SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-Q

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


For the quarterly period ended September 30, 1996


                                       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                             91201-2394
----------------------------------------                 ----------------------
(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 November 13, 1996:

Common Stock, $.10 par value, 84,445,228 shares outstanding
-----------------------------------------------------------

Class B Common Stock, $.10 Par Value - 7,000,000 shares
-------------------------------------------------------
<PAGE>
                              PUBLIC STORAGE, INC.

                                      INDEX



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

Item 1.  Condensed Consolidated Balance Sheets at
           September 30, 1996 and December 31, 1995                          1

         Condensed Consolidated Statements of Income for the
           Three and Nine Months Ended September 30, 1996 and 1995           2

         Condensed Consolidated Statement of Shareholders' Equity            3

         Condensed Consolidated Statements of Cash Flows
           for Nine Months Ended September 30, 1996 and 1995             4 - 5

         Notes to Condensed Consolidated Financial Statements           6 - 15

Item 2.  Management's Discussion and Analysis of
           Financial Condition and Results of Operations               16 - 27

PART II. OTHER INFORMATION (Items 1, 2, 3, and 5 are not applicable)
--------------------------

Item 4.  Submission of Matters to a Vote of Security Holders           28 - 29

Item 6.  Exhibits and Reports on Form 8-K                                   29



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

<CAPTION>
                                                                                    September 30,          December 31,
                                                                                        1996                   1995
                                                                                  ----------------        ---------------
                                                                                     (unaudited)

                                     ASSETS
                                     ------

<S>                                                                                   <C>                    <C>        
Cash and cash equivalents................................................             $    60,228            $    80,436
Real estate facilities, at cost:
   Land..................................................................                 512,679                382,144
   Buildings.............................................................               1,406,578              1,030,990
                                                                                  ----------------        ---------------
                                                                                        1,919,257              1,413,134
   Accumulated depreciation..............................................                (282,517)              (241,966)
                                                                                  ----------------        ---------------
                                                                                        1,636,740              1,171,168



Investment in real estate entities.......................................                 401,488                416,216
Intangible assets, net...................................................                 224,580                231,562
Mortgage notes receivable from affiliates................................                  25,414                 23,699
Other assets.............................................................                  26,129                 14,380
                                                                                  ----------------        ---------------
              Total assets...............................................             $ 2,374,579            $ 1,937,461
                                                                                  ================        ===============


                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------

Notes payable............................................................             $   112,647            $   158,052

Accrued and other liabilities............................................                  37,315                 32,533
                                                                                  ----------------        ---------------

         Total liabilities...............................................                 149,962                190,585

Minority interest........................................................                 121,551                112,373

Commitments and contingencies

Shareholders' equity:

   Preferred Stock, $0.01 par value,  50,000,000 shares  authorized,  13,509,805
     shares issued, 13,441,180 outstanding (13,444,100 issued and outstanding at
     December 31, 1995), at liquidation preference:

         Cumulative Preferred Stock, issued in series....................                 618,900                450,150
         Convertible Preferred Stock.....................................                 115,519                 85,970

   Common stock,  $0.10 par value,  200,000,000  shares  authorized,  84,411,391
     shares issued and outstanding (71,513,799 at December 31, 1995).......
                                                                                            8,442                  7,152
   Class B Common Stock, $0.10 par value, 7,000,000 shares authorized
     and issued..........................................................                     700                    700
   Paid-in capital.......................................................               1,357,855              1,100,088
   Cumulative net income.................................................                 353,317                242,871
   Cumulative distributions paid.........................................                (351,667)              (252,428)
                                                                                  ----------------        ---------------
         Total shareholders' equity......................................               2,103,066              1,634,503
                                                                                  ----------------        ---------------
              Total liabilities and shareholders' equity.................             $ 2,374,579            $ 1,937,461
                                                                                  ================        ===============


</TABLE>
                             See accompanying notes.
                                        1

<PAGE>
<TABLE>


                              PUBLIC STORAGE, INC.

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                  (Amounts in thousands, expect per share data)

                                   (Unaudited)
<CAPTION>


                                                             For the Three Months Ended         For the Nine Months Ended
                                                                   September 30,                      September 30,
                                                             ---------------------------        ---------------------------- 
                                                               1996             1995                1996              1995
                                                             -----------   -------------        ------------     ----------- 
       REVENUES:
          Rental income:
<S>                                                            <C>            <C>               <C>                 <C>     
             Mini-warehouse facilities................         $ 70,434       $ 50,853          $ 195,295           $130,228
             Business park facilities.................            6,006          4,666             16,675             13,359
          Equity in earnings of real estate entities..            5,559            418             15,649                997
          Facilities management fees..................            3,609              -             10,918                  -
          Interest and other income...................            1,820          1,001              6,129              3,464
                                                             -----------   -------------        ------------     ----------- 
                                                                 87,428         56,938            244,666            148,048
                                                             -----------   -------------        ------------     ----------- 

       EXPENSES:
         Cost of operations:
             Mini-warehouse facilities................           20,859         17,446             58,835             45,563
             Business park facilities.................            2,739          2,381              7,325              6,606
         Cost of facilities management................              576              -              1,751                  -
         Depreciation and amortization ...............           16,819         10,961             47,553             27,887
         General and administrative...................            1,536            875              4,595              2,611
         Advisory fee ................................                -          2,036                  -              5,462
         Interest expense.............................            2,080          2,035              6,893              5,249
                                                             -----------   -------------        ------------     ----------- 
                                                                 44,609         35,734            126,952             93,378
                                                             -----------   -------------        ------------     ----------- 
       Income before minority interest................           42,819         21,204            117,714             54,670


       Minority interest in income....................           (2,453)        (1,734)            (7,268)            (5,449)
                                                             -----------   -------------        ------------     ----------- 

       Net income.....................................         $ 40,366       $ 19,470          $ 110,446           $ 49,221
                                                             ===========   =============        ============     =========== 

       Net income allocation:
          Allocable to preferred shareholders.........         $ 17,056        $ 8,596          $  50,118           $ 21,904
          Allocable to common shareholders............           23,310         10,874             60,328             27,317
                                                             -----------   -------------        ------------     ----------- 
                                                               $ 40,366       $ 19,470          $ 110,446           $ 49,221
                                                             ===========   =============        ============     =========== 

       PER COMMON SHARE:

       Net income.....................................            $0.30          $0.26              $0.81              $0.76
                                                             ===========   =============        ============     =========== 

       Weighted average common shares outstanding               78,338          42,217             74,690             35,847
                                                             ===========   =============        ============     =========== 
</TABLE>

                             See accompanying notes.
                                        2
<PAGE>
<TABLE>
                              PUBLIC STORAGE, INC.
            CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                  For the Nine Months Ended September 30, 1996
                    (Amounts in thousands except share data)
                                   (Unaudited)
<CAPTION>
                                                                 Preferred Stock          
                                                             -------------------------                 Class B     
                                                             Cumulative                   Common       Common      
                                                               Senior     Convertible      Stock        Stock      
                                                             ----------   -----------     ---------    ---------   
<S>                                                            <C>            <C>            <C>            <C>    
Balances at December 31, 1995.........................         $450,150       $85,970        $7,152         $700   

Issuance of Preferred Stock:
     Series H (6,750 shares)..........................          168,750             -             -            -   
     Mandatory Convertible, Series CC (58,955 shares).                -        58,955             -            -   
                                                      
Issuance of Common Stock:
     In connection with mergers (4,974,471 shares)....                -             -           499            -   
     Conversion of Mandatory Convertible
       Participating Preferred Stock into Common
       Stock (1,611,265 shares).......................                -       (28,470)          161            -   
     Conversion of 8.25% Convertible Preferred Stock
       into Common Stock (62,993 shares)..............                -          (936)            6            -   
     In connection with a private offerings
       (6,151,200 shares).............................                -             -           615            -   
     Other (97,663 shares)............................                -             -             9            -   

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

Cash distributions:
   Cumulative Senior Preferred Stock..................                -             -             -            -   
   Mandatory Convertible Preferred Stock, Series CC...                -             -             -            -   
   8.25% Convertible Preferred Stock..................                -             -             -            -   
   Mandatory Convertible Participating Preferred
     Stock............................................                -             -             -            -   
   Common Stock.......................................                -             -             -            -   
                                                             ----------   -----------     ---------    ---------   

Balances at September 30, 1996........................         $618,900      $115,519        $8,442         $700   
                                                             ==========   ===========     ==========   ========= 
</TABLE>
<TABLE>
                              PUBLIC STORAGE, INC.
            CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                  For the Nine Months Ended September 30, 1996
                    (Amounts in thousands except share data)
                                   (Unaudited)
<CAPTION>
                                                                                                                  Total
                                                                 Paid-in      Cumulative     Cumulative      Shareholders'
                                                                 Capital      Net Income   Distributions        Equity
                                                               ----------     ----------   -------------       ----------
<S>                                                            <C>              <C>           <C>              <C>       
Balances at December 31, 1995.........................         $1,100,088       $242,871      $(252,428)       $1,634,503

Issuance of Preferred Stock:
     Series H (6,750 shares)..........................             (5,617)             -              -           163,133
     Mandatory Convertible, Series CC (58,955 shares).                  -              -              -            58,955
                                                      

Issuance of Common Stock:
     In connection with mergers (4,974,471 shares)....            105,786              -              -           106,285
     Conversion of Mandatory Convertible
       Participating Preferred Stock into Common
       Stock (1,611,265 shares).......................             27,799              -              -              (510)
     Conversion of 8.25% Convertible Preferred Stock
       into Common Stock (62,993 shares)..............                930              -              -                 -
     In connection with a private offerings
       (6,151,200 shares).............................            127,886              -              -           128,501
     Other (97,663 shares)............................                983              -              -               992

Net income............................................                  -        110,446              -           110,446

Cash distributions:
   Cumulative Senior Preferred Stock..................                  -              -        (41,063)           (41,063)
   Mandatory Convertible Preferred Stock, Series CC...                  -              -         (3,832)            (3,832)
   8.25% Convertible Preferred Stock..................                  -              -         (3,523)            (3,523)
   Mandatory Convertible Participating Preferred
     Stock............................................                  -              -         (1,700)            (1,700)
   Common Stock.......................................                  -              -        (49,121)           (49,121)
                                                               ----------     ----------   -------------       ----------
Balances at September 30, 1996........................         $1,357,855       $353,317      $(351,667)       $2,103,066
                                                               ==========     ==========   =============       ==========
</TABLE>
                             See accompanying notes.
                                        3

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

                                   (Unaudited)
<CAPTION>


                                                                                           For the Nine Months Ended
                                                                                                 September 30,
                                                                                      -------------------------------------
                                                                                              1996               1995
                                                                                      ----------------     ----------------

      Cash flows from operating activities:
<S>                                                                                           <C>               <C>     
         Net income...........................................................                $110,446          $ 49,221
         Adjustments to reconcile  net income to net cash  provided by operating
           activities:
           Depreciation and amortization (including amortization of  mortgage
             notes receivable discounts)......................................                  47,483            27,797
           Depreciation included in equity in earnings of real estate entities                  13,241                 -
           Minority interest in income........................................                   7,268             5,449
                                                                                      ----------------     ----------------


               Total adjustments..............................................                  67,992            33,246
                                                                                      ----------------     ----------------
                   Net cash provided by operating activities..................                 178,438            82,467
                                                                                      ----------------     ----------------

      Cash flows from investing activities:
           Principal payments received on mortgage notes receivable from
             affiliates.......................................................                   1,364               344
           Acquisition of real estate facilities..............................                (101,972)         (101,021)
           Acquisition cost of business combinations..........................                 (83,620)          (35,434)
           Capital improvements to real estate facilities.....................                 (13,465)           (6,380)
           Construction in process............................................                 (30,579)           (3,866)
           Acquisition of minority interests in consolidated real estate
             partnerships.....................................................                 (10,075)          (35,901)
           Acquisition of mortgage notes receivable...........................                  (3,709)           (2,215)
           Acquisition of interests in real estate entities...................                 (86,508)           (3,988)
           Other..............................................................                  (6,381)              132
                                                                                      ----------------     ----------------
                   Net cash used in investing activities......................                (334,945)         (188,329)
                                                                                      ----------------     ----------------

