SHURGARD STORAGE CENTERS INC, 10-K405, 1996-03-20

SHURGARD STORAGE CENTERS INC
10-K405, 1996-03-20
TRUCKING & COURIER SERVICES (NO AIR)

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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 $250
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For the fiscal year ended December 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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For the transition period from to
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Commission file number 0-23466
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SHURGARD STORAGE CENTERS, INC.
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(Exact name of registrant as specified in its charter)

DELAWARE 91-1603837
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(State of organization) (IRS Employer Identification No.)

1201 THIRD AVENUE, SUITE 2200, SEATTLE, WASHINGTON 98101
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(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (206) 624-8100
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock, par value $.001 per share
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Class B Common Stock, par value $.001 per share
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Preferred Share Purchase Rights
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(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 (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporat-ed by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. X
---

Aggregate market value of voting stock held by non-affiliates of the
registrant as of March 1, 1996: $594,413,669

Class A Common Stock outstanding as of March 1, 1996: 23,046,517 shares
Class B Common Stock outstanding as of March 1, 1996: 154,604 shares

Documents incorporated by reference: Part III is incorporated by reference from
the proxy statement to be filed in connection with the Company's Annual
Shareholders' Meeting to be held May 14, 1996.

There are 44 pages.

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PART I

ITEM 1 - BUSINESS

OVERVIEW
Shurgard Storage Centers, Inc. (the Company) is a fully integrated, self-
administered and self-managed real estate investment trust (REIT) that develops,
acquires, owns and manages self storage centers. The Company's self storage
centers offer low-cost, easily accessible storage space for personal and
business uses. The Company is one of the three largest operators of self
storage centers in the United States. The Company owns and operates, as of
December 31, 1995, directly and through its joint ventures, 181 properties
(including 178 self storage properties), containing approximately 11.8 million
net rentable square feet, which are located in 19 states. As a result of the
merger (the Merger) with Shurgard Incorporated (the Management Company)
described below, the Company also manages approximately 90 self storage centers
for affiliates and nonaffiliates. For the year ended December 31, 1995, the
Company's self storage centers had a weighted average annual net rentable square
foot occupancy rate of 88% and a weighted average rent per net rentable square
foot of $8.84.

The Company was incorporated in Delaware on July 23, 1993 and began
operations through the consolidation on March 1, 1994 of 17 publicly held real
estate limited partnerships (the Consolidation) that were sponsored by the
Management Company. On March 24, 1995, the Management Company merged with and
into the Company, pursuant to an Agreement and Plan of Merger dated December 19,
1994, and the Company became self-administered and self managed. Through the
Merger, the Company internalized the expertise and experience of the Management
Company's personnel that cover all aspects of the self storage industry.

BUSINESS STRATEGY
The Company implements its strategy of being a national leader in storage
products and services by (i) emphasizing customer service and satisfaction,
(ii) maintaining a portfolio of convenient and secure stores, (iii) optimizing
revenues through efficient rent pricing and collection policies, (iv) pursuing
on-going market research and Company marketing programs, and (v) integrating its
property management systems and procedures. Shurgard believes the key to the
success of its business strategy is the quality of its employees' interaction
with customers. Accordingly, the Company focuses on employee training programs
that emphasize a team-oriented approach to customer service.

COMMITMENT TO CUSTOMER SERVICE AND SATISFACTION
The Company's goal is to achieve a high level of customer satisfaction, and
it views the quality of its customers' interaction with its employees as
critical to its long-term success. Through its emphasis on training, personnel
development and decentralized decision-making, the Company believes it attracts
and retains well-qualified, highly motivated employees committed to providing
superior levels of customer service.

CONVENIENT AND SECURE STORES
The Company's stores are located for easy access, offer a range of premium
storage products and services for customer convenience, and emphasize security
and product quality. The Company believes that its strategy of offering high-
quality, convenient stores strengthens the brand image of Shurgard, attracts
customers and enables the Company to maintain premium rents.

STORE LOCATION AND HOURS. The Company's stores are generally located in
major metropolitan areas along retail and high-traffic corridors for easy
customer access, and usually have significant road frontage for high visibility.
Although hours vary from store to store, customers can generally access their
individual units between 6 a.m. and 9 p.m.

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ONE-STOP CONVENIENCE. The Company's stores offer a range of storage
products and ancillary services, generally including sales of supplies such as
packing material, locks and boxes, as well as property insurance referrals,
moving company referrals, and other services such as Ryder truck rentals
(through a third-party rental company), to conveniently and efficiently address
customers' storage needs. In addition, the Company's stores generally offer
premium features such as computer-controlled access and electronic security
systems. Some of its stores offer climate-controlled storage space.

PROPERTY SECURITY. A variety of measures are used at the Company's stores
as appropriate to enhance security. Such measures may include, among others, on
site personnel, electronic devices such as intrusion and fire alarms, access
controls, video and intercom surveillance devices, individual unit alarms,
perimeter beams, fencing and lighting. Customers are assigned a designated
personal identification number for use in connection with a computerized gate
access system. Each access is computer-logged. In addition, the Company has
developed and plans to continue to develop a proprietary package of security
controls, including software, video and interactive communication.

CAPITAL EXPENDITURES AND MAINTENANCE. The Company budgets for a level of
capital expenditures consistent with its commitment to maintaining attractive,
well-maintained and secure self storage centers. This commitment contributes to
the Company's ability to pursue a premium pricing strategy. In addition,
capital expenditures for uniform signage and color scheme among the Company's
properties strengthen the brand image of Shurgard. (See Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Capital Expenditures)

SELECTIVE DISPOSITION. The Company regularly reviews its portfolio
compared to established internal standards and identifies those few properties
which can not economically meet those standards. The Company intends to dispose
of these properties over time.

MARKETING AND MARKET RESEARCH
The Company employs various means to increase its share of the self storage
market. It places prominent advertisements in the yellow pages and seeks to
promote customer awareness of its stores through highly visible store locations,
site signage and architectural features. The Company locates its stores along
retail and high-traffic corridors, usually with significant road frontage to
increase visibility. The Company builds, on newly developed stores, a
distinctive "lighthouse" office to distinguish itself from competitors and to
increase customer awareness of the Shurgard brand.

Primary marketing emphasis is placed on providing managers with telephone
sales skills to elicit customer needs and close rental sales. The Company also
has a national call center to field overflow calls from individual properties.
Employees at the national call center are able to market and sell a rental at
the Company store nearest to the caller.

The Company has sophisticated market research skills, and maintains an
extensive market research database on its primary markets that permits it to
closely track occupancy levels, rental rates and other operational data
regarding self storage properties within these markets. The Company also has
conducted focus group research, telephone surveys, and utilizes customer comment
cards to identify the primary considerations in customers' self storage choices
and satisfaction so that the Company can better attract and service customers.

PROPERTY MANAGEMENT SYSTEMS/MANAGEMENT INFORMATION SYSTEMS
The Company has integrated property management systems and procedures for
marketing, advertising, leasing, operations, maintenance and security of
properties and the management of on site personnel. The Company's computerized
management information system links the Company's corporate office with each
store. The Company has developed and begun installing proprietary software that
expedites internal auditing, financial statement and budget preparations, and
manages detailed information with respect to the tenant mix, demographics,
occupancy levels, rental rates, revenue optimization, payroll and other
information relating to each store. The Company's corporate office can exchange
information with the stores via computer on a daily basis. Management believes
that the Company's new

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information systems will be adequate to support the Company's owned properties
and significant growth.

OTHER ACTIVITIES
The Company also manages, under the Shurgard name, self storage properties
owned by others that meet the Company's quality standards. Management of such
properties enables the Company to spread the cost of overhead over a greater
number of properties. Additionally, it enables the Company to expand its
presence in the markets in which it operates, to offer customers a broader
geographic selection of self storage properties to suit their needs and to
establish relationships with property owners that may lead to future
acquisitions. Management fees earned by the Company are not qualifying income
for REIT qualification purposes. Accordingly, the Company closely monitors the
level of these activities to ensure the Company's continued qualification as a
REIT.

GROWTH STRATEGIES
The Company's growth strategies are designed to maximize shareholder value
by increasing funds from operations through (i) increases in revenues and
operating efficiencies at its existing stores and (ii) the development of new
self storage properties and the acquisition of additional self storage
properties. The Company has an integrated real estate and storage operations
management team which combines its experience to implement the Company's growth
plan. The Company believes that the experience of its management team in
operating, developing and acquiring self storage properties and its access to
capital markets strongly contribute to its ability to execute these strategies.
Internal Growth Strategy

INTERNAL GROWTH STRATEGY
The Company's internal growth strategy is to increase same store cash flow
by achieving the highest rental rate structure consistent with strong occupancy
rates, containing costs and improving operating leverage, and undertaking
expansion of its existing stores.

- OPTIMIZE RENTS. The Company seeks to optimize its revenues by
achieving the highest rental rate structure for its stores, consistent with
strong levels of occupancy, through the use of teams of store employees who
are trained and authorized to set rental rates and make rental rate changes
based on their analysis of demand and availability at a particular store.
The Company encourages decentralized decisions by store managers to change
marginal rental rates in order to ensure a fast, flexible response to
changing market dynamics. Store managers evaluate their property's rental
rates on a periodic basis, based on unit demand, unit availability and
competitors' rental rates, and can quickly change marginal rental rates to
ensure that revenues are optimized.

- COST CONTAINMENT AND IMPROVED OPERATING LEVERAGE. The Company seeks
to maximize cash flow by carefully containing operating expenses. For
example, the Company aggressively appealed its real estate tax assessments,
which has resulted in savings in excess of $1.3 million over the last three
years. Because of the active market for self storage properties, the
Company does not expect this level of savings to continue. In addition, as
the Company increases the number of properties in its targeted markets, it
achieves larger economies of scale and lessens the impact of corporate
overhead expense. The Company believes that its management and operational
procedures, which can be implemented over a large number of properties,
enable it to add new properties with little additional overhead expense.

- STRATEGIC BUILD-OUTS. The Company seeks to maximize revenues by
building out additional rentable storage space at suitable stores. The
Company

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receives high incremental returns on investments to build out additional
rental units, either through on site expansion or acquisition of property
adjacent to existing stores, because resulting revenue increases are
achieved with little increase in fixed operating costs.

- ADDRESSING CUSTOMER NEEDS IN ADDITIONAL WAYS. Shurgard has begun a
research and development program to identify customer storage needs and
uses, and to engage in pilot programs for meeting those needs.

EXTERNAL GROWTH STRATEGY
The Company's external growth strategy is to develop new, high-quality self
storage properties and to selectively acquire additional self storage properties
that meet or can be upgraded to the Company's standards. In general, the
Company plans to develop or acquire new properties (i) primarily in its existing
markets and (ii) in new markets that create economies of scale with its current
network of stores. The Company seeks to own at least 15 stores in each of its
markets in order to realize operating and marketing efficiencies and increase
brand awareness. The Company believes that the experience of its management
team in developing and acquiring self storage properties strengthens its ability
to pursue its external growth strategy.

The Company favors development or acquisition of self storage properties in
major metropolitan markets, located near retail or high-traffic corridors,
usually with significant road frontage to increase visibility. The Company
relies on its market personnel to target areas in which to develop and acquire
new stores. The Company utilizes its staff of real estate acquisition
specialists in various markets around the nation to develop and acquire new
stores in the markets presenting the best business opportunities. The Company
has developed comprehensive market expansion plans for each of its target
markets, and uses the plans as the basis for selecting new store locations and
acquisition targets. The market expansion plans utilize a demographic analysis
of an area along with an evaluation of competitors' locations, rates and product
quality to determine the optimum number and location of new stores. Management
believes that, under current market conditions, development will provide
generally superior long-term returns when compared to acquisitions of similar
size, quality and location. Based on this belief, the Company's current growth
plan focuses heavily on property development; however, management continually
analyzes market conditions and acquisition opportunities.

DEVELOPMENT. The Company believes that several factors favor its
development strategy:

- DEVELOPMENT EXPERTISE. The Company has substantial construction
management and architectural experience that was acquired through the
Management Company's development of over 64 properties over the past 22
years. Since 1972, the Company (or its predecessors) have maintained an
internal development staff, which currently employs 19 development
professionals. The in-house development staff oversees construction and
architectural design performed by third parties to ensure cost-effective,
quality development of self storage properties.

- STRATEGIC SITE SELECTION TO MAXIMIZE REVENUES. To obtain the best
store locations, the Company targets sites for development in urban areas
and up-scale retail areas that often require rezoning and other complex
development measures. The Company believes that the difficulties of
developing storage properties in such in-fill areas may discourage
competitors from locating nearby and, as a result, enable the Company to
operate in areas that are underserved. This in turn enables the Company to
charge higher rental rates.

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- INCREASED COMPETITION FOR ACQUISITIONS. Recently, increased
competition for acquisitions of high-quality properties has decreased the
pool of favorably priced acquisition targets in many of the Company's
markets. In these markets, management believes that returns from
development are generally more favorable than those from acquisitions, and
make attractive a strategy of developing new self storage centers in the
markets in which the Company currently operates. The Company may also
pursue opportunities for developments in new markets primarily through
affiliation agreements with established local operators or chain
acquisitions.

- POSITIVE SUPPLY AND DEMAND CHARACTERISTICS. Funding for the
construction of new self storage properties (especially from traditional
sources such as savings and loan associations) continues to be below levels
seen in the mid-80's, while demand for storage space has continued to
increase. The Company believes that the relative scarcity of capital,
combined with existing high construction costs is a constraint on
construction of new properties in the self storage industry. The Company
intends to capitalize on its access to capital to pursue development of new
storage properties under current conditions.

- FOCUS ON QUALITY AND BRAND IMAGE DEVELOPMENT. Development of its own
self storage properties provides the Company with greater control to ensure
excellent construction and consistent building design that is inviting to
customers. The Company's focus on quality and consistency will enable it
to further strengthen awareness of the Shurgard brand, obtain repeat
business, maintain premium prices and differentiate itself from its
competitors.

It has been the Company's experience that a self storage property has a
break-even point of 20% to 30% occupancy, meaning that it must be approximately
20% to 300% occupied (on the basis of net square footage) in order for gross
receipts from operations to equal or exceed normal operating expenses (exclusive
of debt service payments associated with the property). Given the anticipated
lease-up time frame, the Company will not normally expect a development property
to generate positive cash flow during the first six to nine months a developed
property is operating.

The historical results of recent development properties held by
partnerships sponsored by the Management Company demonstrate the superior
returns possible through development; annualized returns for such properties,
completed from 1989 to 1993, average 14% for the last six months of 1995
based on original property costs. There can be no assurance, however, that
the Company will achieve such returns on its development properties. To the
extent that these historical numbers are considered by investors as a factor
in projecting forward looking results for the Company, future development
results may differ materially from results of the partnerships. Factors that
may lead to different results include but are not limited to the possibility
of more competition to the Company's new developments than was experienced in
the periods in which these partnerships were renting up their developments,
the quality and location of the competing projects being built, and the
possibility that the metropolitan markets in which the Company is developing
may have less favorable supply and demand characteristics.

ACQUISITIONS. The Company also selectively acquires high-quality
properties that will provide a strategic advantage to the Company. Additional
acquisitions allow the Company to spread overhead and certain management,
marketing and advertising costs over a greater number of revenue-producing
assets. As a result, the Company can achieve increasing economies of scale with
each new property acquired. The Company completes a thorough analysis of each
property that it intends to acquire, including, but not limited to, a review of

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capital expenditures that will be required for the property to meet the
Company's standards and, at a minimum, a Phase I environmental assessment
report.

CAPITAL STRATEGY
The Company expects to fund future development and acquisitions through the
incurrence of additional indebtedness, future offerings of equity securities and
retained cash flow. In the long-term, the Company anticipates reducing its
payout ratio in order to retain cash flow for growth.

The Company has access to two revolving credit facilities to fund
development and acquisitions. The Company has up to $100 million available
pursuant to its two revolving credit facilities, $20 million of which was drawn
down as of March 1, 1996. The actual amount available under each of the two
revolving credit facilities is a function of the quarterly income performance of
the properties securing the respective credit facility and the quarterly debt
service payments.

The Company anticipates that cash flow from operating activities will
continue to provide adequate capital for debt service payments until maturity,
as well as for dividend payments in accordance with REIT requirements. The
Company anticipates refinancing outstanding debt upon maturity through long-term
debt or equity or some combination thereof.

Under the By-Laws, subject to certain exceptions, the Company may not incur
debt if, after giving effect to such borrowing, its Indebtedness for borrowed
funds would exceed 50% of its Total Assets or 300% of its Adjusted Net Worth (as
such terms are defined in the By-laws). As of December 31, 1995, the Company's
Indebtedness was approximately 22% of its Total Assets and approximately 31% of
its Adjusted Net Worth.

THE SELF STORAGE INDUSTRY
The self storage industry serves an important function in the commercial
and residential real estate markets. Self storage properties were first
developed in the early 1960s in the southwestern United States in response to
the growing need for low-cost, accessible storage. A number of factors
accelerated the demand for low-cost storage, including, among others, a more
mobile society, with individuals moving to new homes and new cities needing
short-term storage for their belongings, the increasing cost of housing
(resulting in smaller houses), the increased popularity of apartments and
condominiums, more individuals with growing discretionary income (resulting in
the purchase of items such as boats and recreational vehicles that cannot be
stored at residences), the growing number of small businesses and the escalating
cost of other storage alternatives. As the demand for such storage increased,
and the acceptance of self storage became more widespread, self storage
properties were built throughout the United States. Generally, such properties
were constructed along major thoroughfares that provided ready access and public
visibility or in outlying areas where land was inexpensive. In certain areas of
the country, where new construction was impractical because of construction
costs, lack of suitable sites or other restrictions, older structures have been
converted into self storage properties.

The company believes, based on the experience of its management, that the
self storage industry is characterized by fragmented ownership, high gross
margins, low levels of price sensitivity and increasing customer demand.
Typical customers of a self storage property include individuals, ranging from
homeowners to college students, and commercial users, such as sales
representatives and distributors, who require frequent access, to business
owners requiring seasonal storage. The Company believes business use to be a
growing segment of demand in the industry. A single customer rarely occupies
more than 1% or 2% of the net rentable area in any particular store.

Capital expenditures are generally less for self storage properties as
compared to other types of commercial real estate due to the properties'
structural simplicity and durable materials and the lack of tenant improvement
demands. Primary capital expenditures include periodic expenditures for
replacing roofs and pavement, as well as improvements

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such as expansions and unit reconfigurations. Expense items include repairing
asphalt, doors, fences and masonry walls, maintaining landscaping, and repairing
damage caused by customer vehicles. Minimal maintenance is required within a
storage unit between customers.

COMPETITION
Competition exists in every market in which the Company's stores are
located. The Company competes with, among others, national, regional and
numerous local self storage operators and developers. The primary factors on
which competition is based are location, rental rates, security, suitability of
the property's design to prospective tenants' needs and the manner in which the
property is operated and marketed. The Company believes that the primary
competition for potential customers of any of the Company's self storage stores
comes from other self storage properties within a three-to-five-mile radius of
that store. The Company has established itself within its markets as a high-
quality operator that emphasizes customer service and security. The Company
does not seek to be the lowest-price storage provider.

Entry into the self storage business through acquisition of existing
properties is relatively easy for persons or institutions with the required
initial capital. Some of the Company's competitors may have more resources than
the Company. Competition may be accelerated by any increase in availability of
funds for investment in real estate. Decreases in interest rates tend to
increase the availability of funds and therefore can increase the growth of
competition. Due to recent increases in plans for development of self storage
properties, the Company anticipates that increased available storage space may
reduce occupancy levels per storage property within the industry in 1996 or 1997
and further intensify competition among storage providers for available tenants.
The extent to which the Company is affected by competition will depend in
significant part on local market conditions.

REGULATION
ENVIRONMENTAL REGULATIONS
The Company is subject to federal, state and local environmental
regulations that apply to the ownership, management and development of real
property, including regulations affecting both construction activities and the
operation of self storage properties.

In developing properties and constructing improvements, the Company
utilizes environmental consultants and/or governmental data to determine whether
there are any floodplains, wetlands or environmentally sensitive areas that are
part of the property to be developed. If any such areas are identified,
development and construction are planned in conformance with federal and local
environmental and land-use requirements.

Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real property may become liable for the costs of removal or
remediation of certain hazardous substances released on or in its property.
Such laws may impose liability without regard to whether the owner or operator
knew of, or was responsible for, the release of such hazardous substances. The
presence of hazardous substances on a property may adversely affect the owner's
ability to sell such property or to borrow using such property as collateral,
and may cause the owner or manager of the property to incur substantial
remediation costs. In addition to claims for cleanup costs, the presence of
hazardous substances on a property could result in the owner or manager
incurring substantial liabilities as a result of a claim by a private party for
personal injury or a claim by an adjacent property owner for property damage.

The Company has not been notified by any governmental authority of any
current, material environmental noncompliance, claim or liability in connection
with any of the properties it owns or manages. The Company has not been
notified of a current claim for personal injury or property damage by a private
party in connection with any of the

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properties in connection with environmental conditions. The Company has
received a Phase I environmental assessment report prepared by an independent
environmental consultant for each of the properties it owns.

The Company is not aware of any environmental condition with respect to the
properties it owns or manages that could have a material adverse effect on the
Company's financial condition or results of operations. There can be no
assurance, however, that any environmental assessments undertaken with respect
to the properties have revealed all potential environmental liabilities, that
any prior owner or operator of the properties did not create any material
environmental condition not known to the Company, or that an environmental
condition does not otherwise exist as to any one or more of the properties that
could have a material adverse effect on the Company's financial condition or
results of operation. In addition, there can be no assurance that (i) future
laws, ordinances or regulations will not impose any material environmental
liability, (ii) the current environmental condition of the Company's owned or
managed properties will not be affected by the condition of properties in the
vicinity of such properties (such as the presence of leaking underground storage
tanks) or by third parties unrelated to the Company, or (iii) tenants will not
violate their leases by introducing hazardous or toxic substances into the
Company's owned or managed properties that could expose the Company to liability
under federal or state environmental laws.

AMERICANS WITH DISABILITIES ACT; FIRE AND SAFETY REGULATIONS
Under the ADA, all public accommodations are required to meet certain
federal requirements relating to physical access and use by disabled persons.
Compliance might require, among other things, removal of access barriers. A
determination that the Company is not in compliance with the ADA could result in
the imposition of fines, injunctive relief, damages or attorneys' fees. If the
Company were required to make modifications to comply with the ADA, the
Company's ability to make expected distributions to its shareholders could be
adversely affected; however, management believes that such effect would not be
material. In addition, the Company is required to operate its properties in
compliance with fire and safety regulations, building codes and other land use
regulations, as they may be adopted by governmental agencies and bodies and
become applicable to the Company's properties. Compliance with such
requirements may require the Company to make substantial capital expenditures,
which expenditures would reduce the money otherwise available for distribution
to shareholders.

INSURANCE
Management believes that its self storage properties are covered by
adequate fire, flood, wind, earthquake and property insurance, as well as
business interruption insurance, provided by reputable companies and with
commercially reasonable deductibles and limits. The Company maintains
comprehensive liability insurance coverage with respect to the self storage
properties it owns or manages with policy specifications, limits and deductibles
customarily carried for similar properties. The Company or its predecessors
have obtained existing title insurance insuring fee title to the properties that
the Company owns in an aggregate amount that the Company believes to be
adequate.

EMPLOYEES
As of December 31, 1995, the Company employed approximately 700 persons.
None of the Company's employees is covered by a collective bargaining agreement.
The Company believes that its relations with its employees are good.

ITEM 2 - PROPERTIES

The Company owns, as of December 31, 1995, directly and through its wholly
owned subsidiaries and joint ventures, 181 properties (including 178 self
storage properties) located in 19 states. The Company's self storage properties
are designed to offer accessible storage space for personal and business use.
Individuals typically rent individual units in self storage

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properties for storage of personal belongings such as furniture, appliances,
motor vehicles, boats and other household and recreational goods. Businesses
typically rent space for storage of business property such as equipment,
seasonal goods, records and fixtures. The Company believes that it is desirable
to have commercial customers because they tend to rent larger units, stay for
longer terms, are more reliable payers and are less sensitive to price
increases. Accordingly, the Company has marketing programs that target
commercial users. The Company estimates that commercial users account for
approximately 30%-35% of its total occupancy.

The Company's self storage properties are divided into a number of self-
enclosed rental units that generally range in size from 25 to 360 square feet.
Many properties have uncovered storage outside the buildings for parking motor
vehicles, boats, campers and other similar items suitable for outside storage.
Approximately 20% of the properties owned by the Company include climate-
controlled storage units for which the Company charges rents at substantial
premiums.

Customers of self storage properties are generally responsible for
delivering and retrieving their goods. Many leased spaces can be accessed
directly by automobile or truck, but some properties, in particular the
multistory buildings, have separate loading docks and elevators available for
delivery and retrieval of stored goods. Customers generally have access to
their unit without additional charge during normal business hours and control
access to such space through the use of padlocks. The Company offers truck
rentals at a majority of its properties for added convenience to its customers
and to differentiate itself from most of its competitors. In addition to truck
rentals, the Company sells locks, boxes and packing and storage materials at its
stores.

The leasing, maintenance and operation of the Company's stores are the
responsibility of store managers. The property's security is provided through a
variety of systems that may include, among others, on site personnel, electronic
devices such as intrusion and fire alarms, access controls, video and intercom
surveillance devices, property fencing and lighting.

Although the Company's stores range considerably in size, most properties
consist of one or more single-story buildings that are located on a site of 1.5
to 5 acres. The smallest store has approximately 25,000 net rentable square
feet, while the largest store has approximately 300,000 net rentable square
feet. The properties generally are constructed with concrete block or tilt-up
concrete panels, with steel columns or precast concrete columns that rest on
concrete footings and slabs, and have built-up tar roofs or pitched truss roofs
with shingles or standing seam metal roofs. The interior walls are generally
constructed with metal studs and partitions or other construction materials that
are secure but readily movable. The parking areas and driveways are generally
paved with asphalt or cement. All stores have fencing, floodlights, sliding or
swinging gates and certain additional security devices mentioned above.

In some cases, multistory buildings able to bear substantial weight loads,
such as warehouses and newspaper plants, have been converted into self storage
properties. In addition, similar multistory buildings for self storage have been
constructed in dense urban areas where land costs, zoning and other development
considerations make it impractical or undesirable to construct single-story
buildings.

<PAGE>

The following table provides information regarding the year developed or
acquired (by the Company or by one of the partnerships included in the
Consolidation, as the case may be), year built, approximate net rentable square
feet and acreage of each of the self storage properties and business parks owned
by the Company as of December 31, 1995. The Company owns additional undeveloped
properties not reflected in the table.

