PS PARTNERS II LTD, 10-K, 1998-03-30

PS PARTNERS II LTD
10-K, 1998-03-30
LESSORS OF REAL PROPERTY, NEC

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

FORM 10-K

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

For the fiscal year ended December 31, 1997
-----------------

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

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

Commission File Number 0-11981
-------

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

California 95-3878680
- ----------------------------------------------- ---------------------
(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
--------------

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

NONE

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

Units of Limited Partnership Interest
(Title of class)

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

Yes X No
--- ---

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

- --------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
NONE

<PAGE>

PART I

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

General
- -------

PS Partners II, Ltd. (the "Partnership") is a publicly held limited
partnership formed under the California Uniform Limited Partnership Act in
August 1983. Commencing in November 1983, 128,000 units of limited partnership
interest (the "Units") were offered to the public in an interstate offering. The
offering was completed in June 1984.

The Partnership was formed to invest in and operate existing
self-service facilities offering storage space for personal and business use
(the "mini-warehouses") and to invest up to 30% of the net proceeds of the
offering in and operate existing office and industrial properties. The
Partnership's investments were made through general partnerships with Storage
Equities, Inc., now known as Public Storage, Inc. ("PSI"), a real estate
investment trust ("REIT") organized as a corporation under the laws of
California. For tax administrative efficiency, the original general partnerships
with PSI were consolidated into a single general partnership effective December
31, 1990.

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

The Partnership's general partners (the "General Partners") are PSI and
B. Wayne Hughes ("Hughes"). PSI became a co-general partner in September 1993,
when PSI acquired the interest of PSI Associates, Inc. ("PSA"), an affiliate of
PSMI, relating to PSA's general partner capital contribution in the Partnership.
Hughes has been a general partner of the Partnership since its inception. Hughes
is the chairman of the board and chief executive officer of PSI, and Hughes and
members of his family (the "Hughes Family") are the major shareholders of PSI.
The Partnership is managed, and its investment decisions are made by Hughes and
the executive officers and directors of PSI. The limited partners of the
Partnership have no right to participate in the management or conduct of its
business affairs.

The Partnership's mini-warehouse properties are managed by PSI pursuant
to a Management Agreement. PSI believes that it is the largest operator of
mini-warehouse facilities in the United States.

Through 1996, the Partnership's commercial properties were managed by
Public Storage Commercial Properties Group, Inc. ("PSCPG") pursuant to a
Management Agreement. In January 1997, the Partnership and PSI and other related
partnerships transferred a total of 35 business parks to PS Business Parks, L.P.
("PSBPLP"), formerly known as American Office Park Properties, L.P., an
operating partnership formed to own and operate business parks in which PSI has
a significant interest. Included among the properties transferred were the
Partnership's business parks in exchange for a partnership interest in PSBPLP.
Until March 17, 1998, the general partner of PSBPLP was American Office Park
Properties, Inc., an affiliate of PSI. On March 17, 1998, American Office Park
Properties, Inc. was merged into Public Storage Properties XI, Inc., which
changed its name to PS Business Parks, Inc. ("PSBP"). PSBP is a REIT affiliated
with PSI, and is publicly traded on the American Stock Exchange. As a result of
the merger, PSBP became the general partner of PSBPLP (which changed its name
from American Office Park Properties, L.P. to PS Business Parks, L.P.). See Item
13.

PSI's current relationship with the Partnership includes (i) the joint
ownership of 27 of the Partnership's 33 properties (which excludes the
properties transferred to PSBPLP in January 1997), (ii) PSI is a co-general
partner along with Hughes, who is chairman of the board and chief executive
officer of PSI, (iii) as of December 31, 1997, PSI owned approximately 73.81% of
the Partnership's limited partnership units and (iv) PSI is the operator of the
Partnership's mini-warehouse facilities.

2
<PAGE>

Investments in Facilities
- -------------------------

The Partnership owns interests in 33 properties (excluding the
properties transferred to PSBPLP in January 1997); 27 of such properties are
held in a general partnership comprised of the Partnership and PSI . One
property is a leasehold interest in a mini-warehouse property in Raleigh, North
Carolina. The Partnership purchased its last property in July, 1984. Reference
is made to the table in Item 2 for a summary of information about the
Partnership's properties.

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

Mini-warehouses
- ---------------

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

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

Mini-warehouses in which the Partnership has invested generally consist
of three to seven buildings containing an aggregate of between 258 to 1,178
storage spaces, most of which have between 25 and 400 square feet and an
interior height of approximately 8 to 12 feet.

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

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

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

Commercial Properties
- ---------------------

Through 1996, the Partnership owned and operated an office building in
Lakewood, California and a retail office warehouse center in Austin, Texas which
were transferred to PSBPLP in January 1997 in exchange for a partnership
interest in PSBPLP.

Investment Objectives and Polices; Sale or Financing of Investments
- --------------------------------------------------------------------

The Partnership's objectives are to (i) preserve and protect invested
capital, (ii) maximize the potential for appreciation in value of its
properties, (iii) provide Federal income tax deductions so that during the early
years of property operations a portion of cash distributions may be treated as a
return of capital for tax purposes, and therefore, may not represent taxable

3
<PAGE>

income to the limited partners, (iv) provide for cash distributions from
operations and (v) build up equity through the reduction of mortgage loans on
the Partnership's properties. The Partnership will terminate on December 31,
2020 unless dissolved earlier.

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

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

* Capitalize on Public Storage's name recognition. PSI, together
with its predecessor, has more than 20 years of operating
experience in the mini-warehouse business. PSI has informed the
Partnership that it is the largest mini-warehouse facility
operator in the United States in terms of both number of
facilities and rentable space operated. PSI believes that its
marketing and advertising programs improve its competitive
position in the market. PSI's in-house Yellow Pages staff designs
and places advertisements in approximately 700 directories.
Commencing in early 1996, PSI began to experiment with a telephone
reservation system designed to provide added customer service.
Customers calling either PSI's toll-free referral system, (800)
44-STORE, or a mini-warehouse facility are directed to PSI's
reservation system where a trained representative discusses with
the customer space requirements, price and location preferences
and also informs the customer of other products and services
provided by PSI. As of December 31, 1997, the telephone
reservation system was supporting rental activity at all of the
Partnership's properties. PSI's toll-free telephone referral
system services approximately 160,000 calls per month from
potential customers inquiring as to the nearest Public Storage
mini-warehouse.

* Maintain high occupancy levels and increase realized rents.
Subject to market conditions, the Partnership generally seeks to
achieve average occupancy levels in excess of 90% and to eliminate
promotions prior to increasing rental rates. The monthly average
realized rent per occupied square foot for the mini-warehouse
facilities was $.64 in 1997 compared to $.61 in 1996. The weighted
average occupancy levels at the mini-warehouse facilities were 90%
in 1997 compared to 91% in 1996. The Partnership has increased
rental rates in many markets where it has achieved high occupancy
levels and eliminated or minimized promotions.

* Systems and controls. PSI has an organizational structure and a
property operation system, "CHAMP" (Computerized Help and
Management Program), which links its corporate office with each
mini-warehouse. This enables PSI to obtain daily information from
each mini-warehouse and to achieve efficiencies in operations and
maintain control over its space inventory, rental rates,
promotional discounts and delinquencies. Expense management is
achieved through centralized payroll and accounts payable systems
and a comprehensive property tax appeals department, and PSI has
an extensive internal audit program designed to ensure proper
handling of cash collections.

* Professional property operation. In addition to the
approximately 150 support personnel at the Public Storage
corporate offices, there are approximately 2,700 on-site personnel
who manage the day-to-day operations of the mini-warehouses in the
Public Storage system. These on-site personnel are supervised by
110 district managers, 15 regional managers and 3 divisional
managers (with an average of 13 years experience in the
mini-warehouse industry) who report to the president of the
mini-warehouse property operator (who has 14 years of experience
with the Public Storage organization). PSI carefully selects and
extensively trains the operational and support personnel and
offers them a progressive career path. See "Mini-warehouse
Property Operator."