      Cash flows from financing activities:
           Net pay downs on note payable to banks.............................                       -           (20,447)
           Net proceeds from the issuance of preferred stock..................                 163,133           108,377
           Net proceeds from the issuance of common stock.....................                 129,493            80,525
           Principal payments on mortgage notes payable.......................                 (47,106)           (6,394)
           Distributions paid to shareholders.................................                 (99,239)          (46,042)
           Distributions from operations to minority interests in real estate
             partnerships.....................................................                 (15,976)          (13,642)
           Net reinvestment by minority interests into real estate              
             partnerships.......................................................                 2,023            (1,969)
           Other..............................................................                   3,971                 -
                                                                                      ----------------     ----------------
                   Net cash provided by financing activities..................                 136,299           100,408
                                                                                      ----------------     ----------------

      Net decrease in cash and cash equivalents...............................                 (20,208)           (5,454)

      Cash and cash equivalents at the beginning of the period................                  80,436            20,151
                                                                                      ----------------     ----------------

      Cash and cash equivalents at the end of the period......................                $ 60,228          $ 14,697
                                                                                      ================     ================

</TABLE>
                             See accompanying notes.
                                        4

<PAGE>
<TABLE>

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

                                   (Unaudited)

                                   (Continued)
<CAPTION>


                                                                                           For the Nine Months Ended
                                                                                                 September 30,
                                                                                      -------------------------------------
                                                                                              1996               1995
                                                                                      ----------------     ----------------

      Supplemental schedule of noncash investing and financing activities:
      --------------------------------------------------------------------
       <S>                                                                               <C>                  <C>        
       Acquisition of real estate facilities in exchange for the cancellation of
          mortgage notes  receivable,  the assumption of mortgage notes payable,
          and issuance of common and preferred stock..............................       $    (2,401)         $  (82,426)


       Business combinations:
          Real estate facilities..................................................          (351,907)           (211,190)
          Other assets............................................................            (5,076)             (4,251)
          Accrued and other liabilities...........................................             9,370               7,478
          Mortgage notes payable..................................................                 -               3,387
          Minority interest.......................................................            20,139              16,566


       Reduction to investment in real estate entities in connection with business
          combinations............................................................            82,113               4,729


       Acquisition of partnership interests in real estate entities in exchange
          for common stock........................................................                 -              (4,034)


       Assumption of mortgage notes payable in connection with the acquisition of
          real estate facilities..................................................             1,701              56,908


       Cancellation of mortgage notes receivable in connection with the
          acquisition of real estate facilities...................................               700              14,920


       Issuance of Mandatory Convertible Preferred Stock, Series CC...............            58,955                   -


       Issuance of Convertible Participating Preferred Stock in connection with
          the acquisition of partnership interests................................                 -              28,470


       Issuance of common stock:
          - in connection with mergers............................................           106,285              99,972
          - to acquire real estate facilities.....................................                 -              10,598
          - to acquire partnership interests in real estate entities..............                 -               4,034
          - in connection with the conversion of Convertible Preferred Stock......            28,896                   -

       Conversion of 8.25% Convertible Preferred Stock............................              (936)                  -

       Conversion of Mandatory Convertible Preferred Stock........................           (28,470)                  -

</TABLE>
                             See accompanying notes.
                                        4

<PAGE>
                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1996


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

          Public Storage, Inc. (the "Company") is a California corporation which
     was organized in 1980. The Company is a fully integrated, self-administered
     and  self-managed  real estate  investment  trust  ("REIT") that  acquires,
     develops,  owns and operates self-service  mini-warehouse  facilities which
     offer self-storage spaces for lease, usually on a month-to-month basis, for
     personal and business use. The Company,  to a lesser extent,  also owns and
     operates  business park  facilities  containing  commercial  and industrial
     rental space.

          Prior to November 16, 1995,  the  Company's  operations  were managed,
     pursuant to contractual arrangements, by Public Storage Advisers, Inc. (the
     "Adviser"), the Company's investment advisor, by Public Storage Management,
     Inc. ("PSMI"),  its mini-warehouse  property operator and by Public Storage
     Commercial  Properties  Group,  Inc.  ("PSCP"),  its business park facility
     operator.

          On  November  16,  1995,  in a series of  mergers  among  PSMI and its
     affiliates,  culminating  in the merger of PSMI into the Company (the "PSMI
     Merger"),  the  Company  became   self-administered  and  self-managed  and
     acquired  substantially  all of the United States real estate operations of
     PSMI. As a result of the PSMI Merger,  the Company's  name was changed from
     Storage Equities, Inc. to Public Storage, Inc.

          The Company invests in real estate  facilities  primarily  through the
     acquisition of  wholly-owned  facilities  combined with the  acquisition of
     equity interests in real estate entities owning real estate facilities.  At
     September 30, 1996, the Company had direct and indirect equity interests in
     1,072  properties  located in 37  states,  including  1,037  mini-warehouse
     facilities and 35 business parks.  All of these  facilities are operated by
     the Company  under the "Public  Storage"  name.  In  addition,  the Company
     operates real estate  facilities on behalf of various  ownership  entities,
     substantially  all of which are partnerships and REITs in which the Company
     has an ownership interest.

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

          Basis of presentation
          ---------------------
          The accompanying unaudited condensed consolidated financial statements
     have  been  prepared  in  accordance  with  generally  accepted  accounting
     principles for interim financial  information and with instructions to Form
     10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
     of the information and footnotes required by generally accepted  accounting
     principles for complete financial statements. In the opinion of management,
     all  adjustments  (consisting  of  normal  recurring  accruals)  considered
     necessary for a fair presentation have been included. Operating results for
     the three and nine months  ended  September  30,  1996 are not  necessarily
     indicative of the results that may be expected for the year ended  December
     31, 1996.  For further  information,  refer to the  consolidated  financial
     statements and footnotes thereto included in the Company's annual report on
     Form 10-K for the year ended December 31, 1995.

          The  consolidated  financial  statements  include the  accounts of the
     Company,  majority owned subsidiaries,  and twenty-one limited partnerships
     (the  "Consolidated  Partnerships")  in which the Company  has  significant
     economic interest and is able to exercise  significant  control through its
     ownership of limited and general partnership interests.

          The Company also has equity  investments in other  affiliated  limited
     partnerships  and REITs which  principally  own  mini-warehouse  facilities
     managed by the  Company.  The  Company's  ownership  interest  in such real
     estate entities is less than 50% of the total equity interest, accordingly,
     the Company's  investments in these real estate  entities are accounted for
     using the equity method.

                                       6

<PAGE>
                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1996

          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, the Company is not taxed on that portion
     of its taxable  income which is distributed  to its  shareholders  provided
     that the Company meets  certain  tests.  The Company  believes it will meet
     these tests during  1996,  accordingly,  no provision  for income taxes has
     been made in the accompanying financial statements.

          Allowance for possible losses
          -----------------------------
          The Company has no allowance  for possible  losses  relating to any of
     its real estate investments,  including mortgage notes receivable. The need
     for such an  allowance  is  evaluated  by  management  by means of periodic
     reviews of its investment portfolio.

          Cash and cash equivalents
          -------------------------
          For  purposes  of  financial  statement   presentation,   the  Company
     considers all highly liquid debt  instruments  purchased with a maturity of
     three months or less to be cash equivalents.

          Depreciation 
          ------------
          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.

          Intangible assets
          -----------------
          Intangible  assets  consist of property  management  contracts and the
     cost over the fair value of net tangible and identifiable intangible assets
     acquired in the PSMI Merger and are amortized  straight-line over 25 years.
     At  September  30,  1996,   intangible   assets  are  net  of   accumulated
     amortization of $8,146,000  ($1,164,000 at December 31, 1995).  Included in
     depreciation and  amortization  expense for the three and nine months ended
     September 30, 1996 is $2,328,000 and $6,982,000,  respectively,  related to
     the  amortization of intangible  assets (none for the three and nine months
     ended September 30, 1995).

          Net income per common share
          ---------------------------
          Net income per common  share is computed  using the  weighted  average
     common shares  outstanding  (adjusted for stock options).  The inclusion of
     the Class B Common Stock in the  determination of earnings per common share
     has been  determined  to be  anti-dilutive  (after giving effect to the pro
     forma additional income required to satisfy certain contingencies  required
     for the Class B common stock to convert into common stock) and accordingly,
     the  conversion  of the Class B common stock into common stock has not been
     assumed.

          The Company's  preferred stocks are not common stock  equivalents.  In
     computing  earnings per common share,  preferred  stock  dividends  reduced
     income available to common stockholders.

          Fully diluted  earnings per common are not  presented,  as the assumed
     conversion  of  the  Company's   convertible   preferred  stocks  would  be
     anti-dilutive.

          Revenue/expense recognition
          ---------------------------
          Property  rents are  recognized as earned.  Equity in earnings of real
     estate entities are recognized based on the Company's ownership interest in
     the earnings of each of the  unconsolidated  real estate entities.  Leasing
     commissions  relating  to the  business  park  operations  are  expensed as
     incurred.

                                       7
<PAGE>
                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1996


3.   Business combinations
     ---------------------

          Mergers with affiliated REITs
          -----------------------------
          During the first nine  months of 1996,  the Company  completed  merger
     transactions with five affiliated public REITs whereby the Company acquired
     all the  outstanding  stock of the REITs which it did not previously own in
     exchange  for  cash  and  common  stock  of  the  Company.   The  aggregate
     acquisition cost of these mergers is summarized as follows:
<TABLE>
<CAPTION>

                                                                                                Merger consideration
                                                                                     ----------------------------------------------
                                                                                                                 Pre-
                                                                                      Common                   existing
     Entity                                                   Date of merger          Stock        Cash       investment     Total
     ----------------------------------------------------    -------------------     --------    --------     --------    ---------
                                                                                                    (In thousands)

<S>                                                                                  <C>         <C>          <C>         <C>     
     Public Storage Properties IX, Inc. ("Properties 9")      March 26, 1996         $24,719     $ 9,907      $12,937     $ 47,563
     Public Storage Business Parks, Inc. ("PSBP")             March 26, 1996           5,249       2,719        3,337       11,305
     Storage Properties, Inc. ("SPI")                         June 27, 1996           17,148       4,801        1,799       23,748
     Public Storage Properties X, Inc. ("Properties 10")      September 16, 1996      26,012      14,178        9,333       49,523
     Public Storage Properties XII, Inc.("Properties 12")     September 16, 1996      33,157       7,436        9,472       50,065
                                                                                     --------    --------     --------    ---------
                                                
                                                                                     $106,285     $39,041      $36,878     $182,204
                                                                                     ========    ========     ========    =========
</TABLE>
          As a result of these mergers,  the Company acquired 48  mini-warehouse
     (2,932,000 square feet) facilities and 4 business park facilities  (405,000
     square feet).

          Other business combinations:
          ----------------------------
          During the second  quarter of 1996,  the Company  acquired  all of the
     limited  partnership units of two affiliated  partnerships for $58,955,000,
     consisting of the issuance of the Company's  Convertible  Preferred  Stock,
     Series CC (Note 8). The Company's  acquisition  in one of the  partnerships
     increased its ownership  interest in the partnership to 100%,  accordingly,
     the  partnership  was  dissolved  and the  partnership's  8  mini-warehouse
     facilities became  wholly-owned by the Company.  The remaining  partnership
     owns 15  mini-warehouses.  During the first  quarter of 1996,  the  Company
     acquired   approximately  64%  of  the  limited  partnership  units  of  an
     affiliated   partnership  which  owns  28  mini-warehouse   facilities  for
     approximately  $41,080,000 in cash. The acquisition of interests in the two
     remaining   partnerships  combined  with  the  Company's  existing  general
     partnership  interest  in  the  partnerships  significantly  increased  the
     Company's  ownership  interest  and control of the  partnerships  and, as a
     result, the Company began to consolidate the accounts of these partnerships
     for financial statement purposes.

