SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

For the quarterly period ended June 30, 2009

                                       or

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

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

Commission File Number:  001-33519
                         ---------

                                 PUBLIC STORAGE
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                Maryland                                      95-3551121
-----------------------------------------        -------------------------------
     (State or other jurisdiction of             (I.R.S. Employer Identification
     incorporation or organization)                           Number)

701 Western Avenue, Glendale, California                      91201-2349
-----------------------------------------        -------------------------------
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code:  (818) 244-8080.
                                                     --------------



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

                                 [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter)  during the  preceding 12 months (or for such shorter  period that
the registrant was required to submit and post such files).

                                 [X] Yes [ ] No

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated filer, a non-accelerated  filer or a smaller reporting company.  See
the definitions of "large accelerated  filer",  "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

   Large Accelerated Filer [X] Accelerated Filer [ ] Non-accelerated Filer [ ]
                          Smaller Reporting Company [ ]


Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

                                 [ ] Yes [X] No



Indicate the number of the registrant's  outstanding common shares of beneficial
interest, as of August 5, 2009:

Common  Shares of  beneficial  interest,  $.10 par value per share - 169,513,148
shares








                                 PUBLIC STORAGE
                                 --------------

                                      INDEX


                                                                           Pages
                                                                           -----

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

Item 1.   Financial Statements (Unaudited)

          Condensed Consolidated Balance Sheets at
             June 30, 2009 and December 31, 2008                               1

          Condensed Consolidated Statements of Income for the
             Three and Six Months Ended June 30, 2009 and 2008                 2

          Condensed Consolidated Statement of Equity
             for the Six Months Ended June 30, 2009                            3

          Condensed Consolidated Statements of Cash Flows
             for the Six Months Ended June 30, 2009 and 2008               4 - 5

          Notes to Condensed Consolidated Financial Statements            6 - 36

Item 2.   Management's Discussion and Analysis of
             Financial Condition and Results of Operations               37 - 63

Item 3.   Quantitative and Qualitative Disclosures about Market Risk          64

Item 4.   Controls and Procedures                                             65

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

Item 1.   Legal Proceedings                                                   66

Item 1A.  Risk Factors                                                        66

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds    66 - 67

Item 4.   Submission of Matters to a Vote of Security Holders                 67

Item 6.   Exhibits                                                            67







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




                                                                                June 30,           December 31,
                                                                                   2009                 2008
                                                                            ---------------      ----------------
                                   ASSETS

                                                                                           
  Cash and cash equivalents...............................................  $     584,860        $     680,701
  Real estate facilities, at cost:
     Land.................................................................      2,716,466            2,716,254
     Buildings............................................................      7,534,187            7,490,768
                                                                            ---------------      ----------------
                                                                               10,250,653           10,207,022
     Accumulated depreciation.............................................     (2,568,215)          (2,405,473)
                                                                            ---------------      ----------------
                                                                                7,682,438            7,801,549
     Construction in process..............................................         12,703               20,340
                                                                            ---------------      ----------------
                                                                                7,695,141            7,821,889

  Investment in real estate entities......................................        562,732              544,598
  Goodwill, net...........................................................        174,634              174,634
  Intangible assets, net..................................................         40,511               52,005
  Loan receivable from Shurgard Europe....................................        550,499              552,361
  Other assets............................................................         95,459              109,857
                                                                            ---------------      ----------------
                Total assets..............................................  $   9,703,836        $   9,936,045
                                                                            ===============      ================
                           LIABILITIES AND EQUITY

  Notes payable...........................................................  $     524,440        $     643,811
  Accrued and other liabilities...........................................        219,697              212,353
                                                                            ---------------      ----------------
           Total liabilities..............................................        744,137              856,164

  Redeemable noncontrolling interests in subsidiaries (Note 7)............         12,872               12,777

  Commitments and contingencies (Note 12)
  Equity:
     Public Storage shareholders' equity:
      Cumulative Preferred Shares of beneficial interest, $0.01 par
         value, 100,000,000 shares authorized, 886,140 shares issued
         (in series) and outstanding, (887,122 at December 31, 2008)
         at liquidation preference........................................      3,399,777            3,424,327
      Common Shares of beneficial interest, $0.10 par value, 650,000,000
         shares authorized, 168,355,703 shares issued and outstanding
         (168,279,732 at December 31, 2008)...............................         16,837               16,829
      Equity Shares of beneficial interest, Series A, $0.01 par value,
         100,000,000 shares authorized, 8,377.193 shares issued and
         outstanding......................................................              -                    -
      Paid-in capital.....................................................      5,673,201            5,590,093
      Retained earnings (deficit).........................................       (258,732)            (290,323)
      Accumulated other comprehensive loss................................        (18,090)             (31,931)
                                                                            ---------------      ----------------
            Total Public Storage shareholders' equity.....................      8,812,993            8,708,995
     Equity of permanent noncontrolling interests in subsidiaries
      (Note 7) ...........................................................        133,834              358,109
                                                                            ---------------      ----------------
        Total equity......................................................      8,946,827            9,067,104
                                                                            ---------------      ----------------
                Total liabilities and equity..............................  $   9,703,836        $   9,936,045
                                                                            ===============      ================


                            See accompanying notes.
                                       1


                                 PUBLIC STORAGE
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                (Amounts in thousands, except per share amounts)

                                   (Unaudited)



                                                                       Three Months Ended                 Six Months Ended
                                                                            June 30,                          June 30,
                                                                 -------------------------------    --------------------------------
                                                                     2009             2008              2009             2008
                                                                 ---------------  --------------    ---------------  ---------------

Revenues:
                                                                                                          
   Self-storage facilities...................................     $    371,630     $    380,770      $    742,869     $    805,043
   Ancillary operations......................................           28,106           26,710            53,941           56,747
   Interest and other income.................................            7,516           11,014            15,149           13,858
                                                                 ---------------  --------------    ---------------  ---------------
                                                                       407,252          418,494           811,959          875,648
                                                                 ---------------  --------------    ---------------  ---------------
Expenses:
  Cost of operations:
      Self-storage facilities................................          124,478          128,124           257,952          284,779
      Ancillary operations...................................           10,374           12,064            20,027           23,368
  Depreciation and amortization..............................           83,796           94,829           168,762          217,069
  General and administrative.................................            8,199           33,173            17,878           48,089
  Interest expense...........................................            7,288            9,601            15,416           26,088
                                                                 ---------------  --------------    ---------------  ---------------
                                                                       234,135          277,791           480,035          599,393
                                                                 ---------------  --------------    ---------------  ---------------
Income from continuing operations before equity in earnings
   of real estate entities, gain (loss) on disposition of real
   estate investments, gain on early retirement of debt
   and foreign currency exchange gain (loss).................          173,117          140,703           331,924          276,255
Equity in earnings of real estate entities...................            7,398            4,632            30,209            7,361
Gain (loss) on disposition of real estate investments........                -              (92)            2,722          341,773
Gain on early retirement of debt.............................                -                -             4,114                -
Foreign currency exchange gain (loss)........................           33,205               (2)           (1,528)          40,969
                                                                 ---------------  --------------    ---------------  ---------------
Income from continuing operations............................          213,720          145,241           367,441          666,358
Discontinued operations......................................           (8,333)          (1,286)           (8,625)          (2,462)
                                                                 ---------------  --------------    ---------------  ---------------
Net income...................................................          205,387          143,955           358,816          663,896
Net income allocated (to) from noncontrolling equity
   interests:
   Based upon income of the consolidated entities............           (6,215)         (10,142)          (14,642)         (17,741)
   Based upon redemptions of preferred partnership units.....                -                -            72,000                -
                                                                 ---------------  --------------    ---------------  ---------------
Net income allocable to Public Storage shareholders..........     $    199,172     $    133,813      $    416,174     $    646,155
                                                                 ===============  ==============    ===============  ===============
Allocation of net income to (from) Public Storage
   shareholders:
   Preferred shareholders based on distributions paid........     $     58,108     $     60,333      $    116,216     $    120,666
   Preferred shareholders based on redemptions...............                -                -            (6,218)               -
   Equity Shares, Series A...................................            5,131            5,356            10,262           10,712
   Restricted share units ...................................              446              146               932            1,971
   Common shareholders.......................................          135,487           67,978           294,982          512,806
                                                                 ---------------  --------------    ---------------  ---------------
                                                                  $    199,172     $    133,813      $    416,174     $    646,155
                                                                 ===============  ==============    ===============  ===============
Net income per common share - basic
   Continuing operations.....................................     $      0.85      $      0.41       $      1.80      $      3.06
   Discontinued operations...................................           (0.05)           (0.01)            (0.05)           (0.01)
                                                                 ---------------  --------------    ---------------  ---------------
                                                                  $      0.80      $      0.40       $      1.75      $      3.05
                                                                 ===============  ==============    ===============  ===============
Net income per common share - diluted
   Continuing operations.....................................     $      0.85      $      0.41       $      1.80      $      3.05
   Discontinued operations...................................           (0.05)           (0.01)            (0.05)           (0.01)
                                                                 ---------------  --------------    ---------------  ---------------
                                                                  $      0.80      $      0.40       $      1.75      $      3.04
                                                                 ===============  ==============    ===============  ===============
Net income per depositary share of Equity Shares, Series A
        (basic and diluted) .................................     $      0.61      $      0.61       $      1.23      $      1.23
                                                                 ===============  ==============    ===============  ===============
Basic weighted average common shares outstanding.............         168,348          168,028           168,330          168,307
                                                                 ===============  ==============    ===============  ===============
Diluted weighted average common shares outstanding...........         168,528          168,479           168,501          168,731
                                                                 ===============  ==============    ===============  ===============
Weighted average shares of Equity Shares, Series A (basic
        and diluted).........................................           8,377            8,744             8,377            8,744
                                                                 ===============  ==============    ===============  ===============


                            See accompanying notes.
                                       2


                                 PUBLIC STORAGE
                   CONDENSED CONSOLIDATED STATEMENT OF EQUITY
                    (Amounts in thousands, except share data)
                                   (Unaudited)




                                                                                                                   Accumulated
                                                      Cumulative                                     Retained         Other
                                                      Preferred       Common          Paid-in        Earnings     Comprehensive
                                                        Shares        Shares          Capital        (Deficit)         Loss
                                                     --------------  -----------  -------------  --------------  -------------
                                                                                                  
Balance at December 31, 2008.......................   $  3,424,327   $   16,829   $  5,590,093   $   (290,323)   $   (31,931)
Repurchase of cumulative preferred shares (982,000
  shares) (Note 8).................................        (24,550)           -          7,015              -              -
Redemption of preferred partnership units (Note 7).              -            -         72,000              -              -
Issuance of common shares in connection with
   share-based compensation (75,971 shares)
   (Note 10).......................................              -            8            761              -              -
Stock-based compensation expense (Note 10) ........              -            -          3,332              -              -
 Adjustments of redeemable noncontrolling
   interests in subsidiaries to liquidation value
   (Note 7)........................................              -            -              -           (255)             -
Net income.........................................              -            -              -        358,816              -
Net income allocated based upon income of the
   consolidated entities to (Note 7):
    Redeemable noncontrolling interests in
      subsidiaries.................................              -            -              -           (506)             -
    Permanent noncontrolling equity interests......              -            -              -        (14,136)             -
Distributions to equity holders:
   Cumulative preferred shares (Note 8)............              -            -              -       (116,216)             -
   Permanent noncontrolling interests in
     subsidiaries .................................              -            -              -              -              -
   Equity Shares, Series A ($1.225 per depositary
     share)........................................              -            -              -        (10,262)             -
   Holders of unvested restricted share units......              -            -              -           (674)             -
   Common Shares ($1.10 per share).................              -            -              -       (185,176)             -
Other comprehensive income: Currency translation
  adjustments (Note 2).............................              -            -              -              -         13,841
                                                     --------------  -----------  -------------  --------------  -------------
Balance at June 30, 2009...........................   $  3,399,777   $   16,837   $  5,673,201   $   (258,732)   $   (18,090)
                                                     ==============  ===========  =============  ==============  =============





                                                                         Equity of
                                                        Total Public     Permanent
                                                          Storage     Noncontrolling
                                                       Shareholders'     Interests
                                                           Equity     In Subsidiaries  Total Equity
                                                     -------------   ----------------  -------------
                                                                              
Balance at December 31, 2008.......................  $  8,708,995    $   358,109       $ 9,067,104
Repurchase of cumulative preferred shares (982,000
  shares) (Note 8).................................       (17,535)             -           (17,535)
Redemption of preferred partnership units (Note 7).        72,000       (225,000)         (153,000)
Issuance of common shares in connection with
   share-based compensation (75,971 shares)
   (Note 10).......................................           769              -               769
Stock-based compensation expense (Note 10) ........         3,332              -             3,332
 Adjustments of redeemable noncontrolling
   interests in subsidiaries to liquidation value
   (Note 7)........................................          (255)             -              (255)
Net income.........................................       358,816              -           358,816
Net income allocated based upon income of the
   consolidated entities to (Note 7):
    Redeemable noncontrolling interests in
      subsidiaries.................................          (506)             -              (506)
    Permanent noncontrolling equity interests......       (14,136)        14,136                 -
Distributions to equity holders:
   Cumulative preferred shares (Note 8)............      (116,216)             -          (116,216)
   Permanent noncontrolling interests in
     subsidiaries .................................             -        (13,411)          (13,411)
   Equity Shares, Series A ($1.225 per depositary
     share)........................................       (10,262)             -           (10,262)
   Holders of unvested restricted share units......          (674)             -              (674)
   Common Shares ($1.10 per share).................      (185,176)             -          (185,176)
Other comprehensive income: Currency translation
  adjustments (Note 2).............................        13,841              -            13,841
                                                     -------------   ----------------  -------------
Balance at June 30, 2009...........................  $  8,812,993    $   133,834       $ 8,946,827
                                                     =============   ================= =============


                            See accompanying notes.
                                       3


                                 PUBLIC STORAGE
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)
                                   (Unaudited)



                                                                                       For the Six Months Ended
                                                                                               June 30,
                                                                                    -----------------------------
                                                                                         2009            2008
                                                                                    -------------   -------------
Cash flows from operating activities:
                                                                                              