APPROXIMATE
OWNED YEAR NET RENTABLE
PROPERTY NAME PROPERTY LOCATION SINCE BUILT SQUARE FEET ACREAGE
- ------------- ----------------- ----- ------- ------------ -------
<S> <C> <C> <C> <C> <C>
Kalamazoo Kalamazoo, MI 1980 1980 43,000 3.0
Vancouver Mall Vancouver, WA 1980 1982 46,000 3.3
West Seattle Seattle, WA 1980 1981 48,000 3.4
Bellingham Bellingham, WA 1981 1981 73,000 5.7
Everett Everett, WA 1981 1978 64,000 4.2
Highland Hill Tacoma, WA 1981 1982 60,000 3.9
Troy East Troy, MI 1981 1975/77 79,000 4.8
Alsip Alsip, IL 1982 1980 66,000 4.6
Dolton Calumet City, IL 1982 1979 64,000 3.0
Lombard Lombard, IL 1982 1980 52,000 3.1
Rolling Meadows Rolling Meadows, IL 1982 1980 60,000 4.5
Schaumburg Schaumburg, IL 1982 1980 71,000 4.3
Grand Rapids Grand Rapids, MI 1983 1978 46,000 3.2
Lansing Lansing, MI 1983 1978/79 41,000 2.5
Salem Salem, OR 1983 1979/81 67,000 3.8
Seattle Seattle, WA 1983 1979 79,000 4.5
Southfield Southfield, MI 1983 1976 77,000 4.3
Troy West Troy, MI 1983 1979 88,000 5.2
Bellevue East and West(1) Bellevue, WA 1984 1975 165,000 10.8
Edmonds Edmonds, WA 1984 1974/75 120,000 6.5
Factoria Bellevue, WA 1984 1984 57,000 3.8
Federal Way Federal Way, WA 1984 1975 134,000 5.7
Fife (2) Tacoma, WA 1984 1977 64,000 3.9
North Spokane Spokane, WA 1984 1976 76,000 4.1
Renton Renton, WA 1984 1979/89 80,000 4.5
Tamarac Denver, CO 1984 1977 25,000 1.9
Tempe Tempe, AZ 1984 1976 54,000 3.0
Thornton Denver, CO 1984 1984 41,000 2.4
Totem Lake Kirkland, WA 1984 1978 61,000 2.6
Windermere Littleton, CO 1984 1977/79 83,000 5.3
Woodinville Woodinville, WA 1984 1982/84 70,000 3.5
Beaverton Beaverton, OR 1985 1974 26,000 2.0
Bedford Bedford, TX 1985 1984 69,000 2.7
Bellefontaine St. Louis, MO 1985 1979 45,000 4.9
Bridgeview Bridgeview, IL 1985 1983 75,000 4.1
Burien Seattle, WA 1985 1974 92,000 5.3
Colton Colton, CA 1985 1984 73,000 3.8
Hayward Hayward, CA 1985 1983 48,000 2.8
Hill Country Village San Antonio, TX 1985 1982 79,000 4.0
Irving Irving, TX 1985 1975/84 78,000 4.2
Issaquah Issaquah, WA 1985 1986 56,000 4.7
Oakland Park Ft. Lauderdale, FL 1985 1974/78 292,000 13.4
Phoenix Phoenix, AZ 1985 1984 77,000 2.7
Plymouth Canton Township, MI 1985 1979 75,000 5.3
San Antonio NE San Antonio, TX 1985 1982 74,000 3.6
Scottsdale Scottsdale, AZ 1985 1976/85 47,000 3.0
Sea-Tac Seattle, WA 1985 1979 60,000 3.0
Southcenter Renton, WA 1985 1979 67,000 4.1
Union City Hayward, CA 1985 1985 42,000 2.9

<PAGE>

<CAPTION>
APPROXIMATE
OWNED YEAR NET RENTABLE
PROPERTY NAME PROPERTY LOCATION SINCE BUILT SQUARE FEET ACREAGE
- ------------- ----------------- ----- ----- ------------ -------
<S> <C> <C> <C> <C> <C>
Scottsdale North Scottsdale, AZ 1985/87 1985 112,000 4.1
Walled Lake Walled Lake, MI 1985/89 1984 68,000 4.3
Newport News S. Newport News, VA 1985/92 1985 60,000 3.9
Airport Philadelphia, PA 1986 1985 101,000 6.7
Arlington Arlington, TX 1986 1984 57,000 2.7
Aurora North Seattle, WA 1986 1978 58,000 1.6
Gold Brooklyn, NY 1986 1940 108,000 0.4
Utica Brooklyn, NY 1986 1964 71,000 1.1
Van Dam Long Island City, NY 1986 1925 63,000 0.5
Yonkers Yonkers, NY 1986 1928 102,000 1.6
Chandler Chandler, AZ 1986 1986 69,000 4.0
Clinton Clinton, MD 1986 1985 31,000 2.0
College Park Indianapolis, IN 1986 1984 70,000 6.0
Downtown Seattle (3) Seattle, WA 1986 1912 28,000 0.3
East Lynnwood Lynnwood, WA 1986 1978 80,000 3.8
El Cajon El Cajon, CA 1986 1977 127,000 6.0
El Cerrito Richmond, CA 1986 1987 62,000 1.5
Fairfax Fairfax, VA 1986 1980 62,000 5.6
Glendale Indianapolis, IN 1986 1985 60,000 5.6
Kearney-Balboa San Diego, CA 1986 1984 94,000 2.3
La Habra La Habra, CA 1986 1979/91 97,000 7.1
Lakewood Golden, CO 1986 1985 67,000 2.7
Lisle Lisle, IL 1986 1976/86 52,000 3.4
MacArthur Blvd. Irving, TX 1986 1984 63,000 7.2
North Austin Austin, TX 1986 1982 76,000 5.9
Palo Alto Palo Alto, CA 1986 1987 49,000 1.4
Roswell Roswell, GA 1986 1986 57,000 3.8
Santa Ana Santa Ana, CA 1986 1975/86 168,000 8.1
Seminole Seminole, FL 1986 1984/85 61,000 2.7
Sunnyvale Sunnyvale, CA 1986 1974/75 122,000 6.5
Thousand Oaks San Antonio, TX 1986 1987 53,000 2.9
West Chester (4) West Chester, PA 1986 1980 87,000 7.0
Westheimer Houston, TX 1986 1977 73,000 3.7
Westwood Santa Monica, CA 1986 1988 38,000 0.3
Willowbrook Willowbrook, IL 1986 1979/82 44,000 3.3
B Y Northern Long Island City, NY 1987 1940 78,000 1.9
Capitol Hill (5) Seattle, WA 1987 1988 76,000 0.7
Euless Blvd. Hurst, TX 1987 1974 68,000 4.7
Falls Church Falls Church, VA 1987 1988 93,000 1.5
Fontana Sierra Fontana, CA 1987 1980/85 84,000 3.6
Fredricksburg San Antonio, TX 1987 1978/82 82,000 4.5
Interbay Seattle, WA 1987 1988 80,000 0.4
King City Tigard, OR 1987 1986 84,000 4.9
Mesa Mesa, AZ 1987 1985 103,000 4.8
Military Trail West Palm Beach, FL 1987 1981 124,000 9.4
Mountain View Mountain View, CA 1987 1986 29,000 0.7
Northglenn Northglenn, CO 1987 1979 75,000 5.5
Old Bridge Matawan, NJ 1987 1987 78,000 6.1
Olive Innerbelt St. Louis, MO 1987 1952/86 94,000 2.5
Phoenix East Phoenix, AZ 1987 1984 66,000 2.0
S. San Francisco San Francisco, CA 1987 1985 57,000 2.1
Smokey Point Arlington, WA 1987 1984/87 34,000 2.2
Solana Beach (4) Solana Beach, CA 1987 1984 95,000 4.5
South Tacoma Tacoma, WA 1987 1975 46,000 3.1
Suitland Suitland, MD 1987 1985 44,000 2.7
West Palm Beach West Palm Beach, FL 1987 1975 63,000 11.8
Tacoma Interstate (2) Tacoma, WA 87/88/91 1979/81 128,000 12.2

<PAGE>

<CAPTION>
APPROXIMATE
OWNED YEAR NET RENTABLE
PROPERTY NAME PROPERTY LOCATION SINCE BUILT SQUARE FEET ACREAGE
- ------------- ----------------- ----- ----- ------------ -------
<S> <C> <C> <C> <C> <C>
Ann Arbor Ann Arbor, MI 1988 1977 62,000 3.9
Bandera Road San Antonio, TX 1988 1981 76,000 3.6
Bayside Virginia Beach, VA 1988 1984 28,000 1.7
Blanco Road San Antonio, TX 1988 1989/91 66,000 3.6
Brentwood Brentwood, MO 1988 1977 53,000 3.4
Canton (6) Canton, MI 1988 1986 58,000 3.3
Crofton Gambrills, MD 1988 1985 40,000 2.1
Culver City Los Angeles, CA 1988 1989 76,000 1.4
Federal Houston, TX 1988 1988 55,000 3.4
Fraser (6) Fraser, MI 1988 1985 73,000 5.2
Herndon Herndon, VA 1988 1985 39,000 3.0
Hillside Hillside, IL 1988 1988 65,000 5.3
Huntington Beach Huntington Beach, CA 1988 1986 91,000 3.3
Imperial Valley Houston, TX 1988 1987 54,000 3.1
Kingwood Kingwood, TX 1988 1988 54,000 3.3
Laurel Laurel, MD 1988 1984 30,000 2.0
Livonia (6) Livonia, MI 1988 1985 67,000 4.8
Manassas East Manassas, VA 1988 1984 35,000 2.0
Manassas West Manassas, VA 1988 1985 35,000 1.5
North Richmond Richmond, VA 1988 1984 37,000 2.6
Portland Portland, OR 1988 1988 49,000 2.1
Sugarland Sugarland, TX 1988 1987 55,000 3.0
Warren (6) Warren, MI 1988 1985 68,000 4.6
Woodlands Houston, TX 1988 1988 64,000 3.8
Beltline Rd. Irving, TX 1989 1985/86 89,000 6.3
Denny Road Beaverton, OR 1989 1988 65,000 6.2
Greenbriar Houston, TX 1989 1988 60,000 1.8
Kempsville Virginia Beach, VA 1989 1985 33,000 2.0
Medical Center Houston, TX 1989 1989 57,000 2.6
Virginia Beach Virginia Beach, VA 1989 1985 36,000 2.3
Hillcroft (4) Houston, TX 1991 1988 59,000 3.4
Briggs Chaney Silver Spring, MD 1994 1987 28,000 2.0
Capital Blvd Raleigh, NC 1994 1984 35,000 2.1
Cary Cary, NC 1994 1984 62,000 4.7
Cedar Road Chesapeake, VA 1994 1989 36,000 2.1
Charlottesville Charlottesville, VA 1994 1984 32,000 2.1
Crater Road Petersburg, VA 1994 1987 36,000 3.8
Dale City Dale City, VA 1994 1986 31,000 1.6
Frederick Frederick, MD 1994 1987 32,000 1.7
Gainesville Gainesville, VA 1994 1988 31,000 2.0
Gaithersburg Gaithersburg, MD 1994 1986 57,000 5.4
Garner Garner, NC 1994 1987 28,000 3.1
Germantown Germantown, MD 1994 1988 45,000 1.9
Glenwood Raleigh, NC 1994 1983 31,000 1.9
Holland Road Virginia Beach, VA 1994 1985 34,000 3.9
Jeff Davis Hwy Richmond, VA 1994 1990 35,000 5.2
Laskin Road Virginia Beach, VA 1994 1984 39,000 2.5
Morrisville Morrisville, NC 1994 1988 40,000 3.3
Oxon Hill Ft. Washington, MD 1994 1987 28,000 1.3
Princess Anne Road Virginia Beach, VA 1994 1985 40,000 2.2
Temple Avenue Petersburg, VA 1994 1989 34,000 4.0
Daly City Daly City, CA 1995 1989 96,000 5.2
Hermitage (7) Nashville, TN 1995 1995 68,000 19.0
Taylor Taylor, MI 1995 1980 66,000 4.2
Oak Forest Orland Park, IL 1995 1991 63,000 3.9
Medical Center(8) Nashville, TN 1994 1995 60,000 2.3

<PAGE>

<CAPTION>
APPROXIMATE
OWNED YEAR NET RENTABLE
PROPERTY NAME PROPERTY LOCATION SINCE BUILT SQUARE FEET ACREAGE
- ------------- ----------------- ----- ----- ------------ -------
<S> <C> <C> <C> <C> <C>
Ansley Park Atlanta, GA 1995 1991 69,000 1.4
Brookhaven Atlanta, GA 1995 1992 66,000 2.0
Decatur Atlanta, GA 1995 1992 63,000 2.5
Oregon City Portland, OR 1995 1992 57,000 3.2
Edgmont Philadelphia, PA 1995 1992 64,000 5.5
Barbur Boulevard Portland, OR 1995 1993 67,000 2.8
Liberty Road Salem, OR 1995 1993 54,000 4.4
Warner (9) Tempe, AZ 1995 1985 62,000 3.1
Universal City (9) San Antonio, TX 1995 1985 77,000 5.1
Lake City (9) Seattle, WA 1995 1987 51,000 1.1
South Hill Puyallup, WA 1995 1980 44,000 2.8
Franklin(10) Nashville, TN 1995 1995 55,000 3.3
South Hwy 6 Houston, TX 1995 1995 55,000 4.1
Parker Road Plano, TX 1995 1995 46,000 3.5
Park Cities East Dallas, TX 1995 1995 56,000 4.3
Madison Heights Madison Heights, MI 1995 1977 66,000 4.1
Forest (11) Brussels, Belgium 1995 1995 49,000 0.4
Waterloo (11) Waterloo, Belgium 1995 1995 86,000 3.5
Molenbeek (11) Brussels, Belgium 1995 1995 34,000 0.5
----------
Total 11,837,000
----------
----------

</TABLE>

- ------------------
(1) Bellevue East and Bellevue West are now operated as one property.
(2) Property is a business park.
(3) Property is a commercial building.
(4) The Company does not have fee title, but has a long-term lease, with
respect to the land on which property is located.
(5) The Company owns a 90% interest in this property.
(6) The Company owns a 30% interest in this property.
(7) The Company owns a 50% interest in this property.
(8) The Company owns a 67% interest in this property.
(9) The Company owns a 59.5% interest in this property.
(10) The Company owns a 92% interest in this property.
(11) The Company owns an 85.6% interest in this property.

The following table sets forth information regarding weighted average
occupancy and weighted average rent per square foot for the domestic self
storage properties owned by the Company (and its predecessors) for the years
ended December 31, 1993, 1994 and, 1995.

<TABLE>
<CAPTION>
1993 1994 1995 1993 1994 1995
---- ---- ---- ---- ---- ----
STATE AVERAGE OCCUPANCY AVERAGE RENT PER SQUARE FOOT
- ----- ------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Arizona 97% 91% 84% $ 6.26 $ 7.50 $ 9.15
California 88 86 85 8.85 9.28 10.04
Colorado 96 91 88 6.30 7.01 7.52
Florida 83 85 83 7.67 7.70 8.12
Illinois 91 95 95 7.47 7.84 8.30
Michigan 87 91 93 6.08 6.66 7.38
New York 80 87 92 14.34 14.63 15.14
Oregon 89 93 92 6.82 7.22 7.77
Texas 79 87 82 7.41 7.63 8.13
Virginia 90 89 90 9.40 9.40 8.95
Washington 88 88 89 7.58 7.83 8.17
Other 89 92 89 7.95 8.53 9.48
-- -- -- ------ ------ ------
Total 87% 89% 88% $ 7.84 $ 8.25 $ 8.84
--- --- --- ------ ------ ------
--- --- --- ------ ------ ------

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
1991(1) 1992(1) 1993(2) 1994 1995
------- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Weighted average occupancy........... 82% 86% 87% 89% 88%
Weighted average rent per square
foot............................... $7.35 $7.68 $7.84 $8.25 $8.84

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

(1) Calculated as the simple average of the information for the 17 partnerships
included in the Consolidation.

(2) Calculated as the weighted average of the original 137 properties owned by
the Company.

LEASING OF PROPERTIES. Rental units are usually rented on a month-to-month
basis. The average rental period for a tenant is approximately 1.5 years. This
average is comprised of the rental periods of business tenants, who tend to
lease space for longer periods (approximately 2-3 years), and those of
residential customers, who tend to lease space for shorter periods
(approximately six months to a year). Rental income from leased space
constitutes the primary revenue from such properties, but additional revenues
are received from incidental services rendered at the properties, such as lock
and box sales and truck rentals. Rental rates vary substantially depending on
the size of the storage space, the property location, the quality of the
property and the location of competition within five miles.

OTHER PROPERTIES. The Company owns two business parks, both of which are
located near Tacoma, Washington. The business parks were built in 1977 and 1979
and contain an aggregate of approximately 192,000 net rentable square feet. The
Company also manages three business parks for two affiliated owners and one
unaffiliated owner. In addition, the Company owns a property in downtown
Seattle, Washington that is leased to a records storage company affiliated with
the Company's management, on terms approved by the Company's disinterested
directors.

ITEM 3 - LEGAL PROCEEDINGS

There are no legal proceedings pending to which the Company is a party that
are likely to have a material adverse impact on the Company's operations.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of shareholders during the fourth
quarter of 1994.

PART II

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

On May 5, 1995, the Company began trading on the NYSE under the symbol
"SHU." Before May 5, 1995, the Common Stock was quoted on the Nasdaq National
Market under the symbol "SHUR." As of March 1, 1996, there were 21,479 holders
of record of the Company's Common Stock.

The table below sets forth for the fiscal periods indicated the high and
low sale prices per share of Common Stock as reported in published financial
sources, and distributions declared.

<PAGE>

<TABLE>
<CAPTION>
PRICE PER SHARE OF
COMMON STOCK
------------------ DIVIDENDS
HIGH LOW DECLARED(1)
------- ------ -----------
<S> <C> <C> <C>
1994
First Quarter (beginning March 28, 1994).... $24.25 $21.50 $.14(2)
Second Quarter.............................. 24.25 21.00 .44
Third Quarter............................... 23.25 20.50 .44
Fourth Quarter.............................. 23.00 17.75 .44
1995
First Quarter............................... 24.00 19.50 .46
Second Quarter.............................. 24.50 22.63 .46
Third Quarter............................... 26.00 22.25 .46
Fourth Quarter.............................. 27.00 24.75 .46
Special Dividend............................ .10(3)

</TABLE>

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

(1) Dividends declared by the Company's Board of Directors based on financial
results for the quarter specified.
(2) This dividend reflects one month of operations for the original portfolio
of assets.
(3) The special dividend was declared on November 22, 1995.

Holders of shares of Company Common Stock are entitled to receive
distributions when, as and if declared by the Company's Board of Directors out
of any assets legally available for payment. The Company is required to
distribute annually to its shareholders at least 95% of its "REIT taxable
income," which, as defined by the relevant tax statutes and regulations, is
generally equivalent to net taxable ordinary income.

ITEM 6 - SELECTED FINANCIAL DATA

The following selected consolidated financial data of the Company should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the other financial information
included elsewhere in this Form 10-K.

(in thousands, except per share data)

PREDECESSOR (1) COMPANY
-------------------------------------------------------- ----------------------
PERIOD AT OR FOR
FROM YEAR
AT OR FOR YEAR ENDED DEC. 31, JAN 1 TO ENDED
----------------------------------------- MAR 1, DEC. 31,
1991 1992 1993 1994 1994(2) 1995
---- ---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenue $60,767 $67,105 $72,346 $12,368 $66,921 $96,771
Net income 20,411 22,055 18,284 34,286 17,821 29,572
Net income per common
share(3) 38.08 41.15 34.11 63.97 1.05 1.43
Dividends declared per common
share(3) 60.45 56.71 59.57 732.05 1.02(4) 2.38(5)
BALANCE SHEET DATA:
Total assets 416,085 400,182 393,982 391,685 494,590 610,394
Total borrowings 24,430 24,365 26,016 --- 167,137 142,840

</TABLE>

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

(1) The Predecessor information reflects the combination of the 17 partnerships
included in the Consolidation.

<PAGE>

(2) Operating data for the Company for the year ended December 31, 1993 are not
included as they are de minimis.
(3) Predecessor "per share" information is net income and distributions per
limited partner unit. Distributions for the period from January 1, 1994
to March 1, 1994 include the liquidating distribution made in connection
with the Consolidation.
(4) Does not include the dividend of $.44 per share declared in January 1995
based on financial results for the quarter ended December 31, 1994.
(5) Includes dividend of $.44 per share declared in January 1995 based on
financial results for the quarter ended December 31, 1994 as well as the
special dividend of $.10 declared in November 1995.

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

OVERVIEW

The Company is a fully integrated, self-administered, self-managed REIT
headquartered in Seattle, Washington, specializing in all aspects of the self
storage industry. The Company operates a network of more than 265 storage
centers located throughout the United States and in Europe. Of these
properties, it owns, as of December 31, 1995, directly and through its wholly
owned subsidiaries and joint ventures, 181 operating properties (including 178
self storage properties), containing approximately 11.8 million net rentable
square feet, located in 19 states. Self storage properties offer low-cost,
easily accessible storage space for personal and business uses. The Company's
investment objectives are to maximize shareholder value by increasing funds from
operations through internal growth and through the acquisition and development
of additional self storage properties. The Company believes that its access to
both the debt and equity markets, the experience of its management team in
acquiring, developing, and operating self storage properties, its geographic
diversification and its emphasis on quality will enhance its ability to achieve
this objective.

During 1994 and 1995, the Company expanded its portfolio of real estate
properties and real estate based investments through the use of equity and debt
capital. During 1995, the Company acquired 15 and developed nine new centers
directly or through joint ventures. The following discussion of the Company's
operations provides additional comparative financial information and discussion
of each of the areas of Company growth, including internal or same store growth,
direct acquisitions, domestic development, European development, property
management operations and other forms of real estate investments. A discussion
of capital expenditures, financing transactions and liquidity is also included.

When used in this discussion, the words "believes," "anticipates," "projects"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. Factors which could
affect the Company's financial results are described below and in Item 1
(Business) of this Annual Report on Form 10-K. Forward-looking statements are
based on estimates as of the date hereof; estimates are likely to change over
time as additional information becomes known. The Company undertakes no
obligation to publicly release the results of any revisions to these forward-
looking statements reflecting new estimates, events or circumstances after the
date hereof.

INTERNAL GROWTH

In 1995, management continued its focus on internal growth, i.e.,
increasing net operating income from its existing real estate assets through
revenue optimization and cost containment. The Company differentiates its
product from other storage operators through a high quality, high service
strategy that it believes translates into premium rents. Management implements
this quality strategy by emphasizing customer service and satisfaction,

<PAGE>

maintaining convenient and secure stores, and pursuing ongoing market research
and Company marketing programs. The Company believes the key to the success of
this strategy is the quality of its employees' interaction with customers.
Accordingly, the Company focuses on employee training programs that emphasize a
team-oriented approach to customer service.

The Company's original portfolio was assembled on March 1, 1994 (the
Consolidation date) through the consolidation of 17 publicly held limited
partnerships (the Predecessor) administered by the Management Company. Real
estate assets acquired consisted of 137 self storage centers (including five
through joint ventures), one commercial building, and two business parks located
in 17 states.

The Company regularly reviews its asset portfolio, comparing it to
established internal standards, identifying those few properties which can not
economically meet those standards, and disposing of them over time. Based on
such analysis, during 1995 the Company sold three of its storage centers to an
unaffiliated purchaser. The sales provided $6.4 million in net proceeds and
resulted in a net gain of $223,000.

The following table summarizes the operating performance of the storage
centers from the original portfolio:

DOLLARS IN THOUSANDS EXCEPT AVERAGE RENT YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, (1)
----------------------------------- --------------------------------
PRO FORMA PRO FORMA % PRO FORMA %
1993(2) 1994(2) CHANGE 1994(2) 1995 CHANGE
--------- --------- ------ --------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Rental revenue $71,682 $76,445 6.6% $75,307 $79,616 5.7%
Property operating expenses (3) 23,695 23,958 1.1% 23,383 24,002 2.6%
------ ------ ------ ------
Net operating income 47,987 52,487 9.4% 51,924 55,614 7.1%
------ ------ ------ ------
------ ------ ------ ------
Avg. Annual rent per sq.ft. (4) $7.84 $8.25 5.2% $8.31 $8.87 6.8%
Avg. sq.ft. occupancy 87% 89% 89% 88%
Total net rentable sq.ft. 9,600,000 9,600,000 9,400,000 9,400,000
No. Of properties (5) 137 137 134 134

</TABLE>

- ---------------
(1) Excludes the three storage centers sold in 1995.
(2) Represents the actual historical results of the properties as if they had
been acquired by the Company on January 1, 1993.
(3) Includes all direct property expenses. Does not include property
management fees previously charged by the Management Company nor does it
include any allocation of joint expenses incurred by the Company such as
off-site management personnel.
(4) Average annual rent per square foot is calculated by dividing actual rent
collected by the average number of square feet occupied during the period.
(5) Includes 100% of the operating results of four properties in which the
Company owns a 30% interest (operating results for these properties are not
consolidated in the Company's financial statement), as well as one property
in which the Company owns a 90% interest (operating results for this
property are consolidated in the Company's financial statements).

As demonstrated by the operating information above, the Company's same
store net operating income is primarily driven by its ability to increase
revenues while limiting expense increases. In order to maximize property
revenue, the Company invests in various programs that enhance its ability to
bring in and keep storage customers. Providing the best customer service
requires the Company to select exceptional employees and provide them with on-
going quality training. Company personnel are trained in all aspects of the
storage operation from operating the computer system and closing a telephone
sale to analyzing

<PAGE>

demand and pricing strategies. Personnel are trained and authorized to make
substantially all pricing and customer service decisions on-site, with reference
to the Company's values and mission statement. The Company continually
evaluates and improves its personnel and training programs. Another revenue
enhancing program undertaken by the Company in 1994 was the establishment of the
national call center which fields overflow calls from all the individual
properties, providing personal service when on-site employees are not available.
Employees at the national call center are able to market and sell a rental at
the Company store nearest to the caller.

Net operating income has risen over the last three years due to increases
in revenue, which are a function of changes in rental rates and occupancy.
While storage has a seasonal trend, spring and summer being peak occupancy
periods, the cycle is annual and the revenue trend from 1993 to 1995 reflects
general market changes. Revenue gains from 1993 to 1994 were driven
approximately 80% by rent increases and 20% by climbing occupancy rates, while
the change from 1994 to 1995 resulted entirely from rental rate increases. As a
result of competition, the Company does not expect to be able to continue to
increase rental rates in excess of inflation each year over the long-term.

Industry occupancy rates have risen since 1990 as demand continued to rise
during a period of scarce capital and thus little storage development.
Management believes the month-to-month nature of storage rentals is such that in
order to maintain available product for incoming customers, occupancy in the
high 80s to low 90s is considered "full." Beyond that level, average market
rates will begin to rise. Management has begun to see development activity pick
up in many of its markets and, due to the increasing competition, does not
expect to be able to raise rents at the same rate as in the past in markets
where development occurs close to the Company's existing stores. Management
believes that some of its markets will begin to reflect the effect of this
development in 1996 or 1997.

The following table is a geographical summary of the changes in average
revenues, rates and occupancies for the original portfolio of storage centers
held by the Company throughout the years indicated:

% CHANGE IN % CHANGE IN RATE PER % CHANGE IN SQ. FT.
REVENUES SQ. FT. OCCUPANCY
------------------------- ------------------------- -------------------------
93 TO 94 94 TO 95 93 TO 94 94 TO 95 93 TO 94 94 TO 95
--------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ARIZONA 16.3% 10.4% 19.8% 21.7% (5.7%) (8.4%)
CALIFORNIA 2.8 4.7 4.9 6.9 (3.0) (1.3)
COLORADO 7.2 5.6 11.2 7.4 (4.9) (2.7)
FLORIDA 3.1 3.4 0.4 5.6 2.7 (2.8)
ILLINOIS 11.9 4.8 4.9 5.3 5.1 (0.3)
MICHIGAN 14.4 11.9 9.7 10.1 4.2 1.8
NEW YORK 8.8 9.1 2.0 3.4 9.2 5.8
OREGON 9.3 7.3 5.9 7.2 3.6 0.7
TEXAS 3.7 2.7 3.0 7.5 0.2 (4.6)
VIRGINIA 7.8 4.9 5.8 4.0 (1.5) 1.0
WASHINGTON 3.9 5.3 3.3 3.0 0.1 1.3
OTHER 8.7 4.8 6.7 6.6 3.4 (2.2)
--------- ---------- ---------- ---------- ---------- ----------
TOTAL 6.6% 5.7% 5.2% 6.8% 1.6% (1.1%)

</TABLE>

The Company maintains a diversified portfolio which it believes offers
protection against the individual market fluctuations that result in
geographical performance differences. Over the last three years, market
conditions in Phoenix,AZ, Detroit, MI, Chicago, IL and New York, NY contributed
to above average revenue increases. Phoenix, in particular, demonstrates the
Company's use of rate optimization; although occupancy declined in the Phoenix
market, revenues rose well above average due to rate increases. Market
conditions in

<PAGE>

southern California resulted in lower than average revenue growth. The Florida
and Houston, TX markets have grown below the portfolio average as competition in
these markets has made it difficult to move rates and/or occupancy levels.

ACQUISITIONS

Although the real estate market has in many cases driven acquisition prices
up, the Company has continued to selectively seek acquisition opportunities for
high quality storage centers that meet existing investment standards. The
Company also has limited its efforts to pursuing only those centers that enhance
its existing network of stores and thus can be efficiently managed and operated.
In many cases, this has resulted in the purchase of properties previously
managed by the Company under a third-party property management contract. The
following table summarizes the operating performance of properties acquired
during 1994 and 1995:

DOLLARS IN THOUSANDS EXCEPT AVERAGE RENT 1994 ACQUISITIONS 1995 ACQUISITIONS
--------------------------------------- -----------------
YEAR ENDED DECEMBER 31,
-------------------------------------- YEAR ENDED
1994 1995 $ CHANGE DEC. 31, 1995 (1)
-------- -------- -------- -----------------
<S> <C> <C> <C> <C>
Rental revenue $1,920 $5,939 $4,019 $6,352
Property operating expenses (2) 554 1,957 1,403 1,770
------- ------- ------- ------
Net operating income $1,366 $3,982 $2,616 $4,582
------- ------- ------- ------
------- ------- ------- ------
Avg. annual rent per sq.ft. (3) n/a (4) $8.01 10.25
Avg. sq.ft. occupancy 91% 91% 86%
Total net rentable sq.ft. 730,000 730,000 970,000
# of properties 20 20 15
# of property-months (5) 80 240 115

</TABLE>

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

(1) Includes the operating results of the three properties owned by Shurgard
Institutional Partners in which the Company owns a 59.5% interest.
(2) Includes all direct property expenses. Does not include property
management fees previously charged by the Management Company nor does it
include any allocation of joint expenses incurred by the Company such as
off-site management personnel.
(3) Average annual rent per square foot is calculated by dividing actual rents
collected by the average number of square feet occupied during the period.
(4) Information is not available for this period. Under the prior owner, the
average rate per square foot for these properties was $7.34.
(5) Represents the sum of the number of months each property operated during
the year.

