     <C>            <C>             <C>        <C>             <C>               <C>
Property payroll expense..........      $  15,795      $ 14,434        9.4%       $   31,436      $   29,593        6.2%
Property taxes....................         15,379        14,824        3.7%           32,397          31,270        3.6%
Repairs and maintenance...........          3,846         4,343      (11.4)%           6,895           8,173      (15.6)%
Advertising and promotion.........          4,532         4,324        4.8%            7,362           7,175        2.6%
Telephone reservation center costs          2,566         2,624       (2.2)%           4,830           5,634      (14.3)%
Management, office, insurance,
   utilities, and other expenses..         12,817        11,917        7.6%           26,019          25,777        0.9%
                                       -----------    ----------- -----------    -----------     -----------   -----------
     Total cost of operations ....      $  54,935      $ 52,466        4.7%       $  108,939      $  107,622        1.2%
                                       ===========    =========== ===========    ===========     ===========   ===========
</TABLE>

         Increases in property payroll expense for the three and six months
ended June 30, 2002 as compared to the same periods in 2001 are due primarily to
increased compensation to property managers and supervisory personnel. Included
in advertising and promotion is $1,529,000 and $954,000 in television
advertising for the three months ended June 30, 2002 and 2001, respectively; and
$2,075,000 and $955,000 in television advertising for the six months ended June
30, 2002 and 2001, respectively.

         The following table summarizes Same Store operating trends by region
for the six months ended June 30, 2002 and 2001 (Dollar amounts in thousands):

                                       40

<PAGE>

<TABLE>
<CAPTION>
                  Northern    Southern                                          Other
                  California  California    Texas      Florida     Illinois     states      Total
                  ----------  ----------    -------    --------    --------     --------   --------
<S>         <C>    <C>          <C>         <C>         <C>        <C>          <C>        <C>
Rental income:
--------------
            2002   $44,963      $60,536     $32,155     $31,192    $27,620      $163,431   $359,897
            2001   $47,099      $60,144     $32,585     $31,011    $28,142      $165,230   $364,211
        % change     (4.5)%       0.7%       (1.3)%       0.6%      (1.9)%       (1.1)%      (1.2)%

Cost of operations:
-------------------
            2002   $10,345      $13,524     $12,246     $10,419    $10,943       $51,462   $108,939
            2001    $9,966      $12,828     $12,576     $10,686    $10,921       $50,645   $107,622
        % change      3.8%        5.4%       (2.6)%      (2.5)%      0.2%         1.6%        1.2%

Net operating income:
---------------------
            2002   $34,618      $47,012     $19,909     $20,773    $16,677      $111,969   $250,958
            2001   $37,133      $47,316     $20,009     $20,325    $17,221      $114,585   $256,589
        % change     (6.8)%      (0.6)%      (0.5)%       2.2%      (3.2)%       (2.3)%      (2.2)%

Weighted avg. occupancy:
------------------------
            2002     85.3%       86.9%        84.7%       85.2%      83.5%       84.7%        85.0%
            2001     92.5%       91.6%        89.5%       86.7%      89.1%       88.1%        89.1%
        % change     (7.2)%      (4.7)%      (4.8)%      (1.5)%     (5.6)%       (3.4)%      (4.1)%

Weighted avg. annualized realized rents per occupied sq. ft.:
-------------------------------------------------------------
            2002     $15.33     $15.69        $8.61      $10.44      $12.64      $10.50       $11.59
            2001     $14.86     $14.87        $8.34      $10.31      $12.17      $10.29       $11.21
        % change      3.2%        5.5%        3.2%        1.3%       3.9%         2.0%        3.4%

Number of facilities:
---------------------
                       127         143         142         123         86           639       1,260
</TABLE>


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 used to
make distributions to our shareholders (see "Requirement to Pay Distributions"
below). However, despite the significant distribution requirements, we have been
able to retain a significant amount of our operating cash flow. The following
table summarizes our ability to fund distributions to the minority interest,
capital improvements to maintain our facilities, and distributions to our
shareholders through the use of cash provided by operating activities. The
remaining cash flow generated is available to make both scheduled and optional
principal payments on debt and for reinvestment.