   Net income...............................................................        $   358,816     $   663,896
   Adjustments to reconcile net income to net cash provided by operating
     activities:
    Gain on disposition of real estate investments, including amounts in
       discontinued operations..............................................             (6,903)       (341,773)
    Gain on early retirement of debt........................................             (4,114)              -
    Impairment charge on intangible asset...................................              8,205               -
    Depreciation and amortization including amounts in discontinued
       operations...........................................................            169,484         217,877
    Equity share of income allocations from investee's repurchases of
       preferred stock .....................................................            (16,284)              -
    Distributions received from real estate entities in excess of equity in
       earnings.............................................................              9,783          11,788
    Foreign currency exchange loss (gain)...................................              1,528         (40,969)
    Adjustments for stock-based compensation, amortization of note premium,
       and other............................................................             21,733             371
                                                                                    -------------   -------------
       Total adjustments....................................................            183,432        (152,706)
                                                                                    -------------   -------------
       Net cash provided by operating activities............................            542,248         511,190
                                                                                    -------------   -------------
Cash flows from investing activities:
    Capital improvements to real estate facilities .........................            (32,575)        (31,571)
    Construction in process.................................................             (5,933)        (40,081)
    Acquisitions of real estate facilities..................................                  -         (20,992)
    Proceeds from sales of other real estate investments....................             10,261             493
    Proceeds from the disposition of interest in Shurgard Europe (Note 3)...                  -         609,059
    Deconsolidation of Shurgard Europe (Note 3).............................                  -         (34,588)
    Investment in Shurgard Europe...........................................                  -         (32,911)
    Other investing activities..............................................               (823)          1,157
                                                                                    -------------   -------------
       Net cash (used in) provided by investing activities..................            (29,070)        450,566
                                                                                    -------------   -------------
Cash flows from financing activities:
    Principal payments on notes payable.....................................             (3,746)         (6,200)
    Redemption of senior unsecured notes payable............................           (109,622)              -
    Proceeds from borrowing on debt of Existing European Joint Ventures.....                  -          14,654
    Net proceeds from the issuance of common shares.........................                769           5,090
    Repurchases of common shares............................................                  -        (111,903)
    Redemption of cumulative preferred shares...............................            (17,535)              -
    Redemption of permanent noncontrolling equity interests.................           (153,000)              -
    Distributions paid to Public Storage shareholders.......................           (312,328)       (316,980)
    Distributions paid to noncontrolling equity interests...................            (14,077)        (19,401)
                                                                                    -------------   -------------
       Net cash used in financing activities................................           (609,539)       (434,740)
                                                                                    -------------   -------------
Net (decrease) increase in cash and cash equivalents........................            (96,361)        527,016
Net effect of foreign exchange translation on cash..........................                520           2,542
Cash and cash equivalents at the beginning of the period....................            680,701         245,444
                                                                                    -------------   -------------
Cash and cash equivalents at the end of the period..........................        $   584,860     $   775,002
                                                                                    =============   =============


                            See accompanying notes.
                                       4



                                PUBLIC STORAGE
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)
                                   (Unaudited)

                                   (Continued)



                                                                                    For the Six Months Ended
                                                                                            June 30,
                                                                                 --------------------------------
                                                                                      2009            2008
                                                                                 --------------   ---------------
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES:

   Foreign currency translation adjustment:
                                                                                            
       Real estate facilities, net of accumulated depreciation...........        $     (2,022)    $    (96,581)
       Construction in process...........................................                   -             (956)
       Investment in real estate entities................................             (11,633)             891
       Intangible assets, net............................................                   -           (4,526)
       Loan receivable from Shurgard Europe..............................               1,862               98
       Other assets......................................................                   -           (3,699)
       Notes payable.....................................................                   -           28,912
       Accrued and other liabilities.....................................                   -            5,879
       Permanent noncontrolling equity interests in subsidiaries.........                   -            7,249
       Accumulated other comprehensive income............................              12,313           65,275

   Deconsolidation of Shurgard Europe (Note 3)
       Real estate facilities, net of accumulated depreciation...........                   -        1,693,524
       Construction in process...........................................                   -           10,886
       Investment in real estate entities................................                   -         (594,330)
       Loan receivable from Shurgard Europe..............................                   -         (618,822)
       Intangible assets, net............................................                   -           78,135
       Other assets......................................................                   -           68,486
       Notes payable.....................................................                   -         (424,995)
       Accrued and other liabilities.....................................                   -          (98,571)
       Permanent noncontrolling equity interests in subsidiaries.........                   -         (148,901)

   Real estate acquired in exchange for assumption of mortgage note......                   -         (10,250)
   Mortgage note assumed in connection with the acquisition of real
          estate.........................................................                   -          10,250

   Revaluation of notes payable:
       Notes payable.....................................................                   -             224
       Other assets......................................................                   -            (224)



                            See accompanying notes.
                                       5




                                 PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009


1.       Description of the Business
         ---------------------------

              Public  Storage,  Inc.,  formerly a  California  corporation,  was
     organized  in 1980.  Effective  June 1,  2007,  following  approval  by our
     shareholders,  we reorganized  Public Storage,  Inc. into Public Storage, a
     Maryland real estate investment trust (referred to herein as "the Company",
     "the Trust",  "we",  "us",  or "our").  Our principal  business  activities
     include  the   acquisition,   development,   ownership   and  operation  of
     self-storage  facilities which offer storage spaces for lease, generally on
     a  month-to-month  basis,  for personal and business use. Our  self-storage
     facilities  are located  primarily in the United States  ("U.S.").  We also
     have interests in self-storage facilities located in seven Western European
     countries.

              At June 30, 2009, we had direct and indirect  equity  interests in
     2,010  self-storage  facilities  located in 38 states  operating  under the
     "Public  Storage" name, and 185 self-storage  facilities  located in Europe
     which operate under the "Shurgard  Storage  Centers" name.  Included in the
     2,010  self-storage  facilities  is one facility for which we  discontinued
     operations  during the three months ended June 30, 2009 in connection  with
     an eminent  domain  proceeding.  We also have  direct and  indirect  equity
     interests  in   approximately  21  million  net  rentable  square  feet  of
     commercial space located in 11 states in the U.S.  primarily operated by PS
     Business Parks, Inc. ("PSB") under the "PS Business Parks" name.

              Any reference to the number of properties,  square footage, number
     of tenant  reinsurance  policies  outstanding and the aggregate coverage of
     such  reinsurance  policies  are  unaudited  and  outside  the scope of our
     independent  registered  public  accounting  firm's review of our financial
     statements  in  accordance   with  the  standards  of  the  Public  Company
     Accounting Oversight Board.

2.       Summary of Significant Accounting Policies
         ------------------------------------------

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

              The  accompanying   unaudited  condensed   consolidated  financial
     statements  have been prepared in accordance with U.S.  generally  accepted
     accounting  principles  ("GAAP") for interim financial  information and the
     instructions  to Form 10-Q and Article 10 of Regulation  S-X.  Accordingly,
     they do not include all of the  information  and notes required by GAAP for
     complete  financial   statements.   In  the  opinion  of  management,   all
     adjustments  (consisting  of normal and recurring  adjustments)  considered
     necessary for a fair  presentation  have been reflected in these  unaudited
     condensed  consolidated  financial  statements.  Operating  results for the
     three and six months ended June 30, 2009 are not necessarily  indicative of
     the results that may be expected for the year ending  December 31, 2009 due
     to seasonality  and other factors.  The  accompanying  unaudited  condensed
     consolidated   financial  statements  should  be  read  together  with  the
     consolidated  financial  statements  and  related  notes  included  in  the
     Company's Annual Report on Form 10-K for the year ended December 31, 2008.

              Certain  amounts  previously  reported in our  December  31, 2008,
     March  31,  2008,  and  June  30,  2008  financial   statements  have  been
     reclassified  to  conform  to the June  30,  2009  presentation,  including
     discontinued operations,  the grouping of the separate captions "cumulative
     earnings" and "cumulative distributions" into "retained earnings (deficit)"
     on our condensed  consolidated  balance sheet, as well as reclassifications
     required by newly implemented accounting standards described below.

              The Company has  evaluated  subsequent  events  through  August 7,
     2009,  which  represents  the  filing  date  of this  Form  10-Q  with  the
     Securities and Exchange  Commission  ("SEC").  As of August 7, 2009,  there
     were no subsequent events which required recognition or disclosure.

                                       6



                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

     Adjustments due to accounting  pronouncements becoming effective January 1,
     ---------------------------------------------------------------------------
     2009
     ----

              Statement   of   Financial    Accounting    Standards   No.   160,
     "Noncontrolling   Interests  in  Consolidated  Financial  Statements  -  an
     amendment  of ARB No. 51" ("SFAS No. 160") and other  accounting  standards
     implemented  by the  Financial  Accounting  Standards  Board  and  the  SEC
     (collectively,  the "Revised Minority Interest Standards") became effective
     January 1, 2009. As a result, we have reclassified certain equity interests
     previously  referred  to as  minority  interests  on our  balance  sheet at
     December 31, 2008 to "permanent  noncontrolling  interests in subsidiaries"
     or   "redeemable   noncontrolling   interests   in   subsidiaries."   These
     reclassifications  increased equity by $351,640,000,  increased  redeemable
     noncontrolling  interests in  subsidiaries  by  $12,777,000,  and decreased
     minority  interest by $364,417,000,  as compared to the amounts  previously
     presented as of December 31, 2008. On our condensed  consolidated statement
     of income,  income allocations to the aforementioned  equity interests were
     reclassified from "minority  interest in income", a reduction to income, to
     "income  allocated  to   noncontrolling   interests  in  subsidiaries,"  an
     allocation of net income in calculating net income  allocable to our common
     shareholders.  These  adjustments  increased  net  income  $10,142,000  and
     $17,741,000 for the three and six months ended June 30, 2008, respectively,
     but had no impact upon net income  allocable to our common  shareholders or
     on earnings per common share, as compared to amounts previously presented.

              In addition,  FASB Staff  Position  No. EITF 03-6-1,  "Determining
     Whether  Instruments  Granted  in  Share-Based  Payment   Transactions  Are
     Participating Securities," which became effective January 1, 2009, requires
     the "two class"  method of  allocating  income with  respect to  restricted
     share units to  determine  basic and  diluted  earnings  per common  share.
     Previously,  restricted  share  units were  included  in  weighted  average
     diluted shares,  based upon application of the treasury stock method.  This
     change   resulted  in  a  decrease  in  income   allocable  to  our  common
     shareholders  of  approximately  $146,000 and  $1,971,000 and a decrease in
     diluted weighted  average common shares  outstanding of 335,000 and 291,000
     for the three and six months ended June 30, 2008, respectively. As a result
     of these  changes,  basic  and  diluted  earnings  per  common  share  each
     decreased  approximately $0.01, as compared to amounts previously presented
     for the three and six months ended June 30, 2008, respectively.

     Consolidation Policy
     --------------------

              Entities  in which we have an  interest  are  first  evaluated  to
     determine  whether,  in  accordance  with the  provisions  of the Financial
     Accounting  Standards  Board's  Interpretation  No. 46R,  "Consolidation of
     Variable  Interest  Entities," they represent  Variable  Interest  Entities
     ("VIE's").  VIE's in which we are the primary beneficiary are consolidated.
     Entities that are not VIE's that we control are consolidated.

              When we are the general partner,  we are considered to control the
     partnership unless the limited partners possess  substantial  "kick-out" or
     "participative"  rights as defined in Emerging  Issues Task Force Statement
     04-5 - "Determining  whether a general partner or the general partners as a
     group,  controls a limited  partnership  or similar entity when the limited
     partners have certain rights" ("EITF 04-5").

              The accounts of the  entities we control,  along with the accounts
     of the VIE's for which we are the primary beneficiary,  are included in our
     condensed consolidated financial statements,  and all intercompany balances
     and transactions are eliminated.  We account for our investment in entities
     that we do not consolidate  using the equity method of accounting or, if we

                                       7


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

     do not have the ability to exercise significant influence over an investee,
     the  cost  method  of  accounting.  Changes  in  consolidation  status  are
     reflected  effective  the date the change of control  or  determination  of
     primary  beneficiary status occurred,  and previously  reported periods are
     not restated. The entities that we consolidate during the periods, to which
     the reference  applies,  are referred to hereinafter  as the  "Consolidated
     Entities." The entities that we have an interest in but do not  consolidate
     during  the  periods,  to which the  reference  applies,  are  referred  to
     hereinafter as the "Unconsolidated Entities."

              Collectively,  at June 30, 2009, the Company and the  Consolidated
     Entities own a total of 2,000 real estate  facilities,  consisting of 1,991
     self-storage  facilities in the U.S., one self-storage  facility in London,
     England and eight commercial facilities in the U.S.

              At June 30, 2009,  the  Unconsolidated  Entities are  comprised of
     PSB,  Shurgard  Europe,  as well  as  various  limited  and  joint  venture
     partnerships  (referred to as the "Other  Investments").  At June 30, 2009,
     PSB owns  approximately  19.6 million  rentable  square feet of  commercial
     space,  Shurgard  Europe has  interests in 184  self-storage  facilities in
     Europe with 9.8 million net rentable square feet, and the Other Investments
     own in aggregate 19 self-storage facilities in the U.S.

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

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

     Income Taxes
     ------------

              For  all  taxable  years  subsequent  to  1980,  the  Company  has
     qualified  and intends to  continue to qualify as a real estate  investment
     trust ("REIT"),  as defined in Section 856 of the Internal Revenue Code. As
     a REIT, we do not incur federal or significant state tax on that portion of
     our taxable income which is distributed to our shareholders,  provided that
     we meet certain  tests.  We believe we have met these tests during 2008 and
     we expect to meet these tests  during 2009 and,  accordingly,  no provision
     for  federal  income  taxes  has been  made in the  accompanying  condensed
     consolidated  financial  statements on income  produced and  distributed on
     real estate rental operations. Our taxable REIT subsidiaries are subject to
     regular corporate tax on their taxable income, and such corporate taxes are
     presented in ancillary  cost of  operations in our  accompanying  condensed
     consolidated  statements  of income.  We also are subject to certain  state
     taxes,  which are  presented in general and  administrative  expense in our
     accompanying condensed consolidated statements of income. We have concluded
     that there are no significant uncertain tax positions requiring recognition
     in our  financial  statements  with respect to all tax periods which remain
     subject to examination by major tax  jurisdictions  as of June 30, 2009, as
     well as the six month interim period ended June 30, 2009.

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

              Real estate facilities are recorded at cost. Costs associated with
     the acquisition,  development,  construction, renovation and improvement of
     properties  are  capitalized.  Interest,  property  taxes and  other  costs
     associated with  development  incurred during the  construction  period are
     capitalized as building cost. Costs associated with the sale of real estate
     facilities  or  interests  in  real  estate  investments  are  expensed  as
     incurred.  The purchase cost of existing  self-storage  facilities  that we
     acquire are allocated based upon relative fair value of the land,  building
     and tenant intangible components of the real estate facility.  Expenditures
     for  repairs and  maintenance  are  expensed  when  incurred.  Depreciation
     expense is  computed  using the  straight-line  method  over the  estimated
     useful lives of the buildings and improvements,  which generally range from
     5 to 25 years.

                                       8


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

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

              Other assets primarily consist of prepaid expenses, investments in
     held-to-maturity debt securities, accounts receivable, interest receivable,
     and restricted cash.

     Accrued and Other Liabilities
     -----------------------------

              Accrued and other  liabilities  consist primarily of real property
     tax accruals, tenant prepayments of rents, accrued interest payable, losses
     and loss adjustment  liabilities for our own exposures and estimated losses
     related to our tenant insurance activities, and trade payables.

     Financial Instruments
     ---------------------

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

              For purposes of financial statement presentation,  we consider all
     highly liquid financial instruments such as short-term treasury securities,
     money  market funds with daily  liquidity  and a rating in excess of AAA by
     Standard and Poor's,  or investment grade short-term  commercial paper with
     remaining  maturities of three months or less at the date of acquisition to
     be  cash  equivalents.  Any  such  cash  and  cash  equivalents  which  are
     restricted from general corporate use (restricted cash) due to insurance or
     other regulations, or based upon contractual requirements,  are included in
     other assets.

              Due  to  the  short   period  to  maturity   and  the   underlying
     characteristics of our cash and cash equivalents, other assets, and accrued
     and other  liabilities,  we believe the carrying values as presented on the
     consolidated balance sheets are reasonable estimates of fair value.