4
<PAGE>

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

The Partnership's mini-warehouse properties are managed by PSI pursuant
to a Management Agreement.

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

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

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

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

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

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

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

Commercial Property Operator
- ----------------------------

Through 1996, the Partnership's commercial properties were managed by
PSCPG, now known as PS Business Parks, Inc., pursuant to a Management Agreement.
In January 1997, the Partnership transferred its commercial properties to PSBPLP
in exchange for a partnership interest.

Competition
- -----------

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

5
<PAGE>

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

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

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

Employees
- ---------

There are 114 persons who render services on behalf of the Partnership.
These persons include resident managers, assistant managers, relief managers,
area managers, and administrative personnel. Some of these employees may be
employed on a part-time basis and may also be employed by other persons,
partnerships, REITs or other entities owning facilities operated by PSI or
PSBPLP.

Impact of Year 2000
- -------------------

PSI has completed an initial assessment of its computer systems. The
majority of the computer programs were installed or upgraded over the past few
years and are Year 2000 compliant. Some of the older computer programs utilized
by PSI were written without regard for Year 2000 issues and could cause a system
failure or miscalculations with possible disruption of operations. Each of these
computer programs and systems has been evaluated to be upgraded or replaced as
part of PSI's Year 2000 project.

The cost of the Year 2000 project will be allocated to all entities
that use the PSI computer systems. The cost of the Year 2000 project which is
expected to be allocated to the Partnership is approximately $99,000. The cost
of new software will be capitalized and the cost of maintenance to existing
systems will be expensed as incurred.

The project is expected to be completed by March 31, 1999 which is
prior to any anticipated impact on operating systems. PSI believes that with
modifications to existing software and, in some instances, the conversion to new
software, the Year 2000 issue will not pose significant operational problems.
However, if such modifications are not made, or are not completed timely, the
Year 2000 issue could have a material impact on the operations of the
Partnership.

The costs of the project and the date on which PSI believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events. There can be
no guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated.

ITEM 2. PROPERTIES.
-----------
The following table sets forth information as of December 31, 1997,
about properties owned by the Partnership. Twenty seven of these properties were
acquired jointly with PSI and were contributed to general partnerships comprised
of the Partnership and PSI .

Net Number
Rentable of Date of Ownership
Location Square Feet Spaces Acquisition Percentage
- --------------------- ----------- -------- ----------- ----------
CALIFORNIA
Fremont 60,700 604 01/13/84 70.0%
Albrae Street
Pico 47,400 398 03/01/84 50.0
Bermudez Street

<PAGE>

Net Number
Rentable of Date of Ownership
Location Square Feet Spaces Acquisition Percentage
- --------------------- ----------- -------- ----------- ----------
GEORGIA
Augusta 40,300 395 12/09/83 81.5%
Crescent Drive
Marietta 29,700 258 03/30/84 75.0
S. Cobb Drive

KANSAS
Olathe 41,800 287 01/19/84 74.4
E. Spruce
Shawnee 64,100 432 01/19/84 74.4
W. 63rd St.
Topeka 50,000 376 01/19/84 74.4
SW 41st St.
Merriam 59,000 458 01/19/84 74.4
W. Frontage

MARYLAND
Baltimore 77,200 807 06/27/84 100.0
Shannon Road
Baltimore 49,000 600 06/27/84 100.0
Laurel Bowie Road
Belton 42,900 366 01/19/84 74.4
S. 71 Fwy.
Gladstone 74,900 590 01/19/84 74.4
N. Oak Trafficway
Independence 78,300 554 01/19/84 74.4
E. 31st St.
Kansas City 74,100 534 01/19/84 74.4
E. 112th Terrace
Kansas City 52,300 465 01/19/84 74.4
Holmes

NORTH CAROLINA
Charlotte 53,900 435 12/09/83 81.5
South Blvd.
Greensboro 41,900 406 12/09/83 81.5
Electra Drive
Greensboro 62,200 651 12/09/83 81.5
W. Market St.
Raleigh 105,100 567 05/16/84 53.0
Departure Dr.
Raleigh 52,300 439 12/09/83 100.0
Yonkers Rd

OREGON
Milwaukee 34,400 384 04/18/84 100.0
SE McLoughlin Blvd.

<PAGE>

Net Number
Rentable of Date of Ownership
Location Square Feet Spaces Acquisition Percentage
- --------------------- ----------- -------- ----------- ----------
PENNSYLVANIA
Philadelphia 110,300 1,178 05/21/84 36.1%
Grant Ave.
Trevose 62,500 787 07/03/84 67.8
Old Lincoln Highway

RHODE ISLAND
Cranston 28,700 302 01/24/85 64.6
Pontiac - 71
Freeway Dr.
N. Providence 35,600 386 04/19/84 90.0
Mineral Springs Ave.

SOUTH CAROLINA
Columbia 67,300 596 12/09/83 81.5
Broad River Rd

TENNESSEE
Knoxville 62,100 578 02/16/84 81.9
E. Central
Ave. Pike
Knoxville 97,400 801 02/16/84 81.9
Unicorn Drive

VIRGINIA
Lorton 55,500 576 06/27/84 100.0
Richmond Hwy
Manassas Balls 44,000 435 03/26/84 41.6
Ford Rd.
Richmond 65,700 518 12/09/83 81.5
Jefferson Davis
Virginia Beach 99,400 762 05/18/84 100.0
Independence

WASHINGTON
Tacoma 52,300 666 01/03/84 90.0
24th St. W.

The weighted average occupancy level for the mini-warehouse facilities
was 90% in 1997 compared to 91% in 1996. The monthly average realized rent per
square foot for the mini-warehouse facilities was $.64 in 1997 compared to $.61
in 1996.

Substantially all of the Partnership's facilities were acquired prior
to the time that it was customary to conduct extensive environmental
investigations in connection with the property acquisitions. During the fourth
quarter of 1995, an independent environmental consulting firm completed
environmental assessments on the Partnership's properties to evaluate the
environmental condition of, and potential environmental liabilities of such
properties. Based on the assessments, the Partnership believes that it is
probable that it will incur costs totaling $68,000 after December 31, 1997 for
known environmental remediation requirements. Although there can be no
assurance, the Partnership is not aware of any unaccrued environmental
contamination of its facilities which individually or in the aggregate would be
material to the Partnership's overall business, financial condition, or results
of operations.

<PAGE>

ITEM 3. LEGAL PROCEEDINGS.
------------------
No material legal proceeding is pending against the Partnership.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of 1997.

PART II

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

The Partnership has no common stock.

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

Exclusive of the General Partners' interest in the Partnership, as of
December 31, 1997, there were approximately 1,639 record holders of Units.

The Partnership makes quarterly distributions of all "Cash Available
for Distribution" and will make distributions of "Cash from Sales or
Refinancing". Cash Available for Distribution is cash flow from all sources less
cash necessary for any obligations, capital improvements, or reserves.

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

9
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.
------------------------

<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- -------------- ------------- ------------- -------------
(In thousands, except per Unit data)

<S> <C> <C> <C> <C> <C>
Revenues $ 14,369 $ 15,456 $ 15,088 $ 14,881 $ 13,827

Depreciation and amortization 2,887 3,502 3,293 3,419 3,688

Interest expense - 14 177 285 698

Income before gain on - 4,634 4,114 4,185 3,498 2,106
disposition of real estate facility
and early extinguishment of debt

Net income 4,634 4,114 4,185 3,722 3,053

Limited partners' share 4,043 3,597 3,262 3,528 2,866

General partners' share 591 517 923 194 187

Limited partners' per unit data(a)

Net income $ 31.59 $ 28.10 $ 25.48 $ 27.56 $ 22.39

Cash distributions (b) (c) $ 38.34 $ 33.44 $ 61.97 $ 11.00 $ 11.00

As of December 31,
- ------------------

Cash and cash equivalents $ 1,085 $ 1,239 $ 904 $ 3,258 $ 1,083

Total assets $ 53,252 $ 54,558 $ 56,371 $ 61,149 $ 63,334

Mortgage notes payable $ - $ - $ 2,260 $ 2,326 $ 7,285

- ---------------
</TABLE>

(a) Limited partners' per Unit data is based on the number of units (128,000)
outstanding during the year.