In September 1994, the Company purchased 20 storage centers from an
unaffiliated storage operator based in Raleigh, North Carolina for an aggregate
purchase price of $34 million. These centers were financed with $30 million
from the Company's lines of credit, a $1 million note to the seller and $3
million in cash. This acquisition gave the Company a significant presence in
the Raleigh market as well as expanding its presence in Washington DC, Richmond
and Virginia Beach, VA. For 1995, annual return on this investment, defined as
net operating income divided by the historical investment amount, was 11.4%.

In May 1995, the Company purchased the limited partner interest in Shurgard
Evergreen Limited Partnership (the Evergreen Partnership), an entity formed in
May 1990 to

<PAGE>

develop and own self storage centers, of which the Company is the general
partner. The limited partner interest was owned by a wholly owned subsidiary of
the State Investment Board of the State of Washington. The Evergreen Partnership
developed and owns seven self storage centers directly and, through a joint
venture, owns an interest in an additional three centers. Three of the centers
are located in the Atlanta, Georgia area, three are located in the Portland,
Oregon area, and one each is located near Philadelphia, Pennsylvania, Phoenix,
Arizona, San Antonio, Texas and Seattle, Washington. The ten centers have an
aggregate of 630,000 net rentable square feet. The purchase price for the
limited partner interest in the Evergreen Partnership was $35.5 million which
was financed through the Company's line of credit. For 1995, annualized return
on this investment, defined as annualized net operating income divided by the
historical investment amount, was 10.8%.

In addition to these major acquisitions, the Company has also acquired four
self storage properties through individual purchases and one storage property
through the Merger. These five storage centers, having a total of approximately
340,000 net rentable square feet of storage space, are located and were acquired
as follows: Daly City, California (March 1995), Taylor, Michigan (March 1995),
Orland Park, Illinois (May 1995), Puyallup, Washington (May 1995) and Madison
Heights, Michigan (June 1995). The Company continues to evaluate potential
acquisitions from both affiliated and unaffiliated owners. The Company is
currently discussing possible transactions involving certain affiliated
partnerships, including possible acquisitions of interests in or mergers with
such partnerships. There are currently no agreements, but the Company intends
to pursue one or more of these transactions in the near future. Of course,
whether and when the Company will pursue or consummate any particular
transaction depends on a number of factors, and there is no assurance that the
Company will complete any such transaction.

DOMESTIC DEVELOPMENT

Due to the increased competition for acquisitions in the storage market and
the Company's focus on maintaining its high quality standards and consistent
building design to develop brand awareness, the Company's long-term growth plan
focuses heavily on the development of new storage centers in markets in which
the Company currently operates. Implementation of this development strategy
began in 1994 and is expected to continue throughout 1996 and beyond. Each
development project progresses through a series of review processes from initial
review, through due diligence, final review and finally to the land purchase and
construction. Management's substantial experience in storage development has
aided in the success of this strategy.

In addition to utilizing the experience of its in-house real estate
development personnel, the Company has begun establishing relationships with
quality storage operators outside its current markets. Management believes that
the most efficient way to operate storage centers is to saturate a market
thereby creating brand awareness and allowing certain economies of scale in
operation processes and advertisement. These relationships create instant
presence in a new market as affiliate owned centers begin using the "Shurgard"
name. In exchange for the use of the Company name, computer, systems and
general operations support services, the affiliate pays the Company an
affiliation fee of 2% of revenues. Additionally, these affiliation agreements
provide the framework for the joint development of additional storage centers,
allowing the Company to take advantage of the local operators' contacts. The
Company has signed two such affiliation agreements, one with a Tennessee
developer that began opening jointly developed centers in 1995 and one with a
Florida developer that will begin construction on its first joint development in
1996.

The Company opened three facilities in Texas (100% owned) and three
facilities in Tennessee (owned through joint ventures) during 1995 and has
numerous projects in various stages of review. Construction costs on all six
projects completed during 1995 were within

<PAGE>

4% of their original projected cost. All six projects are renting up at or
ahead of plan. The following table summarizes domestic development projects in
progress during 1995:

ESTIMATED
COMPLETED COST
# OF PROJECTS OF PROJECTS
----------------- --------------
<S> <C> <C>
OPENED DURING 1995 6 $17 MILLION

CONSTRUCTION IN PROGRESS 7 $25 MILLION

LAND PURCHASED PENDING CONSTRUCTION 3 $14 MILLION

PROJECTS EXPECTED TO OPEN IN 1996 15 - 20

</TABLE>

In the current real estate environment, management believes that a long-
term strategy of growth through development will result in the highest returns
over the long-term. A development strategy, however, creates a short-term drag
on earnings during the rent-up phase of a project. Although interest and pre-
opening costs are capitalized during the construction period, cash flow does not
generally exceed interest expense on development projects for at least the first
year of operations; the timing of positive cash flow cannot be predicted as it
is based on a number of factors including length of construction and timing of
opening dates. This rent-up deficit was $105,000 in 1995 and the effect will
increase in 1996 as more development locations are opened. The rent-up deficit
for a typical $3 million project, assuming it takes 21 months to rent-up and it
is financed with debt at 8% to 8.5%, is estimated to be $240,000 to $250,000 in
the first year of operations. This represents a decrease in FFO of
approximately $.01 per share per property during this initial year. Despite
this initial rent-up phase deficit, Management believes the Company will, at a
minimum, be able to maintain current dividend rates in 1996. The potential of
developing 30 to 40 properties per year sometime after 1996 is presently being
evaluated. The Company is currently considering various alternatives which, if
implemented, could minimize this rent-up deficit as the volume of development
projects increases. some of these alternatives include, but are not limited to,
phased development, joint venture development programs, and increasing the rate
at which stores rent-up.

The "projects expected to open in 1996," in the table above, as well as the
number of potential developments after 1996, are forward looking statements from
which actual results may vary materially. The number of projects could be
reduced by zoning and permitting delays outside of the control of the Company,
increased competition for sites, delays during construction caused by, among
other things, weather, unforeseen site conditions, labor shortages, scheduling
problems with contractors, subcontractors or suppliers, or resource constraints.

EUROPEAN DEVELOPMENT

During 1995, the Company invested $5.4 million in SSC Benelux & Co., SCS
(hereafter Benelux SCS), a Belgian entity that will own and operate self storage
properties in the Benelux region of Europe. Through its entitlement to a
majority of the seats on the Board, the Company currently has authority to
direct the business affairs of Benelux SCS. Its percentage interest in economic
benefits from this partnership is 85.6%. At December 31, 1995, the Company was
obligated to invest an additional $1.6 million under commitments made in 1994
and 154,080,000 Belgian francs (approximately $5.3 million at current exchange
rates) under commitments made during 1995. The funding for investments made
during 1995 was obtained from the Company's cash flow from operations, proceeds
from the equity offering and available lines of credit.

<PAGE>

The storage industry is not yet well established in much of Europe and
Benelux SCS is in the process of developing the market in the Brussels area.
During 1995, Benelux SCS opened three developed storage centers in Belgian at a
total cost of $10.6 million. These centers have been funded through a
combination of outside debt and equity capital from both the Company and its
Belgian partner. Current debt covenants limit the debt to equity ratio to 60%.
Benelux SCS is currently evaluating four additional development sites and plans
to develop two sites during 1996. Because of the newness of storage to this
market, the rent-up period for these storage centers is expected to be
substantially longer than that of domestic development projects. Management
estimates that the European sites may take two and a half to three years to
reach a stabilized occupancy of approximately 85%. The Company's remaining
investment commitment will fund its pro rata share of the negative cash flow
expected during 1996 as well as additional development projects.

OTHER REAL ESTATE INVESTMENTS

In addition, the Company has made several investments during 1994 and 1995
through participating mortgages, joint ventures and limited partnerships.

The Company has entered into three joint ventures with a storage operator
and developer to develop three properties in the Nashville, Tennessee
metropolitan area. The Company's economic interest in these joint ventures
range from 50% to 92%. The Company has guaranteed $1.9 million of loans, its
pro rata portion of the joint ventures' debt. Subsequent to year end, the
Company committed to invest $1.0 million and guaranteed $2.1 million of debt in
a joint venture to develop a site in Orlando, Florida under a similar
arrangement. The financial information of these projects are not consolidated
in the Company financial statements because the affiliation agreement allows the
local operator to control the daily operations of the property and all
significant investment decisions require the approval of both parties regardless
of ownership percentage. (See DOMESTIC DEVELOPMENT)

During 1995, the Company purchased, for $3.8 million in cash, 3.5 limited
partnership units of Shurgard Institutional Fund LP II, an affiliated
partnership in which it owns an interest through the general partner. The
Company is now entitled to 37% of partnership cash flow. Subsequent to year
end, the Company also purchased, for $1.1 million in cash, one limited
partnership unit in Shurgard Institutional Fund LP, an affiliated partnership in
which it also owns an interest through the general partner. The Company is now
entitled to 9% of this partnership's cash flow.

PROPERTY MANAGEMENT OPERATIONS

In connection with the Merger in March 1995, the Company internalized the
management of its own properties as well as acquired certain management
contracts and relationships under which it provides property management services
to outside parties. Prior to the Merger, the Company paid a property management
fee equal to 6% of revenues to the Management Company. The Company now incurs
the actual costs of property management and receives property management fees
from affiliated partnerships and outside parties. The

<PAGE>

following table compares property management fees for 1994 and 1995 (as if the
Merger had not taken place) to actual property management costs incurred for
1995:

IN THOUSANDS 6% OF 1995
REVENUES (1) ACTUAL 1995
---------------- -------------
<S> <C> <C>
Property management fees $5,544 $1,320
Property management expenses:
Operating 3,850
Administrative 911
Third party property management revenues (2,978)
------ -------
Net cost of property management $5,544 $3,103
------ ------
------ ------

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

(1) Approximately equal to the fees that would have been paid had the Merger
not occurred.

Due to the Merger, the Company increased its earnings by $2.44 million in
1995 representing the nine month operating benefit of the internalization of
property management and the acquisition of third party management contracts.
This represents an annualized return of 11% on its $29.4 million investment in
the Management Company. Since the Merger, the Company has added management
contracts and licensing agreements for 14 additional properties, bringing the
total number of managed or licensed properties to nearly 90 storage centers.
Management will continue to pursue growth opportunities in this area to maximize
brand awareness, realize economies of scale in management and as a means of
establishing relationships with owners of quality projects that may provide
future acquisition opportunities. However, property management revenue will be
limited to 5% or less of total revenue due to limitations imposed by the REIT
qualification requirements (see REIT QUALIFICATION AND DISTRIBUTION
REQUIREMENTS).

PRE-CONSOLIDATION INCOME AND EXPENSES

The Predecessor operating results presented in the consolidated financial
statements are not comparable in all material respects with financial statements
of the Company. The most significant differences relate to (1) lower
depreciation resulting from the Company's lower original cost of storage centers
and (2) higher debt and related interest expense as a result of certain limited
partners electing to take a cash payment in lieu of the Company's common stock
at the Consolidation Date. The following discussion summarizes differences for
the periods presented which do not directly relate to property operations.

General and administrative expenses from January 1, 1994 to the
Consolidation Date for the Predecessor included certain expenses related to the
liquidation of the Partnerships including audit, tax and legal fees. State
taxes for the Predecessor were also high for the two months of 1994 due to the
tax resulting from the sale of assets.

The Predecessor financial statements for the period from January 1, 1994 to
the Consolidation Date and for the year ended December 31, 1993 include various
nonrecurring items related to the Consolidation of the seventeen partnerships
which comprise the Predecessor; these include the gain incident to the
Consolidation and related incentive management fees, legal expenses, hostile
takeover defense and transaction costs. The Company's debt at December 31, 1994
is $141 million higher than the Predecessor's debt at December 31, 1993. This
additional debt is reflected in the Company's interest expense and earnings for
the year ended December 31, 1994. Certain of the limited partners of the
partnerships included in the Consolidation elected to take cash rather than
stock in the Company. The Company borrowed the $67 million required for these
cash payments as well

<PAGE>

as approximately $20 million to pay liabilities related to the Consolidation
which were assumed from the Predecessor and approximately $10 million to cover
loan closing costs and establish cash reserves. Interest on the $97 million for
the year ended December 31, 1994 is $6.7 million. Additionally, as a result of
the Consolidation, the majority of the debt held by the partnerships, including
short-term debt at relatively low interest rates, was refinanced at a slightly
higher rate (8.28%). The Company also borrowed $30 million in connection with
the acquisition of the 20 storage centers on September 1, 1994 and $12 million
in connection with an investment in participating mortgages on December 14,
1994; interest on this $42 million was $806,000.

FUNDS FROM OPERATIONS

Funds from operations (FFO) is used by many financial analysts in
evaluating REIT's financial performance. However, FFO should not be considered
as an alternative to net income (determined in accordance with Generally
Accepted Accounting Principles, GAAP) as an indication of the Company's
financial performance or cash from operating activities (determined in
accordance with GAAP) or as a measure of liquidity, not is it necessarily
indicative of sufficient cash flow to fund all of the Company's needs. The
Company had historically defined FFO as net income before extraordinary items,
plus depreciation and amortization, plus or minus certain non-recurring revenue
and expenses. The Company has modified its definition of FFO in accordance with
the recommendations of NAREIT (the REIT industry association) to exclude
amortization of financing costs. Accordingly, management now calculates FFO as
net income before extraordinary items, plus depreciation and amortization
relating to real estate activities, plus or minus certain non-recurring revenue
and expenses. The following table reconciles its previous definition to the new
NAREIT definition (in thousands):

Year ended December 31,
-------------------------------------------------------------
Pro forma Pro forma
1993(1) 1994(1) 1995
----------- ------------ -----------
<S> <C> <C> <C>
Net income before extraordinary item $ 19,095 $ 21,917 $ 29,572
Depreciation/amortization (including JV) 12,887 13,632 17,559
Non-recurring revenue/expenses (317) (58) (223)
----------- ------------ -----------

FFO as previously defined 31,665 35,491 46,908

Less deferred financing costs 820 820 1,120
----------- ------------ -----------

FFO as currently defined $ 30,845 $ 34,671 $ 45,788
----------- ------------ -----------
----------- ------------ -----------

</TABLE>

- ---------------
(1) Represents the actual historical results as if the Predecessors' properties
had been acquired by the Company on January 1, 1993. Assumes the Company's
fixed rate seven-year debt (8.28%) was outstanding during the entire
period.

Using the NAREIT definition, FFO for 1995 rose $11.1 million over the 1994
pro forma FFO which had grown $3.8 million from pro forma 1993. As previously
discussed, this growth rate reflects the improved performance of the original
portfolio of properties as well as the addition of properties acquired during
the two years. Management believes future growth rates will slow as the rent-up
period on development projects partially offsets operating results from current
properties and acquisitions.

<PAGE>

INVESTING TRANSACTIONS

On March 1, 1994, the Company acquired the assets, subject to existing
liabilities, of the Predecessor for an aggregate cost of $387.4 million. The
Consolidation was funded by the issuance of 16,983,728 shares of Company's
Class A and Class B Common Stock and $67.1 million in borrowings from a
financial services company. Additionally, in 1994, the Company purchased a
chain of twenty storage centers in the mid-Atlantic region for $34 million.
Investments in other real estate assets during 1994 consisted primarily of the
two participating mortgages and two of the Tennessee joint ventures discussed
earlier.

On March 24, 1995, in order to create a fully integrated company and more
closely align the interests of management with the shareholders, the Management
Company merged with the Company. Pursuant to the Agreement and Plan of Merger,
the outstanding shares of the Management Company common stock were converted
into an aggregate of 1,289,734 newly issued shares of the Company's Class A
Common Stock (Class A Stock) and an additional 282,572 shares that replaced the
Class A Stock previously owned by the Management Company, subject to certain
adjustments. The market value of consideration on the date of the Merger was
$29.4 million. Pursuant to the Merger Agreement, Management Company
shareholders are also entitled to receive additional shares of Class A Stock in
the future based on (i) the extent to which, during the five years following the
Merger, the Company realizes value on this back end interest as a result of
certain transactions relating to interests in or assets of six limited
partnerships acquired by the Company in the Merger or (ii) the value, at the end
of five years after the Merger, or in the event of a change of control of the
Company, of any remaining interests in such partnerships as determined by
independent appraisal. One of the six partnerships is the Evergreen
Partnership, the limited partnership interest of which the Company purchased
during 1995. As a result of this purchase, the Board of Directors could, at
their option, choose to liquidate the partnership, and upon such liquidation the
Company would be required to issue additional shares based on an independent
appraisal.

During 1995, the Company invested $7.6 million in a storage center acquired
in the Merger (which was a non-cash transaction), $9.4 million in acquisitions
of four operating storage centers, $30.1 million in domestic development and
expansion projects ($9.6 million of which were completed during the year), $10.6
million in European development projects, and $4.1 million in capital
improvements to its existing portfolio. The $6.5 million increase in other real
estate investments reflects primarily the $3.8 million invested in the limited
partnership units and the $2.6 million invested in the Tennessee joint ventures.
As described above, the Company also invested $36 million in cash in the
purchase of the Evergreen partnership interest. Proceeds from the sale of real
estate contributed $3.3 million in cash.

CAPITAL EXPENDITURES

In addition to continued investments in acquisitions and developments, the
Company makes investments in improving its current portfolio of real estate.
Investments in existing storage properties include primarily expansions,
conversions (i.e., size of units or climate control) and certain recurring
improvements that management believes are necessary to maintain the Company's
quality standards and its ability to generate premium returns. The following
table summarizes the type of recurring expenditures the Company anticipates and
the average cost per square foot per year:

Annual Cost per Sq.Ft.
--------------------------
<S> <C>
Roofs $0.07

Pavement 0.05

Sealant 0.03

Other 0.02-0.03
--------------------------
Total $0.17-0.18

</TABLE>

<PAGE>

The above amounts assume expenditures are made evenly over the life of the
project, this however does not occur in reality. In certain years expenditures
will be significantly higher than $0.18 per square foot, but this in turn would
mean other years will be significantly lower. In addition to these types of
expenditures, the Company invests in other improvements such as security
upgrades. Of the $4.1 million in capital improvements expended during 1995,
$2.2 million was for roof, pavement and sealant. Specifically identified
capital improvements expected for 1996 total $3.6 to $4.1 million, of which $1.7
to $2.2 represents roofs, pavement and sealant.

FINANCING TRANSACTIONS

On June 9, 1994, the Company refinanced substantially all of its existing
debt through a debt purchase transaction with Nomura Asset Capital Corp., a
subsidiary of Nomura Securities International, Inc. The $122.6 million of
indebtedness, secured by certain real estate, has a seven year term, a fixed
rate equal to 8.28% and requires monthly payments of interest only until
maturity. The Company paid $1.8 million in fees for this seven-year loan. The
following table summarizes the uses of proceeds from this loan (in thousands):

<TABLE>
<CAPTION>
<S> <C>
Repayment of consolidation debt $104,600
Repayment of other debt 14,156
Loan fees and closing costs 2,371
Net proceeds 1,453
------------
Loan proceeds $122,580
------------
------------

</TABLE>

Repayment of other debt represents retirement of notes assumed from the
Predecessor in connection with the Consolidation. In connection with the
refinance, the Company wrote off $1.2 million of unamortized loan fees. The
refinancing provided the Company with stabilized debt service costs and greater
flexibility for future growth. Additionally, in 1994, the Company established
two $50 million lines of credit under which it borrowed $42 million in 1994 to
fund property acquisitions.

In June and July 1995, the Company issued a total of 4.92 million
additional Class A Common shares through a public offering. These shares were
issued at $23.00 per share, providing net proceeds after offering costs of $106
million. Net proceeds were used to repay lines of credit and the remaining
funds have been used to fund storage center acquisitions, development, and
general corporate purposes.

Prior to the stock offering, $96 million was outstanding on the Company's
domestic lines of credit. This amount had been borrowed to meet interim
acquisition and development requirements and repay the $4.3 million line of
credit assumed in the Merger. All outstanding balances on the Company's
domestic lines of credit were repaid on June 13, 1995. Subsequent to the
offering, the Company invested the excess proceeds in real estate developments
and borrowed an additional $11 million on its lines. Additionally, during 1995,
the Company borrowed $2.9 million under its European line of credit to fund
development activity in Belgium. Subsequent to year end, the Company borrowed
an additional $13 million on its domestic lines to fund construction.

27
<PAGE>

SHORT-TERM AND LONG-TERM LIQUIDITY

Cash balances decreased from December 31, 1994 to December 31, 1995
primarily as a result of the capital expenditures, financing and equity
transactions described above. The following table summarizes certain information
regarding the Company's liquidity and capital resources:

At December 31,
1994 1995
----------- -------------
<S> <C> <C>
Debt to total assets 34% 23%
Total market capitalization $520 million $769 million
Debt to total market cap 32% 19%
Weighted avg. interest rate 8.16% 8.18%
Available lines of credit $58 million $92 million

</TABLE>

The Company's total debt at December 31, 1995 was $143 million, of which
$132 million is fixed rate debt. Because of the limited use of variable rate
debt, fluctuations in interest rates have minimal impact on the Company. In
addition to affecting interest expense, however, rising interest rates in the
future may also limit the amount available to the Company under its credit
facilities due to certain restrictive covenants. Management believes it will be
able to raise sufficient debt or equity capital to fund its growth plan in 1996,
make required principal payments and make dividend payments in accordance with
REIT requirements. Cash provided by operating activities for the year ended
December 31, 1995 was $46 million. The Company declared the following dividends
during 1995:

For Quarter Ended Record Date Payable Date Per Share Amount
----------------- ------------- ------------- ----------------
Dec. 31, 1994 Feb. 10, 1995 Mar. 29, 1995 0.44
Mar. 31, 1995 Mar. 24, 1995 May 19, 1995 0.46
June 30, 1995 June 2, 1995 July 31, 1995 0.46
Sept. 30, 1995 Nov. 9, 1995 Nov. 22, 1995 0.46
Special Dividend Dec. 4, 1995 Dec. 18, 1995 0.10
Dec. 31, 1995 Dec. 26, 1995 Jan. 26, 1996 0.46

In order to distribute accumulated earnings and profits related to the Merger
with the Management Company, the Company accelerated its usual fourth quarter
dividend and declared a special dividend.

REIT QUALIFICATION AND DISTRIBUTION REQUIREMENTS

As a REIT, the Company is not required to pay federal income tax on annual
taxable income that it currently distributes to its shareholders, provided that
the Company distributes an amount equal to at least 95% of its taxable income.
Such distributions must be made in the taxable year to which they relate or in
the following taxable year if declared before the REIT timely files its tax
return for such years and is paid on or before the first regular dividend
payment date after such declaration. The Company's first distribution in 1995
was partially applied towards the Company's 1994 distribution requirement.

In connection with the Merger, the accumulated earnings and profits of the
Management Company were carried over to the Company for tax purposes. In order
to maintain its REIT qualification, the Company was required to distribute to
its shareholders in 1995 an amount necessary to eliminate such accumulated
earnings and profits. The Company did so through accelerating its normal
quarterly distribution and a special distribution of $2.3 million. As a result
of these additional distributions, approximately 14% of the 1995 dividends were
return of capital for federal income tax purposes.

As a REIT, the Company must derive at least 95% of its total gross income
from specified classes of income related to real property, dividends, interest
or certain gains from the sale or other disposition of stock or other
securities. The Company's revenues from truck rentals, sales of locks and boxes
and management services performed for owners of other properties do not qualify
under this 95% gross income test. Such nonqualifying income was approximately
4.4% of gross revenue in 1995 and the Company estimates that it will meet the
95% test in 1996. The Company's acquisition of additional properties and
development of new properties will tend to reduce the percentage of
nonqualifying income, while additional management contracts and the sales of
properties from the existing portfolio will tend to increase the percentage of
nonqualifying income. There can be no assurance, however, that acquisitions and
development activities will occur on such a scale or within such time periods
that nonqualifying income will meet the 95% test for future years. Accordingly,
the Company may be required to defer or reduce its income from its third-party
management services to avoid terminating its REIT qualification.

<PAGE>

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

December 31, December 31,
(in thousands, except share data) 1994 1995
- ----------------------------------------------------------------------
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------
Storage centers:
- ----------------------------------------------------------------------
Land $ 88,532 $ 105,224
- ----------------------------------------------------------------------
Buildings and equipment, net 362,332 404,329
- ----------------------------------------------------------------------
Construction in progress 532 20,942
- ----------------------------------------------------------------------
Total storage centers 451,396 530,495
- ----------------------------------------------------------------------
Other real estate investments 15,104 21,407
- ----------------------------------------------------------------------
Cash and cash equivalents 13,162 5,683
- ----------------------------------------------------------------------
Restricted cash and investments 2,766 5,551
- ----------------------------------------------------------------------
Other assets 12,162 47,258
- ----------------------------------------------------------------------
Total assets $ 494,590 $ 610,394
- ----------------------------------------------------------------------
Liabilities and Shareholders' Equity:
- ----------------------------------------------------------------------
Accounts payable and other liabilities $ 10,138 $ 19,101
- ----------------------------------------------------------------------
Dividends payable 10,669
- ----------------------------------------------------------------------
Lines of credit 42,000 10,905
- ----------------------------------------------------------------------
Notes payable 125,137 131,935
- ----------------------------------------------------------------------
Total liabilities 177,275 172,610
- ----------------------------------------------------------------------
Minority interest in other real estate
investments 470 3,288
- ----------------------------------------------------------------------
Commitments (Notes C and D)
- ----------------------------------------------------------------------
Shareholders' equity:
- ----------------------------------------------------------------------
Class A common stock, $0.001 par
value; 120,000,000 authorized;
16,829,283 and 23,039,317
shares issued and outstanding 317,434 452,852
- ----------------------------------------------------------------------
Class B common stock, $0.001 par
value; 500,000 shares authorized;
154,604 issued and outstanding;
net of loans to shareholders of
$4,002 (1,086) (1,086)
- ----------------------------------------------------------------------
Retained earnings (deficit) 497 (17,270)
- ----------------------------------------------------------------------
Total shareholders' equity 316,845 434,496
- ----------------------------------------------------------------------
Total liabilities and
shareholders' equity $494,590 $610,394
- ----------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

29
<PAGE>

CONSOLIDATED STATEMENTS OF NET INCOME

Predecessor Company
------------------------------- ------------------------------
Year Ended Period from Year Ended Year Ended
Dec. 31, Jan. 1, 1994 to Dec. 31, Dec. 31,
(in thousands, except per share data) 1993 Mar. 1, 1994 1994 1995
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
REVENUE:
- ------------------------------------------------------------------------------------------------------------------------------
Rental $ 72,217 $ 12,348 $ 66,697 $ 92,397
- ------------------------------------------------------------------------------------------------------------------------------
Other real estate investments 129 20 224 1,396
- ------------------------------------------------------------------------------------------------------------------------------
Property management 2,978
- ------------------------------------------------------------------------------------------------------------------------------
Total revenue 72,346 12,368 66,921 96,771
- ------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------------------------------------------------
Operating 16,879 2,961 15,799 24,851
- ------------------------------------------------------------------------------------------------------------------------------
Management fees 4,695 733 4,046 1,320
- ------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 13,923 2,390 11,373 17,410
- ------------------------------------------------------------------------------------------------------------------------------
Real estate taxes 7,066 1,170 5,840 7,596
- ------------------------------------------------------------------------------------------------------------------------------
General, administrative and other 2,390 1,232 2,502 4,859
- ------------------------------------------------------------------------------------------------------------------------------
Total expenses 44,953 8,486 39,560 56,036
- ------------------------------------------------------------------------------------------------------------------------------
Income from Operations 27,393 3,882 27,361 40,735
- ------------------------------------------------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE):
- ------------------------------------------------------------------------------------------------------------------------------
Interest and other income 590 188 745 875
- ------------------------------------------------------------------------------------------------------------------------------
Interest expense (2,288) (487) (9,105) (12,038)
- ------------------------------------------------------------------------------------------------------------------------------
Incentive management fees (5,340)
- ------------------------------------------------------------------------------------------------------------------------------
Gain on consolidation 48,223
- ------------------------------------------------------------------------------------------------------------------------------
Litigation, hostile takeover defense
and consolidation expenses (7,411) (12,180)
- ------------------------------------------------------------------------------------------------------------------------------
Other income (expense), net (9,109) 30,404 (8,360) (11,163)
- ------------------------------------------------------------------------------------------------------------------------------

Income before extraordinary item 18,284 34,286 19,001 29,572
- ------------------------------------------------------------------------------------------------------------------------------
Extraordinary item - loss on retirement of debt (1,180)
- ------------------------------------------------------------------------------------------------------------------------------
Net Income $ 18,284 $ 34,286 $ 17,821 $ 29,572
- ------------------------------------------------------------------------------------------------------------------------------

NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
- ------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary item $ 1.12 $ 1.43
- ------------------------------------------------------------------------------------------------------------------------------
Extraordinary item - loss on retirement of debt (0.07)
- ------------------------------------------------------------------------------------------------------------------------------
Net Income $ 1.05 $ 1.43
- ------------------------------------------------------------------------------------------------------------------------------

Net Income per Unit of Limited
Partnership Interests $ 34.11 $ 63.97
- ------------------------------------------------------------------------------------------------------------------------------

Distributions per Unit of Limited
Partnership Interests $ 59.57 $ 732.05
- ------------------------------------------------------------------------------------------------------------------------------

</TABLE>

See notes to consolidated financial statements.