              Financial assets that are exposed to credit risk consist primarily
     of cash and cash equivalents as well as accounts  receivable and restricted
     cash  which are  included  in other  assets on our  accompanying  condensed
     consolidated balance sheets. Cash and cash equivalents and restricted cash,
     consisting of short-term investments,  including commercial paper, are only
     invested in investment instruments with an investment grade rating. We have
     a loan receivable from Shurgard Europe.  See "Loan Receivable from Shurgard
     Europe" below for information  regarding our fair value measurement of this
     instrument.

              At June 30,  2009,  due  primarily to our  investment  in and loan
     receivable from Shurgard Europe,  our operations and our financial position
     are affected by fluctuations in the exchange rates between the Euro, and to
     a lesser extent, other European currencies, against the U.S. Dollar.

              We estimate the fair value of our notes payable to be $529,532,000
     at June 30,  2009,  based upon  discounting  the future  current cash flows
     under each respective note at an interest rate that  approximates  those of
     loans with  similar  credit  characteristics,  term to  maturity  and other
     market data.

     Goodwill
     --------

              Goodwill  represents the excess of acquisition  cost over the fair
     value of net  tangible  and  identifiable  intangible  assets  acquired  in
     business  combinations.  Each business  combination from which our goodwill
     arose was for the  acquisition of single  businesses and  accordingly,  the

                                       9


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

     allocation  of our goodwill to our business  segments is based  directly on
     such  acquisitions.  Our goodwill has an  indeterminate  life. Our goodwill
     balance of  $174,634,000  is reported net of  accumulated  amortization  of
     $85,085,000  as of June 30, 2009 and December 31, 2008 in our  accompanying
     condensed consolidated balance sheets.

              We evaluate  impairment  of goodwill  annually  by  comparing  the
     aggregate book value  (including  goodwill) of each reporting unit to their
     respective  estimated  fair  value.  No  impairment  of  our  goodwill  was
     identified  in our annual  evaluation  at December 31, 2008.  No impairment
     indicators  were noted as of June 30,  2009 which  would have  required  an
     interim evaluation of goodwill for impairment.

     Intangible Assets
     -----------------

              We acquire finite-lived  intangible assets representing  primarily
     the estimated value of tenants in place (a "Tenant Intangible") at the date
     of the acquisition of each respective acquired facility. Tenant Intangibles
     are  amortized  relative  to the  benefit  of the  tenants in place to each
     period.  At June 30, 2009, our Tenant  Intangibles have a net book value of
     $21,687,000 ($33,181,000 at December 31, 2008), which is net of accumulated
     amortization  and  impairment  charges  of  $347,499,000  ($336,005,000  at
     December 31, 2008).

              Amortization  expense of $1,032,000 and  $11,722,000  was recorded
     for our Tenant  Intangibles  for the three  months  ended June 30, 2009 and
     2008,  respectively and $3,289,000 and $40,133,000 was recorded for the six
     months  ended June 30, 2009 and 2008,  respectively.  Also during the three
     and six months ended June 30,  2009,  we recorded an  impairment  charge of
     $8,205,000 in connection  with an eminent  domain  proceeding at one of our
     facilities.   This  impairment  charge  is  reflected  under  "discontinued
     operations"  on  our  condensed   consolidated  statement  of  income.  The
     estimated  future  amortization  expense  for our  finite-lived  intangible
     assets is as follows:

     2009 (remainder of)        $     2,062,000
     2010                             2,113,000
     2011                             1,590,000
     2012                             1,521,000
     2013                             1,414,000
     2014 and beyond                 12,987,000
                                -----------------
                                $    21,687,000
                                =================

              We also have an  intangible  asset  representing  the value of the
     "Shurgard"  trade  name,  which is used by  Shurgard  Europe  pursuant to a
     licensing  agreement  described  more fully in Note 3, with a book value of
     $18,824,000 at June 30, 2009 and December 31, 2008. The Shurgard trade name
     has an indefinite life and, accordingly,  we do not amortize this asset but
     instead analyze it on an annual basis for impairment.  No impairments  were
     noted from our evaluations in any periods  presented in these  accompanying
     condensed consolidated financial statements.

     Evaluation of Asset Impairment
     ------------------------------

              We evaluate our real estate and Tenant  Intangibles for impairment
     on a quarterly  basis.  We first  evaluate  these assets for  indicators of
     impairment,  and if any  indicators of impairment  are noted,  we determine
     whether  the  carrying  value of such  assets is in  excess  of the  future
     estimated undiscounted cash flows attributable to these assets. If there is

                                       10


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

     excess  carrying  value  over  such  future  undiscounted  cash  flows,  an
     impairment  charge is booked  for the  excess of  carrying  value  over the
     assets' estimated fair value. Any long-lived assets which we expect to sell
     or otherwise  dispose of prior to their estimated useful life are stated at
     the lower of their  estimated net  realizable  value (less cost to sell) or
     their carrying  value. No impairment was identified from our evaluations in
     any periods presented in the accompanying  condensed consolidated financial
     statements,  other than the impairment totaling $8,205,000  described above
     with respect to intangible  assets  recorded in the three months ended June
     30, 2009.

     Revenue and Expense Recognition
     -------------------------------

              Rental   income,   which   is   generally   earned   pursuant   to
     month-to-month  leases  for  storage  space,  as well as late  charges  and
     administrative  fees, are recognized as earned.  Promotional  discounts are
     recognized  as a reduction to rental  income over the  promotional  period,
     which is generally during the first month of occupancy.  Ancillary revenues
     and interest and other income is recognized when earned. Equity in earnings
     of real estate  entities is recognized  based on our ownership  interest in
     the earnings of each of the Unconsolidated Entities.

              We accrue for  property  tax  expense  based upon  actual  amounts
     billed for the  related  time  periods  and, in some  circumstances  due to
     taxing  authority  assessment  timing and  disputes  of  assessed  amounts,
     estimates and historical  trends.  If these  estimates are  incorrect,  the
     timing  and  amount  of  expense  recognition  could be  affected.  Cost of
     operations,  general and administrative expense,  interest expense, as well
     as television, yellow page, and other advertising expenditures are expensed
     as  incurred.  Casualty  losses or gains are  recognized  in the period the
     casualty  occurs,  based upon the  differential  between  the book value of
     assets destroyed and estimated insurance  proceeds,  if any, that we expect
     to receive in accordance with our insurance contracts.

     Foreign Currency Exchange Translation
     -------------------------------------

              The local  currency  is the  functional  currency  for the foreign
     operations for which we have an interest.  Assets and liabilities  included
     on  our  condensed  consolidated  balance  sheets,   including  our  equity
     investment in Shurgard  Europe,  are translated at  end-of-period  exchange
     rates, while revenues, expenses, and equity in earnings of the related real
     estate  entities,  are  translated at the average  exchange rates in effect
     during the period. The Euro, which represents the functional  currency used
     by a majority of the foreign operations for which we have an interest,  was
     translated at an end-of-period  exchange rate of  approximately  1.405 U.S.
     Dollars per Euro at June 30, 2009 (1.409 at December 31, 2008), and average
     exchange  rates of 1.361 and 1.563 for the three months ended June 30, 2009
     and 2008,  respectively  and 1.334 and 1.530 for the six months  ended June
     30, 2009 and 2008,  respectively.  Equity is translated at historical rates
     and the resulting  cumulative  translation  adjustments,  to the extent not
     included in net income,  are included as a component of  accumulated  other
     comprehensive income (loss) until the translation adjustments are realized.
     See "Other  Comprehensive  Income" below for further information  regarding
     our foreign currency translation gains and losses.

     Fair Value Accounting
     ---------------------

              In 2006,  the FASB issued SFAS No. 157,  "Fair Value  Measurement"
     ("SFAS No. 157").  SFAS No. 157 expands  required  fair value  disclosures,
     whenever  other   accounting   standards   require  or  permit  fair  value
     measurements, including the information used to measure fair value, and the
     effect of fair value measurements on earnings.  SFAS No. 157 clarifies that
     fair value is an exit price, representing the amount that would be received
     to sell an asset or paid to transfer a liability in an orderly  transaction
     between  market  participants,  and  establishes  a  three-tier  fair value
     hierarchy,  which  prioritizes the inputs used in measuring fair value. The
     Company  adopted  the  provisions  of SFAS No.  157 on January 1, 2008 with
     respect to  financial  assets and  liabilities  and on January 1, 2009 with
     respect to non-financial assets and liabilities, which had no effect on our
     financial  position,  operating results or cash flows. See "Loan Receivable
     from Shurgard Europe" and "Financial  Instruments",  as well as "Redeemable
     Noncontrolling    Interests   in   Subsidiaries"   and   "Other   Permanent
     Noncontrolling  Interests  in  Subsidiaries"  in  Note  7  for  information
     regarding our fair value measurements.

                                       11


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

     Loan Receivable from Shurgard Europe
     ------------------------------------

              As of June 30, 2009, we had a loan receivable from Shurgard Europe
     totaling $550,499,000 ($552,361,000 at December 31, 2008).

              The loan bears interest at a fixed rate of 7.5% per annum, and had
     an initial term of one year  expiring  March 31, 2009 which was extended by
     Shurgard  Europe  pursuant to the terms of the  original  note to March 31,
     2010. If Shurgard Europe acquires its partner's interests in First Shurgard
     and Second Shurgard (collectively, the "Existing European Joint Ventures"),
     we have agreed to provide  additional loans to Shurgard  Europe,  under the
     same terms as the  existing  loans,  for up to  (euro)185  million  ($259.9
     million as of June 30, 2009).  This  commitment  was also extended to March
     31, 2010 and was originally for (euro)305  million,  but was reduced as the
     result of refinancing  one of the joint venture loans.  Shurgard Europe has
     no obligation  to acquire these  interests,  and the  acquisition  of these
     interests is contingent on a number of items,  including  whether we assent
     to the acquisition.  Loan fees collected from Shurgard Europe are amortized
     on a  straight-line  basis as interest  income over the applicable  term to
     which the fee applies.

              The loan  receivable  from Shurgard Europe is denominated in Euros
     and is converted to U.S. Dollars for financial statement  purposes.  During
     each applicable  period,  because we expected repayment within two years of
     each  respective  balance  sheet  date,  we have been  recognizing  foreign
     exchange  rate gains or losses in income as a result of changes in exchange
     rates between the Euro and the U.S.  Dollar during the three and six months
     ended June 30, 2009 and 2008.  For the three and six months  ended June 30,
     2009,  we  recorded   interest  income  of  approximately   $5,797,000  and
     $10,974,000,  respectively,  related  to the  loan.  For the  three and six
     months ended June 30, 2008, we recorded  interest  income of  approximately
     $6,319,000 related to the loan.

              The $5,797,000 in interest  income for the three months ended June
     30, 2009  reflects the gross  amount  charged to Shurgard  Europe  totaling
     $11,366,000  less our 49% pro-rata  portion  totaling  $5,569,000  which is
     reflected as part of our equity in earnings of real estate  entities rather
     than interest and other income.  The $10,974,000 in interest income for the
     six  months  ended  June 30,  2009  reflects  the gross  amount  charged to
     Shurgard Europe totaling $21,517,000 less our 49% pro-rata portion totaling
     $10,543,000  which is  reflected  as part of our equity in earnings of real
     estate  entities  rather than interest and other income.  The $6,319,000 in
     interest  income for the three and six months ended June 30, 2008  reflects
     the gross amount charged to Shurgard Europe totaling  $12,390,000  less our
     49% pro-rata  portion  totaling  $6,071,000 which is reflected as equity in
     earnings of real estate entities rather than interest and other income.

              Although  there can be no  assurance,  we  believe  that  Shurgard
     Europe has  sufficient  liquidity and  collateral,  and we have  sufficient
     creditor rights, such that credit risk is minimal. In addition,  we believe
     the interest rate on the loan  approximates  the market rate for loans with
     similar credit  characteristics and tenor;  however, due to dysfunctions in
     current  credit  markets,  it is  difficult  to  estimate  a  market  rate.
     Nonetheless,  based upon the estimated  market rate combined with the short
     term to maturity,  we believe the carrying  value of the loan  approximates
     fair  value.  The  characteristics  of the  loan  and  comparative  metrics
     utilized in our evaluation represent significant unobservable inputs, which
     are "Level 3" inputs as the term is utilized in SFAS No. 157.

     Other Comprehensive Income
     --------------------------

              We reflect  other  comprehensive  income  (loss) for our  pro-rata
     share of currency translation adjustments related to the foreign operations
     for which we have an  interest  that is not already  recognized  in our net

                                       12


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

     income.  Such other  comprehensive  income  (loss) is reflected as a direct
     adjustment  to  "Accumulated  Other  Comprehensive  Income"  in the  equity
     section of our  consolidated  balance sheet, and is added to our net income
     in determining total comprehensive income for the period.

              The  following   table   reflects  the  components  of  our  other
     comprehensive  (loss) income, and our total comprehensive  income, for each
     respective period:



                                                   For the Three Months Ended    For the Six Months Ended
                                                            June 30,                   June 30,
                                                   --------------------------  --------------------------
                                                      2009         2008           2009           2008
                                                   -----------   ------------  -----------  -------------
                                                                    (Amounts in thousands)
                                                                                 
     Net income................................    $  205,387    $  143,955    $  358,816    $  663,896
     Other comprehensive income (loss):
        Aggregate foreign currency translation
           adjustments for the period..........        57,249          (947)       12,313        65,275
        Less: foreign currency translation
           adjustments recognized during the
           period and reflected in "Gain
           (loss) on disposition of real
           estate investments".................             -             -             -       (37,854)
        Less: foreign currency translation
           adjustments reflected in net income
           as "Foreign currency (gain) loss"...       (33,205)            2         1,528       (40,969)
                                                   -----------   ------------  -----------  -------------
     Other comprehensive income (loss) income
           for the period......................        24,044          (945)       13,841       (13,548)
                                                   -----------   ------------  -----------  -------------
     Total comprehensive income................    $  229,431    $  143,010    $  372,657    $  650,348
                                                   ===========   ============  ===========  =============


     Discontinued Operations
     -----------------------

              We  segregate  all  of our  discontinued  operations  that  can be
     distinguished  from the rest of the Company and will be eliminated from the
     ongoing  operations  of the  Company.  During the six months ended June 30,
     2009,  we decided to terminate our truck rental and  containerized  storage
     business  units.  Truck  operations  ceased as of March 31,  2009,  and the
     containerized  operations  are  being  actively  marketed  for sale and are
     expected  to  be  disposed  of  by  December  31,  2009.  As a  result,  we
     reclassified  all  of  the  historical   revenues  and  expenses  of  these
     operations   from   ancillary   revenues  and  ancillary   expenses,   into
     "discontinued  operations."  Included in  discontinued  operations  is $3.5
     million in expenses  incurred in the six months ended June 30, 2009 related
     primarily to disposing of trucks used in our truck rental operations.  Also
     included in discontinued operations for the three and six months ended June
     30,  2009 is an $8.2  million  impairment  charge on  intangible  assets in
     connection  with an eminent  domain  proceeding at one of our  self-storage
     facilities.