(b) The General Partners distributed, concurrent with the distributions for the
second and third quarters of 1995, a portion of the operating reserve of
the Partnership and the proceeds from the Weymouth property condemnation
estimated to be $13.92 and $17.40, respectively.

(c) The General Partners distributed, concurrent with the distribution for the
first quarter of 1997, a portion of the operating reserve of the
Partnership estimated to be $4.90.

10
<PAGE>

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

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

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996:

The Partnership's net income was $4,634,000 in 1997 compared to
$4,114,000 in 1996, representing an increase of $520,000, or 13%. Excluding the
1996 operations for the Partnership's business park facilities as compared to
the 1997 equity in income of real estate partnership, the increase is due to an
increase in the Partnership's mini-warehouse operations, partially offset by
increased minority interest in income for those properties held jointly with
PSI.

Rental income for the Partnership's mini-warehouse operations was
$13,617,000 in 1997 compared to $13,049,000 during 1996, representing an
increase of $568,000, or 4%. The increase in rental income was primarily
attributable to increased rental rates at the Partnership's mini-warehouse
facilities, partially offset by decreased average occupancy levels. The monthly
average realized rent per square foot for the mini-warehouse facilities was $.64
in 1997 compared to $.61 in 1996. The weighted average occupancy levels at the
mini-warehouse facilities decreased from 91% in 1996 to 90% in 1997. Cost of
operations (including management fees) increased $222,000, or 5%, to $4,973,000
during 1997 from $4,751,000 in 1996, respectively. This increase was primarily
attributable to increases in advertising, property tax, and management expenses.
Accordingly, for the Partnership's mini-warehouse operations, property net
operating income increased by $346,000, or 4%, from $8,298,000 in 1996 to
$8,644,000 during 1997.

The following table summarizes the Partnership's operating income, net
of depreciation, from its investment in PSBPLP in 1997 compared to that of the
exchanged business park facilities during 1996:

1997 1996
------------ -----------
Equity in earnings of real estate partnership $ 694,000 $ -
Rental income - 2,347,000
Cost of operations - 1,286,000
------------ -----------
Net operating income 694,000 1,061,000
Depreciation - 747,000
------------ -----------
Operating income, net of depreciation $ 694,000 $ 314,000
============ ===========

The difference in operating income, net of depreciation, in 1997 and
1996 is primarily due to the effect of depreciation and an improvement in
proeprty operations.

Depreciation and amortization attributable to the Partnership's
mini-warehouses increased $132,000 from $2,755,000 to $2,887,000 in 1997. This
increase was primarily attributable to the depreciation of capital expenditures
made during 1996 and 1997.

Minority interest in income was $1,732,000 in 1997 compared to
$1,637,000 in 1996, representing an increase of $95,000, or 6%. This increase
was primarily attributable to an increase in operations at the Partnership's
real estate facilities owned jointly with PSI.

Interest expense in 1996 represents interest on the Partnership's
mortgage note payable that was repaid prior to maturity in March 1996.

11
<PAGE>

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

The Partnership's net income in 1996 was $4,114,000 compared to
$4,185,000 in 1995, representing a decrease of $71,000, or 2%. The decrease was
primarily due to an increase in depreciation expense, an increase in minority
interest in income for those properties held jointly with PSI, and a decrease in
interest income, partially offset by improved property operations at the
Partnership's real estate facilities combined with a reduction in environmental
costs.

Property net operating income (rental income less cost of operations
and management fees and excluding depreciation expense) increased approximately
$82,000 in 1996 compared to 1995, as rental income increased by $468,000, or 3%,
and cost of operations (including management fees) increased by $386,000, or 7%.

Rental income for the Partnership's mini-warehouse operations was
$13,049,000 in 1996 compared to $12,564,000 in 1995, representing an increase of
$485,000, or 4%. The increase in rental income was primarily attributable to
increased average realized rental rates combined with increased average
occupancy levels at the mini-warehouse facilities. The monthly average realized
rent per square foot for the mini-warehouse facilities were $.61 in 1996
compared to $.59 in 1995. The weighted average occupancy levels at the
mini-warehouse facilities were 91% in 1996 compared to 90% in 1995. Costs of
operations (including management fees) increased $232,000, or 5%, to $4,751,000
in 1996 from $4,519,000 in 1995. This increase was primarily attributable to
increases in advertising and promotion, repairs and maintenance, and office
expenses. Accordingly, for the Partnership's mini-warehouse operations, property
net operating income increased by $253,000, or 3%, to $8,298,000 in 1996 from
$8,045,000 in 1995.

Rental income for the Partnership's business park operations was
$2,347,000 in 1996 compared to $2,364,000 in 1995, representing a decrease of
$17,000. The decrease in rental income is attributable to decreased average
occupancy levels at the business park facilities. The weighted average occupancy
levels at the business park facilities were 95% in 1996 compared to 97% in 1995.
The monthly average realized rent per square foot for the business park remained
stable at $.81 for both 1996 and 1995. Cost of operations (including management
fees) increased $154,000, or 14%, to $1,286,000 in 1996 from $1,132,000 in 1995.
The increase in cost of operations is primarily due to increases in property
taxes, lease commissions, utilities, and repairs and maintenance expenses.
Accordingly, for the Partnership's business park facilities, property net
operating income decreased by $171,000, or 14%, to $1,061,000 in 1996 from
$1,232,000 in 1995.

Interest income decreased in 1996 over 1995 as a result of a decrease
in average invested cash balances.

Depreciation and amortization increased $209,000 to $3,502,000 in 1996
from $3,293,000 in 1995. This increase is principally attributable to
depreciation of capital expenditures made during 1995 and 1996.

Interest expense decreased approximately $163,000 to $14,000 in 1996
from $177,000 in 1995 as a result of the payoff of the Partnership's mortgage
note payable in the first quarter of 1996.

Minority interest in income increased by $138,000, or 9%, in 1996
compared to 1995. This increase was primarily attributable to an increase in
operations at the Partnership's real estate facilities owned jointly with PSI,
partially offset by the allocation of depreciation and amortization expense
(pursuant to the partnership agreement with respect to those real estate
facilities which are jointly owned with PSI) to PSI of $347,000 compared to
$328,000 for 1996 and 1995, respectively

Liquidity and Capital Resources
- -------------------------------

The Partnership has adequate sources of cash to finance its operations,
both on a short-term and long-term basis, primarily by internally generated cash
from property operations combined with cash on hand at December 31, 1997 of
$1,085,000.

<PAGE>

Cash flows from operating activities ($8,363,000 for the year ended
December 31, 1997) have been sufficient to meet all current obligations of the
Partnership. Total capital improvements were $1,461,000, $1,236,000 and $803,000
in 1997, 1996, and 1995, respectively. The increase in 1996 capital improvements
is primarily attributable to painting and roofing improvements at the
Partnership's mini-warehouse facilities, combined with tenant improvements at
the Partnership's Lakewood, CA business park facility. The increase in 1997 is
primarily attributable to roofing, office, and parking and driveway improvements
at the Partnership's mini-warehouse facilities. During 1998, the Partnership
anticipates approximately $1,050,000 of capital improvements (including PSI 's
joint venture share of $208,000). During 1995, the Partnership's property
manager commenced a program to enhance the visual appearance of the
mini-warehouse facilities. Such enhancements include new signs, exterior color
schemes, and improvements to the rental offices.

In March 1996, the Partnership repaid early its remaining mortgage note
payable, utilizing cash reserves.