30
<PAGE>

CONSOLIDATED STATEMENTS OF PARTNERS' AND SHAREHOLDERS' EQUITY

PREDECESSOR
Limited General
(in thousands) Partners Partners Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $ 368,292 $ (498) $ 367,794
- ---------------------------------------------------------------------------------------------------------
Distributions (31,606) (310) (31,916)
- ---------------------------------------------------------------------------------------------------------
Earnings 18,101 183 18,284
- ---------------------------------------------------------------------------------------------------------

BALANCE, DECEMBER 31, 1993 $ 354,787 $ (625) $ 354,162
- ---------------------------------------------------------------------------------------------------------
Distributions (388,432) (4,018) (392,450)
- ---------------------------------------------------------------------------------------------------------
Contribution 4,002 4,002
- ---------------------------------------------------------------------------------------------------------
Earnings 33,645 641 34,286
- ---------------------------------------------------------------------------------------------------------

Balance, March 1, 1994 $ --- $ --- $ ---
- ---------------------------------------------------------------------------------------------------------

</TABLE>

COMPANY Class A Class B
Common Stock Common Stock Loans to Retained
--------------------- -------------------- Class B Earnings
(in thousands) Shares Amount Shares Amount Shareholders (Deficit) Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 23, 1993
(inception) and
- ----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1993 --- $ --- --- $ --- $ --- $ --- $ ---
- ----------------------------------------------------------------------------------------------------------------------------------
Issuance of common
stock 16,829 317,434 155 2,916 (4,002) 316,348
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income 17,821 17,821
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends (17,324) (17,324)
- ----------------------------------------------------------------------------------------------------------------------------------

Balance, Dec. 31, 1994 16,829 317,434 155 2,916 (4,002) 497 316,845
- ----------------------------------------------------------------------------------------------------------------------------------
Issuance of common
stock 6,210 135,418 135,418
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income 29,572 29,572
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends (47,339) (47,339)
- ----------------------------------------------------------------------------------------------------------------------------------

Balance, Dec. 31, 1995 23,039 $ 452,852 155 $ 2,916 $ (4,002) $ (17,270) $ 434,496
- ----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

See notes to consolidated financial statements.

31
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

Predecessor Company
---------------------------- -------------------------
Year Ended Period from Year Ended Year Ended
Dec. 31, Jan. 1, 1994 to Dec. 31, Dec. 31,
(in thousands) 1993 Mar. 1, 1994 1994 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------------------------
Net Income $ 18,284 $ 34,286 $ 17,821 $ 29,572
- -----------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile earnings
to net cash by operating activities:
- -----------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 13,923 2,390 11,392 17,485
- -----------------------------------------------------------------------------------------------------------------------------
Gain on consolidation (48,223)
- -----------------------------------------------------------------------------------------------------------------------------
Other (223)
- -----------------------------------------------------------------------------------------------------------------------------
Loss on retirement of debt 1,180
- -----------------------------------------------------------------------------------------------------------------------------
Earnings in excess of distributions
from joint ventures (20) (149)
- -----------------------------------------------------------------------------------------------------------------------------
Minority interest in earnings from investments
in joint partnerships 251
- -----------------------------------------------------------------------------------------------------------------------------
Changes in operating accounts:
- -----------------------------------------------------------------------------------------------------------------------------
Restricted cash (2,766) (2,785)
- -----------------------------------------------------------------------------------------------------------------------------
Other assets (2,594) 2,675 (1,196) 518
- -----------------------------------------------------------------------------------------------------------------------------
Accounts payable and other liabilities 1,557 (2,391) 3,027 1,295
- -----------------------------------------------------------------------------------------------------------------------------
Accrued consolidation expense 3,879 16,399
- -----------------------------------------------------------------------------------------------------------------------------

Net cash provided by operating activities 35,049 5,116 29,309 46,113
- -----------------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------------------------
Proceeds from sale of real estate and equipment 64,120 6,398
- -----------------------------------------------------------------------------------------------------------------------------
Purchase of other real estate investments (12,534) (6,670)
- -----------------------------------------------------------------------------------------------------------------------------
Distributions in excess of earnings
from joint ventures 306 452
- -----------------------------------------------------------------------------------------------------------------------------
Purchase of amortizable assets (416)
- -----------------------------------------------------------------------------------------------------------------------------
Purchase of property management company (885)
- -----------------------------------------------------------------------------------------------------------------------------
Investment in limited partnership (35,671)
- -----------------------------------------------------------------------------------------------------------------------------
Acquisition of and improvements to storage centers (5,888) (1,158) (102,635) (49,519)
- -----------------------------------------------------------------------------------------------------------------------------

Net cash (used in) provided by investing activities $ (5,582) $ 62,962 $(115,169) $ (86,311)
- -----------------------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------------------------
Proceeds from stock offering, net $ $ $ $ 106,012
- -----------------------------------------------------------------------------------------------------------------------------
Contribution by minority partner 778
- -----------------------------------------------------------------------------------------------------------------------------
Dividends or distributions paid (31,916) (764) (17,324) (36,670)
- -----------------------------------------------------------------------------------------------------------------------------
Net proceeds from (payments on) lines of credit 2,620 680 42,000 (35,432)
- -----------------------------------------------------------------------------------------------------------------------------
Proceeds from notes payable 350 227,180
- -----------------------------------------------------------------------------------------------------------------------------
Payment of financing costs (4) (8,718) (1,088)
- -----------------------------------------------------------------------------------------------------------------------------
Payment of assumed consolidation liabilities (14,946)
- -----------------------------------------------------------------------------------------------------------------------------
Principal payments on notes payable (969) (855) (129,171) (552)
- -----------------------------------------------------------------------------------------------------------------------------
Distributions to minority partners (329)
- -----------------------------------------------------------------------------------------------------------------------------

Net cash (used in) provided by financing activities (30,269) (589) 99,021 32,719
- -----------------------------------------------------------------------------------------------------------------------------

(Decrease) increase in cash and cash equivalents (802) 67,489 13,161 (7,479)
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 9,859 9,057 1 13,162
- -----------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of period $ 9,057 $76,546 $ 13,162 $ 5,683
- -----------------------------------------------------------------------------------------------------------------------------

</TABLE>

See notes to consolidated financial statements.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION
Shurgard Storage Centers, Inc. (the Company) was organized under the laws of
the State of Delaware on July 23, 1993, to serve as a vehicle for investments
in, and ownership of, a professionally managed, nationally diverse real estate
portfolio consisting primarily of self-service storage properties which provide
month-to-month leases for business and personal use. The Company intends to
qualify as a real estate investment trust (REIT) as defined in Section 856 of
the Internal Revenue Code.
On March 1, 1994 (Consolidation Date), the Company completed the acquisition
of 17 publicly-held limited partnerships (the Predecessor, Note O) administered
by Shurgard Incorporated (the Management Company) as a means for assembling an
initial portfolio of real estate investments (Note E). On March 24, 1995, the
Company became self-advised and self-administered after acquiring the Management
Company through a merger (the Merger, Note E).

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of the Company and its subsidiaries, including both U.S. and Belgian
subsidiaries. All intercompany balances and transactions have been eliminated
upon consolidation. Prior to the Consolidation Date, the Company was inactive.
The accompanying combined financial statements for the year ended December
31, 1993, and for the period from January 1, 1994 to March 1, 1994 represent
the Predecessor's combined results of operations and cash flows through the
Consolidation Date. The Predecessor financial statements are not comparable
in all material respects with financial statements of the Company. The most
significant differences relate to (1) the Company's lower original cost of
storage centers lower depreciation expense due to and (2) higher debt and
related interest expense as a result of certain limited partners electing to
take a cash payment in lieu of the Company's common stock at the
Consolidation Date. Certain amounts in the Predecessor financial statements
have been reclassified to conform to the Company's current year presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
STORAGE CENTERS: Storage centers are recorded at cost. Depreciation on
buildings and equipment is recorded on a straight-line basis over their
estimated useful lives which range from three to 30 years.
OTHER REAL ESTATE INVESTMENTS: The Company consolidates the accounts of
those joint ventures in which the Company has effective control as evidenced
by, among other factors, a majority interest in the investment and the
ability to cause a sale of investment assets. A minority interest in earnings
from such investments is included in other income. All other investments in
joint ventures are accounted for on the equity method and are included in
other real estate investments. Investments accounted for on the equity method
include four joint ventures owning a total of seven storage centers as well
as investments in certain limited partnerships. Participating mortgages,
which are accounted for as loans, are also included in other real estate
investments.
CASH EQUIVALENTS: Cash equivalents consist of money market instruments and
securities with original maturities of 90 days or less.
RESTRICTED CASH AND INVESTMENTS: Restricted cash and investments consist of
certain cash deposits and securities held in trust in connection with certain
notes payable. Restricted cash deposits represent expense reserves required by
lenders. Restricted securities (Note H), per the loan agreement, must be held to
maturity and thus are carried at amortized cost. The premium is amortized over
the estimated remaining life of the security using the constant yield method.
OTHER ASSETS: Other assets include financing costs, non-competition
agreements, and goodwill, which are presented net of accumulated amortization of
$906,000 and $3,765,000 for the years ended December 31, 1994 and 1995,
respectively. Financing costs are amortized on the effective interest method
over the life of the related debt and the related expense is included in
amortization. Non-competition agreements and good will are amortized over their
estimated useful lives which range from three to 30 years.
FEDERAL INCOME TAXES: To qualify as a REIT, the Company must distribute
annually at least 95% of its taxable income and meet certain other requirements.
Additionally, as a REIT, it will not be subject to federal income taxes to the
extent of dividends. The Company was not required to pay any federal income tax
in 1994 and intends to make elections regarding dividends such that it will not
pay federal taxes for 1995. As a result, no provision for federal income taxes
has been made in the Company's financial statements.
The financial statements of the Predecessor do not reflect a provision for
federal income taxes because such taxes were the responsibility of the
individual partners.
FOREIGN EXCHANGE: The consolidated financial statements are prepared in
United States dollars. Assets and liabilities of the foreign subsidiary are
denominated in foreign currencies and are translated to United States dollars
at the exchange rates in effect on the balance sheet date. Revenues, costs
and expenses for this subsidiary are translated using an average rate.
REVENUE RECOGNITION: Revenue is recognized when earned under accrual
accounting principles.
GAIN ON CONSOLIDATION: Gain on consolidation is calculated as the excess of
the purchase price paid by the Company over the

33
<PAGE>

book value of the net assets of the Predecessor on the Consolidation Date.
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE: Net income per share is
calculated based on the weighted average shares outstanding during the periods
presented (16,983,887 and 20,675,356 shares for the years ended December 31,
1994 and 1995, respectively).
EARNINGS PER UNIT OF LIMITED PARTNERSHIP INTEREST: Earnings per unit of
limited partnership interest of the Predecessor is based on total earnings
allocated to the limited partners divided by the total number of $1,000 limited
partnership units outstanding during the year (530,607 units for the year ended
December 31, 1993 and the period ended March 1, 1994).
DISTRIBUTIONS PER UNIT OF LIMITED PARTNERSHIP INTEREST: Distributions per
unit of limited partnership interest of the Predecessor is based on the total
amount distributed to the limited partners divided by the total number of $1,000
limited partnership units outstanding during the year (530,607 units for the
year ended December 31, 1993 and the period ended March 1, 1994).
IMPAIRMENT VALUATION OF LONG-LIVED ASSETS: The Company, using its best
estimates based on reasonable and supportable assumptions and projections,
reviews storage centers and other assets for impairment whenever events or
changes in circumstances have indicated that the carrying amount of its
assets might not be recoverable. Impaired assets are reported at the lower of
cost or fair value. At December 31, 1995, no assets had been written down.
FINANCIAL INSTRUMENTS: The carrying values reflected in the balance sheet at
December 31, 1995, reasonably approximate the fair value of cash and cash
equivalents, other assets and capitalized ground leases. The Company estimates
that the fair value of its notes from shareholders is $2.5 million. Based on the
borrowing rates currently available to the Company for bank loans with similar
terms and average maturities, the fair value of fixed rate long-term debt is
estimated to be $131.6 million.

NOTE C -- STORAGE CENTERS

(in thousands) Dec. 31, 1994 Dec. 31, 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 88,532 $ 105,224
- -------------------------------------------------------------------------------------------------------------------
Buildings 368,593 424,760
- -------------------------------------------------------------------------------------------------------------------
Equipment 5,123 7,935
- -------------------------------------------------------------------------------------------------------------------
462,248 537,919
- -------------------------------------------------------------------------------------------------------------------
Less accumulated depreciation (11,384) (28,366)
- -------------------------------------------------------------------------------------------------------------------
450,864 509,553
- -------------------------------------------------------------------------------------------------------------------
Construction in progress, including related land of $8,353
- -------------------------------------------------------------------------------------------------------------------
at December 31, 1995 532 20,942
- -------------------------------------------------------------------------------------------------------------------
$ 451,396 $ 530,495
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

The Company has entered into ten construction contracts for improvements
to current facilities. Outstanding commitments under these contracts total $6.7
million. In 1995, the Company capitalized approximately $1.1 million in interest
related to the development of storage centers.

NOTE D -- OTHER REAL ESTATE INVESTMENTS
<TABLE>
<CAPTION>

The Company has paid approximately $11.6 million and committed an
additional $400,000 for investment in two 10-year participating mortgage
loans, which are nonrecourse to the borrower and are secured by real estate,
including four storage centers and office/warehouse space. The Company will
receive interest at 8% per annum plus 50% of both operating cash flow and
distributions from the gain on sale of real property, as defined. The Company
has options to purchase the properties at established prices, generally
exercisable in 1999 and extending until maturity of the loans.
The Company has entered into joint ventures with a storage operator and
developer to develop three properties in the Nashville, Tennessee
metropolitan area. The Company's economic interest in these ventures range
from 50% to 92%. The Company has guaranteed its pro rata portion of the joint
ventures' debt which total $1.9 million. In addition, the Company holds a 30%
interest in Shurgard Joint Partners II, a limited partnership which owns four
storage centers.
During 1995, the Company purchased, for $3.8 million in cash, limited
partnership units in Shurgard Institutional Fund LP II, an affiliated
partnership in which it already owned an interest through the general partner.
The Company is now entitled to 37% of

34
<PAGE>

partnership cash flow. Subsequent to year end, the Company also purchased one
partnership unit in Shurgard Institutional Fund LP, an affiliated partnership in
which it already owned an interest through the general partner. This unit was
purchased for $1.1 million in cash, bringing the Company's total interest in
this partnership to 9% of cash flow.

NOTE E -- ACQUISITIONS
On March 1, 1994, the Company acquired the assets, subject to existing
liabilities, of the Predecessor for a cost of $387 million (the Consolidation).
A summary of the assets and liabilities assumed in this transaction are as
follows (in thousands):

<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
Real estate $ 417,218
- -------------------------------------------------------------------------------
Interest in joint ventures 7,074
- -------------------------------------------------------------------------------
Cash, receivables and other assets 10,642
- -------------------------------------------------------------------------------
Notes payable (26,192)
- -------------------------------------------------------------------------------
Other liabilities (21,326)
- -------------------------------------------------------------------------------
$ 387,416
- -------------------------------------------------------------------------------
</TABLE>

The Consolidation was funded by the issuance of 16,983,728 shares of common
stock and $67,068,631 in proceeds from a note payable to a financial services
company. Assets assumed by the Company included approximately $2,947,000 in cash
and cash equivalents. Real estate assets acquired in the Consolidation consist
of 134 self-service storage centers and two business parks located in seventeen
states, as well as interests in two joint ventures owning an additional five
storage centers. In 1994, the purchase price was increased $1,200,000 for
estimated additional costs related to the Acquisition.
On September 1, 1994, the Company purchased twenty storage centers for $34
million from an unaffiliated seller. These centers, located in Maryland,
Virginia and North Carolina, were financed through a $30 million draw on the
Company's credit facility, a $1 million note to the seller and approximately
$3 million from cash reserves. The note to the seller is due in two $500,000
installments in September 1995 and 1996 which include accrued interest. The
discounted value of these notes on the acquisition date was estimated to be
$917,000.
On March 24, 1995, the Company merged with the Management Company in order to
become self-administered and self-advised. On that date, the Company issued
1,266,704 new shares of Class A common stock to the shareholders of the
Management Company. In addition, 282,572 shares previously owned by the
Management Company were reissued to Management Company shareholders. On August
28, 1995, pursuant to the Merger Agreement, an additional 23,030 shares were
issued as a result of adjustments identified in the audit of the Management
Company's final statement of assets, liabilities and stockholder's equity. The
Management Company shareholders may receive additional shares over the next five
years as consideration for certain partnership interests held by the Management
Company which were not valued at the time of the Merger. A summary of the assets
and liabilities assumed in this transaction are as follows (in thousands):

<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
Storage centers $ 7,964
- -------------------------------------------------------------------------------
Cash 780
- -------------------------------------------------------------------------------
Other assets 35,133
- -------------------------------------------------------------------------------
Line of credit (4,337)
- -------------------------------------------------------------------------------
Notes payable (7,275)
- -------------------------------------------------------------------------------
Other liabilities (2,856)
- -------------------------------------------------------------------------------
$ 29,409
- -------------------------------------------------------------------------------
</TABLE>

During the second quarter of 1995, the Company purchased the limited
partnership interest in a partnership (the Evergreen Partnership) which owns
seven storage centers and a 59.5% interest in a joint venture owning three
additional storage centers. The Company paid $35.5 million in exchange for the
99% limited partnership interest. The Company already owned the 1% general
partnership interest.
The following unaudited pro forma statements of income represent the results
of operations of the Company for the years ended December 31, 1994 and 1995, as
if all properties owned by the Company at December 31, 1995 had been acquired on
January 1, 1994 and the merger of the Management Company, the acquisition of the
Evergreen Partnership, and the 1995 stock offering (Note I) had been consummated
on January 1, 1994. The pro forma results do not necessarily indicate the actual
results that would have been obtained, nor are they necessarily indicative of
the future operations of the combined companies.

35
<PAGE>
<TABLE>
<CAPTION>

Year ended December 31,
(in thousands) 1994 1995
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Revenues and other income $ 94,601 $ 99,842
- ------------------------------------------------------------------------------------------------------
Operations expenses (38,063) (39,464)
- ------------------------------------------------------------------------------------------------------
Depreciation and amortization (16,833) (18,059)
- ------------------------------------------------------------------------------------------------------
Interest expense (11,006) (10,170)
- ------------------------------------------------------------------------------------------------------
Net income before extraordinary item 28,699 32,149
- ------------------------------------------------------------------------------------------------------
Extraordinary item - loss of retirement of debt (1,180)
- ------------------------------------------------------------------------------------------------------
Net income $ 27,519 $ 32,149
- ------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------
Per share data:
- ------------------------------------------------------------------------------------------------------
Net income before extraordinary item $ 1.24 $ 1.39
- ------------------------------------------------------------------------------------------------------
Extraordinary item - loss of retirement of debt (.05)
- ------------------------------------------------------------------------------------------------------
Net income $ 1.19 $ 1.39
- ------------------------------------------------------------------------------------------------------
</TABLE>

NOTE F - BELGIAN OPERATIONS
The Company has invested $5.4 million in a Belgian subsidiary, and has
committed to invest an additional $6.9 million to acquire, develop, and operate
storage centers. At December 31, 1995, the Company's investment represents an
85.6% interest in three Belgian storage centers. The Company controls the
majority of the seats on the subsidiary's Board of Directors.
Ground leases related to two of these centers are included in land at the
discounted value of required cash payments ($1.9 million) and the corresponding
liabilities have been recorded in other liabilities. The lease terms are 27 and
99 years with bargain purchase options at 27 and 16 years, respectively. These
leases require annual payments of approximately $170,000 in each of the next
five years.

NOTE G - LINES OF CREDIT
In August 1994, the Company established a $50 million revolving two-year
credit facility with a commercial bank group. This credit facility accrues
interest at either the banks' prime rate or LIBOR plus 175 basis points (reduced
from 200 basis points in June 1995) and can be fixed for various periods at the
Company's option. On December 31, 1994 and 1995, the outstanding balances under
this credit facility were $42 million and $8 million with weighted average
interest rates of 7.8% and 7.4%, respectively. The credit facility is secured by
real estate and may extend any outstanding balance for a one year term.
Subsequent to year end, the Company borrowed an additional $13 million under
this credit facility.
In December 1994, the Company established a second $50 million two-year
revolving credit facility with a financial services company. This credit
facility is secured by real estate, bears interest at LIBOR plus 175 basis
points, and requires a draw fee equal to 25 basis points of the amount drawn. No
amounts were outstanding under this credit facility on either December 31, 1994
or 1995.
The loan agreements related to the above lines of credit provide for certain
restrictive covenants based on net worth and cash flow. The actual amount
available on these credit facilities is a function of the quarterly performance
of the secured properties and the quarterly interest rate.
The Company has two additional credit facilities maturing January 2000, with
a Dutch bank under which it has borrowed approximately $2.9 million, the maximum
available. These credit facilities accrue interest at 100 basis points above the
Belgium Interbank Offer Rate. The Company purchased an agreement under which the
effective rate on borrowings would not be above 6% or below 4.45%.

NOTE H - NOTES PAYABLE

<TABLE>
<CAPTION>
<S> <C>
(in thousands) Dec. 31, 1994 Dec. 31, 1995
- -------------------------------------------------------------------------------------------------
Note payable to financial services company $ 122,580 $ 122,580
- -------------------------------------------------------------------------------------------------
Mortgage notes payable 1,467 8,733
- -------------------------------------------------------------------------------------------------
Other notes payable 1,090 622
- -------------------------------------------------------------------------------------------------
$ 125,137 $ 131,935
- -------------------------------------------------------------------------------------------------
</TABLE>

On June 9, 1994, the Company refinanced substantially all of its existing
debt through a debt purchase transaction with a financial services company. The
$122.58 million loan provides the Company with funds for seven years at a fixed
rate equal to 8.28%, requires monthly payments of interest only until maturity
and is secured by the 86 properties owned by SSC Property Holdings, Inc., a
wholly owned subsidiary of the Company. The refinancing of existing debt
resulted in a loss on early retirement of $1.18 million, consisting of
unamortized loan fees. As required by the loan agreement, the Company has
deposited cash in restricted accounts to fund certain expenses including real
estate taxes and insurance. During 1995, the Company sold two properties
securing this note

36
<PAGE>

and, as part of the defeasance, was required to place U.S. treasury notes
costing $3.1 million into a trust account. These treasury notes mature in June
2001 and carry an effective interest rate of 5.1%.
The mortgage notes are secured by a deed of trust on two storage centers. The
first is due in monthly installments of $13,441, including principal and
interest at 10.25%, and matures April 2001. The second is a participating
mortgage for $7.3 million requiring fixed monthly payments of interest only at
8% plus quarterly payments of 90% of cashflow, as defined. This mortgage also
requires payment of 90% of the storage center's appreciation upon maturity,
December 2003. Other notes payable consists of local improvement district
warrants and a note taken in connection with a real estate acquisition. The
approximate maturities of principal over the next five fiscal years range from
$20,000 to $516,000.

NOTE I -- SHAREHOLDERS' EQUITY
In addition to the rights, privileges and powers of Class A common stock,
Class B common stockholders received loans from the Company to fund certain
obligations to the Partnerships. The loans are due between 2000 and 2003 and are
secured by the Class B stock. Class B common stock is convertible to Class A
stock at a one-to-one ratio as the loans are repaid.
The Company has authorized 40,000,000 shares of preferred stock, of which
2,800,000 shares have been designated as Series A Junior Participating Preferred
Stock, and none are issued and outstanding at December 31, 1995. The Board of
Directors is authorized to determine the rights, preferences and privileges of
the preferred stock including the number of shares constituting any such series,
and the designation thereof.
In June and July, 1995, the Company issued a total of 4.9 million
additional Class A Common shares at $23.00 per share, providing net proceeds
after offering costs of $106 million. Net proceeds were used to repay lines
of credit and to fund storage center development and acquisitions, as well as
other general corporate purposes.

NOTE J -- STOCK OPTIONS
The Company has established the 1993 Stock Option Plan (the 1993 Plan) for
the purpose of attracting and retaining the Company's directors, executive
officers and other employees. The 1993 Plan provides for the granting of options
for up to 3% of the Company's outstanding shares of Class A common stock at the
end of each year, limited in the aggregate to 5,000,000 shares. In general, the
options vest ratably over five years and must be exercised within ten years from
date of grant. The exercise price for qualified incentive options under the 1993
Plan must be at least equal to fair market value at date of grant and at least
85% of fair market value at date of grant for non qualified options. The 1993
Plan expires in 2003.
The Company also established the Stock Option Plan for Nonemployee Directors
(the Directors Plan) for the purpose of attracting and retaining the services of
experienced and knowledgeable outside directors. This plan was amended during
1995 and provided current outside directors with 6,000 shares each in 1995 and
3,000 shares each annually thereafter. Such options vest upon continued service
until the next annual meeting of the Company. The total shares reserved under
the Directors Plan, as amended, is 200,000. The exercise price for options
granted under the Directors Plan is equal to fair market value at date of grant.

No. of Shares Option Price per Share
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, January 1, 1994 ---
- --------------------------------------------------------------------------------
Granted 9,200 $18.90 to $23.07
- --------------------------------------------------------------------------------
Outstanding, December 31, 1994 9,200 $18.90 to $23.07
- --------------------------------------------------------------------------------
Granted 196,500 $20.75 to $23.88
- --------------------------------------------------------------------------------
Forfeited (13,200) $23.00
- --------------------------------------------------------------------------------
Exercised (300) $23.00
- --------------------------------------------------------------------------------
Outstanding, December 31, 1995 192,200 $18.90 to $23.88
- --------------------------------------------------------------------------------
Exercisable, December 31, 1995 15,100 $18.90 to $23.88
- --------------------------------------------------------------------------------
</TABLE>

During 1995, the Company established the 1995 Long-Term Incentive
Compensation Plan (the 1995 Plan). In addition to options authorized under the
1993 Plan, the 1995 Plan provides for stock appreciation rights, stock awards
(including restricted stock), performance awards, other stock-based awards and
dividend equivalent rights. The 1995 Plan requires mandatory acceleration in the
event of certain mergers and consolidations or a sale of substantially all the
assets or a liquidation of the Company, except where such awards are assumed or
replaced in the transaction. The 1995 Plan permits the plan administrator to
authorize loans, loan guarantees or installment payments to assist award
recipients in acquiring shares pursuant to awards and contains certain
limitations imposed by recent tax legislation. The 1995 Plan allows for grants
to consultants and agents, as well as officers and key employees of the Company.
Subsequent to year end, the Company granted 40,160 options at fair market value
which ranged from $26.88 to $27.00 and vest ratably over three years.
Additionally, performance awards for additional 12,994 shares were granted
contingent upon meeting certain performance objectives over the next three
years. The options granted under the 1995 Plan include dividend equivalent
rights under which the dividends of a granted option accrue to the grantee from
the date of grant to the exercise date.

37
<PAGE>

In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation." This statement provides
that the measure of compensation cost be based on the value of the award and
be recognized over the service period. Companies may elect to adopt the
stock-based compensation accounting recognition method under the new standard
or continue accounting for it under current guidance, Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees." The Company
will adopt this standard on January 1, 1996. The Company is currently evaluating
which measurement criteria it will use to account for such compensation.