          Each of the above mergers with  affiliated  REITs and  acquisitions of
     partnership interests discussed above has been accounted for as a purchase;
     accordingly,  allocations of the total  acquisition  cost to the net assets
     acquired  were made based on the fair value of such assets and  liabilities
     as of the dates of each respective  transaction.  The fair market values of
     the  assets   acquired  and   liabilities   assumed  with  respect  to  the
     transactions are summarized as follows:
<TABLE>
<CAPTION>


                                                    REIT          Partnership
                                                   mergers        acquisitions       Total
                                                 -----------  ------------------   ----------
                                                             (In thousands)

<S>                                              <C>                <C>            <C>     
     Real estate facilities...................   $185,097           $166,810       $351,907
     Other assets.............................      4,259                817          5,076
     Accrued and other liabilities............     (7,152)            (2,218)        (9,370)
     Minority interest........................          -            (20,139)       (20,139)
                                                 ----------  ------------------    ----------
                                                 $182,204           $145,270       $327,474
                                                 ==========  ==================    ==========
</TABLE>
                                        8
<PAGE>
                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1996
     

          The historical  operating  results of the above business  combinations
     prior to each  respective  acquisition  date have not been  included in the
     Company's  historical  operating results. Pro forma selected financial data
     for the nine months ended  September  30, 1996 and 1995 as though the above
     business  combinations  had been  effective at the beginning of each period
     are as follows:

<TABLE>
<CAPTION>

                                                                              Nine Months Ended          Nine Months Ended
           (In thousands, except per share data)                               September 30, 1996        September 30, 1995
           -------------------------------------                               ------------------        ------------------
           
           <S>                                                                       <C>                        <C>     
           Revenues                                                               $263,045                   $189,182

           Net Income                                                             $117,078                  $  61,493

           Net income per common share                                                $.83                       $.83
</TABLE>

          The pro forma data does not  purport to be  indicative  of  operations
     that would have  occurred  had the  business  combinations  occurred at the
     beginning of each period 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,  (iii)  estimated  increase in
     depreciation and amortization expense.

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

          Activity  in  real  estate  facilities  during  1996  consists  of the
     following:
<TABLE>
<CAPTION>

                                                                Number of    
                                                               real estate     Net rentable         Net 
                                                               facilities     square feet     carrying cost
                                                               ----------     -----------     -------------
                                                              (in thousands, except number of facilities)

           OPERATING FACILITIES:
           ---------------------
<S>                                                                 <C>          <C>         <C>        
               Beginning balance - December 31, 1995.....           540          32,782      $ 1,163,189
               Property acquisitions:
                  Business combinations..................           103           6,379          351,907
                  Other acquisitions.....................            19           1,289          104,373
               Developed facilities......................             3             179           12,050
               Acquisition of minority interest..........             -               -            5,799
               Capital improvements......................             -               -           13,465
               Depreciation expense......................             -               -          (40,551)
                                                               ----------     -----------     -------------
               Ending balance - September 30, 1996.......           665          40,629        1,610,232
                                                               ----------     -----------     -------------


           CONSTRUCTION IN PROGRESS:
           -------------------------
               Beginning balance - December 31, 1995.....             2             120            7,979
               Current development cost..................            10             603           30,579
               Newly opened development facilities.......            (3)           (179)         (12,050)
                                                               ----------     -----------     -------------
               Ending balance - September 30, 1996.......             9             544           26,508
                                                               ----------     -----------     -------------

             Total  operating  and  development   cost  at
                September 30, 1996.......................           674          41,173       $1,636,740
                                                               ==========     ===========     =============


</TABLE>

                                       9
<PAGE>
                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1996



          During the nine  months  ended  September  30,  1996,  the Company was
     developing  12  mini-warehouse  facilities  (722,000  square feet) three of
     which were  completed  and commenced  operation  during the first and third
     quarters of 1996. The Company's policy is to capitalize  interest  incurred
     on debt during the course of construction of its mini-warehouse facilities.
     Interest  capitalized  during the three and nine months ended September 30,
     1996, was $549,000 and $1,142,000, respectively.

          Subsequent   to   September   30,  1996,   the  Company   acquired  17
     mini-warehouses  (1,098,000  square  feet) and 5 business  park  facilities
     (303,000  square  feet)  from  three  limited  partnerships  which were not
     affiliated   with  the  Company.   The  aggregate   acquisition   cost  was
     approximately $55.7 million.

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

          The  Company's  investment  in real estate  entities at September  30,
     1996,  generally consists of limited and general  partnership  interests in
     approximately 42 affiliated  partnerships and common stock in 11 affiliated
     REITs.  Such interests  consist of ownership  interests ranging from 15% to
     45% and are accounted for using the equity method of accounting. Provisions
     of the agreements of the  partnerships and REITs provide for the payment of
     preferred  cash  distributions  to certain  investors in the entity  (until
     certain  specified  amounts have been paid) without  regard to the pro rata
     interest  of  investors  in  current  earnings.   The  Company's  ownership
     interests in such entities  generally  represents  interests  which are not
     entitled to these preferred cash distributions.

          During the three and nine months ended September 30, 1996, the Company
     recognized   earnings  from  its   investments   totaling   $5,559,000  and
     $15,649,000,  respectively.  Included  in equity in earnings of real estate
     entities  for the three and nine  months  ended  September  30, 1996 is the
     Company's share of depreciation expense totaling $4,415,000 and $13,241,000
     (including  amortization totaling $1,957,000 and $6,009,000,  respectively,
     representing  the  amortization  of  the  Company's  cost  basis  over  the
     underlying  book  value of the  Company's  equity  interest  in each of the
     entities).

          In 1996,  in  connection  with  business  combinations  (Note 3),  the
     Company  reduced its  investment in real estate  entities by  approximately
     $82.1 million, as a result of (i) the elimination of Company's pre-existing
     investment in five REITs which were merged into the Company and included as
     part of the  purchase  price  allocation  with  respect  to the net  assets
     acquired by the Company and (ii). the elimination in  consolidation  of the
     Company's investment in newly consolidated partnerships during 1996.

6.   Mortgage notes receivable from affiliates
     -----------------------------------------

          At  September  30,  1996,   mortgage  notes   receivable   balance  of
     $25,414,000 is net of related  discounts  totaling  $333,000.  The mortgage
     notes bear  interest  at stated  rates  ranging  from 7.4% to 14.0% and are
     secured by 14 mini-warehouse  facilities owned by affiliated  partnerships.
     All of the notes are current as to the payment of principal and interest.

          During the first nine months of 1996,  the Company  canceled  mortgage
     notes which had a net carrying value of $700,000 as part of the acquisition
     cost of the underlying real estate facility securing the mortgage note.

7.   Minority interest 
     -----------------

          The Company classifies  ownership  interests other than its own in the
     net assets of each of the Consolidated Partnerships as minority interest on
     the  Company's  consolidated  financial  statements.  Minority  interest in
     income  consists of such interests'  share of the operating  results of the
     Company  relating  to  the  consolidated  operations  of  the  Consolidated
     Partnerships.


                                       10
<PAGE>

                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1996

          During 1996, in connection with business  combinations (Notes 3 and 5)
     the Company began to  consolidate  the accounts of two  partnerships.  As a
     result,  minority  interest was increased by $20,139,000,  representing the
     remaining partners' equity interests in the aggregate net assets of the two
     partnerships.

          During  1996,  the Company  acquired  additional  limited  partnership
     interests in existing  Consolidated  Partnerships  for an aggregate cost of
     $10,075,000.  These  transactions  had  the  effect  of  reducing  minority
     interest by  approximately  $4,276,000  (the  historical book value of such
     interests in the underlying net assets of the partnerships).  The excess of
     the underlying book value over cost ($5,799,000) has been allocated to real
     estate facilities in consolidation.

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

          Preferred stock
          ---------------
          At  September  30, 1996 and  December  31,  1995,  the Company had the
     following series of Preferred Stock outstanding:
<TABLE>
<CAPTION>

                                                                       Shares Outstanding                 Liquidation Amount
                                                                       ------------------                 ------------------
                                                    Dividend      September 30,   December 31,       September 30,    December 31,
                           Series                      Rate           1996            1995               1996             1995
           ----------------------------------       ----------    -------------   ------------       -------------    -------------
         
                                                                                       (amounts in thousands)

           <S>                                          <C>          <C>              <C>                <C>               <C>     
           Series A                                     10.00%       1,825.00         1,825.00           $  45,625         $ 45,625
           Series B                                      9.20%       2,386.00         2,386.00              59,650           59,650
           Series C                                 Adjustable       1,200.00         1,200.00              30,000           30,000
           Series D                                      9.50%       1,200.00         1,200.00              30,000           30,000
           Series E                                     10.00%       2,195.00         2,195.00              54,875           54,875
           Series F                                      9.75%       2,300.00         2,300.00              57,500           57,500
           Series G                                     8.875%           6.90             6.90             172,500          172,500
           Series H                                      8.45%           6.75             -                168,750                -
                                                                  -------------   ------------       -------------    -------------
             Senior Preferred Stock totals                          11,119.65        11,112.90             618,900          450,150
                                                                  -------------   ------------       -------------    -------------


           Convertible                                   8.25%       2,262.57         2,300.00              56,564           57,500

           Mandatory Convertible - Series CC            13.00%          58.96             -                 58,955                -

           Mandatory Convertible Participating        Variable           -               31.20                   -           28,470
                                                                  -------------   ------------       -------------    -------------
             Convertible Preferred Stock totals                      2,321.53         2,331.20             115,519           85,970
                                                                  -------------   ------------       -------------    -------------
                                                                    13,441.18        13,444.10            $734,419         $536,120
                                                                  =============   ============       =============    =============
</TABLE>

          During  1996,  the  Company   issued   6,750,000   depository   shares
     (depository  shares,  each  representing  1/1,000  of a share) of its 8.45%
     Series H  Preferred  Stock  (January  25,  1996)  raising  net  proceeds of
     approximately  $163.1 million and 4,000,000 depository shares of its 8-5/8%
     Series I  Preferred  Stock  (November  1, 1996)  raising  net  proceeds  of
     approximately $96.7 million.

                                       11

<PAGE>
                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1996


          In  April  1996,  in  connection   with  the  acquisition  of  limited
     partnership  interests  (Note 3), the Company  issued  $58,955,000  (58,955
     shares)  of its  Mandatory  Convertible  Preferred  Stock,  Series  CC (the
     "Series CC Preferred Stock"). The Series CC Preferred Stock ranks junior to
     the Company's  Cumulative  Senior  Preferred  Stock with respect to general
     preference  rights and has a liquidation  value of $1,000 per share.  Other
     significant  terms of the Series CC Preferred Stock include:  (i) quarterly
     distributions equal to $32.50 per share, (ii) conversion, at anytime at the
     option of the  holder,  into common  stock of the  Company at a  conversion
     price of $28.56 or 35.014  shares of common  stock for each share of Series
     CC Preferred Stock, and (iii) automatic conversion into common stock of the
     Company on March 31, 2000 at the conversion price described above.

          The Series A, Series B, Series C, Series D, Series E, Series F, Series
     G, Series H and Series I  (collectively  the "Cumulative  Senior  Preferred
     Stock") have general  preference  rights with  respect to  liquidation  and
     quarterly  distributions.  With  respect to the  payment of  dividends  and
     amounts upon liquidation,  all of the Company's Convertible Preferred Stock
     ranks junior to the Cumulative  Senior Preferred Stock and any other shares
     of preferred stock of the Company ranking on a parity with or senior to the
     Cumulative  Senior Preferred  Stock. The Convertible  Preferred Stock ranks
     senior to the common stock,  any  additional  class of common stock and any
     series  of  preferred  stock  expressly  made  junior  to  the  Convertible
     Preferred Stock.

          During  the  second  quarter  of  1996,   the  Mandatory   Convertible
     Participating Preferred Stock was exchanged into 1,611,265 shares of common
     stock.  Costs incurred in connection with the exchange have been charged to
     Additional Paid in Capital.

          The 8.25%  Convertible  Preferred  Stock is convertible at any time at
     the option of the holders of such stock into shares of the Company's common
     stock at a conversion  rate of 1.6835 shares of common stock for each share
     of  Convertible   Preferred   Stock,   subject  to  adjustment  in  certain
     circumstances.  During  the first  nine  months of 1996,  at the  option of
     shareholders,  a total of 37,425 shares  ($936,000  liquidation  amount) of
     Convertible Preferred Stock were converted into 62,993 common shares.

          Common stock
          ------------
          During 1996, the Company  issued shares of its common as follows:  (i)
     4,974,471 shares ($106,285,000) in connection with the mergers, (ii) 62,993
     shares   ($936,000)  in  connection  with  the  conversion  of  Convertible
     Preferred Stock into common stock, (iii) 6,151,200 shares ($128,501,000) in
     connection with private offerings,  (iv) 1,611,265 shares  ($28,470,000) in
     connection  with the  conversion  of the  Mandatory  Convertible  Preferred
     Stock,  and (v) 97,663 shares  ($992,000)  in  connection  with exercise of
     stock  options.  The shares of common stock issued in  connection  with the
     mergers were issued at the prevailing market price at the time of issuance.