Total distributions paid to the General Partners and the limited
partners (including the per Unit amounts) for 1997 and prior years were as
follows:
Total Per Unit
---------- --------
1997 $5,507,000 $38.34
1996 4,804,000 33.44
1995 8,902,000 61.97
1994 1,582,000 11.00
1993 1,582,000 11.00
1992 1,582,000 11.00
1991 2,708,000 18.85
1990 1,077,000 7.50
1989 4,310,000 30.00
1988 4,309,000 30.00
1987 4,310,000 30.00
1986 4,669,000 32.50
1985 5,747,000 40.00
1984 3,239,000 22.54

During 1990 and 1992, distribution levels were reduced to enable the
Partnership to retire short term borrowings due to PSI and prepay mortgage notes
which were scheduled to mature in 1992, 1993 and 1994 (such mortgage notes
having balloon payments at maturity). The 1992 distribution includes a special
distribution of cash reserves of approximately $3.60 per Unit The 1995
distribution includes a special distribution of cash reserves and proceeds from
the Weymouth property condemnation of approximately $31.32 per Unit. The 1997
distribution includes a special distribution of cash reserves of approximately
$4.90 per Unit. Future distribution levels will be based upon cash flows
available for distributions (cash flows from operations less capital
improvements, distributions to minority interest and necessary cash reserves).

Impact of Year 2000
- -------------------

<PAGE>

software, the Year 2000 issue will not pose significant operational problems.
However, if such modifications are not made, or are not completed timely, the
Year 2000 issue could have a material impact on the operations of the
Partnership.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
--------------------------------------------

The Partnership's financial statements are included elsewhere herein.
Reference is made to the Index to Consolidated Financial Statements and
Financial Statement Schedules in Item 14(a).

Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
-----------------------------------------------------

None.

14
<PAGE>

PART III

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

The Partnership has no directors or executive officers.

The Partnership's General Partners are PSI and B. Wayne Hughes. PSI,
acting through its directors and executive officers, and Mr. Hughes manage and
make investment decisions for the Partnership. The Partnership's mini-warehouse
properties are managed by PSI pursuant to a Management Agreement. Through 1996,
the Partnership's commercial properties were managed by PSCPG, now known as PS
Business Parks, Inc., pursuant to a Management Agreement. In January 1997, the
Partnership transferred its business parks to PSBPLP in exchange for a
partnership interest in PSBPLP.

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

Name Positions with PSI
- ----------------------- -------------------------------------------------

B. Wayne Hughes Chairman of the Board and Chief Executive Officer
Harvey Lenkin President and Director
B. Wayne Hughes, Jr. Vice President and Director
John Reyes Senior Vice President and Chief Financial Officer
Carl B. Phelps Senior Vice President
Obren B. Gerich Senior Vice President
Marvin M. Lotz Senior Vice President
David Goldberg Senior Vice President and General Counsel
A. Timothy Scott Senior Vice President and Tax Counsel
David P. Singelyn Vice President and Treasurer
Sarah Hass Vice President and Secretary
Robert J. Abernethy Director
Dann V. Angeloff Director
William C. Baker Director
Thomas J. Barrack, Jr. Director
Uri P. Harkham Director

B. Wayne Hughes, age 64, a general partner of the Partnership, has been
a director of PSI since its organization in 1980 and was President and Co-Chief
Executive Officer from 1980 until November 1991 when he became Chairman of the
Board and sole Chief Executive Officer. Mr. Hughes has been active in the real
estate investment field for over 25 years. He is the father of B. Wayne Hughes,
Jr.

Harvey Lenkin, age 61, has been employed by PSI for 20 years and became
President and a director of PSI in November 1991. Mr. Lenkin is a director of
the National Association of Real Estate Investment Trusts (NAREIT).

B. Wayne Hughes, Jr., age 38, became a director of PSI in January 1998.
He has been Vice President - Acquisitions of the Company since 1992. He is the
son of B. Wayne Hughes.

John Reyes, age 37, a certified public accountant, joined PSI in 1990
and was controller of PSI from 1992 until December 1996 when he became Chief
Financial Officer. He became a Vice President of PSI in November 1995 and a
Senior Vice President of PSI in December 1996. From 1983 to 1990, Mr. Reyes was
employed by Ernst & Young.

Carl B. Phelps, age 58, became a Senior Vice President of PSI in
January 1998 with overall responsibility for property acquisition and
development. From June 1991 until joining PSI, he was a partner in the law firm

<PAGE>

of Andrews & Kurth, L.L.P., which performed legal services for PSI. From
December 1982 through May 1991, his professional corporation was a partner in
the law firm of Sachs & Phelps, then counsel to PSI.

Obren B. Gerich, age 59, a certified public accountant, has been a Vice
President of PSI since 1980 and became Senior Vice President of PSI in November
1995. He was Chief Financial Officer of PSI until November 1991.

Marvin M. Lotz, age 55, has had overall responsibility for Public
Storage's mini-warehouse operations since 1988. He became a Senior Vice
President of PSI in November 1995. Mr. Lotz was an officer of PSI with
responsibility for property acquisitions from 1983 until 1988.

David Goldberg, age 48, joined PSI's legal staff in June 1991. He
became Senior Vice President and General Counsel of PSI in November 1995. From
December 1982 until May 1991, he was a partner in the law firm of Sachs &
Phelps, then counsel to PSI.

A. Timothy Scott, age 46, became a Senior Vice President and Tax
Counsel of PSI and Vice President and Tax Counsel of the Public Storage REITs in
November 1996. From June 1991 until joining PSI, Mr. Scott practiced tax law as
a shareholder of the law firm of Heller, Ehrman, White & McAuliffe, counsel to
PSI. Prior to June 1991, his professional corporation was a partner in the law
firm of Sachs & Phelps, then counsel to PSI.

David P. Singelyn, age 36, a certified public accountant, has been
employed by PSI since 1989 and became Vice President and Treasurer of PSI in
November 1995. From 1987 to 1989, Mr. Singelyn was Controller of Winchell's
Donut Houses, L.P.

Sarah Hass, age 42, became Secretary of PSI in February 1992. She
became a Vice President of PSI in November 1995. She joined PSI's legal
department in June 1991, rendering services on behalf of PSI. From 1987 until
May 1991, her professional corporation was a partner in the law firm of Sachs &
Phelps, then counsel to PSI, and from April 1986 until June 1987, she was
associated with that firm, practicing in the area of securities law. From
September 1979 until September 1985, Ms. Hass was associated with the law firm
of Rifkind & Sterling, Incorporated.

Robert J. Abernethy, age 58, has been President of American Standard
Development Company and of Self-Storage Management Company, which develop and
operate mini-warehouses, since 1976 and 1977, respectively. Mr. Abernethy has
been a director of PSI since its organization in 1980. He is a member of the
board of directors of Johns Hopkins University and of the Los Angeles County
Metropolitan Transportation Authority and a former member of the board of
directors of the Metropolitan Water District of Southern California.

Dann V. Angeloff, age 62, has been President of the Angeloff Company, a
corporate financial advisory firm, since 1976. The Angeloff Company has
rendered, and is expected to continue to render, financial advisory and
securities brokerage services for PSI. Mr. Angeloff is the general partner of a
limited partnership that owns a mini-warehouse operated by PSI and which secures
a note owned by PSI. Mr. Angeloff has been a director of PSI since its
organization in 1980. He is a director of Compensation Resource Group, Eagle
Lifestyle Nutrition, Inc., Nicholas/Applegate Growth Equity Fund,
Nicholas/Applegate Investment Trust, ReadyPac Produce, Inc. and Royce Medical
Company.