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

              In computing net income allocated to our common  shareholders,  we
     first allocate net income to our  noncontrolling  interests in subsidiaries
     (Note 7) and preferred  shareholders  to arrive at net income  allocable to
     our common shareholders.  Net income allocated to preferred shareholders or
     noncontrolling  interests in  subsidiaries  includes any excess of the cash
     required  to redeem any  preferred  securities  in the period  over the net
     proceeds from the original  issuance of the  securities  (or, if securities
     are redeemed for less than the original issuance proceeds, income allocated
     to the holders of the redeemed securities is reduced).

              The  remaining  net income is allocated  among our regular  common
     shares,  restricted share units, and our Equity Shares, Series A based upon
     the dividends  declared (or  accumulated)  for each security in the period,
     combined  with  each  security's   participation  rights  in  undistributed
     earnings.

                                       13


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

              Net income  allocated to our regular common shares from continuing
     operations  is  computed  by  eliminating  the  net  income  or  loss  from
     discontinued  operations  allocable to our regular common shares,  from net
     income allocated to our regular common shares.

              Basic  net  income  per  share,   basic  net  income  (loss)  from
     discontinued  operations  per share,  and basic net income from  continuing
     operations per share are computed using the weighted  average common shares
     outstanding.  Diluted net income per share,  diluted net income (loss) from
     discontinued  operations per share,  and diluted net income from continuing
     operations per share are computed using the weighted  average common shares
     outstanding,  adjusted  for the  impact,  if  dilutive,  of  stock  options
     outstanding  (Note  10).  Diluted  net loss  per  share  from  discontinued
     operations  does not  include  the  impact  of stock  options  outstanding,
     because including stock options would be anti-dilutive  when applied to the
     loss on discontinued operations for each period presented.

              The following table reflects the components of the calculations of
     our basic and  diluted  net income per share,  basic and diluted net income
     (loss) from  discontinued  operations per share,  and basic and diluted net
     income from continuing operations per share which are not already otherwise
     set forth on the face of our condensed consolidated statements of income:



                                                         For the Three Months Ended    For the Six Months Ended
                                                                 June 30,                     June 30,
                                                        ----------------------------  ---------------------------
                                                           2009            2008          2009              2008
                                                        ------------  --------------  ------------   ------------
                                                                         (Amounts in thousands)

 Net income allocable to common shareholders from
 ------------------------------------------------
  continuing operations and discontinued operations:
  --------------------------------------------------

                                                                                          
  Net income allocable to common shareholders.......... $   135,487    $    67,978    $   294,982     $   512,806
  Eliminate: Loss on Discontinued operations allocable
     to common shareholders ...........................       8,333          1,286          8,625           2,462
                                                        ------------  --------------  ------------   ------------
  Net income from continuing operations allocable to
     common shareholders............................... $   143,820    $    69,264    $   303,607     $   515,268
                                                        ============  ==============  ============   ============
Weighted average common shares and equivalents
----------------------------------------------
   outstanding:
   ------------
   Basic weighted average common shares outstanding....     168,348        168,028        168,330         168,307
   Net effect of dilutive stock options - based on
     treasury stock method using average market price .         180            451            171             424
                                                        ------------  --------------  ------------   ------------
   Diluted weighted average common shares outstanding..     168,528        168,479        168,501         168,731
                                                        ============  ==============  ============   ============


     Recent Accounting Pronouncements and Guidance
     ---------------------------------------------

     Codification and Hierarchy of GAAP
     ----------------------------------

              In June  2009,  the  Financial  Accounting  Standards  Board  (the
     "FASB") issued SFAS 168, "The FASB Accounting  Standards  Codification  and
     the Hierarchy of Generally Accepted  Accounting  Principles - a replacement
     of FASB Statement No 162." SFAS 168  established the effective date for use
     of the FASB  codification  for  interim  and annual  periods  ending  after
     September  15,  2009.  Companies  should  account  for the  adoption of the
     guidance on a prospective  basis. We do not anticipate the adoption of SFAS
     168 will have a material impact on our financial statements. We will update
     our disclosures  for the appropriate  FASB  codification  references  after
     adoption, in the third quarter of 2009.

                                       14


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

     Accounting for Transfers of Financial Assets
     --------------------------------------------

              In June 2009,  the FASB also issued SFAS 167  "Amendments  to FASB
     Interpretation No. 46", and SFAS 166 "Accounting for Transfers of Financial
     Assets - an  Amendment  of FASB  Statement  No.  140."  SFAS 167 amends the
     existing  guidance  around FIN 46(R),  to address  the  elimination  of the
     concept of a  qualifying  special  purpose  entity.  Also,  it replaces the
     quantitative-based  risks and rewards  calculation  for  determining  which
     enterprise  has a  controlling  financial  interest in a variable  interest
     entity with an approach  focused on  identifying  which  enterprise has the
     power to direct  the  activities  of a  variable  interest  entity  and the
     obligation to absorb losses of the entity or the right to receive  benefits
     from the entity. Additionally, SFAS 167 provides for additional disclosures
     about an enterprise's involvement with a variable interest entity. SFAS 166
     amends SFAS 140 to eliminate  the concept of a qualifying  special  purpose
     entity,  amends the  derecognition  criteria for a transfer to be accounted
     for as a sale under SFAS 140, and will require  additional  disclosure over
     transfers   accounted  for  as  a  sale.   The  effective   date  for  both
     pronouncements  is for the first fiscal year  beginning  after November 15,
     2009, and will require  retrospective  application.  We are still assessing
     the potential impact of adopting these two statements.

3.   Disposition of an Interest in Shurgard Europe
     ---------------------------------------------

              On March  31,  2008,  an  institutional  investor  acquired  a 51%
     interest in Shurgard European Holdings LLC, a newly formed Delaware limited
     liability  company and the holding company for Shurgard  Europe  ("Shurgard
     Holdings").  Public  Storage  owns the  remaining  49%  interest and is the
     managing member of Shurgard Holdings.

              Our net proceeds  from the  transaction  aggregated  $609,059,000,
     comprised  of  $613,201,000  paid  by  the   institutional   investor  less
     $4,142,000 in legal, accounting,  and other expenses incurred in connection
     with the  transaction.  As a result  of the  disposition,  we  reduced  our
     investment in Shurgard  Europe by  approximately  $305,048,000  for the pro
     rata portion of our March 31, 2008 investment that was sold, and recognized
     a gain  of  $304,011,000  upon  disposition,  representing  the  difference
     between the net proceeds  received of $609,059,000 and the pro rata portion
     of our investment sold of $305,048,000.

              In addition,  as a result of our  disposition of this interest,  a
     portion  of the  cumulative  currency  exchange  gains  we  had  previously
     recognized in Other  Comprehensive  Income with respect to Shurgard  Europe
     was realized.  Accordingly,  we recognized a cumulative  currency  exchange
     gain of  $37,854,000,  representing  51% (the pro rata  portion of Shurgard
     Europe that was sold) of the cumulative  currency  exchange gain previously
     included in Other Comprehensive Income.

              The gain upon disposition of $304,011,000 and associated  realized
     currency  exchange  gain  totaling  $37,854,000  are both  included  in the
     line-item  "gain (loss) on disposition of real estate  investments"  in our
     condensed  consolidated  statement  of income for the six months ended June
     30, 2008.

              The results of operations of Shurgard Europe have been included in
     our condensed consolidated  statements of income for the three months ended
     March 31, 2008.  Commencing  with the quarter  beginning April 1, 2008, our
     pro rata  share of  operations  of  Shurgard  Europe  is  reflected  on our
     condensed consolidated statement of income under equity in earnings of real
     estate entities.

                                       15


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

4.   Real Estate Facilities
     ----------------------

              Activity in real estate facilities is as follows:

                                                                Six Months Ended
                                                                  June 30, 2009
                                                                ----------------
                                                                   (Amounts in
                                                                    thousands)
Operating facilities, at cost:
  Beginning balance.......................................        $ 10,207,022
  Capital improvements....................................              32,575
  Newly developed facilities opened for operations........              13,570
  Disposition of real estate facilities...................              (5,365)
  Impact of foreign exchange rate changes.................               2,851
                                                                ----------------
  Ending balance..........................................          10,250,653
                                                                ----------------
Accumulated depreciation:
  Beginning balance.......................................          (2,405,473)
  Depreciation expense....................................            (163,920)
  Disposition of real estate facilities...................               2,007
  Impact of foreign exchange rate changes.................                (829)
                                                                ----------------
  Ending balance..........................................          (2,568,215)
                                                                ----------------
Construction in process:
   Beginning balance......................................              20,340
   Current development (includes $347 in capitalized interest
     for the six months ended June 30, 2009)..............               5,933
   Newly developed facilities opened for operation........             (13,570)
                                                                ----------------
   Ending balance.........................................              12,703
                                                                ----------------
 Total real estate facilities at June 30, 2009............        $  7,695,141
                                                                ================

              During the six months  ended June 30, 2009,  we completed  various
     expansion  projects  with  total  costs  of  $13,570,000.  We also  sold an
     existing  real estate  facility as well as a portion of certain real estate
     facilities  during  the six  months  ended  June  30,  2009,  primarily  in
     connection with condemnation  proceedings,  for aggregate proceeds totaling
     $10,261,000.  We recorded an aggregate gain of approximately $6,903,000, of
     which  $4,181,000 is included in discontinued  operations and $2,722,000 is
     included in "gain (loss) on disposition of real estate investments."

              Construction  in process at June 30, 2009 includes the development
     costs relating to various expansions to existing self-storage facilities.

5.   Investments in Real Estate Entities
     -----------------------------------

              During the three and six months ended June 30, 2009, we recognized
     earnings from our  investments in real estate  entities of $7,398,000,  and
     $30,209,000,  respectively,  and  received  cash  distributions  from  such
     investments,  totaling $11,889,000, and $23,708,000,  respectively.  During
     the three and six months ended June 30, 2008, we  recognized  earnings from
     our  investments  in real estate  entities of $4,632,000,  and  $7,361,000,
     respectively,  and  received  cash  distributions  from  such  investments,
     totaling $12,656,000, and $19,149,000,  respectively.  Included in earnings
     recognized  for  the  six  months  ended  June  30,  2009  is  $16,284,000,
     representing  our share of the  earnings  allocated  from  PSB's  preferred
     shareholders,  as a result  of PSB's  repurchases  of  preferred  stock and
     preferred  units for amounts  that were less than the  related  book value,
     during the period.

                                       16


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

              During the six months ended June 30, 2009 and 2008, in addition to
     the impact of earnings  recognized  and cash  distributions  received,  our
     investments in real estate entities  increased by $11,633,000 and decreased
     by $891,000, respectively, due to foreign currency translation adjustments.

              The following  table sets forth our investments in the real estate
     entities at June 30, 2009 and December 31, 2008, and our equity in earnings
     of real estate  entities  for the three and six months  ended June 30, 2009
     and 2008 (amounts in thousands):



                                       Investments in Real Estate
                                               Entities at
                                      --------------------------------
                                        June 30,       December 31,
                                          2009             2008
                                      ---------------  ---------------
     PSB............................    $   280,120       $   265,650
     Shurgard Europe................        268,478           264,145
     Other Investments..............         14,134            14,803
                                      ---------------  ---------------
         Total......................    $   562,732       $   544,598
                                      ===============  ===============




                                       Equity in Earnings of Real    Equity in Earnings of Real
                                         Estate Entities for the       Estate Entities for the
                                       Three Months Ended June 30,    Six Months Ended June 30,
                                       ---------------------------  ---------------------------
                                          2009          2008            2009         2008
                                       ------------  -------------  -----------  --------------
                                                                      
     PSB............................    $    5,201    $   2,847     $  25,667     $   5,192
     Shurgard Europe................         1,709        1,457         3,608         1,457
     Other Investments..............           488          328           934           712
                                       ------------  -------------  -----------  --------------
         Total......................    $    7,398    $   4,632     $  30,209     $   7,361
                                       ============  =============  ===========  ==============



     INVESTMENT IN PSB
     -----------------

              PSB is a REIT  traded  on  the  New  York  Stock  Exchange,  which
     controls an operating partnership (collectively, the REIT and the operating
     partnership  are  referred to as "PSB").  At June 30,  2009,  PSB owned and
     operated  approximately 19.6 million net rentable square feet of commercial
     space and manages certain of our commercial space.

              We have a 46% common  equity  interest  in PSB as of June 30, 2009
     and December 31, 2008,  comprised of our  ownership of 5,418,273  shares of
     PSB's common stock and 7,305,355 limited partnership units in the operating
     partnership.  The limited  partnership units are convertible at our option,
     subject  to  certain  conditions,  on a  one-for-one  basis into PSB common
     stock.  Based upon the closing  price at June 30, 2009 ($48.44 per share of
     PSB common stock), the shares and units had a market value of approximately
     $616.3 million as compared to a book value of $280.1 million.

                                       17


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

              The following table sets forth selected  financial  information of
     PSB;  the amounts  represent  100% of PSB's  balances  and not our pro-rata
     share.

                                                       2009            2008
                                                   --------------  -------------
                                                       (Amounts in thousands)
 For the six months ended June 30,
 --------------------------------
   Total revenue..................................  $   138,073     $  140,929
   Costs of operations and general and
     administrative expense.......................      (47,818)       (48,560)
   Depreciation and amortization..................      (43,803)       (50,567)
   Other items....................................          (76)        (1,373)
                                                   --------------  -------------
     Net income...................................  $    46,376     $   40,429
                                                   ==============  =============


                                                    At June 30,  At December 31,
                                                        2009          2008
                                                   --------------  -------------
                                                       (Amounts in thousands)

   Total assets (primarily real estate)...........  $  1,400,457    $ 1,469,323
   Debt and other liabilities.....................       102,312        105,736
   Equity.........................................     1,298,145      1,363,587

     INVESTMENT IN SHURGARD EUROPE
     -----------------------------

              At  June  30,  2009 we had a 49%  equity  investment  in  Shurgard
     Europe.  As a result of our disposition of an interest in Shurgard  Europe,
     we deconsolidated Shurgard Europe effective March 31, 2008 (see Note 3).

              For the three and six months ended June 30,  2009,  we recorded an
     aggregate of $1,709,000 and $3,608,000, respectively, in equity in earnings
     of real estate entities with respect to our investment in Shurgard  Europe.
     For the three and six months ended June 30, 2008,  we recorded an aggregate
     of $1,457,000 in equity in earnings of real estate entities with respect to
     our  investment  in Shurgard  Europe.  During the six months ended June 30,
     2009 and 2008, our investment in Shurgard Europe increased by approximately
     $11,633,000 and decreased by $891,000,  respectively,  due to the impact of
     changes in foreign currency exchange rates,  primarily between the Euro and
     the U.S. Dollar.

              The following table sets forth selected  financial  information of
     Shurgard  Europe.  These  amounts are based upon 100% of Shurgard  Europe's
     balances,  rather  than  our pro  rata  share  and are  based  upon  Public
     Storage's historical acquired book basis.

              Amounts  for  all  periods  are  presented,  notwithstanding  that
     Shurgard Europe was deconsolidated  effective March 31, 2008.  Accordingly,
     all amounts (net of intercompany  eliminations)  prior to April 1, 2008 are
     included in our consolidated financial statements.