          During the second quarter of 1996, the Company  granted  non-qualified
     options  to  certain  officers  and key  employees  to  purchase a total of
     810,000 shares of the Company' common stock at $19-7/8 per share.


                                       12
<PAGE>
                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1996


          Class B Common Stock
          --------------------
          The Class B Common  Stock will (i) not  participate  in  distributions
     until the later to occur of funds from operations  ("FFO") per Common Share
     as defined below,  aggregating  $1.80 during any period of four consecutive
     calendar quarters, or January 1, 2000; thereafter, the Class B Common Stock
     will participate in distributions  (other than liquidating  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,  (ii)  not  participate  in
     liquidating  distributions,  (iii)  not be  entitled  to  vote  (except  as
     expressly required by California law) and (iv)  automatically  convert 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.

          For  these  purposes,   FFO  means  net  income  (loss)  (computed  in
     accordance with generally accepted  accounting  principles) before (i) gain
     (loss) on early  extinguishment  of debt, (ii) minority  interest in income
     and (iii) gain (loss) on disposition  of real estate,  adjusted as follows:
     (i) plus  depreciation and amortization  (including the Company's  pro-rata
     share of depreciation and amortization of  unconsolidated  equity interests
     and  amortization  of assets  acquired  in the Merger,  including  property
     management  agreements and  goodwill),  and (ii) less FFO  attributable  to
     minority interest.

          For these  purposes,  FFO per Common  Share  means FFO less  preferred
     stock  dividends  (other than  dividends on  convertible  preferred  stock)
     divided by the outstanding weighted average shares of Common Stock assuming
     conversion of all outstanding convertible securities and the Class B Common
     Stock.

          For these  purposes,  FFO per share of Common  Stock (as  defined) was
     $1.83 for the four consecutive calendar quarters ended September 30, 1996.

          Dividends
          ---------
          The following  summarizes  dividends paid during the first nine months
     of 1996:
<TABLE>

<CAPTION>
                                                          For the Nine Months Ended
                                                              September 30, 1996
                                                   -----------------------------------------
                                                   Distributions Per
                                                        Share or
                                                    Depository Share    Total Distributions
                                                   ------------------   --------------------

          
          <S>                                          <C>                   <C>         
          Series A                                     $  1.875              $  3,423,000
          Series B                                     $  1.725                 4,116,000
          Series C                                     $  1.358                 1,630,000
          Series D                                     $  1.781                 2,138,000
          Series E                                     $  1.875                 4,116,000
          Series F                                     $  1.828                 4,205,000
          Series G                                     $  1.688                11,652,000
          Series H                                     $  1.450                 9,783,000
          Convertible                                  $  1.547                 3,523,000
          Series CC                                     $65.000                 3,832,000
          Mandatory Convertible Participating           $54.490                 1,700,000
                                                                        --------------------
                                                                               50,118,000

          Common                                       $  0.660                49,121,000
                                                                        --------------------
                                                                              $99,239,000
                                                                        ====================
</TABLE>


                                       13
<PAGE>
                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1996



          The  dividend  rate on the  Series C  Preferred  Stock for the  first,
     second,  and third  quarters of 1996 was equal to 6.75%,  7.24%,  and 7.77%
     respectively,  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, and Thirty
     Year Constant Maturity Rate) multiplied by 110%. However, the dividend rate
     for any  dividend  period will not be less than 6.75% per annum nor greater
     than 10.75%.  The dividend  rate for the quarter  ending  December 31, 1996
     will be equal to 7.744% per annum.


          Dividends  on the Series H shares  (issued  January 25,  1996) and the
     Series CC shares  (issued April 1, 1996) have been  pro-rated from the date
     issued.

          The Mandatory Convertible  Participating Preferred Stock was issued in
     connection with the acquisition of all of the limited partnership interests
     in a real estate limited partnership in 1995. Dividends with respect to the
     Mandatory  Convertible  Participating  Preferred Stock varied  depending on
     operating   results  of  the  underlying  real  estate  facilities  of  the
     partnership.  During June 1996,  the  Mandatory  Convertible  Participating
     Preferred Stock was exchanged for common stock of the Company.

9.   Proposed mergers and property acquisitions
     ------------------------------------------

          Proposed affiliated REIT mergers
          --------------------------------
          In August 1996,  Partners  Preferred  Yield,  Inc.  ("PPY"),  Partners
     Preferred Yield II, Inc.  ("PPY-2") and Partners  Preferred Yield III, Inc.
     ("PPY-3")  each agreed,  subject to certain  conditions,  to merge with and
     into the  Company.  PPY,  PPY-2 and PPY-3 are  affiliated  publicly  traded
     equity real estate investment trusts. Each of the mergers is conditioned on
     approval by the respective  shareholders of PPY, PPY-2 and PPY-3,  however,
     the mergers  are not  conditioned  on  approval of each other.  The Company
     expects  that  if  approved  by the  shareholders,  the  mergers  would  be
     completed by December 31, 1996.

          The estimated value of the PPY merger is approximately  $68.5 million.
     PPY has  3,077,028  outstanding  shares of common  stock  series A, 420,875
     outstanding shares of common stock series B, 247,574  outstanding shares of
     common  stock  series C, and  163,036  outstanding  shares of common  stock
     series D. The Company owns 438,503 shares of common stock series A, 336,700
     shares of common stock  series B, 198,059  shares of common stock series C,
     and 130,429 shares of common stock series D. Upon completion of the merger,
     each  outstanding  share of common stock series A of PPY (other than shares
     held  by  the  Company)  would  be  converted,   at  the  election  of  the
     shareholders of PPY, into either shares of the Company's  common stock with
     a market  value of $19.00 or,  with  respect to up to 20% of the PPY common
     stock series A, $19.00 in cash. In addition,  each share of PPY series B, C
     and D (other than shares held by the Company)  will be  converted  into the
     right to receive $11.66 in the Company's  common stock,  plus the estimated
     required REIT  distributions  attributable to the PPY common stock series B
     of $0.70 per share.  The shares of PPY  common  stock  series A, B, C and D
     held  by  the  Company  will  be  canceled  in  the  merger.  PPY  owns  19
     mini-warehouse properties (1,249,000 square feet).

          The  estimated  value  of the  PPY-2  merger  is  approximately  $74.4
     million.  PPY-2 has 3,130,103  outstanding shares of common stock series A,
     420,875  outstanding  shares of common stock series B, 247,574  outstanding
     shares of common stock series C, and 163,036  outstanding  shares of common
     stock series D. The Company  owns 441,503  shares of common stock series A,
     336,700  shares of common stock  series B,  198,059  shares of common stock
     series C, and 130,429  shares of common stock series D. Upon  completion of
     the merger, each outstanding share of common stock series A of PPY-2 (other
     than shares held by the Company) would be converted, at the election of the
     shareholders  of PPY-2,  into either shares of the  Company's  common stock
  

                                     14
<PAGE>
                              PUBLIC STORAGE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1996


     with a market  value of $20.39 or,  with  respect to up to 20% of the PPY-2
     common  stock series A, $20.39 in cash.  In  addition,  each share of PPY-2
     series B, C and D (other than shares held by the Company) will be converted
     into the right to receive  $12.26 in the Company's  common stock,  plus the
     estimated  required  REIT  distributions  attributable  to the PPY-2 common
     stock series B of $0.83 per share. The shares of PPY-2  common stock series
     A, B, C and D held by the Company  will be  canceled  in the merger.  PPY-2
     owns 24 mini-warehouse properties (1,362,000 square feet).

          The  estimated  value  of the  PPY-3  merger  is  approximately  $31.1
     million.  PPY-3 has 1,313,384  outstanding shares of common stock series A,
     168,709  outstanding  shares of common stock  series B, 99,241  outstanding
     shares of common  stock series C, and 65,354  outstanding  shares of common
     stock  series D. The Company  owns 82,547  shares of common stock series A,
     134,967  shares of common  stock  series B, 79,393  shares of common  stock
     series C, and 52,283  shares of common stock series D. Upon  completion  of
     the merger, each outstanding share of common stock series A of PPY-3 (other
     than shares held by the Company) would be converted, at the election of the
     shareholders  of PPY-3,  into either shares of the  Company's  common stock
     with a market  value of $20.47 or,  with  respect to up to 20% of the PPY-3
     common  stock series A, $20.47 in cash.  In  addition,  each share of PPY-3
     series B, C and D (other than shares held by the Company) will be converted
     into the right to receive  $12.30 in the Company's  common stock,  plus the
     estimated  required  REIT  distributions  attributable  to the PPY-2 common
     stock  series B of $0.74 per share. The shares of PPY-3 common stock series
     A, B, C and D held by the Company  will be  canceled  in the merger.  PPY-3
     owns 9 mini-warehouse properties (567,000 square feet).

          Property acquisitions
          ---------------------
          The Company has  agreements in principle to acquire 8  mini-warehouses
     (569,000 square feet) and 5 business park facilities  (428,000 square feet)
     from two limited  partnerships  which are not affiliated  with the Company.
     The  Company   currently   manages  these   properties  on  behalf  of  the
     partnerships.  The  acquisition  of the real estate assets from each of the
     limited  partnerships  is  subject  to certain  conditions,  including  the
     approval of the limited partners in each of the partnerships. The aggregate
     acquisition cost is approximately $30.2 million.


                                       15
<PAGE>

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

     OVERVIEW:  Since the  beginning  of fiscal  1995,  the Company  completed a
number  of  transactions  which  have   significantly   affected  the  financial
complexion of the Company.

     *    On November 16, 1995, the Company completed a merger  transaction with
          Public  Storage  Management,  Inc.  ("PSMI") with an aggregate cost of
          $549.3 million (the "PSMI  Merger").  In the PSMI Merger,  the Company
          acquired all the real estate operations of PSMI, principally including
          (i)  general  and  limited   partnership   interests   in  47  limited
          partnerships owning an aggregate of 286  mini-warehouses,  (ii) shares
          of common stock in 16 REITs owning an aggregate of 218 mini-warehouses
          and 14 commercial  properties (five of which have subsequently  merged
          with the Company),  (iii) property management contracts,  exclusive of
          facilities owned by the Company,  for 563  mini-warehouses and through
          ownership  of 95% economic  interest in a  subsidiary,  24  commercial
          properties and (iv) a 95% economic interest in another subsidiary that
          currently  sells  locks and boxes in  mini-warehouses  operated by the
          Company.

     *    Since  January 1, 1995,  the  Company  completed  seven  mergers  with
          affiliated REITs, two in 1995 with an aggregate cost of $135.4 million
          and five in 1996 (through  September 30, 1996) with an aggregate  cost
          of $182.2 million.

     *    From  January 1, 1995 through  September  30,  1996,  through  various
          mergers and acquisitions the number of real estate facilities included
          in the Company's  consolidated financial statements has increased from
          387 at the beginning of 1995 to 665 at September 30, 1996.