William C. Baker, age 64, became a director of PSI in November 1991.
Since November 1997, Mr. Baker has been Chairman of the Board and Chief
Executive Officer of The Santa Anita Companies, Inc., which operates the Santa
Anita Racetrack and is a wholly-owned subsidiary of Meditrust Operating Company.
From August 1996 until November 1997, he was Chairman of the Board and Chief
Executive Officer of Santa Anita Operating Company and Chairman of the Board of
the Board of Santa Anita Realty Enterprises, Inc., the companies which were
merged with Meditrust in November 1992. From April 1993 through May 1995, Mr.
Baker was President of Red Robin International, Inc., an operator and franchiser
of casual dining restaurants in the United States and Canada. From January 1992
through December 1995, he was Chairman and Chief Executive Officer of Carolina
Restaurant Enterprises, Inc., a franchisee of Red Robin International, Inc.
Since 1991, he has been Chairman of the Board of Coast Newport Properties, a
real estate brokerage company. From 1976 to 1988, he was a principal shareholder
and Chairman and Chief Executive Officer of Del Taco, Inc., an operator and
franchiser of fast food restaurants in California. Mr. Baker is a director of
Callaway Golf Company and Meditrust Operating Company.

<PAGE>

Thomas J. Barrack, Jr., age 50, became a director of PSI in February
1998. Mr. Barrack has been the Chairman and Chief Executive Officer of Colony
Capital, Inc. since September 1991. Colony Capital, Inc. is one of the largest
real estate investors in America, having acquired properties in the U.S., Europe
and Asia. Prior to founding Colony Capital, Inc., from 1987 to 1991, Mr. Barrack
was a principal with the Robert M. Bass Group, Inc., the principal investment
vehicle for Robert M. Bass of Fort Worth, Texas. From 1985 to 1987, Mr. Barrack
was President of Oxford Ventures, Inc., a Canadian-based real estate development
company. From 1984 to 1985, he was Senior Vice President at E.F. Hutton
Corporate Finance in New York. Mr. Barrack was appointed by President Ronald
Reagan as Deputy Under Secretary at the U.S. Department of the Interior from
1982 to 1983. Mr. Barrack currently is a director of Continental Airlines, Inc.
and Virgin Entertainment Group, Ltd.

Uri P. Harkham, age 49, became a director of PSI in March 1993. Mr.
Harkham has been the President and Chief Executive Officer of the Jonathan
Martin Fashion Group, which specializes in designing, manufacturing and
marketing women's clothing, since its organization in 1976. Since 1978, Mr.
Harkham has been the Chairman of the Board of Harkham Properties, a real estate
firm specializing in buying and managing fashion warehouses in Los Angeles and
Australia.

Pursuant to Articles 16 and 17 of the Partnership's Amended Certificate
and Agreement of Limited Partnership (the "Partnership Agreement"), a copy of
which is included in the Partnership's prospectus included in the Partnership's
Registration Statement, File No. 2-86355, each of the General Partners continues
to serve until (i) death, insanity, insolvency, bankruptcy or dissolution, (ii)
withdrawal with the consent of the other general partner and a majority vote of
the limited partners, or (iii) removal by a majority vote of the limited
partners.

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

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

17
<PAGE>

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

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

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
---------------------------------------------------------------

(a) At December 31, 1997, PSI beneficially owned more than 5% of the
Units of the Partnership:

Title Amount of Percent
of Name and Address of Beneficial of
Class Beneficial Owner Ownership Class
- -------------------- ---------------------------- ---------- --------

Units of Public Storage, Inc.
Limited 701 Western Avenue
Partnership Interest Glendale, CA 91201-2394 (1) 94,474 Units (1) 73.81%

- ----------------------

(1) These Units are held of record by SEI Arlington Acquisition Corporation, a
wholly-owned subsidiary of PSI.

The Partnership is not aware of any other beneficial owners of
more than 5% of the Units.

(b) The Partnership has no officers and directors.

The General Partners (or their predecessor-in-interest) have
contributed $646,000 to the capital of the Partnership representing 1%
of the aggregate capital contributions and as a result participate in
the distributions to the limited partners and in the Partnership's
profits and losses in the same proportion that the general partners'
capital contribution bears to the total capital contribution.
Information regarding ownership of the Units by PSI , a General
Partner, is set forth under section (a) above. The directors and
executive officers of PSI , as a group, do not own any Units.

(c) The Partnership knows of no contractual arrangements, the operation
of the terms of which may at a subsequent date result in a change in
control of the Partnership, except for articles 16, 17 and 21.1 of the
Partnership's Amended Certificate and Agreement of Limited Partnership,
a copy of which is included in the Partnership's prospectus included in
the Partnership's Registration Statement File No. 2-86355. Those
articles provide, in substance, that the limited partners shall have
the right, by majority vote, to remove a general partner and that a
general partner may designate a successor with the consent of the other
general partner and a majority of the limited partners.

The Partnership owns interests in 33 properties (which exclude
the properties transferred to PSBPLP in January 1997); 27 of such
properties are held in a general partnership comprised of the
Partnership and PSI. Under the terms of the partnership agreement
relating to the ownership of the properties, PSI has the right to
compel a sale of each property at any time after seven years from the
date of acquisition at not less than its independently determined fair
market value provided the Partnership receives its share of the net
sales proceeds solely in cash. As of December 31, 1997, PSI has the
right to require the Partnership to sell all of the joint venture
properties on these terms.

18
<PAGE>

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

The Partnership Agreement provides that the General Partners and their
affiliates are entitled to the following compensation:

1. Incentive distributions equal to 10% of Cash Flow from Operations.

2. Provided the limited partners have received distributions equal to
100% of their investment plus a cumulative 8% per year (not
compounded) on their investment (reduced by distributions other
than from Cash Flow from Operations), subordinated incentive
distributions equal to 15% of remaining Cash from Sales or
Refinancings.

3. Provided the limited partners have received distributions equal to
100% of their capital contributions plus a cumulative 6% per year
(not compounded) on their investment (reduced by distributions
other than distributions from Cash Flow from Operations),
brokerage commissions at the lesser of 3% of the sales price of a
property or 50% of a competitive commission.

During 1997, approximately $551,000 was paid to PSI with respect to
items 1, 2, and 3 above. The Partnership owns interests in 33 properties (which
exclude the properties transferred to PSBPLP in January 1997); 27 of such
properties are held in a general partnership comprised of the Partnership and
PSI.

The Partnership has a Management Agreement with PSI pursuant to which
the Partnership pays PSI a fee of 6% of the gross revenues of the mini-warehouse
spaces operated for the Partnership. During 1997, the Partnership paid fees of
$817,000 to PSI pursuant to the Management Agreement.

Through 1996, the Partnership's commercial properties were managed by
PSCPG pursuant to a Management Agreement which provides for the payment of a fee
by the Partnership of 5% of the gross revenues of the commercial space operated
for the Partnership. In January 1997, the Partnership and PSI and other related
partnerships transferred a total of 35 business parks to PSBPLP, an operating
partnership formed to own and operate business parks in which PSI has a
significant interest. Included among the properties transferred were the
Partnership's business park in exchange for a partnership interest in PSBPLP.
The general partner of PSBPLP is PS Business Parks, Inc., a REIT traded on the
American Stock Exchange.

19
<PAGE>

PART IV

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

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

1. Financial Statements: See Index to Consolidated Financial
Statements and Financial Statement Schedules.

2. Financial Statement Schedules: See Index to Consolidated
Financial Statements and Financial Statement Schedules.

3. Exhibits: See Exhibit Index contained herein.

(b) Reports on Form 8-K:

None

20
<PAGE>

PS PARTNERS II, LTD.
INDEX TO EXHIBITS

3.1 Amended Certificate and Agreement of Limited Partnership. Previously filed
with the Securities and Exchange Commission as Exhibit A to the
Partnership's Prospectus included in Registration Statement No. 2-86355 and
incorporated herein by reference.

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

10.2 Amended Management Agreement dated February 21, 1995 between Storage
Equities, Inc. and Public Storage Commercial Properties Group, Inc.
Previously filed with the Securities and Exchange Commission as an exhibit
to the Partnership's Annual Report on Form 10-K for the year ended December
31, 1994 and incorporated herein by reference.