                                       18


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009



                                                            For the Three Months Ended            For the Six Months Ended
                                                                     June 30,                            June 30,
                                                         ----------------------------------   --------------------------------
                                                             2009               2008                2009            2008
                                                         ---------------    ---------------   ---------------   --------------
                                                                               (Amounts in thousands)

                                                                                                     
   Self-storage and ancillary revenues..................  $     53,613       $     63,386      $    104,657      $   123,021
   Interest and other income (expense)..................            64                (75)              193              356
   Self-storage and ancillary cost of operations........       (25,461)           (27,499)          (49,383)         (53,563)
   Trademark license fee payable to Public Storage......          (384)              (418)             (746)          (1,060)
   Depreciation and amortization........................       (17,376)           (25,604)          (34,812)         (47,475)
   General and administrative...........................        (3,364)            (2,390)           (5,082)          (7,034)
   Interest expense on third party debt ................        (4,198)            (7,235)           (8,423)         (14,127)
   Interest expense on loan payable to Public Storage...       (11,366)           (12,390)          (21,517)         (22,798)
   Income (expenses) from foreign currency exchange ....           972                763               385              655
   Discontinued operations..............................             -                 (8)                8              (20)
                                                         ---------------    ---------------   ---------------   --------------
     Net loss (a).......................................  $     (7,500)      $    (11,470)     $    (14,720)     $   (22,045)
                                                         ===============    ===============   ===============   ==============


     (a) Approximately  $764,000  in net income and  $1,636,000  in net loss was
         allocated to permanent  noncontrolling equity interests in subsidiaries
         for the three  months  ended June 30, 2009 and 2008,  respectively,  of
         which $2,858,000 and $3,448,000, respectively, represented depreciation
         and amortization expense. During the six months ended June 30, 2009 and
         2008,  approximately $178,000 in net income and $3,778,000 in net loss,
         respectively,   was  allocated  to  permanent   noncontrolling   equity
         interests  in   subsidiaries,   of  which  $5,597,000  and  $6,632,000,
         respectively, represented depreciation and amortization expense.


                                                    At June 30,  At December 31,
                                                       2009            2008
                                                    -----------  ---------------
                                                       (Amounts in thousands)

   Total assets (primarily self-storage
    facilities)................................... $ 1,610,400    $ 1,615,370
   Total debt to third parties....................     335,033        362,352
   Total debt to Public Storage...................     550,499        552,361
   Other liabilities..............................      78,827         82,247
   Equity.........................................     646,041        618,410

              Our equity in earnings  of  Shurgard  Europe for the three and six
     months ended June 30, 2009 and the six months ended June 30, 2008  totaling
     $1,709,000,  $3,608,000 and $1,457,000,  respectively, are comprised of (i)
     losses of $4,049,000, $7,300,000 and $4,819,000, respectively, representing
     our 49% pro-rata  share of Shurgard  Europe's  net loss for the  respective
     periods  and  (ii)  income  of  $5,758,000,  $10,908,000,  and  $6,276,000,
     respectively,  representing  our 49% pro-rata share of the interest  income
     and trademark license fees received from Shurgard Europe for the respective
     periods  (such  amounts are  presented as equity in earnings of real estate
     entities rather than interest and other income).

     OTHER INVESTMENTS
     -----------------

              At June 30, 2009,  other  investments  include an aggregate common
     equity ownership of approximately  24% in entities that collectively own 19
     self-storage facilities.

                                       19


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

              The  following  table  sets  forth  certain  condensed   financial
     information  (representing  100% of these  entities'  balances  and not our
     pro-rata  share) with respect to the 19 facilities that we have an interest
     in at June 30, 2009:

                                              2009              2008
                                          ------------    --------------
                                                 (Amounts in thousands)
 For the six months ended June 30,
 --------------------------------
 Total revenue........................    $    8,266      $      8,439
 Cost of operations and other expenses        (3,310)           (3,320)
 Depreciation and amortization........          (966)           (1,076)
                                         ------------    --------------
     Net income.......................    $    3,990      $      4,043
                                         ============    ==============

                                           At June 30,     At December 31,
                                               2009             2008
                                          ------------    --------------
                                                 (Amounts in thousands)

 Total assets (primarily self-storage
     facilities)......................     $   37,926        $   40,168
 Total accrued and other liabilities..          1,047               888
 Total Partners' equity...............         36,879            39,280



                                       20


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

6.   Notes Payable and Line of Credit
     --------------------------------

              The  carrying  amounts of our notes  payable at June 30, 2009  and
     December 31, 2008 consist of the following (dollar amounts in thousands):




                                                                           June 30,       December 31,
                                                                             2009             2008
                                                                        --------------   --------------
                                                                             (Amounts in thousands)

     Unsecured Notes Payable:
                                                                                    
     5.875% effective and stated note rate, interest only and payable
        semi-annually, matures in March 2013...........................  $    186,460     $    200,000
     5.73% effective rate, 7.75% stated note rate, interest only and
        payable semi-annually, matures in February 2011 (carrying
        amount includes $2,856 of unamortized premium at June 30,
        2009 and $7,433 at December 31, 2008) .........................       106,173          207,433

     Secured Notes Payable:

     5.47% average effective rate fixed rate mortgage notes payable,
        secured by 90 real estate facilities with a net book value of
        $567,582 at June 30, 2009 and stated note rates between 4.95%
        and 8.75%, maturing at varying dates between July 2009 and
        August 2015 (carrying amount includes $4,809 of unamortized
        premium at June 30, 2009 and $5,634 at December 31, 2008) .....       231,807          236,378
                                                                        --------------   --------------
            Total notes payable........................................  $    524,440     $    643,811
                                                                        ==============   ==============


              When assumed in connection  with  property or other  acquisitions,
     notes payable are recorded at their  respective  estimated fair values upon
     acquisition.  Any initial premium or discount,  representing the difference
     between the stated  note rate and  estimated  fair value on the  respective
     date of assumption, is amortized over the remaining term of the notes using
     the  effective  interest  method.  Fair  values are  determined  based upon
     discounting the future cash flows under each respective note at an interest
     rate that approximates those of loans with similar credit  characteristics,
     term to  maturity,  and  other  market  data  which  represent  significant
     unobservable  inputs, which are "Level 3" inputs as the term is utilized in
     SFAS No. 157.

              At June  30,  2009,  we have a  revolving  credit  agreement  (the
     "Credit  Agreement")  which  expires on March 27,  2012,  with an aggregate
     limit with  respect to  borrowings  and letters of credit of $300  million.
     Amounts drawn on the Credit  Agreement bear an annual interest rate ranging
     from the London  Interbank  Offered Rate ("LIBOR") plus 0.35% to LIBOR plus
     1.00%  depending on our credit ratings (LIBOR plus 0.35% at June 30, 2009).
     In addition,  we are required to pay a quarterly  facility fee ranging from
     0.10% per annum to 0.25% per annum  depending on our credit  ratings (0.10%
     per annum at June 30, 2009). We had no outstanding borrowings on our Credit
     Agreement at June 30, 2009 or at August 7, 2009.  At June 30, 2009,  we had
     undrawn  standby letters of credit,  which reduce our borrowing  capability
     with  respect to our line of credit by the amount of the letters of credit,
     totaling $20,000,000 ($17,736,000 at December 31, 2008).

              On  February  12,  2009,  we  acquired  $110,223,000  face  amount
     ($113,736,000  book value) of our existing  unsecured  notes  pursuant to a

                                       21


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

     tender offer for an  aggregate of  $109,622,000  in cash  (including  costs
     associated  with  the  tender  of  $414,000)  plus  accrued  interest.   In
     connection  with this  transaction,  we recognized a gain of $4,114,000 for
     the six months ended June 30, 2009, representing the difference between the
     book value of $113,736,000 and the retirement amount paid plus tender offer
     costs.

              Our notes  payable  and our  Credit  Agreement  each have  various
     customary  restrictive  covenants,  all of which  have been met at June 30,
     2009.

              At June 30, 2009,  approximate  principal  maturities of our notes
     payable are as follows (amounts in thousands):

                                     Unsecured    Mortgage Notes
                                   Notes Payable      Payable        Total
                                  --------------  -------------- -----------
    2009........................    $      909    $    4,559     $    5,468
    2010........................         1,900        11,037         12,937
    2011........................       103,364        27,819        131,183
    2012........................             -        55,575         55,575
    2013........................       186,460        64,961        251,421
    Thereafter..................             -        67,856         67,856
                                 --------------  -------------- -----------
                                    $  292,633    $  231,807     $  524,440
                                 ==============  ============== ===========
    Weighted average effective
       rate                              5.8%          5.5%          5.7%
                                 ==============  ============== ===========

              We incurred interest expense  (including  interest  capitalized as
     real estate  totaling  $347,000 and  $1,182,000,  respectively  for the six
     months  ended June 30,  2009 and 2008) with  respect to our notes  payable,
     capital  leases,   debt  to  joint  venture  partner  and  line  of  credit
     aggregating  $15,763,000  and $27,270,000 for the six months ended June 30,
     2009 and 2008,  respectively.  These amounts were  comprised of $17,652,000
     and  $29,704,000  in cash paid for the six months  ended June 30,  2009 and
     2008,  respectively,  less  $1,889,000  and $2,434,000 in  amortization  of
     premium, respectively.

7.   Noncontrolling Interests in Subsidiaries
     ----------------------------------------

              In  consolidation,  we  classify  ownership  interests  in the net
     assets  of each of the  Consolidated  Entities,  other  than  our  own,  as
     "noncontrolling  interests in  subsidiaries."  If these  interests have the
     ability  to  require  us,  except  in  the   circumstances   of  an  entity
     liquidation, to redeem the underlying securities for cash, assets, or other
     securities that would not also be classified as equity, then such interests
     are presented on our balance  sheet  outside of equity.  At the end of each
     reporting period, if the book value is less than the estimated amount to be
     paid upon a redemption  occurring on the related  balance sheet date,  with
     the offset against retained earnings. All other noncontrolling interests in
     subsidiaries   are   presented  as  a  component   of  equity,   "permanent
     noncontrolling interests in subsidiaries."

              Redeemable Noncontrolling Interests in Subsidiaries
              ---------------------------------------------------

              At June 30, 2009, the Other Redeemable Noncontrolling Interests in
     Subsidiaries  represent  equity  interests  in three  entities  that own in

                                       22


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

     aggregate 14 self-storage facilities. At December 31, 2008, these interests
     were increased and retained earnings  (deficit) was decreased by a total of
     $6,469,000 in connection with the implementation of SFAS No. 160, to adjust
     to their estimated  liquidation  value (which  approximates fair value). We
     estimate  the  amount  to be paid upon  redemption  of these  interests  by
     applying the related provisions of the governing  documents to our estimate
     of the fair value of the  underlying  net assets  (principally  real estate
     assets).

              In 2007, we sold an  approximately  0.6% common equity interest in
     Shurgard  Europe to various  officers of the Company  (the "PS  Officers"),
     other than our chief  executive  officer.  For periods  commencing from the
     sale  of the  interest  through  March  31,  2008,  the PS  Officers'  were
     allocated their pro rata share of the earnings of Shurgard Europe, and this
     was   included   in   "Other   Redeemable   noncontrolling   interests   in
     subsidiaries." As described in Note 3, on March 31, 2008, we deconsolidated
     Shurgard Europe and, as a result,  noncontrolling interests in subsidiaries
     with  respect to the PS Officers'  investment  was  eliminated.  See Note 5
     under  "Investment in Shurgard Europe" for further  historical  information
     regarding Shurgard Europe.

              During the three and six months ended June 30, 2009,  we allocated
     a total  of  $244,000  and  $506,000,  respectively,  in  income  to  these
     interests.  During  the same  periods  in  2008,  we  allocated  a total of
     $274,000 and $513,000,  respectively,  of income to these interests. During
     the six months  ended June 30,  2009,  these  interests  were  increased by
     $255,000 to adjust to their estimated liquidation value (which approximates
     fair value).  During the six months  ended June 30, 2009 and 2008,  we paid
     distributions   to  these   interests   totaling   $666,000  and  $645,000,
     respectively.

     Permanent Noncontrolling Interests in Subsidiaries
     --------------------------------------------------

              At June 30, 2009, the Other Permanent  Noncontrolling Interests in
     Subsidiaries  represent  equity  interests  in  28  entities  that  own  an
     aggregate   of   94   self-storage   facilities   (the   "Other   Permanent
     Noncontrolling  Interests  in  Subsidiaries")  and  our  various  preferred
     partnership units (the "Preferred Partnership Interests").  These interests
     are  presented as equity  because the holders of the  interests do not have
     the ability to require us to redeem them for cash or other assets, or other
     securities that would not also be classified as equity.

              Preferred Partnership Interests
              -------------------------------

              At December 31, 2008, our preferred  partnership units outstanding
     were  comprised of 8,000,000  units of our 6.400%  Series NN  ($200,000,000
     carrying amount,  redeemable March 17, 2010), 1,000,000 units of our 6.250%
     Series Z ($25,000,000  carrying amount,  redeemable  October 12, 2009), and
     4,000,000  units of our  7.250%  Series J  ($100,000,000  carrying  amount,
     redeemable May 9, 2011) preferred partnership units.

              In March 2009,  we acquired  all of the 6.40%  Series NN preferred
     partnership  units from a third party ($200.0 million  carrying amount) for
     approximately  $128.0 million,  plus accrued and unpaid  distributions from
     December 31, 2008 through the closing date. This transaction resulted in an
     increase  in paid-in  capital of  approximately  $72.0  million for the six
     months  ended June 30, 2009,  based upon the excess of the carrying  amount
     over the amount paid.

              Also  in  March  2009,  we  acquired  all of the  6.25%  Series  Z
     preferred  partnership  units from a third party  ($25.0  million  carrying
     amount) for $25.0 million. This resulted in no increase in income allocated
     to the common shareholders as they were acquired at par.

              At June 30, 2009, our preferred partnership units outstanding were
     comprised  of  4,000,000  units  of our  7.250%  Series J  preferred  units
     ($100,000,000 carrying amount,  redeemable May 9, 2011). Subject to certain
     conditions,  the Series J preferred  units are  convertible  into our 7.25%
     Series J Cumulative Preferred Shares.

              During the three and six months ended June 30, 2009,  we allocated
     a total of  $1,813,000  and  $5,830,000,  respectively,  in income to these
     interests based upon  distributions  paid. During the same periods in 2008,
     we allocated a total of $5,403,000 and $10,806,000, respectively, in income
     to these interests based upon distributions paid.

                                       23


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

              In  addition,  during  the six  months  ended  June 30,  2009,  we
     allocated  $72,000,000 in income from these  interests in  determining  net
     income allocable to Public Storage  shareholders  based upon our redemption
     of certain of the preferred  partnership  units for a cash payment that was
     $72,000,000 less than the related book value.

              Other Permanent Noncontrolling Interests in Subsidiaries
              --------------------------------------------------------

              At June 30, 2009, the Other Permanent  Noncontrolling Interests in
     Subsidiaries   represent  equity   interests  in  28  entities   (generally
     partnerships) that own in aggregate 94 self-storage facilities.

              Shurgard  Europe  has a 20%  equity  interest  in two VIE's  which
     developed  self-storage  facilities in Europe,  and Shurgard Europe was the
     primary beneficiary. The remaining 80% equity interest in these entities is
     owned by an unaffiliated  investor.  On March 31, 2008, Shurgard Europe was
     deconsolidated  (see Note 3),  eliminating  these permanent  noncontrolling
     interests in subsidiaries  at March 31, 2008. See Note 5 under  "Investment
     in Shurgard Europe" for further historical  information  regarding Shurgard
     Europe, including historical income allocated to these interests.  Earnings
     allocated   to  these   interests   are   included   in  "Other   Permanent
     Noncontrolling   Interests  in  Subsidiaries"  for  periods  prior  to  the
     deconsolidation of Shurgard Europe.