     At September 30, 1996 the Company's  investment  portfolio  consists of (i)
wholly-owned  properties  owned by the Company,  (ii)  properties  owned by real
estate  partnerships  in which the Company has significant  ownership  interests
(the  "Consolidated  Partnerships"),  and (iii)  properties owned by real estate
entities  (partnership and REITs) in which the Company's  ownership interest and
control are not  sufficient to warrant the  consolidation  of such entities (the
"Unconsolidated   Entities").  The  following  table  summarizes  the  Company's
investment in real estate facilities as of September 30, 1996:
<TABLE>
<CAPTION>

                                               Number of Facilities in which the       Net Rentable Square Footage
                                               Company has an ownership interest              (in thousands)
                                               ---------------------------------   ---------------------------------
                                                Mini-       Business                   Mini-     Business
                                              warehouses      Parks       Total     warehouses     Parks      Total
                                               ----------  ------------  -------   ------------  ----------  -------


<S>                                                <C>           <C>        <C>        <C>           <C>      <C>   
Wholly-owned facilities....................        348           11         359        21,020        902      21,922
Facilities     owned    by     Consolidated
Partnerships...............................        292           14         306        17,155      1,552      18,707
                                               ----------  ------------  -------   ------------  ----------  -------
    Total consolidated facilities..........        640           25         665        38,175      2,454      40,629

Facilities owned by Unconsolidated Entities        397           10         407        23,992        649      24,641
                                               ----------  ------------  -------   ------------  ----------  -------
    Total facilities in which the Company
      has an ownership interest............      1,037           35       1,072        62,167      3,103      65,270
                                               ==========  ============  =======   ============  ==========  =======

</TABLE>


     Results of Operations 
     ---------------------
     Net income for the three months ended  September  30, 1996 was  $40,366,000
compared to $19,470,000 for the same period in 1995, representing an increase of
$20,896,000.   Net  income  allocable  to  common   shareholders   increased  to
$23,310,000 for the three months ended  September 30, 1996 from  $10,874,000 for
the three months ended  September 30, 1995.  The increases in net income and net
income  allocable to common  shareholders  were primarily the result of improved
property operations, the acquisition of additional real estate facilities during
1996 and 1995, and the acquisition of additional  partnership  interests  during
1996 and 1995.  Net  income  per  common  share  was  $0.30 per share  (based on
weighted  average shares  outstanding of 78,338,000)  for the three months ended
  
                                       16
<PAGE>

September 30, 1996 compared to $0.26 per share (based on weighted average shares
outstanding of 42,217,000) for the same period in 1995.

     Net income for the nine months ended  September  30, 1996 was  $110,446,000
compared to $49,221,000 for the same period in 1995, representing an increase of
$61,225,000.   Net  income  allocable  to  common   shareholders   increased  to
$60,328,000  for the nine months ended  September 30, 1996 from  $27,317,000 for
the nine months ended  September  30, 1995.  The increases in net income and net
income  allocable to common  shareholders  were primarily the result of improved
property operations, the acquisition of additional real estate facilities during
1996 and 1995, and the acquisition of additional  partnership  interests  during
1996 and 1995.  Net  income  per  common  share  was  $0.81 per share  (based on
weighted  average shares  outstanding  of 74,690,000)  for the nine months ended
September 30, 1996 compared to $0.76 per share (based on weighted average shares
outstanding of 35,847,000) for the same period in 1995.

     PROPERTY  OPERATIONS:  Rental income and cost of operations  have increased
significantly for the three and nine months ended September 30, 1996 compared to
the same periods in 1995. The following table  summarizes the operating  results
of the Company's  mini-warehouse  and business park operations for the three and
nine months ended September 30, 1996 and 1995:
<TABLE>
<CAPTION>

                                          Three months ended                            Nine months ended
                                            September 30,                                 September 30,
                                    -------------------------------------------    ------------------------------------------- 
                                         1996           1995        Change             1996            1995        Change
                                    --------------  ------------  -------------    ------------  -------------  --------------
                                                                  (dollar amounts in thousands)

          Rental income:
             <S>                        <C>            <C>           <C>            <C>              <C>            <C>   
              Mini-warehouse.......      $70,434        $50,853       38.5%          $195,295         $130,228       50.03%
              Business park........        6,006          4,666       28.7%            16,675           13,359       24.97%
                                    --------------  ------------  -------------    ------------  -------------  --------------
                                          76,440         55,519       37.7%           211,970          143,587       47.7%
                                    --------------  ------------  -------------    ------------  -------------  --------------
          Cost of operations:
              Mini-warehouse.......       20,859         17,446       19.6%            58,835           45,563       29.2%
              Business park........        2,739          2,381       15.0%             7,325            6,606       10.9%
                                    --------------  ------------  -------------    ------------  -------------  --------------
                                          23,598         19,827       19.0%            66,160           52,169       26.8%
                                    --------------  ------------  -------------    ------------  -------------  --------------
          Net operating income (a):
              Mini-warehouse.......       49,575         33,407       48.4%           136,460           84,665       61.2%
              Business park........        3,267          2,285       43.0%             9,350            6,753       38.7%
                                    --------------  ------------  -------------    ------------  -------------  --------------
                                         $52,842        $35,692       48.0%          $145,810          $91,418       59.5%
                                    ==============  ============  =============    ============  =============  ==============

          Gross profit margin (b):
              Mini-warehouse.......       70.4%         65.7%          7.1%            69.9%             65.0%        7.5%
              Business park........       54.4%         49.0%         11.1%            56.1%             50.6%       10.9%

          Number of facilities (at
           the end of the period):
              Mini-warehouse.......         640            509        25.7%              640               509       25.7%
              Business park........          25             20        25.0%               25                20      25.0%

</TABLE>
     (a) Net operating income equals rental income less cost of operations which
         does not include depreciation expense related to the facilities.

     (b) Gross  profit  margins  are equal to net  operating  income  divided by
         rental income.

     This increase in property  operations for each of the three and nine months
ended  September 30, 1996  compared to the same periods in 1995 are  principally
the result of the Company's  merger and acquisition  activities  throughout 1995
and 1996. As a result of these activities,  the number of facilities included in
the Company's  consolidated  financial  statements has increased from 529 at the
end of September 30, 1995 to 665 at the end of September 30, 1996.


                                       17
<PAGE>


     MINI-WAREHOUSE  OPERATIONS: The Company's mini-warehouse operations account
for over 90% of the total property  operations and represents the largest source
of comparison  of variances  from period to period.  As a result,  the following
table is presented to further illustrate  variances from period to period by (i)
comparing the operating results of mini-warehouse facilities which were owned by
the Company  throughout 1995 and 1996 and (ii) outlining  operating  results for
those  mini-warehouse  facilities which were acquired by the Company in 1995 and
1996 whereby the operations represent partial results from the date the facility
was acquired through the end of the period.
<TABLE>
 
                                                                     Summary of Mini-warehouse Facility Operations
                                                   -------------------------------------------------------------------------------
    

                                                 Three months ended                           Nine months ended
                                                    September 30,                               September 30,
                                           -------------------------------------------    ------------------------------------------
                                                 1996          1995        Change             1996          1995          Change
                                           --------------  ------------  -------------    ------------  -------------  -------------
                                                                              (dollar amounts in thousands)
    
          Rental income:
<S>                                             <C>            <C>            <C>           <C>           <C>                <C> 
              Pre-1995 acquisitions.......      $40,219        $38,603        4.2%          $117,199      $112,493           4.2%
              1995 acquisitions...........       17,569         12,250       43.4%            50,889        17,735         186.9%
              1996 acquisitions...........       12,646              -        -               27,207             -           -
                                           --------------  ------------  -------------    ------------  -------------  -------------
                                                 70,434         50,853       38.5%           195,295       130,228          50.0%
                                           --------------  ------------  -------------    ------------  -------------  -------------
          Cost of operations:
              Pre-1995 acquisitions.......       12,079         13,270       (9.0%)           35,780        39,594          (9.6%)
              1995 acquisitions...........        4,982          4,176       19.3%            14,705         5,969         146.4%
              1996 acquisitions...........        3,798              -        -                8,350             -           -
                                           --------------  ------------  -------------    ------------  -------------  -------------
                                                 20,859         17,446       19.6%            58,835        45,563          29.1%
                                           --------------  ------------  -------------    ------------  -------------  -------------
          Net operating income:
              Pre-1995 acquisitions.......       28,140         25,333       11.1%            81,419        72,899          11.7%
              1995 acquisitions...........       12,587          8,074       55.9%            36,184        11,766         207.5%
              1996 acquisitions...........        8,848              -        -               18,857             -           -
                                           --------------  ------------  -------------    ------------  -------------  -------------
                                                $49,575        $33,407       48.4%          $136,460       $84,665          61.2%
                                           ==============  ============  =============    ============  =============  =============

          Net rentable square feet, in
           thousands (at the end of the
           period):
              Pre-1995 acquisitions.......       22,106         22,106          -%            22,106        22,106              -%
              1995 acquisitions...........        8,400          4,256       97.4%             8,400         4,256           97.4%
              1996 acquisitions...........        7,669              -          -%             7,669             -              -%

          Number of facilities (at the end
           of the period):
              Pre-1995 acquisitions.......          375           375           -%                375          375             -%
              1995 acquisitions...........          145           134         8.2%                145          134           8.2%
              1996 acquisitions...........          120             -           -%                120            -             -%

          Pre-1995 acquisitions:
              Annualized realized rent per
               occupied square foot (a)...         $7.92          $7.68       3.1%              $7.80         $7.68          1.6%
              Annualized scheduled rent
               per occupied square foot (b)        $9.16          $7.80      17.4%              $9.16         $7.80         17.4%
              Weighted average occupancy
               for the period..............        92.3%          90.8%       1.7%              90.5%         89.5%          1.1%

</TABLE>

          ----------------------------------
          (a)  Realized  rent per square  foot  represents  the  actual  revenue
               earned per occupied  square foot after giving effect to discounts
               through the use of promotions.
          (b)  Scheduled rent per square foot  represents the posted revenue per
               occupied square foot prior to giving effect to discounts  through
               the use of promotions.


                                       18
<PAGE>

     The increases in rental income for the pre-1995  acquisitions for the three
and nine months  ending  September 30, 1996 compared to the same periods in 1995
are due to increasing  realized  rent per occupied  square foot combined with an
increased  weighted average occupancy level. The decreases in cost of operations
for the pre-1995  acquisitions for the three and nine months ended September 30,
1996 compared to the same period in 1995 is principally  the result of decreased
property management fees.

     Prior to the PSMI Merger in November,  1995,  the Company's  mini-warehouse
facilities  were managed by PSMI for a fee.  Fees from  managing  the  Company's
mini-warehouse  facilities  totaled  $3.0 million and $7.8 million for the three
and nine months ended September 30, 1995, respectively, and are included in cost
of operations ($2.3 million and $6.7 million,  respectively,  relate to pre-1995
acquisitions).  As a result of the PSMI Merger, the Company became  self-managed
and no longer incurs property  management fees for the outside management of its
facilities. The Company, however, now incurs operating costs relating to its own
personnel  managing the  facilities  which for the three and nine months  ending
September 30, 1996 totaled $576,000 and $1,751,000,  respectively  ($315,000 and
$964,000, respectively, relate to pre-1995 acquisitions).

     Commencing in early 1996, the Company began to experiment  with a telephone
reservation system designed to provide added customer service. Customers calling
either the Company's toll-free telephone referral system,  (800) 44-STORE,  or a
mini-warehouse facility are directed to the Company's reservation system where a
trained representative discusses with the customer space requirements, price and
location  preferences  and also  informs  the  customer  of other  products  and
services  provided by the Company.  As of  September  30,  1996,  the  telephone
reservation  system  was  supporting  rental  activity  at all of the  Company's
properties,  with the exception of one major  market,  which will be included by
February 1997.

     In  connection  with  the  telephone   reservation   system,   the  Company
experimented with pricing and promotional  discounts designed to increase rental
activity. As a result, rental discounts increased  significantly.  Rental income
for the  Company's  mini-warehouse  facilities is net of  promotional  discounts
totaling  $1,351,000  and $86,000 for the three months ended  September 30, 1996
and 1995,  respectively,  and  $1,955,000 and $296,000 for the nine months ended
September  30, 1996 and 1995,  respectively.  In  addition,  included in cost of
operations  are  expenses  with  respect  to the  telephone  reservation  system
totaling $406,000 and $639,000 for the three and nine months ended September 30,
1996.

     EQUITY IN EARNINGS  OF REAL ESTATE  ENTITIES:  The  Company  currently  has
ownership  interests in 42 limited  partnerships and 11 REITs  (collectively the
"Unconsolidated  Entities").  The Company's ownership interest in these entities
ranges from 15% to 45%, but  generally  averages  approximately  30%. Due to the
Company's limited ownership interest and control of these entities,  the Company
does not  consolidate  the accounts of these  entities for  financial  reporting
purposes and accounts for such investments using the equity method.


     Equity in earnings of real estate  entities was $5,559,000 and $418,000 for
the three  months ended  September  30, 1996 and 1995,  respectively.  Equity in
earnings of real estate  entities  was  $15,649,000  and  $997,000  for the nine
months ended  September 30, 1996 and 1995,  respectively.  For the 1995 periods,
equity in earnings of real estate entities principally consists of earnings from
partnerships which are now consolidated with the Company and,  accordingly,  are
no longer  included in equity in earnings of real estate  entities in 1996.  The
1996 earnings principally consists of earnings related to the interests acquired
pursuant to the PSMI Merger.