10.3 Participation Agreement dated as of November 9, 1984, among Storage
Equities, Inc. the Partnership, Public Storage, Inc., B. Wayne Hughes and
Kenneth Q. Volk, Jr. Previously filed with the Securities and Exchange
Commission as an exhibit to Storage Equities, Inc. Annual Report on Form
10-K for the year ended December 31, 1983 and incorporated herein by
reference.

27 Financial data schedule, Filed herewith.

21
<PAGE>

SIGNATURES

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

PS PARTNERS II, LTD.
Dated: March 26, 1998 By: Public Storage, Inc., General Partner

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

By: /s/ B. Wayne Hughes
--------------------------------------
B. Wayne Hughes, General Partner

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Partnership in the capacities and on the dates indicated.

Signature Capacity Date
- ------------------------------------------ ----------------------------------------------- --------------
<S> <C> <C>
/s/ B. Wayne Hughes Chairman of the Board and Chief March 26, 1998
- ------------------------------------------ Executive Officer of Public Storage, Inc. and
B. Wayne Hughes General Partner (principal executive officer)

/s/ Harvey Lenkin President and Director March 26, 1998
- ------------------------------------------ of Public Storage, Inc.
Harvey Lenkin

/s/ B. Wayne Hughes, Jr. Vice President and Director March 26, 1998
- ------------------------------------------ of Public Storage, Inc.
B. Wayne Hughes, Jr.

/s/ John Reyes Senior Vice President and Chief Financial Officer March 26, 1998
- ------------------------------------------ of Public Storage, Inc. (principal financial
John Reyes officer and principal accounting officer)

/s/ Robert J. Abernethy Director of Public Storage, Inc. March 26, 1998
- ------------------------------------------
Robert J. Abernethy

/s/ Dann V. Angeloff Director of Public Storage, Inc. March 26, 1998
- ------------------------------------------
Dann V. Angeloff

/s/ William C. Baker Director of Public Storage, Inc. March 26, 1998
- ------------------------------------------
William C. Baker

/s/ Uri P. Harkham Director of Public Storage, Inc. March 26, 1998
- ------------------------------------------
Uri P. Harkham

</TABLE>

22
<PAGE>

PS PARTNERS II, LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES

(Item 14 (a))

Page
References
----------

Report of Independent Auditors F-1

Consolidated Financial Statements and Schedules:

Consolidated Balance Sheets as of December 31, 1997
and 1996 F-2

For the years ended December 31, 1997, 1996 and 1995:
F-3
Consolidated Statements of Income

Consolidated Statements of Partners' Equity F-4

Consolidated Statements of Cash Flows F-5 - F-6

Notes to Consolidated Financial Statements F-7 - F-10

Schedule

III - Real Estate and Accumulated Depreciation F-11 - F-13

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

23
<PAGE>

Report of Independent Auditors

The Partners
PS Partners II, Ltd.

We have audited the consolidated balance sheets of PS Partners II, Ltd. as of
December 31, 1997 and 1996 and the related consolidated statements of income,
partners' equity and cash flows for each of the three years in the period ended
December 31, 1997. Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of PS
Partners II, Ltd. at December 31, 1997 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

February 23, 1998
Los Angeles, CA

F-1
<PAGE>

PS PARTNERS II, LTD.
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996

1997 1996
--------------------------------------

ASSETS

<S> <C> <C>
Cash and cash equivalents $ 1,085,000 $ 1,239,000

Rent and other receivables 103,000 123,000

Real estate facilities, at cost:
Land 10,580,000 17,414,000
Buildings and equipment 59,525,000 73,222,000
--------------------------------------
70,105,000 90,636,000

Less accumulated depreciation (32,148,000) (37,683,000)
--------------------------------------
37,957,000 52,953,000

Investment in real estate partnership 13,978,000 -

Other assets 129,000 243,000
--------------------------------------

$ 53,252,000 $ 54,558,000
======================================

LIABILITIES AND PARTNERS' EQUITY

Accounts payable $ 200,000 $ 519,000

Advance payments from renters 416,000 427,000

Mortgage notes payable - -

Minority interest in general partnerships 14,966,000 15,069,000

Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 37,211,000 38,077,000
General partner's equity 459,000 466,000
--------------------------------------

Total partners' equity 37,670,000 38,543,000
--------------------------------------

$ 53,252,000 $ 54,558,000
======================================
</TABLE>
See accompanying notes.
F-2
<PAGE>

PS PARTNERS II, LTD.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1997, 1996, and 1995

1997 1996 1995
-----------------------------------------------------

REVENUE:

<S> <C> <C> <C>
Rental income $ 13,617,000 $ 15,396,000 $ 14,928,000
Equity in income of real estate partnership 694,000 - -
Interest income 58,000 60,000 160,000
-----------------------------------------------------
14,369,000 15,456,000 15,088,000
-----------------------------------------------------

COSTS AND EXPENSES:

Cost of operations 4,156,000 5,137,000 4,779,000
Management fees 817,000 900,000 872,000
Depreciation and amortization 2,887,000 3,502,000 3,293,000
Interest expense - 14,000 177,000
Administrative 143,000 152,000 159,000
Environmental costs - - 124,000
-----------------------------------------------------
8,003,000 9,705,000 9,404,000
-----------------------------------------------------

Income before minority interest 6,366,000 5,751,000 5,684,000

Minority interest in income (1,732,000) (1,637,000) (1,499,000)
-----------------------------------------------------

NET INCOME $ 4,634,000 $ 4,114,000 $ 4,185,000
=====================================================

Limited partners' share of net income
($31.59, $28.10, and $25.48 per unit in
1997, 1996, and 1995, respectively) $ 4,043,000 $ 3,597,000 $ 3,262,000
General partner's share of net income 591,000 517,000 923,000
=====================================================
$ 4,634,000 $ 4,114,000 $ 4,185,000
=====================================================
</TABLE>
See accompanying notes.
F-3

<PAGE>

PS PARTNERS II, LTD.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
For the years ended December 31, 1997, 1996, and 1995

Limited General
Partners Partners Total
------------------------------------------------------

<S> <C> <C> <C>
Balances at December 31, 1994 $ 43,430,000 $ 520,000 $ 43,950,000

Net income 3,262,000 923,000 4,185,000

Distributions (7,932,000) (970,000) (8,902,000)

------------------------------------------------------
Balances at December 31, 1995 38,760,000 473,000 39,233,000

Net income 3,597,000 517,000 4,114,000

Distributions (4,280,000) (524,000) (4,804,000)

------------------------------------------------------
Balances at December 31, 1996 38,077,000 466,000 38,543,000

Net income 4,043,000 591,000 4,634,000

Distributions (4,909,000) (598,000) (5,507,000)
------------------------------------------------------

Balances at December 31, 1997 $ 37,211,000 $ 459,000 $ 37,670,000
======================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>

PS PARTNERS II, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996, and 1995

1997 1996 1995
-------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:

<S> <C> <C> <C>
Net income $ 4,634,000 $ 4,114,000 $ 4,185,000

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

Depreciation and amortization 2,887,000 3,502,000 3,293,000
Decrease (increase) in rent and other receivables 20,000 (38,000) (57,000)
Decrease (increase) in other assets 114,000 (80,000) (9,000)
(Decrease) increase in accounts payable (319,000) (129,000) 215,000
Decrease in advance payments from renters (11,000) (6,000) (6,000)
Equity in income of real estate partnership (694,000) - -
Minority interest in income 1,732,000 1,637,000 1,499,000
-------------------------------------------------

Total adjustments 3,729,000 4,886,000 4,935,000
-------------------------------------------------

Net cash provided by operating activities 8,363,000 9,000,000 9,120,000
-------------------------------------------------

CASH FLOWS USED IN INVESTING ACTIVITIES:

Distributions from real estate partnership 289,000 - -
Investment in real estate partnership (3,000) - -
Additions to real estate facilities (1,461,000) (1,236,000) (803,000)
-------------------------------------------------