              During the three and six months ended June 30, 2009,  we allocated
     a total of  $4,158,000  and  $8,306,000,  respectively,  in income to these
     interests.  During  the same  periods  in  2008,  we  allocated  a total of
     $4,465,000  and  $6,422,000,  respectively,  of income to these  interests.
     During the six months ended June 30, 2009 and 2008,  we paid  distributions
     to these interests totaling $7,581,000 and $7,950,000, respectively.


                                       24


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

8.   Public Storage Shareholders' Equity
     -----------------------------------

              Cumulative Preferred Shares
              ---------------------------

            At June 30, 2009 and December 31, 2008, we had the following series
     of Cumulative Preferred Shares of beneficial interest outstanding:




                                                             At June 30, 2009             At December 31, 2008
                           Earliest                     ---------------------------    --------------------------
                          Redemption      Dividend        Shares       Liquidation       Shares       Liquidation
       Series                Date           Rate        Outstanding    Preference      Outstanding     Preference
--------------------    -------------    -----------    -----------    ------------    ------------   -----------
                                                                      (Dollar amounts in thousands)
                                                                                    
Series V                   9/30/07            7.500%         6,200     $  155,000           6,900     $  172,500
Series W                   10/6/08            6.500%         5,300        132,500           5,300        132,500
Series X                  11/13/08            6.450%         4,800        120,000           4,800        120,000
Series Y                    1/2/09            6.850%       750,900         18,772         750,900         18,772
Series Z                    3/5/09            6.250%         4,500        112,500           4,500        112,500
Series A                   3/31/09            6.125%         4,600        115,000           4,600        115,000
Series B                   6/30/09            7.125%         4,350        108,750           4,350        108,750
Series C                   9/13/09            6.600%         4,425        110,625           4,600        115,000
Series D                   2/28/10            6.180%         5,400        135,000           5,400        135,000
Series E                   4/27/10            6.750%         5,650        141,250           5,650        141,250
Series F                   8/23/10            6.450%         9,893        247,325          10,000        250,000
Series G                  12/12/10            7.000%         4,000        100,000           4,000        100,000
Series H                   1/19/11            6.950%         4,200        105,000           4,200        105,000
Series I                    5/3/11            7.250%        20,700        517,500          20,700        517,500
Series K                    8/8/11            7.250%        16,990        424,756          16,990        424,756
Series L                  10/20/11            6.750%         8,267        206,665           8,267        206,665
Series M                    1/9/12            6.625%        19,065        476,634          19,065        476,634
Series N                    7/2/12            7.000%         6,900        172,500           6,900        172,500
                                                        -----------    ------------    ------------   -----------
     Total Cumulative Preferred Shares                     886,140     $3,399,777         887,122     $3,424,327
                                                        ===========    ============    ============   ===========


              The  holders  of our  Cumulative  Preferred  Shares  have  general
     preference rights with respect to liquidation and quarterly  distributions.
     Holders of the preferred  shares,  except under certain  conditions  and as
     noted below, will not be entitled to vote on most matters.  In the event of
     a cumulative  arrearage  equal to six quarterly  dividends,  holders of all
     outstanding  series of preferred  shares  (voting as a single class without
     regard to series)  will have the right to elect two  additional  members to
     serve on our Board of Trustees until events of default have been cured.  At
     June 30, 2009, there were no dividends in arrears.

              Except  under  certain   conditions   relating  to  the  Company's
     qualification as a REIT, the Cumulative Preferred Shares are not redeemable
     prior the dates  indicated on the table above.  On or after the  respective
     dates,  each  of  the  series  of  Cumulative   Preferred  Shares  will  be
     redeemable,  at the option of the Company,  in whole or in part,  at $25.00
     per share (or depositary share as the case may be), plus accrued and unpaid
     dividends. Holders of the Cumulative Preferred Shares do not have the right
     to require the Company to redeem such shares.

                                       25


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

              Upon  issuance of our  Cumulative  Preferred  Shares of beneficial
     interest,  we classify the  liquidation  value as  preferred  equity on our
     consolidated  balance sheet with any issuance costs recorded as a reduction
     to paid-in capital.

              During  March  2009,  we  repurchased  certain  of our  Cumulative
     Preferred Shares in privately negotiated  transactions as follows: Series V
     - 700,000  depositary shares,  each representing  1/1,000 of a share of our
     Cumulative  Preferred  Shares at a total  cost of  $13,230,000,  Series C -
     175,000  depositary  shares,  each  representing  1/1,000 of a share of our
     Cumulative  Preferred  Shares at a total cost of $2,695,000  and Series F -
     107,000  depositary  shares,  each  representing  1/1,000 of a share of our
     Cumulative  Preferred  Shares at a total cost of  $1,610,000.  The carrying
     value of the  shares  repurchased  totaled  $23.8  million  ($24.6  million
     liquidation  preference less $0.8 million of original issuance costs),  and
     exceeded the aggregate  repurchase  cost of $17.5 million by  approximately
     $6.2  million.  For purposes of  determining  net income per share,  income
     allocated to our preferred shareholders was reduced by the $6.2 million for
     the six months ended June 30, 2009.

     Common Shares
     -------------

              Common Shares
              -------------

              During the six months ended June 30, 2009, we issued 75,971 common
     shares in connection with employee stock-based compensation.

              Our Board of Trustees  previously  authorized the repurchase  from
     time to time of up to 25,000,000 of our common shares on the open market or
     in privately  negotiated  transactions.  On May 8, 2008, such authorization
     was increased to 35,000,000 common shares. During the six months ended June
     30, 2009, we did not repurchase any of our common shares.  Through June 30,
     2009,  we have  repurchased  a total of  23,721,916  of our  common  shares
     pursuant to this authorization.

              Equity Shares, Series A
              -----------------------

              At June 30,  2009 and  December  31,  2008,  we had  8,377,193  of
     depositary  shares  outstanding,  each  representing  1/1,000  of an Equity
     Share, Series A. The Equity Shares, Series A rank on parity with our common
     shares  and  junior to the  Cumulative  Preferred  Shares  with  respect to
     general preference rights and have a liquidation amount which cannot exceed
     $24.50 per share. Distributions with respect to each depositary share shall
     be the  lesser  of:  (i) five  times the per share  dividend  on our common
     shares or (ii) $2.45 per annum. We have no obligation to pay  distributions
     on  the  depositary   shares  if  no  distributions   are  paid  to  common
     shareholders.  During the six months ended June 30, 2009 and 2008,  we paid
     quarterly  distributions  to the holders of the Equity Shares,  Series A of
     $0.6125 per share for each of the quarters ended March 31 and June 30.

              Except in order to  preserve  the  Company's  Federal  income  tax
     status as a REIT, we may not redeem the depositary shares  representing the
     Equity Shares,  Series A before March 31, 2010. On or after March 31, 2010,
     we  may,  at our  option,  redeem  the  depositary  shares  at  $24.50  per
     depositary  share.  If the Company fails to preserve its Federal income tax
     status as a REIT, each of the depositary  shares will be convertible at the
     option of the shareholder  into .956 common shares.  The depositary  shares
     are otherwise not  convertible  into common  shares.  Holders of depositary
     shares  vote as a  single  class  with  holders  of our  common  shares  on
     shareholder  matters,  but the  depositary  shares have the  equivalent  of
     one-tenth of a vote per depositary share.

                                       26


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

              Equity Shares, Series AAA
              -------------------------

              In  November  1999,  we sold  $100,000,000  (4,289,544  shares) of
     Equity  Shares,  Series AAA  ("Equity  Shares AAA") to a newly formed joint
     venture.  The Equity  Shares AAA ranks on a parity with  common  shares and
     junior to the Senior  Preferred  Shares with respect to general  preference
     rights,  and  has  a  liquidation  amount  equal  to  120%  of  the  amount
     distributed to each common share. Annual  distributions per share are equal
     to the lesser of (i) five times the  amount  paid per common  share or (ii)
     $2.1564. We have no obligation to pay distributions if no distributions are
     paid to common shareholders.  During the six months ended June 30, 2009 and
     2008, we paid quarterly  distributions  to the holder of the Equity Shares,
     Series AAA of $0.5391 per share for each of the quarters ended March 31 and
     June 30.  For all  periods  presented,  the Equity  Shares,  Series AAA and
     related dividends are eliminated in consolidation.

              Dividends
              ---------

              The unaudited characterization of dividends for Federal income tax
     purposes is made based upon earnings and profits of the Company, as defined
     by the Internal Revenue Code.  Common share dividends totaled $92.9 million
     ($0.55 per share) and $92.8 million ($0.55 per share), for the three months
     ended June 30, 2009 and 2008,  respectively,  and $185.8 million ($1.10 per
     share) and $185.6 million ($1.10 per share),  for the six months ended June
     30, 2009 and 2008, respectively.  Equity Shares, Series A dividends totaled
     $5.1 million ($0.6125 per share) and $5.3 million ($0.6125 per share),  for
     the three  months ended June 30, 2009 and 2008,  respectively,  and totaled
     $10.3 million ($1.225 per share) and $10.7 million ($1.225 per share),  for
     the six months ended June 30, 2009 and 2008, respectively.  Preferred share
     dividends  pay fixed rates from  6.125% to 7.500% with a total  liquidation
     amount of $3,399,777,000 at June 30, 2009  ($3,424,327,000  at December 31,
     2008) and  dividends  aggregating  $58.1  million and $60.3 million for the
     three months ended June 30, 2009 and 2008, respectively, and $116.2 million
     and  $120.7  million  for the six  months  ended  June 30,  2009 and  2008,
     respectively.

9.   Related Party Transactions
     --------------------------

              Mr. Hughes,  Public  Storage's  Chairman of the Board of Trustees,
     and his family  (collectively the "Hughes Family") have ownership interests
     in, and operate  approximately  51 self-storage  facilities in Canada using
     the "Public  Storage"  brand name ("PS Canada")  pursuant to a royalty-free
     trademark  license  agreement with Public Storage.  We currently do not own
     any interests in these  facilities  nor do we own any facilities in Canada.

                                       27


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

     The Hughes Family owns  approximately 20% of our common shares  outstanding
     at June 30, 2009.  We have a right of first refusal to acquire the stock or
     assets of the corporation  that manages the 51  self-storage  facilities in
     Canada,  if the  Hughes  Family or the  corporation  agrees  to sell  them.
     However, we have no interest in the operations of this corporation, we have
     no right to acquire this stock or assets unless the Hughes  Family  decides
     to sell and we receive no benefit  from the profits and  increases in value
     of the Canadian self-storage facilities.

              We reinsure  risks  relating to loss of goods stored by tenants in
     the self-storage facilities in Canada. During the six months ended June 30,
     2009  and  2008,  we  received  $390,000  and  $441,000,  respectively,  in
     reinsurance  premiums  attributable to the Canadian  facilities.  Since our
     right to provide  tenant  reinsurance  to the  Canadian  facilities  may be
     qualified, there is no assurance that these premiums will continue.

              Public Storage and Mr. Hughes are  co-general  partners in certain
     consolidated  partnerships  and affiliated  partnerships  of Public Storage
     that are not consolidated. The Hughes Family owns 47.9% of the voting stock
     and Public Storage holds 46% of the voting and 100% of the nonvoting  stock
     (representing  substantially all the economic  interest) of a private REIT.
     The private REIT owns  limited  partnership  interests  in five  affiliated
     partnerships.  The Hughes Family also owns limited partnership interests in
     certain of these  partnerships and holds securities in PSB. PS Canada holds
     approximately  a 1.2%  interest  in  Stor-RE,  a  consolidated  entity that
     provides liability and casualty insurance for PS Canada, Public Storage and
     certain  affiliates of Public Storage,  for  occurrences  prior to April 1,
     2004 as  described  below.  Public  Storage and the Hughes  Family  receive
     distributions  from  these  entities  in  accordance  with the terms of the
     partnership agreements or other organizational documents.

              From time to time, the Company and the Hughes Family have acquired
     limited   partnership   units  from  limited   partners  of  the  Company's
     consolidated  partnerships.  In connection with the acquisition in 1998 and
     1999 of a total of 638 limited partnership units by Tamara Hughes Gustavson
     and H-G Family Corp., a company owned by Hughes Family members, the Company
     was granted an option to acquire the limited  partnership units acquired at
     cost,  plus  expenses.  During the  fourth  quarter  of 2008,  the  Company
     exercised  its option to acquire  the units for a total  purchase  price of
     approximately  $239,000.  The  transaction  was approved by the independent
     members of the Board of Trustees  after  considering  that the value of the
     units  had  appreciated  significantly  since  1998  and  1999 and that the
     exercise price for the Company was  substantially  below the prices paid to
     acquire  similar  limited  partner units in third party  transactions.  The
     acquisition was effective January 1, 2009.

10.      Share-Based Compensation
         ------------------------

              Stock Options
              -------------

              We have various  stock option plans  (collectively  referred to as
     the "PS Plans").  Under the PS Plans, the Company has granted non-qualified
     options to certain  trustees,  officers  and key  employees to purchase the
     Company's  common  shares at a price equal to the fair market  value of the
     common  shares  at the date of  grant.  Generally,  options  granted  after
     December 31, 2002 vest generally over a five-year period and expire between
     eight years and ten years after the date they  became  exercisable.  The PS
     Plans  also  provide  for the grant of  restricted  shares  (see  below) to
     officers,  key  employees and service  providers on terms  determined by an
     authorized committee of our Board.

              We recognize  compensation  expense for  share-based  awards based
     upon their fair value on the date of grant  amortized  over the  applicable
     vesting  period  (the "Fair Value  Method"),  net of  estimates  for future
     forfeitures.

              For the three and six months  ended  June 30,  2009,  we  recorded
     $900,000 and $1,500,000, respectively, in stock option compensation expense
     related to options  granted  after January 1, 2002, as compared to $951,000
     and $1,367,000 for the same periods in 2008.

              A total of 1,485,000  stock  options  were granted  during the six
     months ended June 30, 2009, 19,619 shares were exercised, and 79,000 shares
     were forfeited. A total of 3,783,713 stock options were outstanding at June
     30, 2009 (2,397,332 at December 31, 2008).

              Outstanding  stock options are included on a one-for-one  basis in
     our diluted  weighted  average  shares,  less a reduction  for the treasury
     stock method applied to a) the average cumulative measured but unrecognized
     compensation  expense  during the period and b) the strike  price  proceeds
     expected from the employee upon exercise.

                                       28


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

              Restricted Share Units
              ----------------------

              Outstanding  restricted share units vest over a five or eight-year
     period from the date of grant at the rate of  one-fifth or  one-eighth  per
     year, respectively.  The employee receives additional compensation equal to
     the per-share  dividends  received by common  shareholders  with respect to
     restricted share units  outstanding.  Such compensation is accounted for as
     dividends  paid.  Any  dividends  paid  on  units  which  are  subsequently
     forfeited are expensed.  Upon vesting,  the employee receives common shares
     equal to the number of vested  restricted  share units in exchange  for the
     units.

              The total value of each  restricted  share unit grant,  based upon
     the market  price of our common  shares at the date of grant,  is amortized
     over the  service  period,  net of  estimates  for future  forfeitures,  as
     compensation  expense.  The related  employer  portion of payroll  taxes is
     expensed as incurred.