     Equity in earnings of real estate  entities for three and nine months ended
September  30,  1996  consists  of the  Company's  pro rata  share  of  earnings
(including  the  Company's  share  of  depreciation  expense  -  $2,458,000  and
$7,232,000,   respectively)  of  the  Unconsolidated  Entities  based  upon  the
Company's  ownership  interest in each for the period.  In  addition,  equity in
earnings of real estate  entities for three and nine months ended  September 30,
1996 includes  amortization  totaling  $1,957,000 and $6,009,000,  respectively,
representing  the  amortization  of the Company's cost basis over the underlying
book value of the Company's equity interest in each of the entities.


                                       19
<PAGE>


     Similar to the Company, the Unconsolidated  Entities generate substantially
all of their income from their ownership of  mini-warehouse  facilities.  In the
aggregate,  the  Unconsolidated  Entities  own a  total  of  407  facilities  at
September  30, 1996,  including  397  mini-warehouse  facilities.  The following
summarizes combined operating data with respect to those Unconsolidated Entities
existing at September 30, 1996:
<TABLE>
<CAPTION>

                                   Selected Financial Data of Unconsolidated Entities
                    -----------------------------------------------------------------------------------
                                                                                       (in thousands)
                    For the nine months ended September 30, 1996:
                         <S>                                                                  <C>     
                         Rental income..............................................          $153,716
                         Total revenues.............................................           155,111
                         Cost of operations.........................................            56,885
                         Depreciation...............................................            24,179
                         Net income.................................................            65,460
                    At September 30, 1996:
                         Total assets...............................................          $947,480
                         Total debt.................................................            90,684
                         Total equity...............................................           819,362
</TABLE>


     The  Company  expects  that its  equity  in  earnings  from  Unconsolidated
Entities will  generally  decrease as a result of the  acquisition of additional
interests in the Unconsolidated  Entities by the Company. The Company has in the
past, and may continue to seek to acquire in the future,  real estate facilities
owned by or additional interests in the Unconsolidated Entities. During 1996, in
connection with mergers and other business  combinations,  the Company  acquired
several entities which were previously  included in Unconsolidated  Entities and
accounted  for under the equity  method.  Included in equity in earnings of real
estate  entities  for the three and nine  months  ended  September  30,  1996 is
$199,000 and  $1,010,000 of income  derived from entities  which have since been
acquired by the Company and, accordingly,  will no longer be recurring as equity
in earnings of real estate entities.

     PROPERTY  MANAGEMENT  OPERATIONS:  In connection with the PSMI Merger,  the
Company acquired property  management  contracts for  mini-warehouse  facilities
owned by affiliated  entities and third party owners.  In addition,  the Company
acquired a 95%  economic  interest  in a  subsidiary  which  manages  commercial
properties. These facilities constitute all of the United States mini-warehouses
and business parks doing business under the "Public  Storage" name and all those
in which the Company has an interest,  which include all the facilities owned by
the Consolidated Partnerships,  Unconsolidated Entities, and 69 facilities owned
by third  parties in which the Company  has no equity  interest.  Subsequent  to
September 30,1996, the Company acquired 13 of these properties.

     The property management  contracts generally provide for compensation equal
to 6%, in the case of the  mini-warehouses,  and 5%, in the case of the business
parks, of gross revenues of the facilities managed. Under the supervision of the
property owners,  the Company  coordinates  rental policies,  rent  collections,
marketing  activities,  the  purchase of  equipment  and  supplies,  maintenance
activity, and the selection and engagement of vendors, suppliers and independent
contractors. In addition, the Company assists and advises the property owners in
establishing  policies for the hire,  discharge and supervision of employees for
the  operation  of these  facilities,  including  resident  managers,  assistant
managers, relief managers and billing and maintenance personnel.

     During the three months ended  September 30, 1996,  the Company's  property
management  operations  generated net operating income of $3,033,000 on revenues
of $3,609,000 and expenses of $576,000.  During the nine months ended  September
30, 1996, the Company's property management  operations  generated net operating
income of  $9,167,000  on revenues of  $10,918,000  and expenses of  $1,751,000.
Because the Company has  significant  ownership  interests  in all but 69 of the
facilities  it manages,  the revenues  generated  from its  property  management
operations are generally predictable and are dependent upon the future growth of
rental income for those facilities the Company manages.

     As noted  above,  the Company has in the past,  and may continue to seek to
acquire  in the  future,  real  estate  facilities  owned by the  Unconsolidated
Entities.  Although  the  acquisition  such  facilities  will have the affect of
reducing  management  fee income to the  Company  there will be a  corresponding
benefit  to the  Company  from the  reduction  in the  operating  costs of these
facilities as a result of being managed by the Company.

                                       20
<PAGE>

     INTEREST AND OTHER INCOME: Interest and other income increased $819,000, to
$1,820,000 for the three months ended September 30, 1996 from $1,001,000 for the
same  period  in  1995.  Interest  and  other  income  increased  $2,665,000  to
$6,129,000 for the nine months ended  September 30, 1996 from $3,464,000 for the
same period in 1995.

     Interest and other income  principally  consists of interest earned on cash
balances  and interest  related to mortgage  notes  receivable.  The increase in
interest  income for the three and nine months ended September 30, 1996 compared
to the same periods in 1995 is primarily  due to interest  income on excess cash
balances  and an  increase  in  mortgage  notes  receivable  balances.  From mid
December  1995  through  late  January  1996,  the  Company,  through two equity
offerings of preferred stock, raised net proceeds of approximately $330 million.
Additionally   during  the  second  and  third   quarters  the  Company   raised
approximately $128.5 million from two private common stock offerings. Due to the
timing to invest  these  proceeds  into real  estate  assets,  cash  balances in
interest  bearing  accounts during the three and nine months ended September 30,
1996 on average were approximately $15 million and $58 million, respectively.

     Also  included in interest  and other  income for the three and nine months
ended  September  31, 1996 is $447,000  and  $829,000  related to the  Company's
ancillary business activities,  specifically lock and box sales and truck rental
operations.

     DEPRECIATION AND  AMORTIZATION:  Depreciation and amortization  expense has
increased  from  $10,961,000  for the three months ended  September  30, 1995 to
$16,819,000 for the same period in 1996.  Depreciation and amortization  expense
has increased from  $27,887,000  for the nine months ended September 30, 1995 to
$47,553,000 for the same period in 1996.

     These  increases are  principally due to the acquisition of additional real
estate  facilities during 1995 and 1996 combined with amortization of intangible
assets  acquired in connection with the PSMI Merger.  Amortization  expense with
respect to intangible assets acquired in the PSMI Merger totaled  $2,328,000 and
$6,982,000 for the three and nine months ended September 30, 1996,  respectively
(none for the periods in 1995).

     GENERAL AND ADMINISTRATIVE EXPENSE:  General and administrative expense was
$1,536,000  for the three months ended  September 30, 1996 and $875,000 the same
period in 1995. General and  administrative  expense was $4,595,000 for the nine
months ended September 30, 1996 and $2,611,000 the same period in 1995.

     The Company has experienced and expects to continue to experience increased
general  and  administrative  costs  during 1996 due to the  following:  (i) the
growth in the size of the Company has resulted in increased  expenses,  (ii) the
Company's property acquisition activities has continued to expand,  resulting in
certain  additional  costs  incurred  in  connection  with  the  acquisition  of
additional real estate  facilities,  and (iii) pursuant to the PSMI Merger,  the
Company  has  become  self-advised,   resulting  in  the  Company  internalizing
management  functions  which  previously  was provided by the Adviser.  However,
offsetting the expected increases in general and administrative expenses will be
the elimination of advisory fee expense.  General and  administrative  costs for
each year  principally  consist of state  income  taxes (for states in which the
Company is a  non-resident),  investor  relation  expenses,  and  certain  costs
incurred in the acquisition and development of real estate facilities.

     ADVISORY  FEE:  During  1995,  the  Company's  day-to-day  operations  were
performed  by an adviser for a  contractual  fee which during the three and nine
months  ended   September  30,  1995  amounted  to  $2,036,000  and  $5,462,000,
respectively.  Pursuant to the PSMI Merger,  effective  November  16, 1995,  the
Company became self-advised and as a result will no longer incur advisory fees.

     MINORITY  INTEREST IN INCOME:  Minority  interest in income  represents the
income allocable to equity interests in the Consolidated  Partnerships which are
not owned by the Company. Minority interest in income for the three months ended
September 30, 1996 was $2,453,000  compared to $1,734,000 for the same period in
1995,  representing  an increase of $719,000.  This increase is principally  the
result  of the  consolidation  of  additional  partnerships  (and  corresponding
increase in minority  interest) during the first and second quarters of 1996. In
  

                                       21
<PAGE>

determining income allocable to the minority interest for the three months ended
September 30, 1996 and 1995, consolidated  depreciation and amortization expense
of approximately $2,999,000 and $2,801,000,  respectively,  was allocated to the
minority interest.

     Minority  interest in income for the nine months ended  September  30, 1996
was $7,268,000 compared to $5,449,000 for the same period in 1995,  representing
an  increase  of  $1,819,000.  Similar to the third  quarter  comparisons,  this
increase  is   principally   a  result  of  the   consolidation   of  additional
partnerships.  In determining  income allocable to the minority interest for the
nine months ended  September 30, 1996 and 1995,  consolidated  depreciation  and
amortization expense of approximately $8,708,000, and $8,193,000,  respectively,
was allocated to the minority interest.


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

     The  Company  has  operated  and  intends  to  continue  to  operate  in  a
self-sufficient manner without reliance on external sources of financing to fund
its  ongoing  operating  needs.  The  Company  believes  that  funds  internally
generated from ongoing operations will continue to be sufficient to enable it to
meet its operating expenses, capital improvements, debt service requirements and
distributions  to shareholders  for the foreseeable  future.  Over the past nine
years, funds internally  generated from ongoing operations were in excess of the
Company's  operating  needs,  allowing the Company to retain cash flow, which it
used to invest in the acquisition of additional real estate  investments or make
optional principal repayments on debt.

     Despite  the  Company's  ability  to  retain a  portion  of its  internally
generated cash flow, the Company's  growth  strategies have required the Company
to  seek  external  financing.  The  Company  has an  unsecured  $125.0  million
revolving  credit  facility  with a group of banks  which it uses as a temporary
source of  acquisition  financing.  The Company,  however,  seeks to  ultimately
finance all acquisitions  with permanent  sources of capital.  As a result,  the
Company  has raised  capital  through  the public  issuance  of both  common and
preferred  stock  which  was  used  to  repay  borrowings  and  make  additional
investments in real estate assets.

     INTERNALLY  GENERATED  CASH FLOWS:  The  Company  believes  that  important
measures  of its  performance  as well as its  liquidity  are cash  provided  by
operations and funds from operations ("FFO").

     Net cash provided by operations (as determined in accordance with generally
accepted accounting  principles)  reflects the cash generated from the Company's
business before distributions to various equity holders, including the preferred
shareholders,  capital expenditures or mandatory principal payments on debt. Net
cash provided by operations has increased to $178,438,000  from  $82,467,000 for
the nine months ended September 30, 1996 and 1995, respectively

     The following  table  summarizes the Company's  ability to pay the minority
interests'  distributions,  its  dividends  to the  preferred  shareholders  and
capital improvements to maintain the facilities through the use of cash provided
by operating activities.  The remaining cash flow is available to the Company to
make both scheduled and optional  principal  payments on debt, pay distributions
to common shareholders and for reinvestment.