NOTE K - SHAREHOLDER RIGHTS PLAN
In March 1994, the Company adopted a Shareholder Rights Plan and declared a
dividend distribution of one Right for each outstanding share of common stock.
Under certain conditions, each Right may be exercised to purchase one one-
hundredth of a share of Series A Junior Participating Preferred Stock at a
purchase price of $65, subject to adjustment. The Rights will be exercisable
only if a person or group has acquired 10% or more of the outstanding shares of
common stock, or following the commencement of a tender or exchange offer for
10% or more of such outstanding shares of common stock. If a person or group
acquires more than 10% of the then outstanding shares of common stock, each
Right will entitle its holder to receive, upon exercise, common stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the Right. In addition, if the
Company is acquired in a merger or other business combination transaction, each
Right will entitle its holder to purchase that number of the acquiring Company's
common shares having a market value of twice the Right's exercise price. The
Company will be entitled to redeem the Rights at $.0001 per Right at any time
prior to the earlier of the expiration of the Rights in March 2004 or the time
that a person has acquired a 10% position. The Rights do not have voting or
dividend rights, and until they become exercisable, have no dilutive effect on
the Company's earnings.

NOTE L - ADVISORY AND MANAGEMENT AGREEMENTS
Prior to the Merger, the Management Company advised the Company with respect
to its investments, managed the day-to-day operations of the Company, and
provided property management services. The agreements provided for an annual
advisory fee, incentive advisory fees, reimbursement for certain costs and
expenses, and property management fees. The property management fee is equal to
approximately 6% of property revenues. These agreements were eliminated through
the Merger of the Company and the Management Company on March 24, 1995. Property
management fees for the years ended December 31, 1994 and 1995 were $3,987,000
(representing ten months of operations) and $1,261,000 (representing three
months of operations), respectively. In addition, the Company paid $59,000 each
year during 1994 and 1995 under an advisory agreement.
In connection with the management of storage centers, the Predecessor paid to
the Management Company a property management fee of 6% of rental revenues.
Incentive management fees were paid by two of the partnerships included in the
Predecessor. These incentive fees were based on the amount of distributions to
partners at 8% and 25% depending on the cumulative amount of distributions to
limited partners. No comparable fee is paid by the Company.

NOTE M - SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>

Company
Predecessor -------
----------- Three months ended
Jan. 1 to ----------------------------------------------------
Mar. 1 March 31, June 30, Sept. 30, Dec. 31,
(in thousands, except per share data) 1994 1994 1994 1994 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 12,368 $ 6,164 $ 19,131 $ 20,515 $ 21,111
- -----------------------------------------------------------------------------------------------------------------------
Income from operations 3,882 2,852 7,702 8,584 8,223
- -----------------------------------------------------------------------------------------------------------------------
Net income before
extraordinary item 34,286 2,230 5,563 6,004 5,204
- -----------------------------------------------------------------------------------------------------------------------
Extraordinary item - loss on
retirement of debt (Note H) (1,180)
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 34,286 $ 2,230 $ 4,383 $ 6,004 $ 5,204
- -----------------------------------------------------------------------------------------------------------------------
Net income before extraordinary item per
common and common equivalent share $ --- $ 0.13 $ 0.33 $ 0.35 $ 0.31
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

38
<PAGE>

Company operating information for the quarter ended March 31, 1994 reflects
only one month of operating results. Predecessor information includes the gain
on consolidation and related expenses and results in a net income per unit of
limited partnership interest of $63.97.

Three months ended
-----------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
(in thousands, except per share data) 1995 1995 1995 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 21,368 $ 24,107 $ 26,088 $ 25,208
- -----------------------------------------------------------------------------------------------------------------------------
Income from operations 8,551 10,329 11,483 10,372
- -----------------------------------------------------------------------------------------------------------------------------
Net income 5,354 6,638 9,221 8,359
- -----------------------------------------------------------------------------------------------------------------------------
Net income per common and common equivalent share $ 0.31 $ 0.35 $ 0.40 $ 0.35
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE N - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>

Predecessor Company
--------------------------- -------------------
Year ended Period from
Dec. 31, Jan. 1, 1994 to Year Ended Dec. 31,
(in thousands) 1993 Mar. 1, 1994 1994 1995
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Cash paid during the period for interest $ 2,288 $ 487 $ 8,829 $ 13,372
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities incurred in connection
- -----------------------------------------------------------------------------------------------------------------------------
with the construction of
- -----------------------------------------------------------------------------------------------------------------------------
storage centers $ 206 $ --- $ --- $ 4,457
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE O -- PREDECESSOR
The combined financial statements of the Predecessor include the accounts
of the partnerships listed below for the year ended December 31, 1993, and
the period from January 1 to March 1, 1994, except for Shurgard Income
Properties II, III, and IV, each of which are as of their fiscal year ended
September 30, 1993.

Shurgard Mini-Storage Limited Partnership I
Shurgard Income Properties II
Shurgard Income Properties III, a Real Estate Limited Partnership
Shurgard Income Properties VI, a Real Estate Limited Partnership
Shurgard Income Properties Five, a Real Estate Limited Partnership
Shurgard Income Properties Six, a Real Estate Limited Partnership
Shurgard Income Properties Seven, a Real Estate Limited Partnership
Shurgard Income Properties Eight, a Real Estate Limited Partnership
Shurgard Income Properties Nine, a Real Estate Limited Partnership
Shurgard Income Properties Ten, a Real Estate Limited Partnership
Shurgard Income Properties Eleven, a Real Estate Limited Partnership
Shurgard Income Properties Twelve, a Real Estate Limited Partnership
Shurgard Income Properties -- Fund 14 Limited Partnership
Shurgard Growth Capital -- Fund 15 Limited Partnership
Shurgard Income Properties -- Fund 16 Limited Partnership
Shurgard Growth Capital -- Fund 17 Limited Partnership
Shurgard Income Properties -- Fund 18 Limited Partnership

39
<PAGE>

Board of Directors
Shurgard Storage Centers, Inc.
Seattle, Washington

We have audited the accompanying consolidated balance sheets of Shurgard
Storage Centers, Inc., and subsidiaries (the Company) as of December 31, 1995
and 1994, and the related consolidated statements of income, shareholders'
equity, and cash flows for the years ended December 31, 1995 and 1994. We
have also audited the combined statements of income, cash flows and partners'
equity (deficit) of the 17 limited partnerships (the Predecessor) described
in Note A, for the period from January 1, 1994 to March 1, 1994 and for the
year ended December 31, 1993. These financial statements are the
responsibility of the Company's and Predecessor's management. Our
responsibility is to express an opinion on these financial statements 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 of the Company and the
combined financial statements of the Predecessor present fairly, in all material
respects, the financial position of the Company as of December 31, 1995 and
1994, the results of its operations and its cash flows for the years ended
December 31, 1995 and 1994, the results of the Predecessor's operations and its
cash flows for the period from January 1, 1994 to March 1, 1994 and for the year
ended December 31, 1993 in conformity with generally accepted accounting
principles.

Deloitte & Touche LLP

Seattle, Washington
February 2, 1996

<PAGE>

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding directors of the Company and Section 16 reporting is set
forth in the Company's proxy statement for the annual meeting of shareholders to
be held May 14, 1996, and is incorporated herein by reference.

The executive officers of the Company are as follows:

POSITIONS AND OFFICES
NAME AGE WITH THE COMPANY
- ---------------- --- ------------------------------------------
<S> <C> <C>
Charles K. Barbo 54 Chairman of the Board, President and Chief
Executive Officer
Harrell Beck 39 Director, Senior Vice President, Chief
Financial Officer and Treasurer
David K. Grant 42 Executive Vice President
Michael Rowe 39 Executive Vice President
Kristin H. Stred 37 Senior Vice President, Secretary and General
Counsel

</TABLE>

For Mr. Barbo's and Mr. Beck's biographies, see the Company's proxy
statement for the annual meeting of shareholders to be held on May 14, 1996.

DAVID K. GRANT has served as the Company's Executive Vice President and
Director of Real Estate Investment since July 1993. Mr. Grant joined the
Management Company in November 1985 as Director of Real Estate Investment and
continued to serve in that capacity until the Merger. He also served as an
Executive Vice President of the Management Company. Mr. Grant was previously a
manager with Touche Ross & Co., where he was employed for approximately 10 years
providing financial consulting, accounting and auditing services primarily to
clients in the real estate, construction and engineering industries. Mr. Grant
has a Bachelor of Arts degree in Business Administration and a Bachelor of
Science degree in Accounting, both from Washington State University. In
February 1996, Mr. Grant was transferred to Brussels, Belgium. He became
Managing Director Benelux SCS effective January 1, 1996.

MICHAEL ROWE has served as the Company's Executive Vice President and
Director of Storage Operations since July 1993. Effective January 1, 1996, Mr.
Rowe became the Company's Chief Operating Officer. Prior to the Merger, he
served as Executive Vice President and Director of Storage Operations of the
Management Company. Prior to his employment with the Management Company, he was
employed with Touche Ross & Co.,

<PAGE>

where he participated in independent audits of major real estate syndication,
development and management companies in the Pacific Northwest. He became
Controller of the Management Company in 1982 and Vice President and Treasurer in
1983. In 1987, Mr. Rowe was named Director of Storage Operations of the
Management Company. Mr. Rowe has a Bachelor of Arts degree in Business
Administration from Washington State University.

KRISTIN H. STRED has served as the Company's Secretary and General Counsel
since July 1993. She was named Senior Vice President of the Company upon the
closing of the Merger. Ms. Stred joined the Management Company in July 1992 and
until the Merger served as Secretary and General Counsel. She was previously an
attorney with The Boeing Company from October 1991 to July 1992 and Assistant
General Counsel with King Broadcasting Company from July 1987 to September 1991.
Ms. Stred has a Bachelor of Arts degree with honors in general studies from
Harvard University and a J.D. from Harvard Law School. She is a member of the
Washington State Bar Association, is a former president of Washington Women
Lawyers and a former member of the Executive Committee of the Corporate Law
Department Section of the Washington State Bar Association.

ITEM 11 - EXECUTIVE COMPENSATION

Information regarding executive compensation is set forth in the Company's proxy
statement for the annual meeting of shareholders to be held May 14, 1996, and is
incorporated herein by reference.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information regarding security ownership of certain beneficial owners and
management is set forth in the Company's proxy statement for the annual meeting
of shareholders to be held May 14, 1996, and is incorporated herein by
reference.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and related transactions is set
forth in the Company's proxy statement for the annual meeting of shareholders to
be held May 14, 1996, and is incorporated herein by reference.

PART IV

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

(a) 1. Financial Statements

Page No.
--------
<S> <C>
Consolidated Balance Sheet at December 31, 1995 and 1994. 29
For the years ended December 31, 1995 and 1994 (Company),
the period from January 1, 1994 to March 1, 1994
(Predecessor), and the year ended December 31,
1993(Predecessor):
Consolidated Statements of Net Income 30
Consolidated Statements of Partners' and Shareholders'
Equity 31
Consolidated Statements of Cash Flows 32
Notes to Consolidated Financial Statements 33-39
Independent Auditors' Report 40

</TABLE>

<PAGE>

2. Financial Statement Schedules

All schedules have been omitted because either they are not applicable or
the required information is shown in the financial statements.

3. Exhibits

3.1 Amended and Restated Certificate of Incorporation of the
Registrant (1)
3.2 Restated By-Laws of the Registrant
4.1 Rights Agreement between the Registrant and Gemisys Corporation dated
as of March 17, 1994 (2)
10.1 Loan Agreement among Shurgard Storage Centers, Inc., Seattle-First
National Bank, Key Bank of Washington and West One Bank dated
August 19, 1994(4)
10.2 Amended and Restated Loan Agreement between Nomura Asset Capital
Corp., as Lender, and SSC Property Holdings, Inc., as Borrower, dated
as of June 8, 1994(4)
10.3 Amended and Restated Collection Account and Servicing Agreement among
SSC Property Holdings, Inc., Pacific Mutual Life Insurance Company,
LaSalle National Bank and Nomura Asset Capital Corp. dated as of
June 8, 1994(4)
10.4 Revolving Loan Agreement among Shurgard Storage Centers, Inc., SSC
Acquisitions, Inc. and Nomura Asset Capital Corp. dated as of
December 23, 1994(4)
10.5 Agreement and Plan of Merger dated as of December 19, 1994(4)
*10.6 Amended and Restated 1993 Stock Option Plan(3)
*10.7 Amended and Restated Stock Incentive Plan for Nonemployee Directors
*10.8 1995 Long-Term Incentive Compensation Plan (5)
11.1 Statement regarding computation of per share net income
21.1 Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
27.1 Financial Data Schedule

- -----------
(1) Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-4, Amendment No. 8 (Post-Effective
Amendment No. 4), filed with the Securities and Exchange Commission on
February 2, 1994.
(2) Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form 8-A filed with the Securities and
Exchange Commission on March 17, 1994.
(3) Incorporated by reference to exhibit no. 10.7 filed with the
Registrant's Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1995.
(4) Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-4, Amendment No. 2, filed with the
Securities and Exchange Commission on February 8, 1995.
(5) Incorporated by reference to appendix B filed as part of the
Registrant's definitive Proxy Statement dated June 8, 1995.
* Management contract or compensatory plan or arrangement

(b) Reports on Form 8-K

No report on Form 8-K was filed by the Company during the quarter ended
December 31, 1995.

<PAGE>

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Seattle, State of Washington, on the 19th day of
March, 1996.

SHURGARD STORAGE CENTERS, INC.

By: /s/ HARRELL BECK
---------------------------
Harrell Beck
Senior Vice President, Treasurer,
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Annual Report on Form 10-K has been signed by the following
persons in the capacities indicated below on the 19th day of March, 1996.

Signature Title
- -------------------------------- --------------------------------

/s/ CHARLES K. BARBO
- -------------------------------- Chairman of the Board, President and
Charles K. Barbo Chief Executive Officer (Principal
Executive Officer)

/s/ HARRELL BECK
- -------------------------------- Senior Vice President, Treasurer,
Harrell Beck Chief Financial Officer and Director
(Principal Financial and Accounting
Officer)

/s/ DAN KOURKOUMELIS
- -------------------------------- Director
Dan Kourkoumelis

/s/ DONALD W. LUSK
- -------------------------------- Director
Donald W. Lusk

/s/ W.J. SMITH
- -------------------------------- Director
W.J. (Jim) Smith

<PAGE>

EXHIBIT (3.2)

AMENDED AND RESTATED
BY-LAWS
OF
SHURGARD STORAGE CENTERS, INC.

Effective on July 26, 1995

<PAGE>

CONTENTS
--------

SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1

SECTION 2. OFFICES . . . . . . . . . . . . . . . . . . . . . . . . 4

SECTION 3. STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . 4
3.1 Annual Meeting. . . . . . . . . . . . . . . . . . . . . 4
3.2 Special Meetings. . . . . . . . . . . . . . . . . . . . 4
3.3 Place of Meeting. . . . . . . . . . . . . . . . . . . . 4
3.4 Notice of Meeting . . . . . . . . . . . . . . . . . . . 4
3.5 Business for Stockholders' Meetings . . . . . . . . . . 5
3.5.1 Business at Annual Meetings . . . . . . . . . . 5
3.5.2 Business at Special Meetings. . . . . . . . . . 5
3.5.3 Notice to Corporation . . . . . . . . . . . . . 5
3.6 Waiver of Notice. . . . . . . . . . . . . . . . . . . . 6
3.6.1 In Writing. . . . . . . . . . . . . . . . . . . 6
3.6.2 By Attendance . . . . . . . . . . . . . . . . . 6
3.7 Fixing of Record Date for Determining Stockholders. . . 6
3.7.1 Meetings. . . . . . . . . . . . . . . . . . . . 6
3.7.2 Consent to Corporate Action Without a Meeting . 6
3.7.3 Dividends, Distributions and Other Rights . . . 7
3.8 Voting List . . . . . . . . . . . . . . . . . . . . . . 7
3.9 Quorum . . . . . . . . . . . . . . . . . . . . . . . . 7
3.10 Manner of Acting. . . . . . . . . . . . . . . . . . . . 7
3.11 Proxies . . . . . . . . . . . . . . . . . . . . . . . . 8
3.11.1 Appointment . . . . . . . . . . . . . . . . . . 8
3.11.2 Delivery to Corporation; Duration . . . . . . . 8
3.12 Voting of Shares. . . . . . . . . . . . . . . . . . . . 8
3.13 Voting for Directors. . . . . . . . . . . . . . . . . . 8
3.14 Action by Stockholders Without a Meeting. . . . . . . . 8
3.15 Inspectors of Election. . . . . . . . . . . . . . . . . 9
3.15.1 Appointment . . . . . . . . . . . . . . . . . . 9
3.15.2 Duties. . . . . . . . . . . . . . . . . . . . . 9

SECTION 4. BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . 10
4.1 General Powers. . . . . . . . . . . . . . . . . . . . . 10
4.2 Number and Tenure . . . . . . . . . . . . . . . . . . . 10
4.3 Nomination and Election . . . . . . . . . . . . . . . . 10
4.3.1 Nomination. . . . . . . . . . . . . . . . . . . 10
4.3.2 Election. . . . . . . . . . . . . . . . . . . . 11
4.4 Annual and Regular Meetings . . . . . . . . . . . . . . 11
4.5 Special Meetings. . . . . . . . . . . . . . . . . . . . 11
4.6 Meetings by Telephone . . . . . . . . . . . . . . . . . 11
4.7 Notice of Special Meetings. . . . . . . . . . . . . . . 11
4.7.1 Personal Delivery . . . . . . . . . . . . . . . 12
4.7.2 Delivery by Mail. . . . . . . . . . . . . . . . 12
4.7.3 Delivery by Private Carrier . . . . . . . . . . 12
4.7.4 Facsimile Notice. . . . . . . . . . . . . . . . 12
4.7.5 Delivery by Telegraph . . . . . . . . . . . . . 12
4.7.6 Oral Notice . . . . . . . . . . . . . . . . . . 12
4.8 Waiver of Notice. . . . . . . . . . . . . . . . . . . . 12

-ii-
<PAGE>

4.8.1 In Writing. . . . . . . . . . . . . . . . . . . 12
4.8.2 By Attendance . . . . . . . . . . . . . . . . . 12
4.9 Quorum . . . . . . . . . . . . . . . . . . . . . . . . 13
4.10 Manner of Acting. . . . . . . . . . . . . . . . . . . . 13
4.11 Presumption of Assent . . . . . . . . . . . . . . . . . 13
4.12 Action by Board or Committees Without a Meeting . . . . 13
4.13 Resignation . . . . . . . . . . . . . . . . . . . . . . 13
4.14 Removal . . . . . . . . . . . . . . . . . . . . . . . . 13
4.15 Vacancies . . . . . . . . . . . . . . . . . . . . . . . 13
4.16 Executive and Other Committees. . . . . . . . . . . . . 14
4.16.1 Creation and Authority of Committees. . . . . . 14
4.16.2 Audit Committee . . . . . . . . . . . . . . . . 14
4.16.3 Compensation Committee. . . . . . . . . . . . . 14
4.16.4 Nominating and Organization Committee . . . . . 14
4.16.5 Minutes of Meetings . . . . . . . . . . . . . . 15
4.16.6 Quorum and Manner of Acting . . . . . . . . . . 15
4.16.7 Resignation . . . . . . . . . . . . . . . . . . 15
4.16.8 Removal . . . . . . . . . . . . . . . . . . . . 15
4.17 Compensation. . . . . . . . . . . . . . . . . . . . . . 15
4.18 Lead Outside Director . . . . . . . . . . . . . . . . . 15

SECTION 5. OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Number . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Election and Term of Office . . . . . . . . . . . . . . 16
5.3 Resignation . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Removal . . . . . . . . . . . . . . . . . . . . . . . . 16
5.5 Vacancies . . . . . . . . . . . . . . . . . . . . . . . 16
5.6 Chairman of the Board . . . . . . . . . . . . . . . . . 16
5.7 President . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 Vice President. . . . . . . . . . . . . . . . . . . . . 16
5.9 Secretary . . . . . . . . . . . . . . . . . . . . . . . 17
5.10 Treasurer . . . . . . . . . . . . . . . . . . . . . . . 17
5.11 Salaries. . . . . . . . . . . . . . . . . . . . . . . . 17

SECTION 6. CONTRACTS, LOANS, CHECKS AND DEPOSITS . . . . . . . . . 17
6.1 Contracts . . . . . . . . . . . . . . . . . . . . . . . 17
6.2 Loans to the Corporation. . . . . . . . . . . . . . . . 17
6.3 Checks, Drafts, Etc.. . . . . . . . . . . . . . . . . . 18
6.4 Deposits. . . . . . . . . . . . . . . . . . . . . . . . 18

SECTION 7. CERTIFICATES FOR SHARES AND THEIR TRANSFER. . . . . . . 18
7.1 Issuance of Shares. . . . . . . . . . . . . . . . . . . 18
7.2 Certificates for Shares . . . . . . . . . . . . . . . . 18
7.3 Stock Records . . . . . . . . . . . . . . . . . . . . . 18
7.4 Restriction on Transfer . . . . . . . . . . . . . . . . 18
7.5 Transfers of Shares . . . . . . . . . . . . . . . . . . 19
7.6 Stockholders' Disclosures . . . . . . . . . . . . . . . 19
7.7 Lost or Destroyed Certificates. . . . . . . . . . . . . 19

SECTION 8. BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . 19
8.1 Maintenance of Books and Records. . . . . . . . . . . . 19
8.2 Annual Report to Stockholders . . . . . . . . . . . . . 19

-iii-
<PAGE>

SECTION 9. ACCOUNTING YEAR . . . . . . . . . . . . . . . . . . . . 20

SECTION 10. SEAL . . . . . . . . . . . . . . . . . . . . . . . . 20

SECTION 11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 20
11.1 Right to Indemnification. . . . . . . . . . . . . . . . 20
11.2 Right of Indemnitee to Bring Suit . . . . . . . . . . . 21
11.3 Nonexclusivity of Rights. . . . . . . . . . . . . . . . 21
11.4 Insurance, Contracts and Funding. . . . . . . . . . . . 21
11.5 Indemnification of Employees and Agents of
the Corporation . . . . . . . . . . . . . . . . . . . 21
11.6 Persons Serving Other Entities. . . . . . . . . . . . . 21
11.7 Procedures for the Submission of Claims . . . . . . . . 22

SECTION 12. INVESTMENT POLICY AND RESTRICTIONS. . . . . . . . . . . 22
12.1 General Statement of Policy . . . . . . . . . . . . . . 22
12.1.1 Types of Investments. . . . . . . . . . . . . . 22
12.1.2 Tax Treatment as a REIT . . . . . . . . . . . . 22
12.1.3 Liability Protection. . . . . . . . . . . . . . 22
12.1.4 Review of Investment Policies . . . . . . . . . 22
12.2 Appraisal Requirement . . . . . . . . . . . . . . . . . 22
12.3 Specific Investments. . . . . . . . . . . . . . . . . . 23
12.4 Reserves. . . . . . . . . . . . . . . . . . . . . . . . 23
12.5 Investment Restrictions . . . . . . . . . . . . . . . . 23
12.6 Restrictions Upon Dealings Between the
Corporation and Interested Parties. . . . . . . . . . 25
12.7 Corporation's Right to Borrow Funds . . . . . . . . . . 26
12.8 Pursuit of Ancillary Services . . . . . . . . . . . . . 26
12.9 Corporation's Right to Participate in
Joint Investments . . . . . . . . . . . . . . . . . . 27
12.10 Investment in Corporation's Shares. . . . . . . . . . . 27

SECTION 13. INDEPENDENT ACTIVITIES. . . . . . . . . . . . . . . . . 28
13.1 Shares Held by Directors and Officers . . . . . . . . . 28
13.2 Business Interests and Investments of Directors . . . . 28
13.3 Other Business Relationships of Directors . . . . . . . 28

SECTION 14. AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . 28

SECTION 15. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 28
15.1 Provisions in Conflict With Law or Regulations. . . . . 28
15.2 Reliance Upon Legal Advice. . . . . . . . . . . . . . . 28
15.3 Construction. . . . . . . . . . . . . . . . . . . . . . 29

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AMENDED AND RESTATED
BY-LAWS
OF
SHURGARD STORAGE CENTERS, INC.

SECTION 1. DEFINITIONS

Whenever used in these By-Laws, unless the context otherwise requires, the
terms defined in this Section 1 shall have the following respective meanings:

"ADJUSTED NET WORTH" means the amount obtained by subtracting the
Corporation's total liabilities from its total assets as adjusted. The
Corporation shall reduce its total assets by such reasonable reserves as the
Board shall determine but shall not take into account depreciation or
amortization. Except as otherwise stated herein, the Corporation's total assets
and total liabilities shall be as shown on the Corporation's books, which shall
be prepared in accordance with generally accepted accounting principles.

"AFFILIATE" of a Person means (a) any other Person directly or indirectly
controlling, controlled by or under common control with such Person, (b) any
other Person owning or controlling ten percent (10%) or more of the outstanding
voting securities of such Person, (c) any officer, Director or partner of such
Person, and (d) if such Person is an officer, Director or partner, any company
for which such Person acts as an officer, Director or partner.

"ANCILLARY SERVICES" means any business activity rendered in connection
with, or incidental to, the Corporation's primary activity of leasing its
properties, generating revenues for the Corporation that would be treated by the
IRS as Nonqualifying Income, including, but not limited to, the sale of goods
and services to its tenants or others.

"ASSET COVERAGE" means the ratio (expressed as a percentage) which the
value of the Corporation's total assets, less all liabilities and indebtedness,
except indebtedness for unsecured borrowings, bears to the aggregate amount of
all unsecured borrowings of the Corporation.

"BOARD" means the Board of Directors of the Corporation, as constituted
from time to time.

"BY-LAWS" means the By-Laws of the Corporation, as in effect from time to
time.

"CHAIRMAN OF THE BOARD" shall have the meaning assigned to such term in
Sections 5.1 and 5.6 hereof.

"CODE" means the Internal Revenue Code of 1986, as it may be amended from
time to time.

"COMMON STOCK" means the Class A Common Stock of the Corporation, par value
$.001 per share, the Class B Common Stock of the Corporation, par value $.001
per share, and the Excess Stock of the Corporation, par value $.001 per share.

"CONSOLIDATION" means the acquisition by the Corporation of substantially
all of the assets of each of the Partnerships, which was effective on March 1,
1994.

"CORPORATION" means Shurgard Storage Centers, Inc., a Delaware corporation.

"DIRECTORS" means the directors of the Board.

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"INDEBTEDNESS" of the Corporation means, as of the date the amount thereof
is to be determined, any and all amounts due on financial obligations of the
Corporation evidencing its obligations to repay funds borrowed to finance the
business and affairs of the Corporation, including, but not limited to, the
outstanding principal balance, accrued but unpaid interest, late fees and
penalties, or other obligations, due under any of the Corporation's debt
securities, commercial paper, notes, debentures, bonds, promissory notes,
revolving lines of credit, and credit and loan agreements. Indebtedness is
limited to amounts borrowed by the Corporation and does not include other
liabilities, such as accounts payable, lease obligations, liabilities and claims
incurred in the conduct of the Corporation's business, or the liabilities of
other companies or entities in which the Corporation may have invested. In
addition, "Indebtedness" includes any amounts borrowed by any wholly owned
subsidiaries of the Corporation.

"INDEBTEDNESS RESTRICTION" means the restriction placed upon the
Corporation's authority to borrow funds set forth in Section 12.7 hereof.

"INDEPENDENT DIRECTORS" means Directors who do not perform services for the
Corporation, except as Directors.

"INTERESTED PARTY" of the Corporation means a Director, an officer, any
Person owning or controlling ten percent (10%) or more of any class of
outstanding voting securities of the Corporation, or any Affiliate of any of the
aforementioned Persons, and, to the extent that any such Person proposes to
enter into a transaction with the Corporation, such transaction is subject to
the restrictions set forth in Section 12.6 hereof.

"IRS" means the Internal Revenue Service.

"MORTGAGE LOANS" means notes, debentures, bonds and other evidences of
indebtedness or obligations that are secured or collateralized by interests in
real property.

"NONQUALIFYING INCOME" means income not described in Section 856(c)(2) of
the Code, or any successor provision.

"OTHER SHURGARD PROGRAMS" means the real estate programs (other than the
Partnerships), whether organized as joint ventures, general partnerships,
limited partnerships or otherwise, which were organized by Shurgard or any of
the general partners of the Partnerships, and whose assets were managed by
Shurgard as of the date the Corporation was organized.

"OWN," "OWNER" or "OWNERSHIP" means a Person considered to "own" Shares if
such Person is treated as an owner of such Shares for purposes of the REIT
Provisions of the Code, including ownership provisions of Code Sections 542
and 544 (all as in effect from time to time).