              During the six months ended June 30, 2009, 99,050 restricted share
     units were granted, 42,022 restricted share units were forfeited and 90,633
     restricted  share units  vested.  This vesting  resulted in the issuance of
     56,352 common shares. In addition,  cash compensation was paid to employees
     in lieu of 34,281  common  shares based upon the market value of the shares
     at the date of vesting,  and used to settle the  employees'  tax  liability
     generated by the vesting.

              At June 30, 2009,  approximately  596,607  restricted  share units
     were outstanding  (630,212 at December 31, 2008). A total of $2,580,000 and
     $4,593,000 in  restricted  share expense was recorded for the three and six
     months ended June 30, 2009,  respectively,  as compared to  $2,533,000  and
     $4,891,000 for the same periods in 2008.  Restricted share expense includes
     amortization  of the  grant-date  fair value of the units  reflected  as an
     increase to paid-in capital, as well as payroll taxes we incurred upon each
     respective vesting.

              See  also  "net  income  per  common   share"  above  for  further
     discussion regarding the impact of restricted share units on our net income
     per common and income allocated to common shareholders.

11.      Segment Information
         -------------------

              Description of Each Reportable Segment
              --------------------------------------

              Our reportable segments reflect significant  operating  activities
     that are  evaluated  separately by  management,  comprised of the following
     segments which are organized based upon their operating characteristics.

              Our   self-storage   segment   comprises  the  direct   ownership,
     development,  and operation of traditional  self-storage  facilities in the
     U.S.,  and  the  ownership  of  equity   interests  in  entities  that  own
     self-storage  facilities in the U.S., and our interest in the operations of
     a facility in London,  England.  Our Shurgard Europe segment  comprises our
     interest in the  self-storage  and associated  activities owned by Shurgard
     Europe.  See also Note 3 for a discussion of the disposition of an interest
     in, and deconsolidation of, Shurgard Europe effective March 31, 2008.

              Our ancillary  segment  includes (i) the  reinsurance  of policies
     against losses to goods stored by tenants in our  self-storage  facilities,
     (ii) merchandise  sales,  (iii) commercial  property  operations,  and (iv)
     management of  facilities  for third  parties and  facilities  owned by the
     Unconsolidated  Entities.  During the three months ended March 31, 2009, we
     discontinued our truck rental and containerized  storage operations,  which
     previously had been included in our ancillary  segment.  See  "Discontinued
     Operations" in Note 2 for further discussion.

                                       29


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

              Measurement of Segment Income (Loss) and Segment Assets -
              ---------------------------------------------------------
              Self-Storage and Ancillary
              --------------------------

              The   self-storage   and  ancillary   segments  are  evaluated  by
     management  based upon the net segment income of each segment.  Net segment
     income  represents net income in conformity  with GAAP and our  significant
     accounting policies as denoted in Note 2, before interest and other income,
     interest  expense,  and  corporate  general  and  administrative   expense.
     Interest  and  other  income,  interest  expense,   corporate  general  and
     administrative expense, and gains and losses on sales of real estate assets
     are not allocated to these  segments  because  management  does not utilize
     them to evaluate the results of operations  of each  segment.  In addition,
     there is no presentation of segment assets for these other segments because
     total assets are not considered in the evaluation of these segments.

              Measurement of Segment Income (Loss) and Segment Assets -
              ---------------------------------------------------------
              Shurgard Europe
              ---------------

              Shurgard  Europe's  operations  are primarily  independent  of our
     other segments,  with a separate  management team that makes the financing,
     capital  allocation,  and other significant  decisions.  As a result,  this
     segment is evaluated by  management  as a stand-alone  business  unit.  The
     Shurgard  Europe  segment  presentation   includes  all  of  the  revenues,
     expenses,  and operations of this business unit to the extent  consolidated
     in our financial statements,  and for periods following the deconsolidation
     of Shurgard  Europe,  the  presentation  below includes our equity share of
     Shurgard Europe's  operations,  the interest and other income received from
     Shurgard Europe,  as well as specific general and  administrative  expense,
     disposition  gains,  and foreign  currency  exchange  gains and losses that
     management  considers in evaluating our investment in Shurgard  Europe.  At
     June 30,  2009,  our  condensed  consolidated  balance  sheet  includes  an
     investment in Shurgard  Europe with a book value of $268.5 million  ($264.1
     million at December 31, 2008) and a loan  receivable  from Shurgard  Europe
     totaling  (euro)391.9  million ($550.5 million) ($552.4 million at December
     31, 2008).

              Presentation of Segment Information
              -----------------------------------

              The following table reconciles the performance of each segment, in
     terms of  segment  income,  to our  consolidated  net  income  (amounts  in
     thousands):


                                       30


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009


For the three months ended June 30, 2009



                                                                                                     Other Items Not
                                                                       Shurgard                        Allocated to         Total
                                                     Self-Storage       Europe        Ancillary         Segments       Consolidated
                                                    ---------------  ------------    -------------   ---------------   -------------
                                                                                   (Amounts in thousands)
Revenues:
                                                                                                        
   Self-storage facilities.......................     $   371,630     $        -      $         -      $        -      $  371,630
   Ancillary operations..........................               -              -           28,106               -          28,106
   Interest and other income.....................               -          5,993                -           1,523           7,516
                                                    ---------------  ------------    -------------   ---------------   -------------
                                                          371,630          5,993           28,106           1,523         407,252
                                                    ---------------  ------------    -------------   ---------------   -------------

Expenses:
  Cost of operations:
      Self-storage facilities....................         124,478              -                -               -         124,478
      Ancillary operations.......................               -              -           10,374               -          10,374
  Depreciation and amortization..................          83,124              -              672               -          83,796
  General and administrative.....................               -              -                -           8,199           8,199
  Interest expense...............................               -              -                -           7,288           7,288
                                                    ---------------  ------------    -------------   ---------------   -------------
                                                          207,602              -           11,046          15,487         234,135
                                                    ---------------  ------------    -------------   ---------------   -------------
Income (loss) from continuing operations before
   equity in earnings of real estate entities
   and foreign currency exchange gain............         164,028          5,993           17,060         (13,964)        173,117

Equity in earnings of real estate entities.......             488          1,709            5,201               -           7,398
Foreign currency exchange gain...................               -         33,205                -               -          33,205
                                                    ---------------  ------------    -------------   ---------------   -------------
Income (loss) from continuing operations.........         164,516         40,907           22,261         (13,964)        213,720
Discontinued operations..........................               -              -                -          (8,333)         (8,333)
                                                    ---------------  ------------    -------------   ---------------   -------------
Net income (loss)................................     $   164,516     $   40,907      $    22,261      $  (22,297)     $  205,387
                                                    ===============  ============    =============   ===============   =============






                                       31


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009


For the three months ended June 30, 2008



                                                                                                    Other Items Not
                                                                      Shurgard                       Allocated to         Total
                                                     Self-Storage      Europe        Ancillary         Segments        Consolidated
                                                    --------------  -------------   ------------    ---------------  ---------------
                                                                                 (Amounts in thousands)
Revenues:
                                                                                                      
   Self-storage facilities.......................     $  380,770     $        -      $        -      $        -      $    380,770
   Ancillary operations..........................              -              -          26,710               -            26,710
   Interest and other income.....................              -          6,532               -           4,482            11,014
                                                    --------------  -------------   ------------    ---------------  ---------------
                                                         380,770          6,532          26,710           4,482           418,494
                                                    --------------  -------------   ------------    ---------------  ---------------
Expenses:
  Cost of operations:
      Self-storage facilities....................        128,124              -               -               -           128,124
      Ancillary operations.......................              -              -          12,064               -            12,064
  Depreciation and amortization..................         94,177              -             652               -            94,829
  General and administrative.....................              -         25,400               -           7,773            33,173
  Interest expense...............................              -              -               -           9,601             9,601
                                                    --------------  -------------   ------------    ---------------  ---------------
                                                         222,301         25,400          12,716          17,374           277,791
                                                    --------------  -------------   ------------    ---------------  ---------------
Income (loss) from continuing operations before
   equity in earnings of real estate entities, loss
   on disposition of other real estate investments
   and foreign currency exchange loss............        158,469        (18,868)         13,994         (12,892)          140,703

Equity in earnings of real estate entities.......            328          1,457           2,847               -             4,632
Loss on disposition of other real estate
   investments...................................              -              -               -             (92)              (92)
Foreign currency exchange loss...................              -             (2)              -               -                (2)
                                                    --------------  -------------   ------------    ---------------  ---------------
Income (loss) from continuing operations.........        158,797        (17,413)         16,841         (12,984)          145,241
Discontinued operations..........................              -              -               -          (1,286)           (1,286)
                                                    --------------  -------------   ------------    ---------------  ---------------
Net income (loss)................................     $  158,797     $  (17,413)     $   16,841      $  (14,270)     $    143,955
                                                    ==============  =============   ============    ===============  ===============




                                       32


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009


For the six months ended June 30, 2009



                                                                                                    Other Items Not
                                                                      Shurgard                       Allocated to         Total
                                                     Self-Storage      Europe        Ancillary         Segments        Consolidated
                                                    --------------  -------------   ------------    ---------------  ---------------
                                                                               (Amounts in thousands)
Revenues:
                                                                                                      
   Self-storage facilities.......................     $    742,869    $        -      $       -      $        -      $   742,869
   Ancillary operations..........................                -             -         53,941               -           53,941
   Interest and other income.....................                -        11,354              -           3,795           15,149
                                                    --------------  -------------   ------------    ---------------  ---------------
                                                           742,869        11,354         53,941           3,795          811,959
                                                    --------------  -------------   ------------    ---------------  ---------------
Expenses:
  Cost of operations:
      Self-storage facilities....................          257,952             -              -               -          257,952
      Ancillary operations.......................                -             -         20,027               -           20,027
  Depreciation and amortization..................          167,110             -          1,652               -          168,762
  General and administrative.....................                -             -              -          17,878           17,878
  Interest expense...............................                -             -              -          15,416           15,416
                                                    --------------  -------------   ------------    ---------------  ---------------
                                                           425,062             -         21,679          33,294          480,035
                                                    --------------  -------------   ------------    ---------------  ---------------
Income (loss) from continuing operations before
   equity in earnings of real estate entities, gain
   on disposition of other real estate investments, gain
   on early retirement of debt and foreign currency
   exchange loss.................................          317,807        11,354         32,262         (29,499)         331,924

Equity in earnings of real estate entities.......              934         3,608         25,667               -           30,209
Gain on disposition of other real estate
   investments...................................                -             -              -           2,722            2,722
Gain on early retirement debt....................                -             -              -           4,114            4,114
Foreign currency exchange loss...................                -        (1,528)             -               -           (1,528)
                                                    --------------  -------------   ------------    ---------------  ---------------
Income (loss) from continuing operations.........          318,741        13,434         57,929         (22,663)         367,441
Discontinued operations..........................                -             -              -          (8,625)          (8,625)
                                                    --------------  -------------   ------------    ---------------  ---------------
Net income (loss)................................     $    318,741    $   13,434      $  57,929      $  (31,288)     $   358,816
                                                    ==============  =============   ============    ===============  ===============




                                       33


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009


For the six months ended June 30, 2008



                                                                                                    Other Items Not
                                                                      Shurgard                       Allocated to         Total
                                                     Self-Storage      Europe        Ancillary         Segments        Consolidated
                                                    --------------  -------------   ------------    ---------------  ---------------
                                                                                 (Amounts in thousands)
Revenues:
                                                                                                       
   Self-storage facilities.......................     $  750,321     $    54,722      $        -      $        -      $   805,043
   Ancillary operations..........................              -           4,913          51,834               -           56,747
   Interest and other income.....................              -           6,532               -           7,326           13,858
                                                    --------------  -------------   ------------    ---------------  ---------------
                                                         750,321          66,167          51,834           7,326          875,648
                                                    --------------  -------------   ------------    ---------------  ---------------
Expenses:
  Cost of operations:
      Self-storage facilities....................        260,125          24,654               -               -          284,779
      Ancillary operations.......................              -           1,409          21,959               -           23,368
  Depreciation and amortization..................        193,604          21,871           1,594               -          217,069
  General and administrative.....................              -          30,044               -          18,045           48,089
  Interest expense...............................              -           6,892               -          19,196           26,088
                                                    --------------  -------------   ------------    ---------------  ---------------
                                                         453,729          84,870          23,553          37,241          599,393
                                                    --------------  -------------   ------------    ---------------  ---------------
Income (loss) from continuing operations before
   equity in earnings of real estate entities, gain
   on disposition of real estate investments and
   foreign currency exchange gain................        296,592         (18,703)         28,281         (29,915)         276,255

Equity in earnings of real estate entities.......            712           1,457           5,192               -            7,361
Gain on disposition of real estate investments...              -         341,865               -             (92)         341,773
Foreign currency exchange gain...................              -          40,969               -               -           40,969
                                                    --------------  -------------   ------------    ---------------  ---------------
Income (loss) from continuing operations.........        297,304         365,588          33,473         (30,007)         666,358
Discontinued operations..........................              -               -               -          (2,462)          (2,462)
                                                    --------------  -------------   ------------    ---------------  ---------------
Net income (loss)................................     $  297,304     $   365,588      $   33,473      $  (32,469)     $   663,896
                                                    ==============  =============   ============    ===============  ===============



                                       34


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

12.      Commitments and Contingencies
         -----------------------------

         Legal Matters
         -------------

         Brinkley v. Public  Storage,  Inc.  (filed April 2005)
         ------------------------------------------------------
         (Superior  Court of  California - Los Angeles County)
         -----------------------------------------------------

              The plaintiff  sued the Company on behalf of a purported  class of
     California  non-exempt  employees based on various California wage and hour
     laws and seeking  monetary  damages and injunctive  relief.  In May 2006, a
     motion  for  class   certification   was  filed  seeking  to  certify  five
     subclasses.   Plaintiff  sought   certification  for  alleged  meal  period
     violations, rest period violations, failure to pay for travel time, failure
     to pay for mileage  reimbursement,  and for wage statement  violations.  In
     October  2006,  the  Court  declined  to  certify  three  out of  the  five
     subclasses.  The Court did,  however,  certify  subclasses based on alleged
     meal period and wage statement violations.  Subsequently, the Company filed
     a motion  for  summary  judgment  seeking  to  dismiss  the  matter  in its
     entirety.  On June 22,  2007,  the  Court  granted  the  Company's  summary
     judgment  motion  as to the  causes of action  relating  to the  subclasses
     certified and dismissed those claims.  The only surviving  claims are those
     relating to the named  plaintiff.  The plaintiff has filed an appeal to the
     Court's June 22, 2007 summary  judgment  ruling.  On October 28, 2008,  the
     Court of Appeals sustained the trial court's ruling.  The plaintiff filed a
     petition for review with the California  Supreme  Court,  which was granted
     but further action in this matter was deferred  pending  consideration  and
     disposition  of a related  issue in Brinker  Restaurant  Corp.  v. Superior
     Court which is currently pending before the California Supreme Court.

         Other Items
         -----------

              We are a party to  various  claims,  complaints,  and other  legal
     actions that have arisen in the normal course of business from time to time
     that are not  described  above.  We believe  that it is  unlikely  that the
     outcome of these other pending legal proceedings  including  employment and
     tenant claims,  in the aggregate,  will have a material adverse impact upon
     our operations or financial position.