                                       41

<PAGE>

<TABLE>
<CAPTION>
                                                                              For the six months ended
                                                                                      June 30,
                                                                              --------------------------
                                                                                 2002            2001
                                                                              ----------      ----------
                                                                                (Amount in thousands)
<S>                                                                            <C>             <C>
Net cash provided by operating activities.............................         $295,367        $272,838

Allocable to minority interests (Preferred Units).....................          (13,453)        (17,010)
Allocable to minority interests (common equity).......................          (13,040)         (9,928)
                                                                              ----------      ----------

Cash from operations allocable to our shareholders....................          268,874         245,900

Capital improvements to maintain our facilities:
  Storage facilities..................................................          (12,019)        (11,752)
  Commercial properties...............................................             (507)           (380)
  Add back: minority interest share of capital improvements to maintain
    facilities........................................................              478             211
                                                                              ----------      ----------
Remaining operating cash flow available for distributions to our                256,826         233,979
   shareholders.......................................................

Distributions paid:
  Preferred stock dividends...........................................          (73,776)        (56,772)
  Equity Stock, Series A dividends....................................          (10,751)         (8,766)
  Distributions to Common and Class B shareholders (a)................         (110,123)        (54,411)
                                                                              ----------      ----------
Cash available for principal payments on debt and reinvestment........          $62,176        $114,030
                                                                              ==========      ==========
</TABLE>


(a)  Distributions to common shareholders include the Company's regular common
     distribution of $0.90 and $0.44 per common share for the six months ended
     June 30, 2002 and 2001, respectively.

         Our financial profile is characterized by a low level of debt to total
capitalization, increasing net income, increasing cash flow from operations, and
a conservative dividend payout ratio with respect to the common stock. We expect
to fund our growth strategies with cash on hand at June 30, 2002, internally
generated retained cash flows, and proceeds from issuing equity securities. In
general, our current strategy is to continue to finance our growth with
permanent capital; either common or preferred equity. We have in the past used
our $200 million line of credit as temporary "bridge" financing, and repaid
those amounts with internally generated cash flows and proceeds from the
placement of permanent capital. As of June 30, 2002, we had no outstanding
borrowings on the 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 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.

                                       42

<PAGE>

         Our portfolio of real estate facilities remains substantially
unencumbered. At June 30, 2002, we had mortgage debt outstanding of $22.2
million and unsecured debt in the amount of $100.2 million, and had consolidated
real estate facilities with a book value of $4.1 billion. We have not financed
our acquisitions with debt and generally our borrowing has increased through the
assumption of pre-existing debt on acquired real estate facilities.

         We believe that our size and financial flexibility enables us to access
capital when appropriate. During 2001 and in the first quarter of 2002, we
raised a total of $1.1 billion through the issuance of preferred securities, and
$74.8 million through the issuance of our Equity Stock, Series A. In 2001, we
redeemed for cash $441.3 million in cumulative preferred stock and $80.0 million
in preferred operating partnership units, allowing us to take advantage of
favorable rate spreads.

         We have completed the following issuances of equity during 2002:

o    On January 18, 2002, we completed a public offering of 6,000,000 depositary
     shares ($25 stated value per depositary share) each representing 1/1,000 of
     a share of 7.625% Cumulative Preferred Stock, Series T, raising net
     proceeds of approximately $145.1 million.

o    On February 19, 2002, we completed a public offering of 6,000,000
     depositary shares ($25 stated value per depositary share) each representing
     1/1,000 of a share of 7.625% Cumulative Preferred Stock, Series U, raising
     net proceeds of approximately $145.1 million.

         It is our intent to call for redemption our 10% Senior Preferred Stock
Series A, which becomes redeemable on September 30, 2002. The aggregate
redemption amount for this security is $25 per share or approximately $45.6
million, plus accrued dividends. The Company intends to fund the redemption with
working capital (cash reserves totaled $172,164,000 at June 30, 2002).

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

         During the six months ended June 30, 2002 and 2001, we paid cash
dividends totaling $73,776,000 and $56,772,000, respectively, to the holders of
our Senior Preferred Stock. The amounts paid in 2002 include an aggregate of
$9,342,000 with respect to the Series T and Series U Preferred Stock, which
reflects a payment for a partial period from the date of their respective
issuances. We estimate the regular annual distribution requirements with respect
to our Preferred Stock outstanding at June 30, 2002 to be approximately $151.7
million, which includes $4.6 million for our Senior Preferred Stock, Series A,
which we anticipate redeeming on September 30, 2002.