Net cash used in investing activities (1,175,000) (1,236,000) (803,000)
-------------------------------------------------

CASH FLOWS USED IN FINANCING ACTIVITIES:

Principal payments on mortgage notes payable - (2,260,000) (66,000)
Distributions to holder of minority interest (1,835,000) (365,000) (1,703,000)
Distributions to partners (5,507,000) (4,804,000) (8,902,000)
-------------------------------------------------

Net cash used in financing activities (7,342,000) (7,429,000) (10,671,000)
-------------------------------------------------

Net (decrease) increase in cash and cash equivalents (154,000) 335,000 (2,354,000)

Cash and cash equivalents at the beginning of the period 1,239,000 904,000 3,258,000
-------------------------------------------------

Cash and cash equivalents at the end of the period $ 1,085,000 $ 1,239,000 $ 904,000
=================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>

PS PARTNERS II, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996, and 1995
(Continued)

1997 1996 1995
--------------------------------------------

Supplemental schedule of noncash investing and financing activities:

<S> <C> <C> <C>
Investment in real estate partnership $ (13,570,000) $ - $ -

Transfer of real estate facilities for interest in real estate
partnership, net 13,570,000 - -

</TABLE>
See accompanying notes.
F-6
<PAGE>

PS PARTNERS II, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997

1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------

Description of Partnership
--------------------------

PS Partners II, Ltd. (the "Partnership") was formed with the
proceeds of an interstate public offering. PSI Associates II,
Inc.("PSA"), an affiliate of Public Storage Management, Inc., organized
the Partnership along with B. Wayne Hughes ("Hughes"). In September
1993, Storage Equities, Inc., now known as Public Storage, Inc. ("PSI
") acquired the interest of PSA relating to its general partner capital
contribution in the Partnership and was substituted as a co-general
partner in place of PSA.

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

The Partnership has invested in existing mini-warehouse
storage facilities which offer self-service storage spaces for lease,
usually on a month-to-month basis, to the general public and, to a
lesser extent, in existing business park facilities which offer
industrial and office space for lease.

The Partnership has ownership interests in 33 properties in 12
states, which exclude two properties transferred to PS Business Parks,
L.P. ("PSBPLP") in January 1997. 27 of the properties are owned jointly
through 22 general partnerships (the "Joint Ventures") with PSI. For
tax administrative efficiency the Joint Ventures were subsequently
consolidated into a single general partnership. The Partnership is the
managing general partner of the Joint Ventures, with ownership
interests in the Joint Ventures ranging from 36% to 90%.

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

The consolidated financial statements include the accounts of
the Partnership and the Joint Ventures. PSI 's ownership interest in
the Joint Ventures is shown as minority interest in general
partnerships in the accompanying consolidated balance sheets. All
significant intercompany balances and transactions have been
eliminated.

Minority interest in income represents PSI 's share of net
income with respect to the Joint Ventures. Under the terms of the
partnership agreements all depreciation and amortization with respect
to each Joint Venture is allocated solely to the Partnership until the
limited partners recover their initial capital contribution.
Thereafter, all depreciation and amortization is allocated solely to
PSI until it recovers its initial capital contribution. All remaining
depreciation and amortization is allocated to the Partnership and PSI
in proportion to their ownership percentages.

Depreciation and amortization allocated to PSI was $336,000,
$347,000 and $328,000 in 1997, 1996 and 1995, respectively. The
allocation of depreciation and amortization to PSI has the effect of
reducing minority interest in income and has no effect on the reported
depreciation and amortization expense.

Under the terms of the partnership agreements, for property
acquisitions in which PSI issued convertible securities to the sellers
for its interest, PSI 's rights to receive cash flow distributions from
the partnerships for any year after the first year of operation are
subordinated to cash distributions to the Partnership equal to a
cumulative annual 7% of its cash investment (not compounded). These
agreements also specify that upon sale or refinancing of a property for
more than its original purchase price, distribution of

F-7
<PAGE>

PS PARTNERS II, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997

1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
(continued)
-----------

Basis of Presentation (continued)
---------------------------------

proceeds to PSI is subordinated to the return to the Partnership of the
amount of its cash investment and the 7% distribution described above.

In addition to the above provisions, PSI has the right to
compel the sale of each property in the general partnerships at any
time after seven years from the date of acquisition at not less than
its independently determined fair market value provided the Partnership
receives its share of the net sales proceeds solely in cash. PSI 's
right to require the Partnership to sell all of the properties owned
jointly with the Partnership became exercisable in 1991.

Depreciation and amortization
-----------------------------

The Partnership depreciates the buildings and equipment on a
straight-line method over estimated useful lives of 25 and 5 years,
respectively. Leasing commissions relating to business park properties
are expensed when incurred.

Revenue Recognition
-------------------

Property rents are recognized as earned.

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

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

Per Unit Data
-------------

Per unit data is based on the number of limited partnership
units (128,000) outstanding during the year.

Cash Distributions
------------------

The Partnership Agreement provides for quarterly distributions
of cash flow from operations (as defined). Cash distributions per unit
were $38.34 for 1997, $33.44 for 1996 and $61.97 for 1995.

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

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

Environmental Cost
------------------

Substantially all of the Partnership's facilities were
acquired prior to the time that it was customary to conduct extensive
environmental investigations in connection with the property
acquisitions. During the fourth quarter of 1995, an independent
environmental consulting firm completed environmental assessments on
the Partnership's properties to evaluate the environmental condition
of, and potential environmental liabilities of such properties. Based
on the assessments, the Partnership believes that it is probable that
it will incur costs totaling $68,000 after December 31, 1997 for known
environmental remediation requirements. During 1997, 1996, and 1995,
the Partnership paid none, $12,000, and $44,000, respectively, in
connection with the environmental remediations. Although there can be
no assurance, the Partnership is not aware of any

F-8
<PAGE>

PS PARTNERS II, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997

1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
(continued)
-----------

Environmental Cost (continued)
------------------------------

unaccrued environmental contamination of its facilities which
individually or in the aggregate would be material to the Partnership's
overall business, financial condition, or results of operations.

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

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

2. Real Estate Facilities
----------------------

In November 1994, the Massachusetts Bay Transportation
Authority exercised its right of eminent domain and took possession of
the mini-warehouse property located in Weymouth, Massachusetts which
was owned jointly by the Partnership and PSI. The Partnership received
initial condemnation proceeds of approximately $1,910,000, resulting in
the recognition of a gain on disposition of real estate facilities of
$224,000.

The Partnership is presently contesting the amount of the
initial condemnation proceeds, however, there is no assurance that the
Partnership will obtain additional condemnation proceeds.

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

In January 1997, the Partnership and PSI and other related
partnerships transferred a total of 35 business parks to PSBPLP, an
operating partnership formed to own and operate business parks in which
PSI has a significant interest. Included among the properties
transferred were the Partnership's business parks in exchange for a
partnership interest in PSBPLP. The general partner of PSBPLP is PS
Business Parks, Inc.

3. Mortgage Notes Payable
----------------------

Mortgage notes payable at December 31, 1995 consisted of a
variable rate mortgage note due to a group of banks and secured by a
real estate facility with a net book value of $2,963,000 at December
31, 1995. The balance was paid off in March 1996.

Interest paid during 1996 and 1995 was $14,000, and $177,000,
respectively.

F-9
<PAGE>

PS PARTNERS II, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997

4. General Partners' Equity
------------------------

The General Partners have a 1% interest in the Partnership. In
addition, the General Partners have a 10% interest in cash
distributions attributable to operations, exclusive of distributions
attributable to sales and refinancing proceeds.

Proceeds from sales and refinancings will be distributed
entirely to the limited partners until the limited partners recover
their investment plus a cumulative 8% annual return (not compounded);
thereafter, the General Partners have a 15% interest in remaining
proceeds.

5. Related Party Transactions
--------------------------

The Partnership has a management agreement with PSI whereby
PSI operates the Partnership's mini-warehouse facilities for a fee
equal to 6% of the facilities' monthly gross revenue (as defined).