"PARTNERSHIPS" means Shurgard Mini-Storage Limited Partnership I, a
Washington limited partnership; Shurgard Income Properties II, a Washington
limited partnership; Shurgard Income Properties III, A Real Estate Limited
Partnership, a Washington limited partnership; Shurgard Income Properties IV, A
Real Estate Limited Partnership, a Washington limited partnership; Shurgard
Income Properties V, A Real Estate Limited Partnership, a Washington limited
partnership; Shurgard Income Properties VI, A Real Estate Limited Partnership, a
Washington limited partnership; Shurgard Income Properties VII, A Real Estate
Limited Partnership, a Washington limited partnership; Shurgard Income
Properties VIII, A Real Estate Limited Partnership, a Washington limited
partnership; Shurgard Income Properties IX, A Real Estate Limited Partnership, a
Washington limited partnership; Shurgard Income Properties X, A Real Estate
Limited Partnership, a Washington limited partnership; Shurgard Income
Properties XI, A Real Estate Limited Partnership, a Washington limited
partnership; Shurgard Income Properties XII, A Real Estate Limited Partnership,
a Washington limited partnership; Shurgard Income Properties - Fund 14 Limited
Partnership, a Delaware limited partnership; Shurgard Growth Capital - Fund 15

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Limited Partnership, a Delaware limited partnership; Shurgard Income Properties
- - Fund 16 Limited Partnership, a Delaware limited partnership; Shurgard Growth
Capital - Fund 17 Limited Partnership, a Delaware limited partnership; and
Shurgard Income Properties - Fund 18 Limited Partnership, a Delaware limited
partnership. References to a "Partnership" shall be understood to refer to any
of the Partnerships.

"PERSON" means an individual, a corporation, limited partnership, general
partnership, joint stock company or an association, a joint venture, trust,
bank, trust company, land trust, business trust or an estate, or any other
entity and governmental agency and any political subdivision thereof.

"PREFERRED STOCK" means the shares of any series or any class of any series
of Preferred Stock authorized and created by the Board in accordance with the
terms and provisions of the Certificate of Incorporation of the Corporation and
the Delaware General Corporation Law.

"PRESIDENT" shall have the meaning assigned to such term in Sections 5.1
and 5.7 hereof.

"REIT" means a real estate investment trust as defined in Sections 856 to
860 of the Code.

"REIT PROVISIONS OF THE CODE" means Part II, Subchapter M of Chapter 1 of
the Code, as now enacted or hereafter amended, or successor statutes, relating
to REITs.

"SECRETARY" shall have the meaning assigned to such term in Sections 5.1
and 5.9 hereof.

"SECURITIES" means any instruments commonly known as "securities,"
including stock, shares, voting trust certificates, bonds, debentures, notes or
other evidences of indebtedness, secured or unsecured, convertible, subordinated
or otherwise, or any certificates of interest, shares or participations, or
warrants, options or rights to subscribe to, purchase or acquire any of the
foregoing.

"SHARES" means the Corporation's shares of stock, whether Common Stock or
Preferred Stock.

"SHURGARD" means Shurgard Incorporated, a Washington corporation.

"STOCKHOLDER" means a holder of the Shares of the Corporation's stock,
whether Common Stock or Preferred Stock.

"SUBSIDIARY" of a Person means an Affiliate controlled by such Person
directly or indirectly, through one or more intermediaries.

"TOTAL ASSETS" of the Corporation means, as of the date the amount thereof
is to be determined, the greater of (a) the Corporation's total assets computed
in accordance with generally accepted accounting principles, consistently
applied (and which would be reflected on the Corporation's balance sheet if such
balance sheet were prepared as of such date), plus all accumulated depreciation
as of such date, and (b) the fair market value of the Corporation's assets
determined in accordance with guidelines established by the Board, consistently
applied. Notwithstanding the foregoing, the Board may change the guidelines
established for computing the fair market value of its assets, pursuant to
clause (b) of the preceding sentence, if such change is made in good faith and
not for the purpose of circumventing the restrictions contained in the
Indebtedness Restriction, and if applied retroactively would not have prohibited
the Corporation from borrowing any funds at the time such funds were actually
borrowed by the Corporation.

"TREASURER" shall have the meaning assigned to such term in Sections 5.1
and 5.10 hereof.

"UNIMPROVED REAL PROPERTY" means the property of a REIT which has the
following three (3) characteristics: (a) an equity interest in property which
was not acquired for the purpose of producing rental

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or other operating income, (b) no development or construction is in progress on
such land, and (c) no development or construction on such land is planned in
good faith to commence within one (1) year of the property's acquisition by the
Corporation or within one (1) year of the Corporation's receipt of all necessary
permits, licenses and approvals to proceed with development or construction,
provided that the Corporation in good faith, following the acquisition of the
land, proceeds to apply for and pursue the issuance of all permits, licenses and
approvals as may be necessary, prudent or advisable for the development and or
construction planned for the land.

"VICE PRESIDENT" shall have the meaning assigned to such term in
Sections 5.1 and 5.8 hereof.

SECTION 2. OFFICES

The principal office of the Corporation shall be located at its principal
place of business or such other place as the Board may designate. The
Corporation may have such other offices, either within or without the State of
Delaware, as the Board may designate or as the business of the Corporation may
require from time to time.

SECTION 3. STOCKHOLDERS
3.1 ANNUAL MEETING

The annual meeting of the Stockholders shall be held the second Tuesday in
May in each year commencing in 1995 at the principal office of the Corporation
or such other place designated by the Board for the purpose of electing
Directors and transacting such other business as may properly come before the
meeting. If the day fixed for the annual meeting is a legal holiday at the
place of the meeting, the meeting shall be held on the next succeeding business
day. At any time prior to the commencement of the annual meeting, the Board may
postpone the annual meeting for a period of up to one hundred twenty (120) days
from the date fixed for such meeting in accordance with this Section 3.1. If
the annual meeting is not held on the date designated therefor, the Board shall
cause the meeting to be held as soon thereafter as may be convenient.

3.2 SPECIAL MEETINGS

The Chairman of the Board, the President, the Board, a majority of the
Independent Directors or the holders of not less than ten percent (10%) of all
the outstanding Shares entitled to vote at the meeting may call special meetings
of the Stockholders for any purpose.

3.3 PLACE OF MEETING

All meetings shall be held at the principal office of the Corporation or at
such other place within or without the State of Delaware designated by the
Board, by any Persons entitled to call a meeting hereunder or in a waiver of
notice signed by all the Stockholders entitled to notice of the meeting.

3.4 NOTICE OF MEETING

The Chairman of the Board, the President, the Secretary, the Board, the
Independent Directors or Stockholders calling an annual or special meeting of
Stockholders as provided for herein shall cause to be delivered to each
Stockholder entitled to notice of or to vote at the meeting, either personally
or by mail, not less than ten (10) nor more than sixty (60) days before the
meeting, written notice stating the place, day and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called. At any time within ten (10) days after receipt of a written request of
the holders of not less than the number of outstanding Shares specified in
Section 3.2 hereof and entitled to vote at the meeting, it shall be the duty of
the Secretary to give notice of a special meeting of Stockholders to be held on
such date and at such

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place and hour as the Secretary may fix, not less than ten (10) nor more than
sixty (60) days after receipt of said request, and if the Secretary shall
neglect or refuse to issue such notice, the Person making the request may do so
and may fix the date for such meeting. If such notice is mailed, it shall be
deemed delivered when deposited in the official government mail properly
addressed to the Stockholder at the Stockholder's address as it appears on the
stock transfer books of the Corporation with postage prepaid. If the notice is
telegraphed, it shall be deemed delivered when the content of the telegram is
delivered to the telegraph company.

3.5 BUSINESS FOR STOCKHOLDERS' MEETINGS

3.5.1 BUSINESS AT ANNUAL MEETINGS

In addition to the election of Directors, other proper business may be
transacted at an annual meeting of Stockholders, provided that such business is
properly brought before such meeting. To be properly brought before an annual
meeting, business must be (a) brought by or at the direction of the Board or
(b) brought before the meeting by a Stockholder pursuant to written notice
thereof, in accordance with Section 3.5.3 hereof, and received by the Secretary
not fewer than sixty (60) days prior to the date specified in Section 3.1 hereof
for such annual meeting (or if less than sixty (60) days' notice or prior public
disclosure of the date of the annual meeting is given or made to the
Stockholders, not later than the tenth day following the day on which the notice
of the date of the annual meeting was mailed or such public disclosure was
made). Any Stockholder notice shall set forth (i) the name and address of the
Stockholder proposing such business; (ii) a representation that the Stockholder
is entitled to vote at such meeting and a statement of the number of Shares of
the Corporation which are beneficially owned by the Stockholder; (iii) a
representation that the Stockholder intends to appear in person or by proxy at
the meeting to propose such business; and (iv) as to each matter the Stockholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting, the language of the proposal (if appropriate) and any
material interest of the Stockholder in such business. No business shall be
conducted at any annual meeting of Stockholders except in accordance with this
Section 3.5.1. If the facts warrant, the Board, or the chairman of an annual
meeting of Stockholders, may determine and declare that (a) a proposal does not
constitute proper business to be transacted at the meeting or (b) business was
not properly brought before the meeting in accordance with the provisions of
this Section 3.5.1, and, if, in either case, it is so determined, any such
business not properly brought before the meeting shall not be transacted. The
procedures set forth in this Section 3.5.1 for business to be properly brought
before an annual meeting by a Stockholder are in addition to, and not in lieu
of, the requirements set forth in Rule 14a-8 under Section 14 of the Securities
Exchange Act of 1934, as amended, or any successor provision.

3.5.2 BUSINESS AT SPECIAL MEETINGS

At any special meeting of the Stockholders, only such business as is
specified in the notice of such special meeting given by or at the direction of
the Person or Persons calling such meeting, in accordance with Section 3.4
hereof, shall come before such meeting.

3.5.3 NOTICE TO CORPORATION

Any written notice required to be delivered by a Stockholder to the
Corporation pursuant to Section 3.4, Section 3.5.1 or Section 3.5.2 hereof must
be given, either by personal delivery or by registered or certified mail,
postage prepaid, to the Secretary at the Corporation's executive offices.

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3.6 WAIVER OF NOTICE

3.6.1 IN WRITING

Whenever any notice is required to be given to any Stockholder under the
provisions of these By-Laws, the Certificate of Incorporation or the Delaware
General Corporation Law, a waiver thereof in writing, signed by the Person or
Persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.

3.6.2 BY ATTENDANCE

The attendance of a Stockholder at a meeting shall constitute a waiver of
notice of such meeting, except when a Stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.

3.7 FIXING OF RECORD DATE FOR DETERMINING STOCKHOLDERS

3.7.1 MEETINGS

For the purpose of determining Stockholders entitled to notice of and to
vote at any meeting of Stockholders or any adjournment thereof, the Board may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which record date
shall not be more than sixty (60) (or the maximum number permitted by applicable
law) nor less than ten (10) days before the date of such meeting. If no record
date is fixed by the Board, the record date for determining Stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of Stockholders
of record entitled to notice of and to vote at the meeting of Stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.

3.7.2 CONSENT TO CORPORATE ACTION WITHOUT A MEETING

For the purpose of determining Stockholders entitled to consent to
corporate action in writing without a meeting, the Board may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board, and which date shall not be more than
ten (10) (or the maximum number permitted by applicable law) days after the date
upon which the resolution fixing the record date is adopted by the Board. If no
record date has been fixed by the Board, the record date for determining
Stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board is required by Chapter 1 of the
Delaware General Corporation Law, as now or hereafter amended, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of Stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board
and prior action by the Board is required by Chapter 1 of the Delaware General
Corporation Law, as now or hereafter amended, the record date for determining
Stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board adopts
the resolution taking such prior action.

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3.7.3 DIVIDENDS, DISTRIBUTIONS AND OTHER RIGHTS

The Board may, out of funds legally available therefor, at any regular or
special meeting, declare dividends upon the Shares as and when it deems
expedient. Before declaring any dividends there may be set apart out of any
funds of the Corporation available for dividends, such sums as the Board, from
time to time in its discretion, deems proper for working capital or as a reserve
fund to make contingencies or for equalizing dividends or for such other
purposes as the Board shall deem conducive to the interests of the Corporation.
For the purpose of determining Stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or Stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purpose of any other lawful action, the Board may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty (60) (or the maximum number permitted by applicable law) days
prior to such action. If no record date is fixed, the record date for
determining Stockholders for any such purpose shall be at the close of business
on the day on which the Board adopts the resolution relating thereto. Any
distribution of income or capital assets of the Corporation to Stockholders will
be accompanied by a written statement disclosing the source of the funds
distributed. If, at the time of distribution, this information is not
available, a written explanation of the relevant circumstances will accompany
the distribution and a written statement disclosing the source of funds
distributed will be sent to the Stockholders not later than sixty (60) days
after the close of the fiscal year in which the distribution was made.

3.8 VOTING LIST

At least ten (10) days before each meeting of Stockholders, a complete list
of the Stockholders entitled to vote at such meeting, or any adjournment
thereof, shall be made, arranged in alphabetical order, with the address of and
number of Shares held by each Stockholder. This list shall be open to
examination by any Stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. This list shall also be produced and
kept at such meeting for inspection by any Stockholder who is present.

3.9 QUORUM

A majority of the outstanding Shares entitled to vote, present in Person or
represented by proxy at the meeting, shall constitute a quorum at a meeting of
the Stockholders; provided, that where a separate vote by a class or classes is
required, a majority of the outstanding shares of such class or classes, present
in person or represented by proxy at the meeting, shall constitute a quorum
entitled to take action with respect to that vote on that matter. If less than
a majority of the outstanding Shares entitled to vote are represented at a
meeting, a majority of the Shares so represented may adjourn the meeting from
time to time without further notice. If a quorum is present or represented at a
reconvened meeting following such an adjournment, any business may be transacted
that might have been transacted at the meeting as originally called. The
Stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
Stockholders to leave less than a quorum.

3.10 MANNER OF ACTING

In all matters other than the election of Directors, if a quorum is
present, the affirmative vote of the majority of the outstanding Shares present
in Person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the Stockholders, unless the vote of a
greater number is required by these By-Laws, the Certificate of Incorporation or
the Delaware General Corporation Law. Where a separate vote by a class or
classes is required, if a quorum of such class or classes is present, the
affirmative vote of the majority of outstanding shares of such class or classes
present in Person or represented by proxy at the meeting shall be the act of
such class or classes. Directors shall be elected by a plurality of the votes of

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the Shares present in Person or represented by proxy at the meeting and entitled
to vote on the election of Directors.

3.11 PROXIES

3.11.1 APPOINTMENT

Each Stockholder entitled to vote at a meeting of Stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another Person or Persons to act for such Stockholder by proxy. Such
authorization may be accomplished by (a) the Stockholder or such Stockholder's
authorized officer, Director, employee or agent executing a writing or causing
his or her signature to be affixed to such writing by any reasonable means,
including facsimile signature, or (b) transmitting or authorizing the
transmission of a telegram, cablegram or other means of electronic transmission
to the intended holder of the proxy or to a proxy solicitation firm, proxy
support service or similar agent duly authorized by the intended proxy holder to
receive such transmission; provided, that any such telegram, cablegram or other
electronic transmission must either set forth or be accompanied by information
from which it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the Stockholder. Any copy, facsimile
telecommunication or other reliable reproduction of the writing or transmission
by which a Stockholder has authorized another Person to act as proxy for such
Stockholder may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.

3.11.2 DELIVERY TO CORPORATION; DURATION

A proxy shall be filed with the Secretary before or at the time of the
meeting or the delivery to the Corporation of the consent to corporate action in
writing. A proxy shall become invalid three (3) years after the date of its
execution unless otherwise provided in the proxy. A proxy with respect to a
specified meeting shall entitle the holder thereof to vote at any reconvened
meeting following adjournment of such meeting but shall not be valid after the
final adjournment thereof.

3.12 VOTING OF SHARES

Each outstanding Share entitled to vote with respect to the subject matter
of an issue submitted to a meeting of Stockholders shall be entitled to one (1)
vote upon each such issue unless otherwise set forth in the Certificate of
Incorporation or other document defining the rights and preferences of any such
Shares.

3.13 VOTING FOR DIRECTORS

Each Stockholder entitled to vote at an election of Directors may vote, in
Person or by proxy, the number of Shares owned by such Stockholder for as many
Persons as there are Directors to be elected and for whose election such
Stockholder has a right to vote.

3.14 ACTION BY STOCKHOLDERS WITHOUT A MEETING

Any action which could be taken at any annual or special meeting of
Stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be (a) signed by all of the Stockholders entitled to vote with respect to
the subject matter thereof (as determined in accordance with Section 3.7.2
hereof) and (b) delivered to the Corporation by delivery to its registered
office in the State of Delaware, its principal place of business, or an officer
or agent of the Corporation having custody of the records of proceedings of
Stockholders meetings. Delivery made to the Corporation's registered office
shall be by hand or by certified mail or registered mail, return receipt
requested.

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Every written consent shall bear the date of signature of each Stockholder who
signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless written consents signed by all of
the Stockholders entitled to vote with respect to the subject matter thereof are
delivered to the Corporation, in the manner required by this Section 3.14,
within sixty (60) (or the maximum number permitted by applicable law) days of
the earliest dated consent delivered to the Corporation in the manner required
by this Section 3.14. The validity of any consent executed by a proxy for a
Stockholder pursuant to a telegram, cablegram or other means of electronic
transmission transmitted to such proxy holder by or upon the authorization of
the Stockholder shall be determined by or at the direction of the Secretary. A
written record of the information upon which the Person making such
determination relied shall be made and kept in the records of the proceedings of
the Stockholders. Any such consent shall be inserted in the minute book as if
it were the minutes of a meeting of the Stockholders.

3.15 INSPECTORS OF ELECTION

3.15.1 APPOINTMENT

In advance of any meeting of Stockholders, the Board shall appoint one or
more Persons to act as inspectors of election at such meeting and to make a
written report thereof. The Board may designate one (1) or more Persons to
serve as alternate inspectors to serve in place of any inspector who is unable
or fails to act. If no inspector or alternate is able to act at a meeting of
Stockholders, the chairman of such meeting shall appoint one or more Persons to
act as inspector of elections at such meeting.

3.15.2 DUTIES

The inspectors shall:

(a) ascertain the number of Shares of the Corporation outstanding and
the voting power of each such Share;

(b) determine the Shares represented at the meeting and the validity
of proxies and ballots;

(d) determine and retain for a reasonable period of time a record of
the disposition of any challenges made to any determination by them; and

(e) certify their determination of the number of Shares represented
at the meeting and their count of the votes and ballots.

The validity of any proxy or ballot shall be determined by the inspectors
of election in accordance with the applicable provisions of the Delaware General
Corporation Law as then in effect. In determining the validity of any proxy
transmitted by telegram, cablegram or other electronic transmission, the
inspectors shall record in writing the information upon which they relied in
making such determination. Each inspector of elections shall, before entering
upon the discharge of his or her duties, take and sign an oath to faithfully
execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors of election may appoint or retain
other Persons to assist them in the performance of their duties.

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SECTION 4. BOARD OF DIRECTORS

4.1 GENERAL POWERS

The business and affairs of the Corporation shall be managed by the Board.

4.2 NUMBER AND TENURE

The Board shall be composed of not less than three (3) nor more than nine
(9) Directors, the specific number to be set by resolution of the Board or the
Stockholders. The number of Directors may be changed from time to time by
amendment to these By-Laws, subject to the Certificate of Incorporation, but no
decrease in the number of Directors shall have the effect of shortening the term
of any incumbent Director. At any time the Board consists of more than one (1)
Director, at least a majority of Directors shall at all times be Independent
Directors; provided, however, that in the event of the death, resignation or
removal of an Independent Director, such requirement shall not be applicable for
a period of sixty (60) days. The Board of Directors shall be divided into three
classes, with the classes to be as equal in number as may be possible, with any
Director or Directors in excess of the number divisible by three being assigned
to Class 3 and Class 2, as the case may be. At the 1995 annual meeting of
stockholders, the following classes shall be elected for the terms set forth
below:

Class Term
----- ----

Class 1 1 year

Class 2 2 years

Class 3 3 years

At each annual meeting of stockholders following the 1995 annual meeting, the
number of Directors equal to the number of Directors in the class whose term
expires at the time of such meeting shall be elected to serve until the third
ensuing annual meeting of stockholders. Unless a Director dies, resigns or is
removed, he or she shall hold office for the term elected or until his or her
successor is elected and qualified, whichever is later.. Directors need not be
Stockholders of the Corporation or residents of the State of Delaware.

4.3 NOMINATION AND ELECTION

4.3.1 NOMINATION

Only Persons who are nominated in accordance with the following procedures
shall be eligible for election as Directors. Nominations for the election of
Directors may be made (a) by or at the direction of the Board or (b) by any
Stockholder of record entitled to vote for the election of Directors at such
meeting; provided, however, that a Stockholder may nominate Persons for election
as Directors only if written notice (in accordance with Section 3.5.3 hereof) of
such Stockholder's intention to make such nominations is received by the
Secretary (i) with respect to an election to be held at an annual meeting of the
Stockholders, not fewer than sixty (60) nor more than ninety (90) days prior to
the date specified in Section 3.1 hereof for such annual meeting (or if less
than sixty (60) days' notice or prior public disclosure of the date of the
annual meeting is given or made to the Stockholders, not later than the tenth
day following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made) and (ii) with respect to an election
to be held at a special meeting of the Stockholders for the election of
Directors, not later than the close of business on the seventh business day
following the date on which notice of such meeting is first given to
Stockholders. Any such Stockholder's notice shall set forth (a) the name and
address of the Stockholder who intends to make a nomination; (b) a
representation that the Stockholder is entitled to vote at such meeting and

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a statement of the number of Shares of the Corporation which are beneficially
owned by the Stockholder; (c) a representation that the Stockholder intends to
appear in person or by proxy at the meeting to nominate the Person or Persons
specified in the notice; (d) as to each Person the Stockholder proposes to
nominate for election or re-election as a Director, the name and address of such
Person and such other information regarding such nominee as would be required in
a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had such nominee been nominated by the Board, and a
description of any arrangements or understandings, between the Stockholder and
such nominee and any other Persons (including their names), pursuant to which
the nomination is to be made; and (e) the consent of each such nominee to serve
as a Director if elected. If the facts warrant, the Board, or the chairman of a
Stockholders' meeting at which Directors are to be elected, shall determine and
declare that a nomination was not made in accordance with the foregoing
procedure, and, if it is so determined, the defective nomination shall be
disregarded. The right of Stockholders to make nominations pursuant to the
foregoing procedure is subject to the rights of the holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation. The procedures set forth in this Section 4.3 for nomination
for the election of Directors by Stockholders are in addition to, and not in
limitation of, any procedures now in effect or hereafter adopted by or at the
direction of the Board or any committee thereof.

4.3.2 ELECTION

At each election of Directors, the Persons receiving the greatest number of
votes shall be the Directors.

4.4 ANNUAL AND REGULAR MEETINGS

An annual Board meeting shall be held without notice immediately after and
at the same place as the annual meeting of Stockholders. By resolution, the
Board or any committee designated by the Board may specify the time and place
either within or without the State of Delaware for holding regular meetings
thereof without other notice than such resolution.

4.5 SPECIAL MEETINGS

Special meetings of the Board or any committee appointed by the Board may
be called by or at the request of the Chairman of the Board, the President, the
Secretary or, in the case of special Board meetings, any two (2) Directors and,
in the case of any special meeting of any committee appointed by the Board, by
the chairman thereof. The Person or Persons authorized to call special meetings
may fix any place either within or without the State of Delaware as the place
for holding any special Board or committee meeting called by them.

4.6 MEETINGS BY TELEPHONE

Members of the Board or any committee designated by the Board may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means so that all Persons
participating in the meeting can hear each other. Participation by such means
shall constitute presence in Person at a meeting.

4.7 NOTICE OF SPECIAL MEETINGS

Notice of a special Board or committee meeting stating the place, day and
hour of the meeting shall be given to a Director in writing or orally by
telephone or in Person. Neither the business to be transacted at nor the
purpose of any special meeting need be specified in the notice of such meeting.

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4.7.1 PERSONAL DELIVERY

If notice is given by personal delivery, the notice shall be effective if
delivered to a Director at least two (2) days before the meeting.

4.7.2 DELIVERY BY MAIL

If notice is delivered by mail, the notice shall be deemed effective if
deposited in the official government mail properly addressed to a Director at
his or her address shown on the records of the Corporation with postage prepaid
at least five (5) days before the meeting.

4.7.3 DELIVERY BY PRIVATE CARRIER

If notice is given by private carrier, the notice shall be deemed effective
when dispatched to a Director at his or her address shown on the records of the
Corporation at least three (3) days before the meeting.

4.7.4 FACSIMILE NOTICE

If notice is delivered by wire or wireless equipment that transmits a
facsimile of the notice, the notice shall be deemed effective when dispatched at
least two (2) days before the meeting to a Director at his or her telephone
number or other number appearing on the records of the Corporation.

4.7.5 DELIVERY BY TELEGRAPH

If notice is delivered by telegraph, the notice shall be deemed effective
if the content thereof is delivered to the telegraph company at least two (2)
days before the meeting for delivery to a Director at his or her address shown
on the records of the Corporation.

4.7.6 ORAL NOTICE

If notice is delivered orally, by telephone or in Person, the notice shall
be deemed effective if personally given to the Director at least two (2) days
before the meeting.

4.8 WAIVER OF NOTICE

4.8.1 IN WRITING

Whenever any notice is required to be given to any Director under the
provisions of these By-Laws, the Certificate of Incorporation or the Delaware
General Corporation Law, a waiver thereof in writing, signed by the Person or
Persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Neither the
business to be transacted at nor the purpose of any regular or special meeting
of the Board or any committee appointed by the Board need be specified in the
waiver of notice of such meeting.

4.8.2 BY ATTENDANCE

The attendance of a Director at a Board or committee meeting shall
constitute a waiver of notice of such meeting, except when a Director attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.

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4.9 QUORUM

A majority of the total number of Directors fixed by or in the manner
provided in these By-Laws or, if vacancies exist on the Board, a majority of the
total number of Directors then serving on the Board, provided, however, that
such number may be not less than one-third (1/3) of the total number of
Directors fixed by or in the manner provided in these By-Laws, shall constitute
a quorum for the transaction of business at any Board meeting. If less than a
majority are present at a meeting, a majority of the Directors present may
adjourn the meeting from time to time without further notice.

4.10 MANNER OF ACTING

The act of the majority of the Directors present at a Board or committee
meeting at which there is a quorum shall be the act of the Board or committee,
unless the vote of a greater number is required by these By-Laws, the
Certificate of Incorporation or the Delaware General Corporation Law.

4.11 PRESUMPTION OF ASSENT

A Director present at a Board or committee meeting at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his or her dissent is entered in the minutes of the meeting, or unless
such Director files a written dissent to such action with the Person acting as
the secretary of the meeting before the adjournment thereof, or forwards such
dissent by registered mail to the Secretary immediately after the adjournment of
the meeting. A Director who voted in favor of such action may not dissent.

4.12 ACTION BY BOARD OR COMMITTEES WITHOUT A MEETING

Any action which could be taken at a meeting of the Board or of any
committee appointed by the Board may be taken without a meeting if a written
consent setting forth the action so taken is signed by each of the Directors or
by each committee member. Any such written consent shall be inserted in the
minute book as if it were the minutes of a Board or a committee meeting.

4.13 RESIGNATION

Any Director may resign at any time by delivering written notice to the
Chairman of the Board, the President, the Secretary or the Board, or to the
registered office of the Corporation. Any such resignation shall take effect at
the time specified therein, or if the time is not specified, upon delivery
thereof, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.

4.14 REMOVAL

At a meeting of Stockholders called expressly for that purpose, one or more
members of the Board (including the entire Board) may be removed, but only with
cause, by a vote of the holders of a majority of the Shares then entitled to
vote on the election of Directors.

4.15 VACANCIES

Any vacancy occurring on the Board may be filled by the affirmative vote
of a majority of the remaining Directors though less than a quorum of the
Board; provided, however, that a vacancy created by the death, resignation or
removal of an Independent Director, in the absence of a vote of the
Stockholders, may be filled only by the vote of a majority of the remaining
Independent Directors. A Director elected to fill a vacancy shall be elected
for the unexpired term of his or her predecessor in office. Any Directorship to
be filled by reason of an increase in the number of Directors may be filled by
the Board for a term of office

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continuing only until the next election of the class for which such Director
shall have been chosen, and until his or her successor shall be elected and
qualify.

4.16 EXECUTIVE AND OTHER COMMITTEES

4.16.1 CREATION AND AUTHORITY OF COMMITTEES

The Board may, by resolution passed by a majority of the number of
Directors fixed by or in the manner provided in these By-Laws, appoint standing
or temporary committees, including an "Executive Committee," each committee to
consist of one or more Directors, and invest such committees with such powers as
it may see fit, subject to such conditions as may be prescribed by the Board and
by applicable law; but no such committee shall have the power or authority of
the Board in reference to (a) amending the Certificate of Incorporation,
(b) adopting a plan of merger or consolidation, (c) recommending to the
Stockholders the sale, lease or exchange or other disposition of all or
substantially all the property and assets of the Corporation other than in the
usual and regular course of business, (d) recommending to the Stockholders a
voluntary dissolution or a revocation thereof, (e) amending these By-Laws,
(f) declaring a dividend, or (g) authorizing the issuance of stock. The Board
may designate one or more Directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a committee member, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
such member or members constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member.