         During the six months ended June 30, 2002 and 2001, we paid cash
dividends totaling $13,453,000 and $17,010,000, respectively, to the holders of
our preferred operating partnership units. The annual distribution requirement
with respect to the preferred operating partnership units outstanding at June
30, 2002 is estimated at $26.9 million.

         During the six months ended June 30, 2002 and 2001, we paid cash
dividends totaling $10,751,000 and $8,766,000, respectively, to the holders of
Equity Stock, Series A. With respect to the Equity Stock, Series A outstanding
at June 30, 2002, we estimate the total annual regular distribution to be
approximately $21.5 million assuming that dividends of at least $0.49 per share
per year are paid to the common shareholders.

                                       43

<PAGE>

         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.

         During the six months ended June 30, 2002, we paid dividends totaling
$110,123,000 ($0.90 per common share) to the holders of our common stock and
Class B common stock. Based upon shares outstanding at August 1, 2002 and a
quarterly distribution of $0.45 per share which was declared by the Board of
Directors on August 9, 2002 and payable on September 30, 2002, we estimate
dividend payments with respect to our common stock and Class B common stock of
approximately $55.3 million for the third quarter of 2002.

         To the extent that the Company continues to qualify as a REIT, we will
not be taxed, with certain limited exceptions, on the taxable income that is
distributed to our shareholders, provided that at least 90% of our taxable
income is so distributed to our shareholders prior to filing the Company's tax
return. Accordingly, for the remainder of 2002, distributions with respect to
the Common Stock and Equity Stock, Series A will be determined based upon our
estimated REIT taxable income taking into consideration distributions to the
preferred shareholders. We anticipate that, at a minimum, quarterly
distributions per common share will remain at $0.45 per common share (regular
quarterly common distributions were increased from $0.22 per common share during
the first two quarters of 2001). Over the past several years, in addition to the
regular quarterly dividends paid to our common shareholder, we also paid special
distributions. These special distributions were necessary to meet our
distribution requirements in order to maintain our REIT tax status. It is
unlikely that any special distribution will be required to enable the Company to
meet its distribution requirements in 2002.

         CAPITAL IMPROVEMENT REQUIREMENTS: For 2002, we have budgeted
approximately $31 million for capital improvements. During the three months
ended June 30, 2002, we incurred capital improvements of approximately $12.5
million.

         DEBT SERVICE REQUIREMENTS: We do not believe we have any significant
refinancing risks with respect to our notes payable, all of which is fixed rate.
At June 30, 2002, we had total outstanding notes payable of approximately $122.4
million. Approximate principal maturities of notes payable at June 30, 2002 are
as follows:

<TABLE>
<CAPTION>
                                      Unsecured
                                     Senior Notes       Mortgage debt              Total
                                    --------------     --------------         --------------
                                                  (amounts in thousands)
<C>                                 <C>                <C>                    <C>
2002 (remainder of)..........       $       4,875      $       1,952          $    6,827
2003.........................              35,900              3,585              39,485
2004.........................              25,800             15,063              40,863
2005.........................              11,200                156              11,356
2006.........................              11,200                170              11,370
Thereafter...................              11,200              1,298              12,498
                                    --------------     --------------         --------------
                                    $     100,175      $      22,224          $  122,399
                                    ==============     ==============         ==============
Weighted average rate........               7.5%              10.2%                 8.0%
                                    ==============     ==============         ==============
</TABLE>

         ACQUISITION 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, and owns 47 storage facilities opened since
1997. On April 19, 2002, the Company acquired through a merger all of the
remaining limited partnership interest not currently owned by the Company in PS
Partners V, Ltd., a partnership which is consolidated with the Company. The
acquisition cost consisted of approximately 533,796 shares of Public Storage
common stock and approximately $12,815,000 in cash.

                                       44

<PAGE>

         ACQUISITION OF SELF-STORAGE FACILITIES FROM THIRD PARTIES: In the six
months ended June 30, 2002, we acquired three self-storage facilities from third
parties for an aggregate acquisition cost of $7,936,000. During 2000 and 2001,
we acquired an aggregate of 15 real estate facilities, substantially all of
which were self-storage facilities, for an aggregate of $70.6 million. Our low
level of third-party acquisitions in recent years is not indicative of either
the supply of facilities offered for sale or our ability to finance the
acquisitions, but is primarily due to prices sought by sellers and our lack of
desire to pay such prices. During the remainder of 2002, we will continue to
seek to acquire additional self-storage facilities from third parties, however,
it is difficult to estimate the level of third-party acquisitions.