                                       22
<PAGE>
<TABLE>
<CAPTION>

                                                                  Three Months Ended                   Nine Months Ended
                                                                     September 30,                    September 30,
                                                             ------------------------------    -------------------------------
                                                                 1996            1995            1996              1995
                                                             -------------   --------------    ------------    ---------------

                                                                                   (Amounts in thousands)

<S>                                                              <C>             <C>            <C>                <C>    
           Net income......................................      $40,366         $19,470        $110,446           $49,221
           Depreciation and amortization...................       16,819          10,961          47,553            27,887
           Depreciation from unconsolidated real
             estate investments............................        4,415               -          13,241                 -
           Minority interest in income.....................        2,453           1,734           7,268             5,449
           Amortization of discounts on mortgage notes
             receivable....................................          (23)            (23)            (70)              (90)
                                                             -------------   --------------    ------------    ---------------
                 Net cash provided by operating            
                 activities................................       64,030          32,142         178,438            82,467


           Distributions from operations to minority
             interests (funds from operations
             allocable to minority interests)..............       (5,452)         (4,535)        (15,976)          (13,642)
                                                             -------------   --------------    ------------    ---------------
           Cash from operations/FFO available to the
             Company's shareholders........................       58,578          27,607         162,462            68,825


             Less: preferred stock dividends...............      (17,056)         (8,596)        (50,118)          (21,904)
                                                             -------------   --------------    ------------    ---------------

           Cash from operations/FFO available to
             common shareholders...........................       41,522          19,011         112,344            46,921
           Capital improvements to maintain facilities:
             Mini-warehouses...............................       (4,557)         (2,193)        (10,884)           (4,590)
             Business parks................................       (1,171)           (881)         (2,581)           (1,790)
           Add back: minority interest share of
             capital improvements..........................          815             593           2,295             1,452
                                                             -------------   --------------    ------------    ---------------

           Funds available for principal payments on
             debt, common dividends and reinvestment.......       36,609          16,530         101,174            41,993
           Cash distributions to common shareholders.......      (16,945)         (9,254)        (49,121)          (24,140)
                                                             -------------   --------------    ------------    ---------------

             Funds available for principal payments on
             debt and investment...........................      $19,664          $7,276         $52,053           $17,853
                                                             =============   ==============    ============    ===============

</TABLE>

     See the  consolidated  statements  of cash flows for the nine months  ended
September 30, 1996 and 1995 for additional  information  regarding the Company's
investing and financing activities.


     FUNDS FROM OPERATIONS  ("FFO"):  FFO is used by many financial  analysts in
evaluating  REITs.  The Company  defines FFO as net income  (loss)  (computed in
accordance  with GAAP)  before (i) gain (loss) on  disposition  of real  estate,
adjusted as follows:  (i) plus depreciation and amortization,  and (ii) less FFO
attributable  to minority  interest.  The  National  Association  of Real Estate
Investment  Trusts,  Inc.  ("NAREIT")  definition  of FFO does not  specifically
address the treatment of minority  interest in the  determination of FFO. In the
case of the Company,  FFO represents  amounts  attributable to its  shareholders
after deducting  amounts  attributable to the minority  interests.  FFO does not
take  into   consideration   scheduled   principal  payments  on  debt,  capital
improvements,  distributions  and other  obligations  of the  Company  which are
further discussed below. Accordingly,  FFO is a supplemental performance measure
and is not a substitute  for the Company's cash flow or net income (as discussed
above) as a measure of the Company's liquidity or operating performance.

     FFO applicable to the common  shareholders  (after  deducting all preferred
stock  dividends)  increased to $41,522,000 for the three months ended September
30, 1996 compared to $19,011,000  for the same period in 1995. FFO applicable to
the  common   shareholders  (after  deducting  all  preferred  stock  dividends)
                                       23

<PAGE>

increased to $112,344,000  for the nine months ended September 30, 1996 compared
to  $46,921,000  for the same  period in 1995.  Although  the  Company  does not
present  FFO per common  share,  those  computing  this amount need to take into
consideration the dilutive effects of the Company's 8.25% convertible  preferred
stock.

     The  Company  accounts  for the  Unconsolidated  Entities  using the equity
method of accounting,  and  accordingly,  earnings are recognized based upon the
Company's economic interest in each of the partnerships and REITs. Provisions of
the  agreements  of these  partnerships  and REITs  provide  for the  payment of
preferred cash distributions to other investors (until certain specified amounts
have been paid)  without  regard to the pro rata  interest of all  investors  in
current earnings.  As a result, cash distributions to be paid to the Company for
a period of time will be less than the  Company's  FFO, as  defined,  from these
entities  (distributable FFO to the Company was approximately $12.6 million less
than the FFO  recognized by the Company for the nine months ended  September 30,
1996).  Preferred cash  distributions paid to other investors during each period
have the effect of  increasing  the Company's  economic  interest in each of the
respective  entities and reducing the amount of future preference payments which
must be paid to other investors  before cash  distributions  will be shared on a
pro rata basis with respect to each investor's actual interest. At September 30,
1996,  the  aggregate   future   preference   payments  to  other  investors  is
approximately  $93.9  million and is expected to be paid over  approximately  15
years, with approximately 50% of the amount being paid over the next 3.5 years.

     RETENTION  OF OPERATING  CASH FLOWS:  Operating  as a REIT,  the  Company's
ability to retain cash flow for  reinvestment  is  restricted.  In order for the
Company to maintain its REIT status, a substantial portion of its operating cash
flows must be used to make  distributions  to its  shareholders.  Remaining cash
flows  must  then be  sufficient  to fund  necessary  capital  improvements  and
scheduled debt service  requirements.  Accordingly,  the Company's ability to be
self-sufficient  is predicated on its ability to generate  sufficient  operating
cash flows to satisfy its REIT distribution  requirements,  capital  improvement
requirements,  scheduled  debt  service  requirements,  and  provide  funds  for
additional investments.

     Over the past four years, the Company's  distribution policy has enabled it
to retain  significant  funds (after capital  improvements)  to make  additional
investments and debt reductions.  During first nine months of 1996 and 1995, the
Company distributed to common shareholders  approximately 44% and 51% of its FFO
available  to  common   shareholders,   respectively,   allowing  it  to  retain
approximately  $52.1  million and $17.9  million (an  increase of  approximately
191%),  respectively,  after  satisfying its capital  improvements and preferred
stock dividend requirements (see table above).

     DISTRIBUTION  REQUIREMENTS:  During  the first  nine  months  of 1996,  the
Company paid  dividends  totaling  $41,063,000  to the holders of the  Company's
Senior Preferred Stock,  $9,055,000 to the holders of the Convertible  Preferred
Stock, and $49,121,000 to the holders of Common Stock. Dividends with respect to
the Senior Preferred Stock and the Convertible Preferred Stock include pro-rated
amounts for securities issued during 1996.

     CAPITAL  IMPROVEMENT  REQUIREMENTS:  During 1996,  the Company has budgeted
approximately  $17.1  million for capital  improvements  ($13.6  million for its
mini-warehouse and $3.5 million for its business park facilities).  The minority
interests'  share of the budgeted  capital  improvements is  approximately  $3.4
million.  During the first nine  months of 1996,  the Company  incurred  capital
improvements of approximately $13.5 million.

     During 1995, the Company commenced a program to enhance its visual icon and
modernize  the   appearance   of  its   mini-warehouse   facilities,   including
modernization of signs, paint color schemes, and rental offices. Included in the
1996 capital  improvement  budget is approximately  $4.0 million with respect to
these expenditures.

     DEBT  SERVICE  REQUIREMENTS:  The  Company  does  not  believe  it has  any
significant  refinancing  risks with  respect to its  mortgage  debt and nominal
interest rate risks associated with its variable rate mortgage debt. The Company
uses its $125.0  million of bank credit  facility (all of which was unused as of
November  13,  1996)  primarily  to  fund  acquisitions  and  provide  financial
flexibility and liquidity. The credit facility currently bears interest at LIBOR
plus 0.75%.


                                       24
<PAGE>

     At September 30, 1996, the Company had total  outstanding  notes payable of
approximately $112.6 million.  Approximate principal maturities of notes payable
at September 30, 1996 are as follows:
<TABLE>
<CAPTION>

                                                                         Mortgage Debt
                                                                 ------------------------------
                                            7.08% Unsecured                         Variable
                                             Senior Notes        Fixed Rate (1)     Rate (2)        Total (3)
                                             ------------        --------------     -----------    ---------
                                                                   (in thousands) 


<S>                                             <C>                 <C>                 <C>        <C>       
         1996 (remainder of)..........          $  2,875            $  1,213            $    5     $    4,093
         1997.........................             6,500               4,812               804         12,116
         1998.........................             7,250               7,900                 -         15,150
         1999 ........................             8,000               6,484                 -         14,484
         2000.........................             8,750               2,721                 -         11,471
         Thereafter...................            29,250              26,083                 -         55,333
                                             ------------        --------------     -----------    ----------
                                                 $62,625             $49,213              $809       $112,647
                                             ============        ==============     ===========    ==========

</TABLE>

      (1)   Weighted average rate of 10.25% at September 30, 1996.
      (2)   Weighted average rate of 7.38% at September 30, 1996.
      (3)   Weighted average rate of 8.5% at September 30, 1996.


     EXTERNAL FINANCING: The Company intends to continue to expand its asset and
capital base through the acquisition of real estate assets and interests in real
estate assets from both  unaffiliated  and  affiliated  parties  through  direct
purchases, mergers, tender offers or other transactions.  The Company expects to
fund  these  transactions  with  internally  generated  retained  cash flows and
borrowings  under its $125.0 million  credit  facility.  The Company  intends to
repay amounts  borrowed under the credit facility from  undistributed  operating
cash flow or, as market conditions permit and are determined to be advantageous,
from the public or private placement of securities.  The Company issued for cash
$163.1  million of its Series H Preferred  Stock in January  1996 and a total of
$128.5  million of Common Stock in June and  September  1996.  The proceeds were
used to repay debt and make additional real estate investments.

     In April 1996, the Company acquired all of the limited partnership interest
in two  partnerships  in which the Company had  previously  acquired the general
partnership interests.  These limited partnership interest were acquired from an
institutional  investor in exchange for $58,955,000 of the Company's Convertible
Preferred Stock, Series CC ("Series CC").

     In November  1996, the Company issued  4,000,000  depository  shares of its
8-5/8%  Series I Preferred  Stock  raising net proceeds of  approximately  $96.7
million.  The Company intends to use the net proceeds from this offering to make
investments  in real estate and to satisfy  cash  elections in  connection  with
mergers with affiliated REITs which are expected to close in December 1996.

     The Company believes that its size and financial  flexibility  enable it to
access capital for growth when appropriate.  The Company's  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.  The  Company's  credit  ratings on its
Senior  Preferred  Stock were  upgraded at the  beginning of 1996 by each of the
three major credit  agencies (Baa2 by Moody's and BBB+ by Standard and Poors and
Duff & Phelps).  Security ratings are not  recommendations  to buy, sell or hold
securities,  may be subject to revision or  withdrawal at any time and should be
evaluated independently of any other rating.

     The Company's  portfolio of real estate  facilities  remains  substantially
unencumbered.  At September 30, 1996, the Company had mortgage debt  outstanding
of approximately  $50 million and had consolidated real estate facilities with a
book value of $1.6 billion. The Company,  however, has been adverse to financing
its  acquisitions  with debt and  generally  will  only  increase  its  mortgage
borrowing  through the assumption of  pre-existing  debt on acquired real estate
facilities.

                                       25
<PAGE>

     Over the past three years the Company has funded  substantially  all of its
acquisitions with permanent  capital (both common and preferred  stock).  Unlike
many other real estate companies, the Company has elected to use preferred stock
despite the fact that the coupon rates of its preferred  stock  exceeds  current
rates on  conventional  debt.  The Company has chosen this  alternative  for the
following reasons:  (i) the Company's  perpetual  preferred stock has no sinking
fund  requirements,  or maturity  date and does not require  redemption,  all of
which eliminate any future  refinancing  risks,  (ii) preferred stock allows the
Company to leverage  the common stock  without the  attendant  interest  rate or
refinancing  risks of debt,  and (iii)  dividends on the preferred  stock can be
applied to the Company's REIT distributions requirements,  which have helped the
Company to satisfy these requirements.

     Mergers and  property  acquisitions:  During the first nine months of 1996,
the Company  completed five merger  transactions  with  affiliated  public REITs
whereby the Company acquired all the outstanding  stock of the REITs in exchange
for cash and common stock of the Company. In the mergers,  the Company issued an
aggregate of 5 million  ($106.3  million)  shares of Common Stock and paid $39.0
million in cash.

     In August 1996, Partners Preferred Yield, Inc. ("PPY"),  Partners Preferred
Yield II, Inc.  ("PPY-2") and Partners  Preferred Yield III, Inc. ("PPY-3") each
agreed, subject to certain conditions,  to merge with and into the Company. PPY,
PPY-2 and PPY-3 are  affiliated  publicly  traded equity real estate  investment
trusts.  Each of the proposed mergers is not conditioned on each other.  Each of
the mergers is conditioned on approval by the  respective  shareholders  of PPY,
PPY-2 and PPY-3. The Company expects that if approved by the  shareholders,  the
mergers  would be completed by December  31,  1996.  After giving  effect to the
Company's  existing  ownership  of common stock in each of these  entities,  the
Company  expects  that  the  acquisition  cost  of the  remaining  shares  to be
approximately $140.0 million.