4.16.2 AUDIT COMMITTEE

In addition to any committees appointed pursuant to this Section 4.16,
there shall be an "Audit Committee," appointed annually by the Board, consisting
of at least two (2) Directors who are not members of management. It shall be
the responsibility of the Audit Committee to review the scope and results of the
annual independent audit of books and records of the Corporation, to review
compliance with all corporate policies that have been approved by the Board and
to discharge such other responsibilities as may from time to time be assigned to
it by the Board. The Audit Committee shall meet at such times and places as the
members deem advisable, and shall make such recommendations to the Board as they
consider appropriate.

4.16.3 COMPENSATION COMMITTEE

The Board may, in its discretion, designate a "Compensation Committee"
consisting of not less than two (2) Directors or such higher number as the Board
may from time to time determine. The duties of the Compensation Committee shall
consist of the following: (a) to establish and review periodically, but not
less than annually, the compensation of the officers of the Corporation and to
make recommendations concerning such compensation to the Board; (b) to consider
incentive compensation plans for the employees of the Corporation; (c) to carry
out the duties assigned to the Compensation Committee under any stock option
plan or other plan approved by the Corporation; (d) to consult with the
President concerning any compensation matters deemed appropriate by the
President or the Compensation Committee; and (e) to perform such other duties as
shall be assigned to the Compensation Committee by the Board.

4.16.4 NOMINATING AND ORGANIZATION COMMITTEE

The Board may, in its discretion, designate a "Nominating and Organization
Committee" consisting of not less than two (2) Directors or such higher number
as the Board may from time to time determine. The duties of the Nominating and
Organization Committee shall consist of the following: (a) to report and make
recommendations to the Board on the size and composition of the Board and
nominees for Directors; (b) to evaluate the performance of the officers of the
Corporation and, together with management, select and recommend to the Board
appropriate individuals for election, appointment and promotion as officers of
the

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Corporation and ensure the continuity of capable management; (c) to report and
make recommendations to the Board on the organization of the Corporation; and
(d) to perform such other duties as shall be assigned to the Nominating and
Organization Committee by the Board.

4.16.5 MINUTES OF MEETINGS

All committees so appointed shall keep regular minutes of their meetings
and shall cause them to be recorded in books kept for that purpose.

4.16.6 QUORUM AND MANNER OF ACTING

A majority of the number of Directors composing any committee of the Board,
as established and fixed by resolution of the Board, shall constitute a quorum
for the transaction of business at any meeting of such committee, but, if less
than a majority are present at a meeting, a majority of such Directors present
may adjourn the meeting from time to time without further notice. The act of a
majority of the members of a committee present at a meeting at which a quorum is
present shall be the act of such committee.

4.16.7 RESIGNATION

Any member of any committee may resign at any time by delivering written
notice thereof to the Chairman of the Board, the President, the Secretary, the
Board or the chairman of such committee. Any such resignation shall take effect
at the time specified therein or, if the time is not specified, upon delivery
thereof, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.

4.16.8 REMOVAL

The Board may remove from office any member of any committee elected or
appointed by it or by an Executive Committee, but only by the affirmative vote
of not less than a majority of the number of Directors fixed by or in the manner
provided in these By-Laws.

4.17 COMPENSATION

By Board resolution, Directors and committee members may be paid their
expenses, if any, of attendance at each Board or committee meeting, or a fixed
sum for attendance at each Board or committee meeting, or a stated salary as
Director or a committee member, or a combination of the foregoing. No such
payment shall preclude any Director or committee member from serving the
Corporation in any other capacity and receiving compensation therefor.

4.18 LEAD OUTSIDE DIRECTOR

The members of the Board who at the time are neither employees of nor
consultants to the Corporation (the "Outside Directors") may, by resolution
passed by a majority of the number of such Outside Directors then in office,
appoint one of their number to serve as Lead Outside Director. If so appointed,
the Lead Outside Director shall be responsible for chairing any meetings of
Outside Directors and shall perform such other duties as shall be requested of
him or her from time to time by the Outside Directors, acting in the same
manner.

SECTION 5. OFFICERS

5.1 NUMBER

The officers of the Corporation shall be a President, a Secretary and a
Treasurer, each of whom shall be elected by the Board. One or more Vice
Presidents and such other officers and assistant officers, including a Chairman
of the Board, may be elected or appointed by the Board, such officers and
assistant officers to hold office for such period, have such authority and
perform such duties as are provided in these By-Laws or as may be provided by
resolution of the Board. Any officer may be assigned by the Board any
additional title that the Board deems appropriate. The Board may delegate to
any officer or agent the power to appoint any such subordinate officers or
agents and to prescribe their respective terms of office, authority and duties.
Any two (2) or more offices may be held by the same Person.

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5.2 ELECTION AND TERM OF OFFICE

The officers of the Corporation shall be elected annually by the Board at
the Board meeting held after the annual meeting of the Stockholders. If the
election of officers is not held at such meeting, such election shall be held as
soon thereafter as a Board meeting conveniently may be held. Unless an officer
dies, resigns or is removed from office, he or she shall hold office until the
next annual meeting of the Board or until his or her successor is elected.

5.3 RESIGNATION

Any officer may resign at any time by delivering written notice to the
Chairman of the Board, the President, a Vice President, the Secretary or the
Board. Any such resignation shall take effect at the time specified therein or,
if the time is not specified, upon delivery thereof, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.

5.4 REMOVAL

Any officer or agent elected or appointed by the Board may be removed by
the Board whenever in its judgment the best interests of the Corporation would
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the Person so removed.

5.5 VACANCIES

A vacancy in any office because of death, resignation, removal,
disqualification, creation of a new office or any other cause may be filled by
the Board for the unexpired portion of the term, or for a new term established
by the Board.

5.6 CHAIRMAN OF THE BOARD

If elected, the Chairman of the Board shall perform such duties as shall be
assigned to him or her by the Board from time to time and shall preside over
meetings of the Board and Stockholders unless another officer is appointed or
designated by the Board as Chairman of such meeting

5.7 PRESIDENT

The President shall be the chief executive officer of the Corporation
unless some other officer is so designated by the Board, shall preside over
meetings of the Board and Stockholders in the absence of a Chairman of the Board
and, subject to the Board's control, shall supervise and control all the assets,
business and affairs of the Corporation. The President may sign certificates
for Shares, deeds, mortgages, bonds, contracts or other instruments, except when
the signing and execution thereof have been expressly delegated by the Board or
by these By-Laws to some other officer or agent of the Corporation or are
required by law to be otherwise signed or executed by some other officer or in
some other manner. In general, the President shall perform all duties incident
to the office of President and such other duties as are prescribed by the Board
from time to time.

5.8 VICE PRESIDENT

In the event of the death of the President or his or her inability to act,
the Vice President (or if there is more than one Vice President, the Vice
President who was designated by the Board as the successor to the

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President or, if no Vice President is so designated, the Vice President first
elected to such office) shall perform the duties of the President, except as may
be limited by resolution of the Board, with all the powers of and subject to all
the restrictions upon the President. Any Vice President may sign with the
Secretary or any Assistant Secretary certificates for Shares. Vice Presidents
shall have, to the extent authorized by the President or the Board, the same
powers as the President to sign deeds, mortgages, bonds, contracts or other
instruments. Vice Presidents shall perform such other duties as from time to
time may be assigned to them by the President or by the Board. A Vice-President
may be designated as an Executive Vice-President, a Senior Vice-President or a
Vice-President of a specific function or responsibility or may be otherwise
designated at the discretion of the Board to differentiate various Vice-
Presidential positions.

5.9 SECRETARY

The Secretary shall be responsible for the preparation of minutes of
meetings of the Board and Stockholders, maintenance of the Corporation's records
and stock registers, and authentication of the Corporation's records and shall
in general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him or her by the President or by
the Board. In the absence of the Secretary, an Assistant Secretary may perform
the duties of the Secretary.

5.10 TREASURER

If required by the Board, the Treasurer shall give a bond for the faithful
discharge of his or her duties in such amount and with such surety or sureties
as the Board shall determine. The Treasurer shall have charge and custody of
and be responsible for all funds and Securities of the Corporation; receive and
give receipts for moneys due and payable to the Corporation from any source
whatsoever, and deposit all such moneys in the name of the Corporation in banks,
trust companies or other depositories selected in accordance with the provisions
of these By-Laws; sign certificates for Shares; and in general perform all the
duties incident to the office of Treasurer and such other duties as from time to
time may be assigned to him or her by the President or by the Board. In the
absence of the Treasurer, an Assistant Treasurer may perform the duties of the
Treasurer.

5.11 SALARIES

The salaries of the officers shall be fixed from time to time by the Board
or by any Person or Persons to whom the Board has delegated such authority. No
officer shall be prevented from receiving such salary by reason of the fact that
he or she is also a Director.

SECTION 6. CONTRACTS, LOANS, CHECKS AND DEPOSITS

6.1 CONTRACTS

The Board may authorize any officer or officers, or agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the Corporation. Such authority may be general or confined to
specific instances.

6.2 LOANS TO THE CORPORATION

No loans shall be contracted on behalf of the Corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the Board. Such authority may be general or confined to specific instances.

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6.3 CHECKS, DRAFTS, ETC.

All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the Corporation shall be signed
by such officer or officers, or agent or agents, of the Corporation and in such
manner as is from time to time determined by resolution of the Board.

6.4 DEPOSITS

All funds of the Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies or
other depositories as the Board may select.

SECTION 7. CERTIFICATES FOR SHARES AND THEIR TRANSFER

7.1 ISSUANCE OF SHARES

No Shares shall be issued unless authorized by the Board, which
authorization shall include the maximum number of Shares to be issued and the
consideration to be received for each share.

7.2 CERTIFICATES FOR SHARES

Certificates representing Shares shall be signed by the Chairman of the
Board or Vice Chairman of the Board or the President or the Vice President and
by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, any of whose signatures may be a facsimile. The Board may in its
discretion appoint responsible banks, trust companies or other qualified
entities from time to time to act as transfer agents and registrars of the stock
of the Corporation; and, when such appointments shall have been made, no stock
certificate shall be valid until countersigned by one of such transfer agents
and registered by one of such registrars. In case any officer, transfer agent
or registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such Person was such officer, transfer agent or registrar at
the date of issue. All certificates shall include on their face written notice
of any restrictions which may be imposed on the transferability of such Shares
and shall be consecutively numbered or otherwise identified.

7.3 STOCK RECORDS

The stock transfer books shall be kept at the registered office or
principal place of business of the Corporation or at the office of the
Corporation's transfer agent or registrar. The name and address of each Person
to whom certificates for Shares are issued, together with the class and number
of Shares represented by each such certificate and the date of issue thereof,
shall be entered on the stock transfer books of the Corporation. The Person in
whose name Shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.

7.4 RESTRICTION ON TRANSFER

Except to the extent that the Corporation has obtained an opinion of
counsel acceptable to the Corporation that transfer restrictions are not
required under applicable securities laws, or has otherwise satisfied itself
that such transfer restrictions are not required, all certificates representing
Shares shall bear a legend on the face of the certificate, or on the reverse of
the certificate if a reference to the legend is contained on the face, which
reads substantially as follows:

"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended, or any applicable state law,
and no interest therein may be sold, distributed, assigned,

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offered, pledged or otherwise transferred unless (a) there is an effective
registration statement under such Act and applicable state securities laws
covering any such transaction involving said securities or (b) this
corporation receives an opinion of legal counsel for the holder of these
securities (concurred in by legal counsel for this corporation) stating
that such transaction is exempt from registration or (c) this corporation
otherwise satisfies itself that such transaction is exempt from
registration. Neither the offering of the securities nor any offering
materials have been reviewed by any administrator under the Securities Act
of 1933, as amended, or any applicable state law."

7.5 TRANSFERS OF SHARES

Subject to Section 7.7 hereof, Shares shall be transferable on the records
of the Corporation upon presentment to the Corporation or a transfer agent of a
certificate or certificates representing the Shares requested to be transferred,
with proper endorsement on the certificate or on a separate accompanying
document, together with such evidence of the payment of transfer taxes and
compliance with other provisions of law as the Corporation or its transfer agent
may require. All certificates surrendered to the corporation for transfer shall
be cancelled and no new certificate shall be issued until the former
certificates for a like number of Shares shall have been surrendered and
cancelled.

Whenever it is deemed by the Board to be reasonably necessary to protect
the tax status of the Corporation, the Board may require a statement or
affidavit from each Stockholder or proposed transferee of Shares setting forth
the number of Shares already owned by such Person and any related Person
specified in the form prescribed by the Board for that purpose. If, in the
opinion of the Board, which shall be conclusive, any proposed transfer would
jeopardize the status of the Corporation as a REIT under the REIT Provisions of
the Code, as now enacted or as hereafter amended, the Directors may refuse to
permit such transfer. Any attempted transfer for which the Directors have
refused this permission shall be void and of no effect to transfer any legal or
beneficial interest in the Shares. All contracts for the sale or other transfer
of Shares shall be subject to this provision.

7.6 STOCKHOLDERS' DISCLOSURES

The Stockholders, upon demand, shall disclose to the Corporation in writing
such information with respect to direct and indirect ownership of the Shares as
the Board deems necessary to comply with the provisions of the Code and the
regulations thereunder or to comply with the requirements of any other taxing
authority, including the provisions relating to qualification of the Corporation
as a REIT.

7.7 LOST OR DESTROYED CERTIFICATES

In the case of a lost, destroyed or mutilated certificate, a new
certificate may be issued therefor upon such terms and indemnity to the
Corporation as the Board may prescribe.

SECTION 8. BOOKS AND RECORDS

8.1 MAINTENANCE OF BOOKS AND RECORDS

The Corporation shall keep correct and complete books and records of
account, stock transfer books, minutes of the proceedings of its Stockholders
and Board, and such other records as may be necessary or advisable.

8.2 ANNUAL REPORT TO STOCKHOLDERS

The Board shall cause an annual report to be sent to the Stockholders not
later than one hundred twenty (120) days after the close of the fiscal year
adopted by the Corporation. This report shall be sent at

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least thirty (30) days before the annual meeting of Stockholders to be held
during the next fiscal year and in the manner specified in Section 3.4 hereof
for giving notice to Stockholders. The annual report shall contain financial
statements prepared in accordance with generally accepted accounting principles
which are audited and reported on by independent certified public accountants.

SECTION 9. ACCOUNTING YEAR

The accounting year of the Corporation shall be the calendar year, provided
that if a different accounting year is at any time selected for purposes of
federal income taxes, the accounting year shall be the year so selected.

SECTION 10. SEAL

The seal of the Corporation, if any, shall consist of the name of the
Corporation, the state of its incorporation and the year of its incorporation.

SECTION 11. INDEMNIFICATION

11.1 RIGHT TO INDEMNIFICATION

Each Person who was or is made a party or is threatened to be made a party
to or is otherwise involved (including, without limitation, as a witness) in any
actual or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a Director or an officer of the Corporation or
that, being or having been such a Director or an officer or an employee of the
Corporation, he or she is or was serving at the request of an executive officer
of the Corporation as a Director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as such a Director, officer, employee or agent or in any other
capacity while serving as such a Director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the full extent permitted by
the Delaware General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
permitted prior thereto), or by other applicable law as then in effect, against
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid in settlement) actually and
reasonably incurred or suffered by such indemnitee in connection therewith, and
such indemnification shall continue as to an indemnitee who has ceased to be a
Director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; provided, however, that except
as provided in Section 11.2 hereof with respect to proceedings seeking to
enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized or ratified
by the Board. The right to indemnification conferred in this Section 11.1 shall
be a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however, that
if the Delaware General Corporation Law requires, an advancement of expenses
incurred by an indemnitee in his or her capacity as a Director or an officer
(and not in any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced upon ultimate determination of nonentitlement to
indemnification for such expenses under this Section 11.1 or otherwise.

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11.2 RIGHT OF INDEMNITEE TO BRING SUIT

If a claim under Section 11.1 hereof is not paid in full by the Corporation
within sixty (60) days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty (20) days, the indemnitee may
at any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim. If successful in whole or in part in any such suit, or in
a suit brought by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the indemnitee shall be entitled to be paid also
the expense of prosecuting or defending such suit. Neither the failure of the
Corporation (including its Board, independent legal counsel or its Stockholders)
to have made a determination prior to the commencement of such suit that
indemnification of the indemnitee is proper in the circumstances nor an actual
determination by the Corporation (including its Board, independent legal counsel
or its Stockholders) that the indemnitee is not entitled to indemnification
shall be a defense to the suit or create a presumption that the indemnitee is
not so entitled.

11.3 NONEXCLUSIVITY OF RIGHTS

The rights to indemnification and to the advancement of expenses conferred
in this Section 11 shall not be exclusive of any other right which any Person
may have or hereafter acquire under any statute, agreement, vote of Stockholders
or Independent Directors, provisions of the Certificate of Incorporation or By-
Laws or otherwise. Notwithstanding any amendment to or repeal of this
Section 11, or of any of the procedures established by the Board of Directors
pursuant to Section 11.7, any indemnitee shall be entitled to indemnification in
accordance with the provisions hereof and thereof with respect to any acts or
omissions of such indemnitee occurring prior to such amendment or repeal.

11.4 INSURANCE, CONTRACTS AND FUNDING

The Corporation may maintain insurance, at its expense, to protect itself
and any Director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such Person against such expense, liability or loss under the
Delaware General Corporation Law. The Corporation, without further Stockholder
approval, may enter into contracts with any Director, officer, employee or agent
in furtherance of the provisions of this Section 11 and may create a trust fund,
grant a security interest or use other means (including, without limitation, a
letter of credit) to ensure the payment of such amounts as may be necessary to
effect indemnification as provided in this Section 11.

11.5 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION

The Corporation may, by action of the Board, grant rights to
indemnification and advancement of expenses to employees or agents or groups of
employees or agents of the Corporation with the same scope and effect as the
provisions of this Section 11 with respect to the indemnification and
advancement of expenses of Directors and officers of the Corporation; provided,
however, that an undertaking shall be made by an employee or agent only if
required by the Board.

11.6 PERSONS SERVING OTHER ENTITIES

Any Person who is or was a Director, an officer or employee of the
Corporation who is or was serving (a) as a director or an officer of another
corporation of which a majority of the shares entitled to vote in the election
of its directors is held by the Corporation or (b) in an executive or management
capacity in a partnership, joint venture, trust or other enterprise of which the
Corporation or a wholly owned Subsidiary of the Corporation is a general partner
or has a majority Ownership shall be deemed to be so serving at the

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request of an executive officer of the Corporation and entitled to
indemnification and advancement of expenses under Section 11.1 hereof.

11.7 PROCEDURES FOR THE SUBMISSION OF CLAIMS

The Board may establish reasonable procedures for the submission of claims
for indemnification pursuant to this Section 11, determination of the
entitlement of any Person thereto and review of any such determination. Such
procedures shall be set forth in an appendix to these By-Laws and shall be
deemed for all purposes to be a part hereof.

SECTION 12. INVESTMENT POLICY AND RESTRICTIONS

12.1 GENERAL STATEMENT OF POLICY

12.1.1 TYPES OF INVESTMENTS

The Corporation intends to invest, directly or indirectly, in: (a) self-
service storage facilities; (b) office and business parks; (c) such other
commercial real estate investments as may be approved by the Board from time to
time; and (d) Mortgage Loans secured by real estate of a type in which the
Corporation is authorized to invest. Subject to the restrictions of this
Section 12, the Corporation's investments may be acquired in such manner,
through such means and upon such terms and conditions as may be determined by
the Board, and such investments may include, but are not limited to, direct
acquisitions by the Corporation of real estate interests as well as investments
in corporations, business trusts, general partnerships, limited partnerships,
joint ventures or other legal entities that acquire real estate investments.
All investments made by the Corporation, except those pursuant to Section 12.3
hereof, must be approved by a majority of the Directors or made in accordance
with guidelines approved by the Board and in effect at the time the investments
are made by the Corporation's management.

12.1.2 TAX TREATMENT AS A REIT

As soon the Corporation commences doing business, the Corporation shall use
its best efforts to be eligible for tax treatment as a REIT under the Code,
shall make such elections and filings, and take such other actions as may be
necessary, to be treated as a REIT under the Code and shall thereafter conduct
its business to continue to qualify as a REIT under the REIT Provisions of the
Code.

12.1.3 LIABILITY PROTECTION

Although the general purpose of the Corporation is to qualify as a REIT
under the REIT Provisions of the Code, no Director, officer, employee, agent or
independent contractor of the Corporation shall be liable for any act or
omission resulting in the loss of tax benefits under the Code.

12.1.4 REVIEW OF INVESTMENT POLICIES

The Independent Directors shall review the investment policies of the
Corporation at least annually to determine that the policies being followed by
the Corporation are in the best interests of its Stockholders. Each such
determination and the basis therefore shall be set forth in the minutes of the
Directors.

12.2 APPRAISAL REQUIREMENT

The consideration paid for real property acquired by the Corporation shall
ordinarily be based on the fair market value of the property as determined by a
majority of the Directors. In determining the fair market value of property
acquired by the Corporation, the Directors shall be entitled to rely upon
appraisals prepared

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by qualified independent real estate appraisers selected by the Corporation or
such other market data and information available to the Directors which, in
their judgment, afford a reasonable basis for making an informed determination
as to the fair market value of the property being acquired.

12.3 SPECIFIC INVESTMENTS

Pending investment or reinvestment of the Corporation's assets in the type
of investments described in Section 12.1 hereof, the Corporation may invest its
assets in investments such as: (a) U. S. government securities, (b) bankers'
acceptances, (c) certificates of deposit, (d) bank repurchase agreements
covering securities of the U. S. government or governmental agencies,
(e) commercial paper rated A-1 or better by Moody's Investors Service, Inc. or
any other nationally recognized rating agency, (f) interest-bearing time
deposits in banks and thrift institutions, (g) money market funds, (h) mortgage-
backed securities issued or guaranteed by the U. S. government or its agencies,
(i) debt securities or equity securities collateralized by debt securities rated
A-1 or better by Moody's Investors Service, Inc., or any other nationally
recognized rating agency, (j) other short- or medium-term liquid investments or
hybrid debt/equity securities approved by the Board, and (k) any combination of
the foregoing investments.

12.4 RESERVES

The Corporation may retain, as a permanent reserve, such funds as the Board
deems reasonable, in cash and in the types of investments described in
Section 12.3 hereof.

12.5 INVESTMENT RESTRICTIONS

The Corporation shall not:

(a) invest more than ten percent (10%) of its Total Assets in Unimproved
Real Property or Mortgage Loans on Unimproved Real Property;

(b) invest in foreign currency, bullion, commodities or commodity future
contracts;

(i) in determining the fair market value of the underlying
property securing the Mortgage Loan, the Directors shall be entitled to
rely upon appraisals prepared by qualified independent real estate
appraisers selected by the Corporation or such other market data and
information available to the Directors which, in their judgment, afford a
reasonable basis for making an informed determination as to the fair market
value of such underlying property.;

(ii) the Corporation has obtained a mortgagee's or owner's title
insurance policy or other commitment as to the priority of the mortgage or
the condition of the title of the underlying property;

(iii) the Mortgage Loan is secured by real estate of a type in
which the Corporation is authorized to invest;

(iv) the aggregate amount of the Mortgage Loan and all senior
indebtedness as secured by the underlying property does not exceed ninety
percent (90%) of the appraised value of the property as determined by an
independent appraiser or as determined by the Board pursuant to this
Section 12.5(c), unless the Board determines that an increased amount is
justified by additional credit or collateral, such as personal guarantees
or the pledge of additional assets, and the aggregate value of Mortgage
Loans junior to other secured indebtedness does not exceed ten percent
(10%) of the Corporation's Total Assets;

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(v) the Mortgage Loan is not subordinate to any mortgage or
equity interest of a Director or any Affiliates thereof or any other
Affiliate of the Corporation; and

(vi) the investment in the Mortgage Loan would not cause the
Corporation to have invested, immediately after the making of such
investment, more than twenty-five percent (25%) of its Total Assets in
Mortgage Loans;

(d) invest in contracts for the sale of real estate;

(e) engage in underwriting or the agency distribution of securities issued
by others;

(f) issue "redeemable securities" (as defined in Section 2(a)(32) of the
Investment Company Act of 1940, as amended), "face amount certificates of the
installment type" (as defined in Section 2(a)(15) thereof) or "periodic payment
plan certificates" (as defined in Section 2(a)(27) thereof);

(g) invest in the equity securities of any nongovernmental issuer for a
period in excess of eighteen (18) months, except for investments in the Other
Shurgard Programs, equity investments in any Person organized for the primary
purpose of investing in self-service storage facilities and office parks or for
rendering Ancillary Services with respect to the ownership, operation and
holding of such real estate assets made pursuant to Section 12.6(f) or 12.8
hereof, equity interests in any general partnership, joint venture, association,
trust, limited partnership or other legal entity permitted under Section 12.9
hereof, equity interests in entities that would be considered qualified REIT
subsidiaries of the Corporation under Section 856(i) of the Code and investments
in REITs the portfolios of which consist of assets the Board of Directors
considers appropriate for the Corporation, were it to hold such assets directly;

(h) issue debt securities of the Corporation unless the issuance of such
debt is not restricted by Section 12.6 hereof and the historical debt service
coverage (in the most recently completed fiscal year), as adjusted for known
changes, would, in the opinion of the Board, be sufficient to service the
principal and interest payments from the higher level of corporate debt;

(i) issue options, warrants or similar evidences of a right to purchase
the Corporation's Securities unless (i) issued to all its Stockholders ratably,
(ii) as a part of a financing arrangement, or (iii) as a part of a stock option
or similar plan to compensate the Corporation's Directors, officers, employees,
consultants, advisors and/or other similar persons that has been approved by the
Board; provided, however, that the number of Shares of Common Stock subject to
outstanding options under such plan shall not exceed ten percent (10%) of the
then outstanding Shares of Common Stock;

(j) engage in short sales, or borrow, on an unsecured basis, if such
borrowing will result in an Asset Coverage of less than three hundred percent
(300%);

(k) engage in trading activities in Securities, as compared with
investment activities;

(l) invest in any commercial real estate other than self-service storage
facilities or office and business parks, unless the Board makes each of the
following determinations as to the proposed investment:

(i) the acquisition and holding of the investment would not
jeopardize or in the future be likely to jeopardize the qualification of
the Corporation as a REIT under the Code;

(ii) the Corporation's management has the experience and
expertise necessary for effective management of the investment or has
contracted or will contract, on behalf of the Corporation, with a third
party manager having such experience and expertise; and

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(iii) the investment constitutes a prudent and reasonable
investment by the Corporation and is being made for the purpose of (A)
maximizing the value of property acquired by the Corporation, a portion of
which is being used as or was acquired for the purpose of a self-service
storage facility or an office and business park, or (B) diversifying the
Corporation's portfolio to protect the value of its assets and to hedge
against the risk of having the Corporation's assets concentrated in self-
service storage facilities and office and business parks; and

(m) acquire securities in any company holding investments or engaging in
activities prohibited by paragraphs (a) through (e), (i) and (k) of this
Section 12.5.

12.6 RESTRICTIONS UPON DEALINGS BETWEEN THE CORPORATION AND INTERESTED
PARTIES

(a) GENERAL RESTRICTION. Except as provided in this Section 12.6, the
Corporation shall not engage in a transaction with any Interested Party. Any
transaction between the Corporation and any Interested Party made in compliance
with the requirements of this Section 12.6 shall be valid notwithstanding such
relationship and such Interested Party shall not be under any disability from or
have any liability as a result of entering into any such transaction with the
Corporation.

(b) SALES TO THE CORPORATION. The Corporation shall not purchase property
from any Interested Party, unless

, after disclosure to the Board of the interest of the Interested Party in
the proposed transaction, a majority of Directors not otherwise interested
in such transaction (including a majority of the Independent Directors) has
determined that the property is being offered to the Corporation upon terms
fair and reasonable to the Corporation.

(d) LOANS TO OR FROM THE CORPORATION. The Corporation shall not make
loans to, or borrow funds from, any Interested Party unless, after disclosure to
the Board of the interest of the Interested Party in the proposed transaction, a
majority of Directors not otherwise interested in such transaction (including a
majority of the Independent Directors) approves the transaction as being fair,
competitive and commercially reasonable and no less favorable to the Corporation
than loans between unaffiliated lenders and borrowers under the same
circumstances.