         DEVELOPMENT OF SELF-STORAGE FACILITIES: In November 1999, we formed a
second joint venture partnership for the development of approximately $100
million of self-storage facilities. The venture is funded solely with equity
capital consisting of 51% from us and 49% from the joint venture partner, and
has completed its development activities. At June 30, 2002, the second
development joint venture owns 22 facilities (approximately 1,413,000 net
rentable square feet) with a total development cost of approximately $108
million.

         The Company anticipates that the cost of development of self-storage
facilities for the year ended December 31, 2002 and beyond will be approximately
$125 million to $150 million per year.

         At June 30, 2002, the Company has a "pipeline" of 37 identified
projects comprised of new and expansion self-storage facilities. Total estimated
costs with respect to these facilities is approximately $250.0 million, of which
$89.0 million has been spent, with opening dates estimated through the fourth
quarter of 2003. 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
$161 million on these 37 projects in the pipeline will be incurred over
approximately the next 24 months.

         We have acquired the land for 26 of the projects in the pipeline, which
have an aggregate estimated cost of $172.0 million and costs incurred through
June 30, 2002 of approximately $85.0 million. The remaining 11 facilities
represent identified sites where we have an agreement in place to acquire the
land, generally within one year. However, there are no assurances that we will
acquire and/or development the land.

         The following table sets forth our development pipeline and a range of
estimated opening dates for these projects (Dollar amounts in thousands):

<TABLE>
<CAPTION>
                                             Number    Total Estimated       Total Cost        Estimated time
                                              of           Cost of            Incurred       Frames of Facility
                                           Facilities    Development    through June 30,2002      Openings
                                           ----------    -----------    -------------------- ------------------
<S>                                             <C>       <C>                 <C>              <C>      <C>
Development - land acquired at 6/30/02
--------------------------------------
Self-storage facilities...............          7         $   30,251         $    8,927       Q3 '02 - Q2 `03
Expansions of existing self-storage
    facilities........................         19            141,777             76,073       Q3 '02 - Q1 `03
                                           ----------    -----------    --------------------
     Total............................         26            172,028             85,000
                                           ----------    -----------    --------------------

Potential development - land to be
acquired after 6/30/02
Self-storage facilities...............         11             77,962              3,978       Q2 '03 - Q4 `03
                                           ----------    -----------    --------------------
     Totals...........................         37         $  249,990         $   88,978
                                           ==========    ===========    ====================
</TABLE>

         REPURCHASES OF THE COMPANY'S COMMON STOCK: As previously announced, 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. From the initial authorization through June
30, 2002, the Company has repurchased a total of 21,497,020 shares of common
stock at an aggregate cost of approximately $535.9 million. There have been no
substantial repurchases of the Company's common stock since May 2001.

                                       45

<PAGE>

         FUNDS FROM OPERATIONS: Total funds from operations or "FFO" increased
to $262,951,000 for the six months ended June 30, 2002 compared to $240,542,000
for the same period in 2001. FFO available to common shareholders (after
deducting preferred stock dividends) was $189,175,000 for the six months ended
June 30, 2002 compared to $183,770,000 for the same period in 2001. FFO is
defined as net income or (loss) (computed in accordance with generally accepted
accounting principles) before: (i) gain or (loss) on early extinguishment of
debt, (ii) minority interest in income and (iii) gain or (loss) on the
disposition of real estate, adjusted as follows: (a) plus depreciation and
amortization (including our pro-rata share of depreciation and amortization of
unconsolidated equity interests and amortization of assets acquired in a merger,
including property management agreements and goodwill), and (b) less FFO
attributable to minority interest.

         FFO is a supplemental performance measure for equity REITs as defined
by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT").
The NAREIT definition does not specifically address the treatment of minority
interest in the determination of FFO or the treatment of the amortization of
property management agreements and goodwill. In our case, FFO represents amounts
attributable to our shareholders after deducting amounts attributable to the
minority interests and before deductions for the amortization of property
management agreements and goodwill. FFO is presented because management, as well
as many industry analysts, consider FFO to be one measure of our performance and
it is used in establishing the terms of the Class B Common Stock. FFO does not
take into consideration capital improvements, scheduled principal payments on
debt, distributions and our other obligations. Accordingly, FFO is not a
substitute for cash flow or net income (as discussed above) as a measure of our
liquidity or operating performance. FFO is not comparable to similarly entitled
items reported by other REITs that do not define it exactly as we have defined
it.