     The estimated value of the PPY merger is approximately  $68.5 million.  PPY
has 3,077,028  outstanding shares of common stock series A, 420,875  outstanding
shares of common  stock  series B,  247,574  outstanding  shares of common stock
series C, and 163,036  outstanding  shares of common stock series D. The Company
owns 438,503  shares of common  stock  series A, 336,700  shares of common stock
series B, 198,059  shares of common stock series C, and 130,429 shares of common
stock series D. Upon completion of the merger,  each outstanding share of common
stock  series  A of PPY  (other  than  shares  held  by the  Company)  would  be
converted, at the election of the shareholders of PPY, into either shares of the
Company's  common  stock with a market value of $19.00 or, with respect to up to
20% of the PPY common stock series A, $19.00 in cash. In addition, each share of
PPY series B, C and D (other than shares held by the Company)  will be converted
into the  right to  receive  $11.66  in the  Company's  common  stock,  plus the
estimated  required  REIT  distributions  attributable  to the PPY common  stock
series B of $0.70 per share. The shares of PPY common stock series A, B, C and D
held by the Company will be canceled in the merger.  PPY owns 19  mini-warehouse
properties (1,249,000 square feet).

     The estimated  value of the PPY-2 merger is  approximately  $74.4  million.
PPY-2  has  3,130,103  outstanding  shares  of common  stock  series A,  420,875
outstanding  shares of common  stock  series B,  247,574  outstanding  shares of
common stock series C, and 163,036  outstanding shares of common stock series D.
The Company  owns 441,503  shares of common  stock  series A, 336,700  shares of
common  stock  series B,  198,059  shares of common  stock series C, and 130,429
shares of common stock series D. Upon completion of the merger, each outstanding
share of common  stock series A of PPY-2 (other than shares held by the Company)
would be converted,  at the election of the  shareholders of PPY-2,  into either
shares of the  Company's  common  stock with a market  value of $20.39 or,  with
respect to up to 20% of the PPY-2  common  stock  series A,  $20.39 in cash.  In
addition,  each share of PPY-2  series B, C and D (other than shares held by the
Company)  will be converted  into the right to receive  $12.26 in the  Company's
common stock, plus the estimated required REIT distributions attributable to the
PPY-2 common stock series B of $0.83 per share. The shares of PPY-2 common stock
series A, B, C and D held by the Company  will be canceled in the merger.  PPY-2
owns 24 mini-warehouse properties (1,362,000 square feet).

     The estimated  value of the PPY-3 merger is  approximately  $31.1  million.
PPY-3  has  1,313,384  outstanding  shares  of common  stock  series A,  168,709
outstanding shares of common stock series B, 99,241 outstanding shares of common
stock  series C, and 65,354  outstanding  shares of common  stock  series D. The
Company owns 82,547  shares of common  stock series A, 134,967  shares of common
stock series B, 79,393  shares of common  stock  series C, and 52,283  shares of
common stock series D. Upon completion of the merger,  each outstanding share of
  
                                       26
<PAGE>

common stock series A of PPY-3 (other than shares held by the Company)  would be
converted,  at the election of the shareholders of PPY-3,  into either shares of
the Company's  common stock with a market value of $20.47 or, with respect to up
to 20% of the PPY-3  common stock  series A, $20.47 in cash.  In addition,  each
share of PPY-3 series B, C and D (other than shares held by the Company) will be
converted into the right to receive $12.30 in the Company's  common stock,  plus
the estimated required REIT distributions attributable to the PPY-2 common stock
series B of $0.74 per share. The shares of PPY-3 common stock series A, B, C and
D  held  by  the  Company  will  be  canceled  in  the  merger.   PPY-3  owns  9
mini-warehouse properties (567,000 square feet).

     Subsequent to September 30, 1996, the Company  acquired 17  mini-warehouses
(1,098,000  square feet) and 5 business park  facilities  (303,000  square feet)
from three limited  partnerships which were not affiliated with the Company. the
aggregate acquisition cost was approximately $55.7 million.

     The  Company  has  agreements  in  principle  to acquire 8  mini-warehouses
(569,000 square feet) and 5 business park facilities  (428,000 square feet) from
two limited  partnerships which are not affiliated with the Company. The Company
currently  manages  these  properties  on  behalf  of  the   partnerships.   The
acquisition of the real estate assets from each of the limited  partnerships  is
subject to certain conditions.  The aggregate  acquisition cost is approximately
$30.2 million.

     DEVELOPMENT ACTIVITIES:  Historically,  the Company only acquired interests
in existing/operating real estate facilities.  However,  commencing in 1995, the
Company  began to construct  mini-warehouse  facilities.  Through  September 30,
1996, the Company  constructed and opened for operation four facilities,  one of
which began  operations in August 1995 and three in 1996. At September 30, 1996,
the Company had nine  mini-warehouses  under  development with an aggregate cost
incurred to date of approximately $22.5 million and total  additional  estimated
cost to complete of $18.8 million.

     The Company currently has plans to develop an additional 13 mini-warehouses
(811,000 square feet) in various locations at an estimated cost of approximately
$57.1  million.   The  Company  is  evaluating  the  feasibility  of  developing
additional  mini-warehouses  in selected markets in which there are few, if any,
facilities  to acquire at  attractive  prices  and where the  scarcity  of other
undeveloped  parcels  of  land  or  other  impediments  to  development  make it
difficult  to  construct   additional  competing  facilities  and  has  incurred
approximately $4.0 in connection with these additional facilities.

     Generally the construction  period takes 9 to 12 months followed by a 18 to
24 month  fill-up  process  until  the  newly  constructed  facility  reaches  a
stabilized  occupancy  level of  approximately  90%.  Due to the  timing  of the
employment of the capital to construct the facilities  and the  relatively  long
"fill-up"  period until the facilities  reach a stabilized  occupancy level, the
Company believes that its development  plans may create earnings dilution in the
short-term.

     OTHER  ACTIVITIES:  In August 1996, a subsidiary of the Company  acquired a
company engaged in the portable  self-storage  business in Southern  California.
The subsidiary  plans to open  locations  during the fourth quarter of 1996. The
operations  of  this  subsidiary  are  not  expected  to be  significant  to the
Company's operations during 1996.

     FUTURE  TRANSACTIONS:  The Company intends to continue to expand its assset
and capital base through the  acquisition of real estate assets and interests in
real estate  assets from  unaffiliated  parties  and  affiliates  of The Company
through direct purchase, merger, tender offers or other transactions.

     REIT STATUS:  The Company  believes  that it has  operated,  and intends 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 it will at all times so
qualify.  To the extent that the Company continues to qualify as a REIT, it will
not be taxed,  with certain  limited  exceptions,  on the taxable income that is
distributed to its shareholders.

     As a REIT,  the Company is not taxed on that portion of its taxable  income
which is  distributed  to its  shareholders  provided  that at least  95% of its
taxable  income is so  distributed  prior to filing of the Company's tax return.
The Company has satisfied the REIT distribution requirement since 1980.


                                       27
<PAGE>

PART II. OTHER INFORMATION


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

     The  Company  held an annual  meeting of  shareholders  on October 7, 1996.
Proxies for the annual  meeting were  solicited  pursuant to Regulation 14 under
the Securities  Exchange Act of 1934. The annual meeting  involved the following
matters:

1.     ELECTION OF DIRECTORS
<TABLE>

<CAPTION>
                                                                                              Number of Shares of Convertible
                                                       Number of Shares of Common Stock          Preferred Stock, Series CC
                                                       --------------------------------          --------------------------
                               Name                      Voted For           Withheld           Voted For          Withheld
                -------------------------------          ---------           --------           ---------          --------

<S>                                                      <C>                 <C>                 <C>                   
                B. Wayne Hughes                          62,222,007          321,179             58,955               -
                Harvey Lenkin                            62,227,394          315,792             58,955               -
                Robert J. Abernethy                      62,228,191          314,995             58,955               -
                Dann V. Angeloff                         62,226,802          316,384             58,955               -
                William C. Baker                         62,224,518          318,668             58,955               -
                Uri P. Harkham                           62,224,001          319,185             58,955               -

</TABLE>
<TABLE>
<CAPTION>

                                                            Total Common Stock and Convertible Preferred Stock, Series CC
                                                            -------------------------------------------------------------


                               Name                                Voted For                              Withheld
                -----------------------------------                ---------                              --------
<S>                                                                 <C>                                       <C>    
                B. Wayne Hughes                                     62,280,962                                321,179
                Harvey Lenkin                                       62,286,349                                315,792
                Robert J. Abernethy                                 62,287,146                                314,995
                Dann V. Angeloff                                    62,285,757                                316,384
                William C. Baker                                    62,283,473                                318,668
                Uri P. Harkham                                      62,282,956                                319,185
</TABLE>

2.   Adoption of amendments to the Company's  articles of  incorporation  in the
     form of Exhibit A to the Company's Proxy Statement dated August 30, 1996 to
     authorize  200,000,000  shares of Equity Stock - approval of this  proposal
     required  the  affirmative  vote of the  holders of (i) a  majority  of the
     Company's  outstanding  shares of Common  Stock and (ii) a majority  of the
     Company's  outstanding  shares of Common  Stock and  Convertible  Preferred
     Stock,  Series CC, voting together as a single class, and this proposal was
     approved by the following vote: 
<TABLE>
<CAPTION>

                                                                  For             Against            Abstain           No Vote
                                                                  ---             -------            -------           -------

<S>                                                            <C>                <C>                 <C>            <C>      
                 Common Stock                                  53,697,808         5,576,843           447,671        2,820,864

                 Convertible Preferred Stock, Series CC            58,955                 -                 -                -
                                                               ----------         ---------           -------        ---------
                 Total Common Stock and Convertible
                 Preferred Stock, Series CC                    53,756,763         5,576,843           447,671        2,820,864
                                                               ==========         =========           =======        =========

</TABLE>

3.   Approval of adoption of the Company's  1996 Stock Option and Incentive Plan
     in the form of Exhibit B to the Company's  Proxy Statement dated August 30,
     1996 -  approval  of  this  proposal  required  the  affirmative  vote of a
     majority of the votes cast on the proposal,  and this proposal was approved
     by the following vote:

<TABLE>
<CAPTION>


                                                                  For             Against             Abstain         No Vote
                                                                  ---             -------             -------         -------

<S>                                                            <C>                <C>                 <C>                 <C>
                 Common Stock                                  60,876,527         1,166,963           499,694             2

                 Convertible Preferred Stock, Series CC            58,955                 -                 -             -
                                                               ----------         ---------           -------        ---------

                 Total Common Stock and Convertible
                 Preferred Stock, Series CC                    60,935,482         1,166,963           499,694             2
                                                               ==========         =========           =======        =========
</TABLE>

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

      (a)  The following Exhibits are included herein:

           (11)  Statement re: Computation of Earnings per Share

           (12)  Statement re: Computation of Ratio of Earnings to Fixed Charges

           (27)  Financial Data Schedule

       (b) Reports on Form 8-K

          The  Company  filed a Current  Report on Form 8-K dated  September  6,
          1996,  pursuant  to  Item  5,  which  filed  the  following  financial
          information  relating to the  Company's  mergers  with Public  Storage
          Properties  X, Inc.  and Public  Storage  Properties  XII,  Inc.,  and
          proposed mergers and acquisitions:

          -    Combined Summary of Historical  Information Relating to Operating
               Revenues and Specified Expenses Certain Properties

          -    Pro Forma Consolidated Financial Statements

          The Company  filed a Current  Report on Form 8-K dated  September  18,
          1996, pursuant to Item 5, which filed certain exhibits relating to the
          Company's public offering of Common Stock.

                                       29
<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: November 13, 1996

                            PUBLIC STORAGE, INC.


                            BY:   /s/ Ronald L. Havner, Jr.
                                -----------------------------
                                Ronald L. Havner, Jr.
                                Senior Vice President and
                                  Chief Financial Officer
                                    (Principal financial officer)


                            BY:   /s/ John Reyes
                                -----------------------------
                                John Reyes
                                Vice President and Controller
                                  (Principal accounting officer)


                                       30