(e) OTHER SERVICES AND TRANSACTIONS. Except to the extent otherwise
expressly authorized by the terms of Section 12.6 or this Section 12.6(e), the
Corporation shall not enter into any transaction with any Interested Party,
unless the terms and conditions of such transaction have been disclosed to the
Board and approved by a majority of the Directors not otherwise interested in
the matter (including a majority of Independent Directors). The disclosure
required by this Section 12.6(e) shall be in writing and shall fully describe
all the material terms and conditions of the proposed transaction, and such
Directors in approving the transaction have determined the transaction to be
fair, competitive and commercially reasonable and on terms and conditions not
less favorable to the Corporation than those available from unaffiliated third
parties. The determinations required by this Section 12.6(e) shall be set forth
in writing, together with such explanation as the Directors deem necessary or
advisable, and shall be filed with the Corporation's books and records. In
construing this Section 12.6(e), the term "transaction" shall be understood to
refer to any dealings between the Corporation and an Interested Party, wherein
the Corporation transfers, or is obligated to transfer, to the Interested Party
valuable consideration, whether in the form of cash, securities, tangible
assets, intangible assets or otherwise, in exchange for property, services,
waiver of claims or other valuable consideration, however designated.

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(f) ANCILLARY SERVICES. The Corporation may permit one or more third
parties, including a property manager, a Director and/or an Affiliate thereof,
to offer Ancillary Services to its customers or others or use the Corporation's
properties as a site for offering such Ancillary Services, provided that the
conditions in Section 12.8 hereof are satisfied.

12.7 CORPORATION'S RIGHT TO BORROW FUNDS

Subject to the restrictions contained in this Section 12.7, the Corporation
may, at any time, at the discretion of the Board, borrow funds, on a secured or
unsecured basis, from institutional lenders, banks and other lenders selected by
the Board and, in connection therewith, execute, issue and deliver promissory
notes, commercial paper, notes, debentures, bonds and other debt obligations
(which may be convertible into Shares or other equity interests or be issued
together with warrants to acquire Shares or other equity interests).
Notwithstanding the foregoing, except as otherwise provided in the following
sentence, the Corporation shall not borrow any funds if, after giving effect to
such borrowing, the Corporation's Indebtedness would exceed fifty percent (50%)
of its Total Assets. The ceiling upon the Corporation's Indebtedness imposed by
the preceding sentence shall not prohibit the Corporation from incurring
Indebtedness as necessary to refinance Indebtedness previously obtained by the
Corporation, which was permissible at the time such Indebtedness was obtained,
and to make distributions to Stockholders in order to preserve the eligibility
of the Corporation as a REIT under the provisions of the Code. The restriction
upon the Corporation's ability to borrow funds is to be applied at the time the
borrowing is obtained by the Corporation. Any borrowing by the Corporation
permitted at the time such borrowing is made does not become unauthorized, or
constitute a violation of these By-Laws, even if, after the borrowing is in
place, the Corporation's Indebtedness exceeds the ceiling upon Indebtedness
referenced above (namely, the fifty percent (50%) ceiling), whether or not such
excess is due, in part, to any accrued but unpaid interest, late fees or
penalties, finance charges or other amounts due with respect to the
Corporation's new borrowing or previous borrowings. In addition, the
Corporation shall not borrow any funds if, after giving effect to such
borrowing, the Corporation's Indebtedness would exceed three hundred percent
(300%) of its Adjusted Net Worth. The Board shall review the status of the
Corporation's Indebtedness at least quarterly.

12.8 PURSUIT OF ANCILLARY SERVICES

(a) The Corporation may provide any Ancillary Services to its tenants or
others as long as the Board believes in good faith that the Corporation's
pursuit of such Ancillary Services would not jeopardize the Corporation's
qualification as a REIT under the Code.

(b) In the event that the Corporation's pursuit of one or more of the
Ancillary Services might jeopardize the qualification of the Corporation as a
REIT under the Code, the Corporation may, in lieu of offering such Ancillary
Services directly:

(i) restructure the manner in which such Ancillary Services are
offered to the Corporation's tenants or others, alter the pricing of the
Ancillary Services or take such other action as the Corporation deems
necessary;

(ii) invest in one or more other entities which directly provide
the Ancillary Services to the Corporation's tenants or others; or

(iii) permit others, including Interested Parties, to offer the
Ancillary Services to the Corporation's tenants or others in compliance
with the terms of Section 12.8(c) hereof;

provided, however, that, in each such instance, the Board has received an
opinion from tax counsel or a ruling from the IRS that such action, subject to
the qualifications and restrictions imposed by the Board, and such

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other assumptions as the Board may reasonably establish, would not disqualify
the Corporation from taxation as a REIT under the Code.

(c) The Corporation may permit one or more third parties to offer
Ancillary Services to its customers or others, or to use the Corporation's
properties as a site for offering such Ancillary Services, if the Board has, in
good faith, made the following determinations:

(i) the Corporation does not wish, or consider it advisable, to
offer the Ancillary Services directly to its tenants and others or has
determined that rendering such Ancillary Services would jeopardize the
qualification of the Corporation as a REIT under the Code;

(ii) permitting others to render such Ancillary Services would
likely increase the rental revenues or other income derived from the
ownership of the Corporation's properties, enhance the competitiveness of
the Corporation or otherwise provide economic benefits, directly or
indirectly, to the Corporation;

(iii) the party or parties rendering the Ancillary Services are
competent to do so, have experience in rendering such Ancillary Services
and have entered into a written contract with the Corporation with respect
to the provision of the Ancillary Services, having terms and conditions
deemed fair and equitable to the Board; and

(iv) if the Person to render the Ancillary Services is an
Interested Party, the transaction has been disclosed to and approved by the
Directors as provided in Section 12.6(e) hereof.

12.9 CORPORATION'S RIGHT TO PARTICIPATE IN JOINT INVESTMENTS

The Corporation may participate in, and contribute funds to or invest in,
any general partnership, joint venture, association, trust, limited partnership
or other legal entity (a "Joint Enterprise") as long as:

(a) such investment in the Joint Enterprise would not (i) jeopardize the
qualification of the Corporation as a REIT under the Code or (ii) result in the
Corporation's becoming an investment company within the meaning of the
Investment Company Act of 1940, as amended (unless the Corporation is exempt
from all the provisions of such Act);

(b) the principal purpose of the Joint Enterprise is either to own,
manage, hold, occupy or otherwise deal with self-service storage facilities
and/or office and business parks, and/or with Mortgage Loans collateralized by
such assets, or to render Ancillary Services to Persons who own, manage or hold
self-service storage facilities, office and business parks and/or Mortgage Loans
collateralized by such assets; and

(c) if one or more of the other parties to the Joint Enterprise are
Interested Parties, such transaction has been disclosed to and approved by the
Directors (including a majority of the Independent Directors) as provided in
Section 12.6(e) hereof.

12.10 INVESTMENT IN CORPORATION'S SHARES

The Corporation may, at any time, at the discretion of the Board, invest in
any class or series of the Common Stock or Preferred Stock, or in any promissory
notes, commercial paper, notes, debentures, bonds or other debt obligations, for
the purpose of supporting the value of any such securities and for any other
valid corporate purposes; provided, however, that until March 1, 1997, any
action to support the value of the Common Stock must be approved by a majority
vote of the Independent Directors.

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SECTION 13. INDEPENDENT ACTIVITIES

13.1 SHARES HELD BY DIRECTORS AND OFFICERS

Any Director or officer may acquire, own, hold and dispose of Shares, for
his or her individual account, and may exercise all rights of a Stockholder to
the same extent and in the same manner as if he or she were not a Director or an
officer.

13.2 BUSINESS INTERESTS AND INVESTMENTS OF DIRECTORS

Subject to the limitations contained in this Section 13.2, any Director who
is not an officer may have personal business interests and may engage in
personal business activities, which interests and activities may include the
acquisition, syndication, holding, management, operation or disposition, for his
or her own account or for the account of others, of interests in real property
or Persons engaged in the real estate business, even if those interests and
activities directly compete with the actual business being conducted by the
Corporation, and is not required to present to the Corporation any business
opportunity which comes to him or her even though such opportunity is within the
Corporation's investment policies.

13.3 OTHER BUSINESS RELATIONSHIPS OF DIRECTORS

Subject to the provisions of Section 12 hereof, any Director or officer may
be interested as trustee, officer, director, stockholder, partner, member,
advisor or employee, or otherwise have a direct or indirect interest in any
Person who may be engaged to render advice or services to the Corporation, and
may receive compensation from such Person as well as compensation as Director,
officer or otherwise hereunder, and no such activity shall be deemed to conflict
with his or her duties and powers as Director or officer.

SECTION 14. AMENDMENTS

These By-Laws may be amended or repealed and new By-Laws may be adopted by
the Board; provided, however, that all By-Laws made by the Board may be amended
or repealed by the Stockholders.

SECTION 15. MISCELLANEOUS

15.1 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS

The provisions of these By-Laws are separable, and if the Board shall
determine, with the advice of counsel, that any one or more of such provisions
(the "Conflicting Provisions") are in conflict with the REIT Provisions of the
Code, the Delaware General Corporation Law or other applicable federal or
Delaware laws and regulations, the Conflicting Provisions shall be deemed never
to have constituted a part of these By-Laws; provided, however, that such
determination of the Directors shall not affect or impair any of the remaining
provisions of these By-Laws or render invalid or improper any action taken or
omitted (including, but not limited to, the election of Directors) prior to such
determination. Such determination shall become effective when a certificate,
signed by a majority of the Directors setting forth any such determination and
reciting that it was duly adopted by the Directors, shall be filed with the
books and records of the Corporation. The Directors shall not be liable for
failure to make any determination under this Section 17. Nothing in this
Section 17 shall in any way limit or affect the rights of the Directors or the
Stockholders to amend these By-Laws.

15.2 RELIANCE UPON LEGAL ADVICE

The Directors, including the Independent Directors, may retain one or more
legal counsel to assist them in making any determinations required by them, or
which they are permitted to make, pursuant to the

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terms of these By-Laws. Such Directors shall not be liable for any loss caused
by or resulting from any action taken or omitted in reliance upon any legal
opinion rendered by such counsel, so long as the selection of the legal counsel
and reliance on the advice was in good faith.
In making any such determinations, the Directors shall, however, not be
obligated to follow the advice of any legal counsel engaged to advise them.

15.3 CONSTRUCTION

Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the Delaware General Corporation Law shall
govern the construction of these By-Laws.

The foregoing By-Laws were adopted by the Board on May 9, 1995 and by the
Stockholders on July 26, 1995.

/s/ Kristin Stred
--------------------------
Secretary

-29-

<PAGE>

SHURGARD STORAGE CENTERS, INC.

Exhibit (10.7) AMENDED AND RESTATED STOCK INCENTIVE PLAN FOR
NONEMPLOYEE DIRECTORS

SECTION 1. PURPOSES

The purposes of the Shurgard Storage Centers, Inc. Stock Incentive Plan for
Nonemployee Directors (the "Plan") are to attract and retain the services of
experienced and knowledgeable nonemployee directors of Shurgard Storage Centers,
Inc. (the "Corporation") and to provide an incentive for such directors to
increase their proprietary interests in the Corporation's long-term success and
progress.

SECTION 2. SHARES SUBJECT TO THE PLAN

Subject to adjustment in accordance with Section 6 hereof, the total number
of shares of the Corporation's Class A Common Stock, $0.001 par value per share
(the "Common Stock"), which may be issued under the Plan is 200,000 (the
"Shares"). The Shares shall be shares presently authorized but unissued or
subsequently acquired by the Corporation and shall include shares representing
the unexercised portion of any option granted under the Plan that expires or
terminates without being exercised in full.

SECTION 3. ADMINISTRATION OF THE PLAN

The administrator of the Plan (the "Plan Administrator") shall be the Board
of Directors of the Corporation (the "Board"). Subject to the terms of the
Plan, the Plan Administrator shall have the power to construe the provisions of
the Plan, to determine all questions arising thereunder and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable. No member of the Plan Administrator shall participate in any vote by
the Plan Administrator on any matter materially affecting the rights of any such
member under the Plan.

SECTION 4. ELIGIBILITY TO PARTICIPATE IN THE PLAN

Each member of the Board elected or appointed who is not otherwise an
employee of the Corporation or any parent or subsidiary corporation (an
"Eligible Director") shall be eligible to participate in the Plan.

<PAGE>

SECTION 5. STOCK OPTION GRANTS

5.1 ORIGINAL GRANTS

Each person who becomes an Eligible Director prior to the first Annual
Meeting of Stockholders held after the consolidating transaction among up to 17
limited partnerships sponsored by Shurgard Incorporated as described in the
Registration Statement on Form S-4 (No. 33-57794) filed with the Securities
Exchange Commission on February 2, 1993, as amended (the "Consolidation"), shall
automatically receive the grant of an option (an "Original Grant") to purchase
400 Shares upon their election or appointment to the Board, such option to vest
and become exercisable upon the optionee's continued service as a director until
the first anniversary of the date of grant.

Each person who is an Eligible Director on May 9, 1995 shall automatically
receive a grant of an option to purchase 3,000 Shares, such option to vest and
become exercisable upon the optionee's continued service until the 1995 Annual
Meeting (as hereinafter defined).

5.2 ANNUAL GRANTS

In addition, each Eligible Director shall automatically receive the grant
of an option (an "Annual Grant") to purchase 3,000 Shares immediately following
each Annual Meeting of Stockholders commencing with the first Annual Meeting of
Stockholders held after the Consolidation and ending with the 1995 Annual
Meeting of Stockholders, such option to vest and become exercisable upon the
optionee's continued service as a director until the next Annual Meeting of
Stockholders after the date of grant.

5.3 PERIODIC GRANTS

Each Eligible Director in office immediately following the 1996 Annual
Meeting of Stockholders shall automatically receive the grant of an option
(a "Periodic Grant") to purchase 9,000 Shares immediately following the 1996
Annual Meeting of Stockholders and each Eligible Director elected for the first
time after the 1996 Annual Meeting of Stockholders shall automatically receive a
Periodic Grant immediately following his or her election by the stockholders
at an Annual Meeting of Stockholders, such option to vest and become
exercisable in three equal annual installments upon the optionee's continued
service as a director until each of the following three Annual Meetings of
Stockholders after the date of grant.

-2-
<PAGE>

Once an Eligible Director's Periodic Grant becomes fully vested, such
Director shall automatically receive another Periodic Grant to purchase 9,000
Shares immediately following the Annual Meeting of Stockholders at which a
Periodic Grant previously granted becomes fully vested, such Periodic Grant to
vest and become exercisable in three equal installments immediately following
each of the three subsequent Annual Meetings of Stockholders.

5.4 OPTION TERMS

Each option granted to an Eligible Director under the Plan and the issuance
of Shares thereunder shall be subject to the following terms:

5.4.1 OPTION AGREEMENT

Each option granted under the Plan shall be evidenced by an option
agreement (an "Agreement") duly executed on behalf of the Corporation. Each
Agreement shall comply with and be subject to the terms and conditions of the
Plan. Any Agreement may contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Plan Administrator.

5.4.2 OPTION EXERCISE PRICE

The option exercise price for each Annual Grant and Periodic Grant granted
under the Plan shall be the fair market value of the Shares covered by the
option at the time the option is granted. For purposes of the Plan, "fair
market value" as of a given date shall be: (i) the closing price of a share of
the Common Stock on the principal exchange on which the Common Stock is then
trading, if any, on the day previous to such date or, if no Common Stock was
traded on such date, on the next preceding date on which Common Stock was so
traded; or (ii) if the Common Stock is not traded on an exchange, the average of
the high and low sales prices at which the Common Stock was sold on the day
previous to such date as reported in the Wall Street Journal for the New York
Stock Exchange--Composite Transactions (or similar successor consolidated
transactions report) on such date or, if no Common Stock was traded on such
date, on the next preceding date on which Common Stock was so traded. The

-3-
<PAGE>

option exercise price for each Original Grant granted under the Plan prior to
May 9, 1995 shall be the average fair market value of the Shares covered by the
option during the 30 business days immediately after the date the Common Stock
is first publicly traded.

5.4.3 HOLDING PERIOD.

If a person subject to Section 16 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), sells shares of Common Stock obtained upon the
exercise of any option granted under the Plan within six months after the date
the option was granted, the option grant will no longer be deemed a nonexempt,
matchable purchase under Section 16 as of the date of the option grant.

5.4.4 TIME AND MANNER OF EXERCISE OF OPTION

Each option may be exercised in whole or in part at any time and from time
to time; provided, however, that no fewer than 50 Shares (or the remaining
Shares then purchasable under the option, if less than 50 Shares) may be
purchased upon any exercise of option rights hereunder and that only whole
Shares will be issued pursuant to the exercise of any option.

Any option may be exercised by giving written notice, signed by the person
exercising the option, to the Corporation stating the number of Shares with
respect to which the option is being exercised, accompanied by payment in full
for such Shares, which payment may be in whole or in part (i) in cash or by
check, (ii) in shares of Common Stock already owned for at least six months by
the person exercising the option, valued at fair market value at the time of
such exercise, or (iii) by delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker, to properly deliver to the
Corporation the amount of sale or loan proceeds to pay the exercise price, all
in accordance with the regulations of the Federal Reserve Board.

5.4.5 TERM OF OPTIONS

Each option shall expire ten years from the date of the granting thereof,
but shall be subject to earlier termination as follows:

(a) In the event that an optionee ceases to be a director of the
Corporation for any reason other than the death of the optionee, the vested
portion of the options granted to such optionee may be exercised by him or her
only within one year after the date such optionee ceases to be a director of the
Corporation.

(b) In the event of the death of an optionee, whether during the
optionee's service as a director or during the one-year period referred to in
Section 5.4.5(a), the

-4-
<PAGE>

vested portion of the options granted to such optionee shall be exercisable, and
such options shall expire unless exercised within one year after the date of the
optionee's death, by the legal representatives or the estate of such optionee,
by any person or persons whom the optionee shall have designated in writing on
forms prescribed by and filed with the Corporation or, if no such designation
has been made, by the person or persons to whom the optionee's rights have
passed by will or the laws of descent and distribution.

5.4.6 TRANSFERABILITY

During an optionee's lifetime, an option may be exercised only by the
optionee. Options granted under the Plan and the rights and privileges
conferred thereby shall not be subject to execution, attachment or similar
process and may not be transferred, assigned, pledged or hypothecated in any
manner (whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution except that, to the extent permitted
by applicable law and Rule 16b-3 promulgated under Section 16(b) of the Exchange
Act, the Plan Administrator may permit a recipient of an option to designate in
writing during the optionee's lifetime a beneficiary to receive and exercise
options in the event of the optionee's death (as provided in Section 5.4.5(b)).
Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any
option under the Plan or of any right or privilege conferred thereby, contrary
to the provisions of the Plan, or the sale or levy or any attachment or similar
process upon the rights and privileges conferred hereby, shall be null and void.

SECTION 6. ELECTION TO RECEIVE STOCK IN LIEU OF CASH
COMPENSATION

Commencing on May 14, 1996, each Eligible Director may elect to reduce all
or a portion of the cash compensation otherwise payable for services to be
rendered by him or her as a director (including the annual retainer and any fees
payable for serving on the Board or a Committee of the Board, but excluding any
expense reimbursement) by a specified dollar amount or percentage and to receive
in lieu thereof a whole number of Shares equal in value to the amount of the
reduction divided by the fair market value of the Common Stock on the date the
cash compensation would have been paid. Such Shares shall be delivered to each
such Eligible Director as soon as practicable after the date the cash
compensation would have been paid. The value of any fractional Shares shall be
paid to the Eligible Director in cash on the date the Shares are delivered.

Any such election shall be made in writing on a form provided by the
Company and shall state the dollar amount or percentage by which the Eligible
Director desires to reduce the cash compensation. To the extent necessary to
qualify

-5-
<PAGE>

the Plan under Rule 16b-3 under the Exchange Act, any such election must be made
at least six months before the services are rendered giving rise to such cash
compensation, and may not be revoked or changed thereafter except as to cash
compensation for services rendered at least six months after any such election
to revoke or change is made in writing.

SECTION 7. CAPITAL ADJUSTMENTS

The aggregate number and class of Shares which may be issued under the
Plan, as provided in Section 2, the number and class of Shares covered by each
automatic option grant and each outstanding option and the exercise price per
share thereof (but not the total price), shall all be proportionately adjusted
for any stock dividends, stock splits, recapitalizations, combinations or
exchanges of shares, split-ups, spin-offs or other similar changes in
capitalization. Upon the effective date of a dissolution or liquidation of the
Corporation, or of a reorganization, merger or consolidation of the Corporation
with one or more corporations that results in more than 80% of the outstanding
voting shares of the Corporation being owned by one or more affiliated
corporations or other affiliated entities, or of a transfer of all or
substantially all of the assets or more than 80% of the then outstanding shares
of the Corporation to another corporation or other entity, this Plan and all
options granted hereunder shall terminate. In the event of such dissolution,
liquidation, reorganization, merger, consolidation, transfer of assets or
transfer of stock, (i) each optionee shall be entitled, for a period of 20 days
prior to the effective date of such transaction, to purchase the full number of
Shares under his or her option that he or she otherwise would have been entitled
to purchase during the remaining term of such option, and (ii) all cash
compensation which has been earned by an Eligible Director who has elected to
receive Shares in lieu of cash compensation but which has not yet been converted
into Shares, shall be paid immediately in cash.

Adjustment under this Section 7 shall be made by the Plan Administrator,
whose determination shall be final. In the event of any adjustment in the
number of Shares covered by any option, any fractional Shares resulting from
such adjustment shall be disregarded and each such option shall cover only the
number of full Shares resulting from such option.

SECTION 8. PARTICIPANT'S OR SUCCESSOR'S RIGHTS AS STOCKHOLDER

Neither the recipient of an option under the Plan nor the optionee's
successor(s) in interest shall have any rights as a stockholder of the
Corporation with respect to any Shares subject to an option granted to such
person until such person becomes a holder of record of such Shares. An Eligible
Director who has made an election to receive Shares in lieu of cash compensation
shall not have any rights as a stockholder of the

-6-
<PAGE>

Corporation until such cash compensation is converted into Shares and such
person becomes a holder of record of such Shares.

SECTION 9. LIMITATION AS TO DIRECTORSHIP

Neither the Plan, nor the granting of an option, nor the making of an
election to receive Shares in lieu of cash compensation, nor any other action
taken pursuant to the Plan shall constitute or be evidence of any agreement or
understanding, express or implied, that an Eligible Director has a right to
continue as a director for any period of time or at any particular rate of
compensation.

SECTION 10. REGULATORY APPROVAL AND COMPLIANCE

The Corporation shall not be required to issue any certificate or
certificates for Shares upon the exercise of an option granted under the Plan,
or pursuant to an Eligible Director's election to receive Shares in lieu of cash
compensation, or to record as a holder of record of Shares the name of the
individual exercising an option under the Plan, or who has made an election to
receive stock in lieu of cash compensation, without obtaining to the complete
satisfaction of the Plan Administrator the approval of all regulatory bodies
deemed necessary by the Plan Administrator, and without complying, to the Plan
Administrator's complete satisfaction, with all rules and regulations under
federal, state or local law deemed applicable by the Plan Administrator.

SECTION 11. EXPENSES OF THE PLAN

All costs and expenses of the adoption and administration of the Plan shall
be borne by the Corporation; none of such expenses shall be charged to any
optionee.

SECTION 12. EFFECTIVE DATE AND DURATION OF THE PLAN

The Plan shall be effective upon approval of the Corporation's
shareholders. The Plan shall continue in effect until it is terminated by
action of the Board or the Corporation's shareholders, but such termination
shall not affect the then-outstanding terms of any options.

SECTION 13. TERMINATION AND AMENDMENT OF THE PLAN

The Board may amend, terminate or suspend the Plan at any time, in its sole
and absolute discretion; provided, however, that if required to qualify the Plan
under Rule 16b-3 promulgated under Section 16(b) of the Exchange Act, no
amendment may be made more than once every six months that would change the
amount, price, timing or vesting of the options, other than to comport with
changes in the Internal

-7-
<PAGE>

Revenue Code of 1986, as amended, or the rules and regulations promulgated
thereunder; and provided, further, that to the extent required for compliance
with applicable law or regulation, the Board may not amend the Plan without the
approval of the Corporation's stockholders, including any amendment that would:
(a) materially increase the number of shares that may be issued under the Plan;
(b) materially modify the requirements as to eligibility for participation in
the Plan to add a class of participants who are subject to Section 16 of the
Exchange Act; or (c) otherwise materially increase the benefits accruing under
the Plan to participants who are subject to Section 16 of the Exchange Act. Any
amendment of the Plan requiring approval by the Corporation's stockholders
pursuant to this Section 13 shall be effective upon adoption by the Board, so
long as it is approved by the stockholders at any time within 12 months of such
adoption or, if earlier, and to the extent required for compliance with
Rule 16b-3 under the Exchange Act, at or prior to the next annual meeting of the
Corporation's stockholders after adoption of the amendment by the Board.

SECTION 14. COMPLIANCE WITH RULE 16B-3

It is the intention of the Corporation that the Plan comply in all respects
with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act and that
Plan participants remain disinterested persons ("disinterested persons") for
purposes of administering other employee benefit plans of the Corporation and
having such other plans be exempt from Section 16(b) of the Exchange Act.
Therefore, if any Plan provision is later found not to be in compliance with
Rule 16b-3 or if any Plan provision would disqualify Plan participants from
remaining disinterested persons, that provision shall be deemed null and void,
and in all events the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3.

-8-

<PAGE>

SHURGARD STORAGE CENTERS, INC.
EXHIBIT (11.1) - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE

Primary Net Income Per Common Year Ended Year Ended
- -----------------------------
and Common Equivalent Share Dec. 31, 1994 Dec. 31, 1995
- ----------------------------- ------------- -------------
<S> <C> <C>
Net income $ 17,821,000 $ 29,572,000
------------- -------------
Weighted average common and common
equivalent shares outstanding:

Weighted average common
shares outstanding 16,983,887 20,661,218

Net effect of dilutive stock options -
based on treasury stock method
using average market price (1) 14,138
------------- --------------

Total $16,983,887 $20,675,356
------------- --------------
------------- --------------

Primary earnings per common and common
equivalent share $1.05 $1.43
------------- --------------
------------- --------------
</TABLE>

(1) No adjustment has been made in 1994 as the option price exceeded the
market price of the Company's stock for substantially all of the
fourth quarter of 1994.

Fully-diluted Net Income Per Common Year Ended Year Ended
- -----------------------------------
and Common Equivalent Share Dec. 31, 1994 Dec. 31, 1995
- ----------------------------------- ------------- -------------
<S> <C> <C>
Net income $ 17,821,000 $ 29,572,000
------------- -------------
Weighted average common and common
equivalent shares outstanding:

Weighted average common
shares outstanding 16,983,887 20,661,218

Net effect of dilutive stock options -
based on treasury stock method
using average market price (1) 34,516
-------------- -------------
Total $ 16,983,887 $ 20,695,734
--------------- --------------
--------------- --------------
Primary earnings per common and common
equivalent share $1.05 $1.43
--------------- --------------
--------------- --------------
</TABLE>

(1) No adjustment has been made in 1994 as the option price exceeded the market
price of the Company's stock for substantially all of the fourth quarter of
1994.

<PAGE>

SHURGARD STORAGE CENTERS, INC.
EXHIBIT (21.1) - SUBSIDIARIES OF THE REGISTRANT

(I) SSC Property Holdings, Inc.;
(ii) SSC Acquisitions, Inc.;
(iii) SSC Benelux, Inc.;
(iv) SSC Evergreen, Inc.; and
(v) SSC North Carolina, Inc.
(vi) Shurgard's Storage To Go, Inc.

<PAGE>

SHURGARD STORAGE CENTERS, INC.
EXHIBIT (23.1) - INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement
No. 33-76248 of Shurgard Storage Centers, Inc. on form S-8 of our report dated
February 2, 1996, appearing in this Annual Report on Form 10-K of Shurgard
Storage Centers, Inc. for the year ended December 31, 1995.

/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Seattle, Washington

March 19, 1996

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,683
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 558,861
<DEPRECIATION> 28,366
<TOTAL-ASSETS> 610,394
<CURRENT-LIABILITIES> 0
<BONDS> 131,935
0
0
<COMMON> 451,766
<OTHER-SE> (17,270)
<TOTAL-LIABILITY-AND-EQUITY> 610,394
<SALES> 0
<TOTAL-REVENUES> 96,771
<CGS> 0
<TOTAL-COSTS> 51,177
<OTHER-EXPENSES> 4,859
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,038
<INCOME-PRETAX> 29,572
<INCOME-TAX> 0
<INCOME-CONTINUING> 29,572
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,572
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43

</TABLE>