                                       46

<PAGE>

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, 2001, you should consider the following factors
in evaluating the Company:

THE HUGHES FAMILY COULD CONTROL US.

         At June 30, 2002, the Hughes family owned approximately 33.8% of our
outstanding shares of common stock (approximately 37.6% upon conversion of our
class B 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.

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 a 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 REIT. These limitations, however,
also 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, which include 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.

WE MAY PAY SOME TAXES.

         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 Public Storage have elected to be treated as
"taxable REIT subsidiaries" of Public Storage 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 Public Storage or any taxable REIT subsidiary is
required to pay federal, state or local taxes, we will have less cash available
for distribution to shareholders.

                                       47

<PAGE>

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 a
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 June 30, 2002, our debt
of $122.4 million was approximately 2.5% 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    changes in supply of or demand for similar or competing facilities
              in an area;

         o    potential terrorist attacks;

         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.

         There is significant competition among self-storage facilities. Most of
our properties are self-storage facilities, which generated 89% of our total
revenues during the first half of 2002. Competition in the market areas in which
many of our properties are located is significant and has affected the occupancy
levels, rental rates and operating expenses of some of our properties. Average
occupancy levels of the Same Store Facilities has decreased from 89.1% for the
six months ended June 30, 2001 to 85.0% for the six months ended June 30, 2002.
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.

         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, 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.

                                       48

<PAGE>

         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.

PUBLIC STORAGE HAS NO INTEREST IN CANADIAN MINI-WAREHOUSES.

         The Hughes family has ownership interests in, and operates,
approximately 38 mini-warehouses in Canada under the name "Public Storage".
Public Storage personnel are engaged, at the expense of the Canadian owners, in
the supervision of the operation of these properties. Public Storage has a right
of first refusal to acquire the stock or assets of the corporation engaged in
these operations if the Hughes family or the corporation agree to sell them.
However, Public Storage has no interest in the operations of this corporations,
has no right to acquire this stock or assets unless the Hughes family decides to
sell and receives no benefit from the profits and increases in value of the
Canadian mini-warehouses. There may be conflicts of interest in allocating the
time of Public Storage personnel between Public Storage's properties and the
Canadian properties.

OUR PORTABLE SELF-STORAGE BUSINESS HAS INCURRED OPERATING LOSSES.

Public Storage Pickup & Delivery was organized in 1996 to operate a portable
self-storage business. We own all of the economic interest of Pickup & Delivery.
Since Pickup & Delivery will operate profitably only if it can succeed in the
relatively new field of portable self-storage, we cannot provide any assurance
as to its profitability. Pickup & Delivery incurred operating losses of
$5,135,000 in 2000 and $2,218,000 in 2001. Pickup & Delivery had an operating
losses totaling approximately $536,000 and $56,000 for the three and six months
ended June 30, 2002, respectively, as compared to $611,000 and $1,538,000 for
the same periods in 2001.

                                       49

<PAGE>

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 June 30, 2002, our debt as a percentage of total
shareholders' equity (based on book values) was 2.9%.

         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 A - September
30, 2002, Series B - March 31, 2003, Series C - June 30, 1999, Series D -
September 30, 2004, Series E - January 31, 2005, Series F - April 30, 2005,
Series J - August 31, 2002, 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 and
Series U - February 19, 2007. 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 J
through Series U), plus accrued and unpaid dividends.

         Our market risk sensitive instruments include notes payable, which
totaled $122.4 million at June 30, 2002. Substantially all of the Company's
notes payable bear interest at fixed rates. See "Item 2" - Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources for approximate principal maturities of the
notes payable as of June 30, 2002.