In January 1997, the Partnership transferred its business park
facilities to PSBPLP in exchange for a partnership interest in PSBPLP.

PSI has a significant economic interest in PSBPLP and PSBP.

6. Leases
------

The Partnership has invested primarily in existing
mini-warehouse storage facilities which offer self-service storage
spaces for lease to the general public. Leases for such space are
usually on a month-to-month basis.

7. Taxes Based on Income
---------------------

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

Taxable net income was $6,509,000, $2,637,000 and $4,068,000
for the years ended December 31, 1997, 1996 and 1995, respectively. The
difference between taxable income and book income is primarily related
to timing differences in depreciation expense.

F-10
<PAGE>

PS PARTNERS II, LTD.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION

Costs Gross Carrying Amount
Initial Cost subsequent At December 31, 1997
--------------------------to acquisition-----------------------------------------------------
Date Building & Building & Building & Accumulated
Acquired Description Encumbrances Land Improvement Improvements Land Improvements Total Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------

Mini-warehouse

<C> <C> <C> <C> <C> <C> <C> <C> <C>
12/83 Charlotte $ - $ 165,000 $ 1,274,000 $ 320,000 $ 165,000 $ 1,594,000 $ 1,759,000 $ 873,000
12/83 Greensboro/Market - 214,000 1,653,000 472,000 214,000 2,125,000 2,339,000 1,186,000
12/83 Greensboro/Electra - 112,000 869,000 248,000 112,000 1,117,000 1,229,000 608,000
1/83 Raleigh/Yonkers - 203,000 914,000 361,000 203,000 1,275,000 1,478,000 690,000
12/83 Columbia - 171,000 1,318,000 442,000 171,000 1,760,000 1,931,000 975,000
12/83 Richmond - 176,000 1,360,000 318,000 176,000 1,678,000 1,854,000 916,000
12/83 Augusta - 97,000 747,000 240,000 97,000 987,000 1,084,000 532,000
4/84 Providence - 92,000 1,087,000 313,000 92,000 1,400,000 1,492,000 753,000
1/85 Cranston - 175,000 722,000 272,000 175,000 994,000 1,169,000 524,000
3/84 Marrietta/Cobb - 73,000 542,000 223,000 73,000 765,000 838,000 398,000
1/84 Fremont/Albrae - 636,000 1,659,000 417,000 636,000 2,076,000 2,712,000 1,160,000
12/83 Tacoma - 553,000 1,173,000 341,000 553,000 1,514,000 2,067,000 832,000
1/84 Belton - 175,000 858,000 458,000 175,000 1,316,000 1,491,000 691,000
1/84 Gladstone - 275,000 1,799,000 373,000 275,000 2,172,000 2,447,000 1,159,000
1/84 Hickman/112 - 257,000 1,848,000 381,000 257,000 2,229,000 2,486,000 1,202,000
1/84 Holmes - 289,000 1,333,000 240,000 289,000 1,573,000 1,862,000 846,000
1/84 Independence - 221,000 1,848,000 266,000 221,000 2,114,000 2,335,000 1,161,000
1/84 Merriam - 255,000 1,469,000 323,000 255,000 1,792,000 2,047,000 940,000
1/84 Olathe - 107,000 992,000 270,000 107,000 1,262,000 1,369,000 663,000
1/84 Shawnee - 205,000 1,420,000 337,000 205,000 1,757,000 1,962,000 939,000
1/84 Topeka - 75,000 1,049,000 195,000 75,000 1,244,000 1,319,000 669,000
2/84 Unicorn/Knoxville - 662,000 1,887,000 420,000 662,000 2,307,000 2,969,000 1,239,000
2/84 Central/Knoxville - 449,000 1,281,000 242,000 449,000 1,523,000 1,972,000 827,000
3/84 Manassas - 320,000 1,556,000 325,000 320,000 1,881,000 2,201,000 1,030,000
3/84 Pico Rivera - 743,000 807,000 302,000 743,000 1,109,000 1,852,000 626,000
5/84 Raleigh/Departure - 302,000 2,484,000 411,000 302,000 2,895,000 3,197,000 1,550,000

</TABLE>
F-11

PS PARTNERS II, LTD.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION

<TABLE>
<CAPTION>
Costs Gross Carrying Amount
Initial Cost subsequent At December 31, 1997
--------------------------to acquisition-----------------------------------------------------
Date Building & Building & Building & Accumulated
Acquired Description Encumbrances Land Improvement Improvements Land Improvements Total Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------

Mini-warehouse

<C> <C> <C> <C> <C> <C> <C> <C> <C>
4/84 Milwaukie/Oregon $ - $ 289,000 $ 584,000 $ 225,000 $ 289,000 $ 809,000 $ 1,098,000 $ 437,000
7/84 Trevose/Old Lincoln - 421,000 1,749,000 347,000 421,000 2,096,000 2,517,000 1,098,000
5/84 Virginia Beach - 509,000 2,121,000 597,000 509,000 2,718,000 3,227,000 1,428,000
5/84 Philadelphia/Grant - 1,041,000 3,262,000 399,000 1,041,000 3,661,000 4,702,000 2,023,000
6/84 Lorton - 435,000 2,040,000 460,000 435,000 2,500,000 2,935,000 1,350,000
6/84 Baltimore - 382,000 1,793,000 530,000 382,000 2,323,000 2,705,000 1,252,000
6/84 Laurel - 501,000 2,349,000 610,000 501,000 2,959,000 3,460,000 1,571,000
----------------------------------------------------------------------------------------------------

TOTAL $ - $ 10,580,000 $ 47,847,000 $ 11,678,000 $ 10,580,000 $ 59,525,000 $ 70,105,000 $32,148,000
======================================================================================================

</TABLE>

F-12
<PAGE>

PS PARTNERS II, LTD.
REAL ESTATE RECONCILIATION
SCHEDULE III (CONTINUED)

(A) The following is a reconciliation of cost and related accumulated
depreciation.

Gross Carrying Cost Reconciliation
<TABLE>
<CAPTION>

Years Ended December 31,
------------------------------------------------
1997 1996 1995
------------------------------------------------

<S> <C> <C> <C>
Balance at beginning of the period $ 90,636,000 $ 89,400,000 $ 88,597,000

Additions during the period:
Improvements, etc. 1,461,000 1,236,000 803,000

Deductions during the period:
Disposition of real estate (21,992,000) - -
------------------------------------------------

Balance at the close of the period $ 70,105,000 $ 90,636,000 $ 89,400,000
================================================

</TABLE>

Accumulated Depreciation Reconciliation

<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1997 1996 1995
------------------------------------------------

<S> <C> <C> <C>
Balance at beginning of the period $ 37,683,000 $ 34,181,000 $ 30,887,000

Additions during the period:
Depreciation 2,887,000 3,502,000 3,294,000

Deductions during the period:
Disposition of real estate (8,422,000) - -
------------------------------------------------

Balance at the close of the period $ 32,148,000 $ 37,683,000 $ 34,181,000
================================================

</TABLE>

(B) The aggregate cost of real estate for Federal income tax purposes is
$70,257,000.

F-13

<ARTICLE> 5
<CIK> 0000727069
<NAME> PS PARTNERS II, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S. $

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 1,085,000
<SECURITIES> 0
<RECEIVABLES> 103,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,188,000
<PP&E> 70,105,000
<DEPRECIATION> (32,148,000)
<TOTAL-ASSETS> 53,252,000
<CURRENT-LIABILITIES> 616,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 37,670,000
<TOTAL-LIABILITY-AND-EQUITY> 53,252,000
<SALES> 0
<TOTAL-REVENUES> 14,369,000
<CGS> 0
<TOTAL-COSTS> 4,974,000
<OTHER-EXPENSES> 3,029,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,634,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,634,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,634,000
<EPS-PRIMARY> 31.59
<EPS-DILUTED> 31.59

</TABLE>