                                       50

<PAGE>

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings
--------------------------

         HENRIQUEZ V. PUBLIC STORAGE, INC. (FILED JUNE 2002). The plaintiff in
this case is suing the Company on behalf of a purported class of renters who
rented self-storage units from the Company. Plaintiff alleges that the Company
misrepresents the size of its units and seeks damages and injunctive and
declaratory relief under California statutory and common law relating to
consumer protection, unfair competition, fraud and deceit and negligent
misrepresentation. The Company does not currently believe that the outcome of
this litigation will have any material adverse effect. However, the Company
cannot presently determine the potential total damages, if any, or the ultimate
outcome of the litigation. The Company intends to vigorously contest the claims
in this case.

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

         The Company held an annual meeting of shareholders on May 9, 2002.
Proxies for the annual meeting were solicited pursuant to Regulation 14 under
the Securities Exchange Act of 1934. The annual meeting involved the following
two matters:

         A.  Election of Directors:

<TABLE>
<CAPTION>
                                      Total Common Stock                    Total Equity Stock, Series A
                            ----------------------------------------    -------------------------------------------
          Name              Total Votes For     Total Votes Withheld    Total Votes For        Total Votes Withheld
------------------------    -----------------   --------------------    -----------------      --------------------
<S>                               <C>                   <C>                   <C>                   <C>
B. Wayne Hughes                   81,642,883            17,890,891            826,679               12,233
Harvey Lenkin                     81,618,360            17,915,414            827,519               11,392
Marvin M. Lotz                    81,625,888            17,907,886            827,364               11,548
B. Wayne Hughes, Jr.              82,199,905            17,333,872            818,059               20,853
Robert J. Abernethy               97,505,439             2,028,335            834,903                4,009
Dann V. Angeloff                  97,022,708             2,511,066            834,705                4,207
William C. Baker                  97,459,206             2,074,568            834,772                4,139
Thomas J. Barrack, Jr.            81,969,973            17,563,802            826,448               12,464
Uri P. Harkham                    78,281,371            21,252,403            826,672               12,239
Daniel C. Staton                  97,305,995             2,227,779            835,061                3,851

</TABLE>

         There was no solicitation in opposition to the management's nominees to
the Board of Directors listed in the proxy statement.

         B. Adoption of amendment to the certificates of determination of the
various series of Preferred Stock of the Company to reclassify the shares of
each of the series into redesignated series of Preferred Stock upon approval by
the holders of 66 2/3% of the shares affected series.

<TABLE>
<CAPTION>
                                             For              Against            Abstain             No Vote
                                         ------------       ------------       ------------       ------------
<S>                                       <C>                 <C>                  <C>               <C>

Votes cast with respect with the proposal for the amendment to the certificates
of determination of the various series of Preferred Stock of the Company to
reclassify the shares of each of the series into redesignated series of
Preferred Stock upon approval by the holders of 66 2/3% of the shares affected
series.

Common Stock                              85,999,472          4,754,296            679,531           8,100,497
Equity Stock, Series A                       434,578             17,508              6,949             379,896
Total Common Stock and Equity
   Stock, Series A                        86,434,050          4,771,804            686,480           8,480,393

</TABLE>
                                       51

<PAGE>

Item 5.  Other Information
--------------------------

         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.

         The Company is evaluating its options in this action. If the Company
sells the units to plaintiff as contemplated by the settlement agreement, 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 three and six months ended June 30, 2002.

                                       52

<PAGE>

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

(a)      Exhibits:

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

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

3.3      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 Registration'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.

3.12     Certificate of Determination for the 8-7/8% Cumulative Preferred Stock,
         Series G. Filed with Registration'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.

                                       53

<PAGE>


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     Certification 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     Certification 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     Certification 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.

3.28     Certification 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     Certification 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 March 31, 2000 and incorporated herein by
         reference.

                                       54

<PAGE>


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

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

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

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

3.41     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.

3.42     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.

3.43     Amendment to Bylaws adopted on May 6, 1999. Filed with Registrant's
         Form 10-Q for the quarterly period ended March 31, 1999 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.

                                       55

<PAGE>

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.

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.

                                       56

<PAGE>

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 March 31, 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.

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, Bank
         Boston, 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.

                                       57

<PAGE>

10.25    Deposit Agreement dated as of August 17, 1999 among Registrant, Bank
         Boston, 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.

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.

                                       58

<PAGE>


10.36    Deposit Agreement dated as of October 31, 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 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.

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.

99.1     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:

         None.

                                       59

<PAGE>

                                   SIGNATURES


Pursuant to the requirements 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:  August 14, 2002

                                    PUBLIC STORAGE, INC.


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

                                       60