         Insurance and Loss Exposure
         ---------------------------

              We  have  historically  carried  customary  property,  earthquake,
     general liability and workers compensation coverage through internationally
     recognized insurance carriers,  subject to customary levels of deductibles.
     The aggregate limits on these policies of $75 million for property coverage
     and $102 million for general liability are higher than estimates of maximum
     probable  loss  that  could  occur  from  individual   catastrophic  events
     determined in recent engineering and actuarial studies; however, in case of
     multiple catastrophic events, these limits could be exhausted.

              Our tenant  insurance  program  reinsures a program that  provides
     insurance to certificate  holders against claims for property losses due to
     specific  named  perils  (earthquakes  and floods are not  covered by these
     policies) to goods  stored by tenants at our  self-storage  facilities  for
     individual limits up to a maximum of $5,000. We have third-party  insurance
     coverage  for  claims  paid  exceeding  $1,000,000  resulting  from any one
     individual  event, to a limit of $25,000,000.  At June 30, 2009, there were
     approximately  612,000 certificate holders participating in this program in
     the U.S. representing  aggregate coverage of approximately $1.4 billion. We
     rely on a  third-party  insurance  company to provide the insurance and are
     subject to licensing  requirements  and regulations in several  states.  No
     assurance  can be given that this  activity can continue to be conducted in
     any given jurisdiction.

                                       35


                                PUBLIC STORAGE
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2009

         Operating Lease Obligations
         ---------------------------

              We lease land,  equipment and office space under various operating
     leases. At June 30, 2009, the future minimum rental payments required under
     our  operating  leases  for the years  ending  December  31, are as follows
     (amounts in thousands):

     2009......................................    $    3,497
     2010......................................         5,858
     2011......................................         5,315
     2012......................................         5,321
     2013......................................         5,201
     Thereafter................................        74,492
                                                   -----------
                                                   $   99,684
                                                   ===========

              Expenses under operating  leases were  approximately  $1.3 million
     and $2.7  million  for the  three  and six  months  ended  June  30,  2009,
     respectively,  as  compared to $1.3  million and $2.6  million for the same
     periods in 2008.







                                       36



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

     The following  discussion and analysis  should be read in conjunction  with
our condensed consolidated financial statements and notes thereto.

     FORWARD  LOOKING   STATEMENTS:   This  document  contains   forward-looking
statements within the meaning of the federal  securities laws. All statements in
this document,  other than  statements of historical  fact, are  forward-looking
statements  which  may  be  identified  by  the  use  of  the  words  "expects,"
"believes,"  "anticipates,"  "plans," "would,"  "should," "may," "estimates" and
similar expressions.  These forward-looking statements involve known and unknown
risks and  uncertainties,  which may cause Public  Storage's  actual results and
performance to be materially  different  from those  expressed or implied in the
forward-looking   statements.   As  a  result,   you  should  not  rely  on  any
forward-looking  statements in this report,  or which management may make orally
or in writing from time to time, as  predictions of future events nor guarantees
of future  performance.  Risk that could  impact  our  performance  and  results
include,  but are not limited to, those  described in Item 1A, "Risk Factors" in
our most recent  Annual  Report on Form 10-K and in this Form 10-Q, in our other
filings with the Securities and Exchange Commission, and the following:

     o    general  risks  associated  with the  ownership  and operation of real
          estate   including   changes  in  demand,   potential   liability  for
          environmental   contamination,   adverse  changes  in  tax,  including
          property  tax,  real estate and zoning laws and  regulations,  and the
          impact of natural disasters;

     o    risks associated with downturns in the national and local economies in
          the markets in which we operate,  including  risks  related to current
          economic conditions;

     o    the  impact of  competition  from new and  existing  self-storage  and
          commercial facilities and other storage alternatives;

     o    difficulties  in  our  ability  to  successfully  evaluate,   finance,
          integrate  into  our  existing  operations  and  manage  acquired  and
          developed properties;

     o    risks  associated with  international  operations  including,  but not
          limited to, unfavorable foreign currency rate fluctuations, that could
          adversely affect our earnings and cash flows;

     o    risks related to our participation in joint ventures;

     o    the impact of the regulatory  environment as well as national,  state,
          and local laws and regulations  including,  without limitation,  those
          governing  environmental,  tax and tenant  insurance  matters and real
          estate investment trusts ("REITs"), and risks related to the impact of
          new laws and regulations;

     o    risks  associated  with a possible  failure by us to qualify as a REIT
          under the Internal Revenue Code of 1986, as amended;

     o    disruptions  or shutdowns of our  automated  processes  and systems or
          breaches of our data security;

     o    difficulties in raising capital at a reasonable cost;

     o    fill-up of our newly developed properties; and

     o    economic uncertainty due to the impact of war or terrorism.

     Our forward-looking  statements speak only as of the date of this report or
as of the dates indicated in the statements.  We assume no obligation to update,
revise or  supplement  publicly  any  forward-looking  statements,  whether as a
result of new information, future events or otherwise.

                                       37


     CRITICAL ACCOUNTING POLICIES

     Management's  Discussion and Analysis of Financial Condition and Results of
Operations  discusses our  consolidated  financial  statements,  which have been
prepared in accordance with United States ("U.S.") generally accepted accounting
principles  ("GAAP").  The  preparation of our financial  statements and related
disclosures  in  conformity  with GAAP and our  discussion  and  analysis of our
financial  condition  and  results of  operations  requires  management  to make
judgments,  assumptions  and estimates  that affect the amounts  reported in our
condensed consolidated financial statements and accompanying notes. The notes to
our June 30, 2009 condensed consolidated financial statements, primarily Note 2,
summarize  the  significant   accounting   policies  and  methods  used  in  the
preparation  of our  condensed  consolidated  financial  statements  and related
disclosures.

     Management  believes the following are critical  accounting  policies,  the
application  of  which  has  a  material  impact  on  the  Company's   financial
presentation. That is, they are both important to the portrayal of our financial
condition  and  results,  and they  require  management  to make  judgments  and
estimates about matters that are inherently uncertain.

     QUALIFICATION AS A REIT - INCOME TAX EXPENSE:  We believe that we have been
organized  and operated,  and we intend to continue to operate,  as a qualifying
REIT under the Internal  Revenue Code and applicable state laws. We also believe
that Shurgard,  prior to merging with us,  qualified as a REIT. A REIT generally
does not pay  corporate  level federal  income taxes on its REIT taxable  income
that is distributed to its shareholders,  and accordingly, we do not pay federal
income tax on the share of our REIT taxable  income that is  distributed  to our
shareholders.

     We therefore  do not estimate or accrue any federal  income tax expense for
income earned and distributed related to REIT operations. This estimate could be
incorrect,  because  due  to  the  complex  nature  of  the  REIT  qualification
requirements,   the  ongoing  importance  of  factual   determinations  and  the
possibility of future changes in our circumstances, we cannot be assured that we
actually have satisfied or will satisfy the  requirements for taxation as a REIT
for any  particular  taxable  year.  For any  taxable  year that we fail or have
failed to qualify as a REIT and for which applicable  relief  provisions did not
apply,  we would be taxed at the regular  corporate  rates on all of our taxable
income,  whether or not we made or make any  distributions to our  shareholders.
Any resulting  requirement to pay corporate income tax, including any applicable
penalties or interest,  could have a material  adverse  impact on our  financial
condition or results of  operations.  Unless  entitled to relief under  specific
statutory provisions,  we also would be disqualified from taxation as a REIT for
the four taxable  years  following  the year for which  qualification  was lost.
There can be no assurance that we would be entitled to any statutory  relief. In
addition,  if  Shurgard  failed to qualify as a REIT,  we  generally  would have
succeeded to or incurred significant tax liabilities.

     IMPAIRMENT OF LONG-LIVED ASSETS: Substantially all of our assets consist of
long-lived  assets,  including  real  estate and other  intangible  assets.  The
evaluation of our long-lived assets for impairment includes  determining whether
indicators  of  impairment  exist,  which  is a  subjective  process.  When  any
indicators of impairment  are found,  the evaluation of such  long-lived  assets
then entails  projections of future  operating  cash flows,  which also involves
significant  judgment.  Future events, or facts and circumstances that currently
exist, that we have not yet identified, could cause us to conclude in the future
that our long-lived  assets are impaired.  Any resulting  impairment  loss could
have a  material  adverse  impact on our  financial  condition  and  results  of
operations.

     ESTIMATED  USEFUL  LIVES OF  LONG-LIVED  ASSETS:  Substantially  all of our
assets consist of  depreciable  or  amortizable,  long-lived  assets.  We record
depreciation  and  amortization  expense with respect to these assets based upon
their estimated  useful lives. Any change in the estimated useful lives of those
assets,  caused by functional or economic  obsolescence or other factors,  could
have a  material  adverse  impact  on our  financial  condition  or  results  of
operations.

     ACCRUALS FOR CONTINGENCIES:  We are exposed to business and legal liability
risks with respect to events that have occurred, but in accordance with GAAP, we
have not accrued for such potential  liabilities  because the loss is either not
probable  or not  estimable  or because  we are not aware of the  event.  Future
events and the  results of pending  litigation  could  result in such  potential
losses  becoming  probable and  estimable,  which could have a material  adverse

                                       38


impact on our  financial  condition  or  results  of  operations.  Some of these
potential  losses,  of which we are aware,  are described in Note 12 to our June
30, 2009 condensed consolidated financial statements.

     ACCRUALS  FOR  OPERATING  EXPENSES:  We accrue for property tax expense and
certain other operating  expenses based upon estimates and historical trends and
current and anticipated  local and state government  rules and  regulations.  If
these estimates and assumptions are incorrect, our expenses could be misstated.

     VALUATION OF ASSETS AND LIABILITIES ACQUIRED IN BUSINESS  COMBINATIONS:  We
have estimated the fair value of real estate,  intangible assets,  debt, and the
other  assets and other  liabilities  acquired  in business  combinations,  most
notably the Shurgard  Merger.  We have acquired these assets,  in certain cases,
with non-cash assets, most notably the 38.9 million shares that we issued to the
Shurgard  shareholders.   These  estimates  are  based  upon  many  assumptions,
including  interest  rates,  market values of land and buildings in the U.S. and
Europe, estimated future cash flows from the tenant base in place at the time of
the  merger,  and the  recoverability  of certain  assets.  We believe  that the
assumptions used were reasonable,  however,  these assumptions were subject to a
significant  degree of judgment,  and others could come to materially  different
conclusions as to the estimated values,  if different  assumptions were used. If
the values were  determined  using  different  assumptions  than those used, our
depreciation and amortization expense,  interest expense, gain on disposition of
an interest in Shurgard Europe,  real estate,  debt, and intangible assets could
have been materially different.

     OVERVIEW OF MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS

     Our principal  business  activities  include the acquisition,  development,
ownership and operation of  self-storage  facilities  which offer storage spaces
for lease,  generally on a month-to-month  basis, for personal and business use.
We are the largest  owner and operator of  self-storage  facilities in the U.S.,
and we have an interest in what we believe is the largest  owner and operator of
self-storage facilities in Europe.

     We currently  operate within three reportable  segments:  (i) self-storage,
(ii) Shurgard Europe and (iii) ancillary. The self-storage segment comprises the
direct and indirect ownership,  development, and operation of storage facilities
in the U.S. Our Shurgard  Europe  segment  comprises our equity  interest in the
self-storage and associated activities in seven countries in Western Europe. Our
ancillary segment represents all of our other activities,  which are reported as
a group, including (i) commercial property operations,  directly and through our
46% ownership  interest in PS Business Parks,  Inc.  ("PSB"),  a publicly traded
REIT whose common stock trades on the New York Stock  Exchange  under the symbol
"PSB" (as of June 30, 2009, PSB owned and operated 19.6 million  rentable square
feet of commercial  space),  (ii) the reinsurance of policies  against losses to
goods stored by tenants in our self-storage facilities,  (iii) merchandise sales
at our  self-storage  facilities and (iv) management of self-storage  facilities
owned by  third-party  owners and domestic  facilities  owned by the  affiliated
entities that are not consolidated.

     During the three months ended March 31, 2009,  we decided to terminate  our
containerized storage and truck rental operations,  each of which had previously
been classified in our ancillary segment. Accordingly, the results of operations
for these  operations  have been  included  in  discontinued  operations  on our
condensed consolidated  statements of income. Our self-storage facilities in the
U.S.  comprise  approximately 91% of our operating revenue for each of the three
and six months ended June 30, 2009,  and represent the primary  driver of growth
in our net  income  and cash flows from  operations.  In  addition,  much of our
ancillary revenues are derived at our self-storage  facility  locations,  either
from our existing self-storage customer base or from the customer traffic within
our self-storage facilities. Accordingly, a large portion of management time and
focus is placed upon maximizing  revenues and effectively  managing  expenses in
our self-storage facilities.

     The self-storage  industry is not immune to the  recessionary  pressures in
the general economic environment. Demand for self-storage space in both the U.S.
and Europe has softened and, as a result, we are experiencing  downward pressure
on  occupancy  levels,  rental  rates,  and  revenues  in each of our  operating
segments.

     An important  determinant  of our long-term  growth is the expansion of our
asset base and deployment of capital.  Acquisitions of  self-storage  facilities
have  been  minimal  over  the  past  year  as we  continue  to  monitor  seller
expectations  and wait for better  opportunities  that may come about as certain
local developers,  who raised capital through the issuance of debt,  endeavor to

                                       39


refinance such debt in the near-term,  but face the current tight credit markets
as  well as  pressure  on  operating  cash  flow  due to the  current  difficult
operating  environment.  There can be no assurance that such  opportunities  may
arise either in the short or long-term.

     While  historically we have developed real estate  facilities,  our current
development  of real estate  facilities  has been  minimized due to the existing
recession and our belief that our capital can be more  effectively put to use in
other ways.

     We currently  have $584.9  million in cash and cash  equivalents on hand at
June 30, 2009, and continue to monitor the appropriate and most effective way to
deploy this capital,  primarily  either through the acquisition of facilities or
through the opportunistic  acquisition of our own debt and equity securities. We
acquired  $110.2  million  of our  outstanding  senior  unsecured  notes  during
February  2009 and we  acquired,  for $24.6  million,  certain of our  preferred
securities in March 2009 at a substantial  discount to liquidation  value.  Also
during March 2009,  we acquired  for $153.0  million,  certain of our  preferred
partnership units at a substantial discount to their carrying amount.

RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2009:
-----------------------------------------------------------

     Net income to our shareholders for the three months ended June 30, 2009 was
$199.2  million  compared  to  $133.8  million  for the  same  period  in  2008,
representing an increase of $65.4 million. This increase is primarily due to (i)
a $33.2  million  foreign  exchange  gain during the three months ended June 30,
2009, (ii) a $25.4 million reduction in general and administrative  expenses due
to  incentive  compensation  incurred  in the three  months  ended June 30, 2008
related to our disposition of an interest in Shurgard Europe, and (iii) an $11.0
million  reduction in depreciation  and  amortization,  primarily due to reduced
intangible  amortization,  offset by (iv) a  reduction  in Same  Store  facility
operations and (v) an impairment charge included in discontinued operations with
respect to  intangible  assets  totaling  $8.2 million in the three months ended
June 30, 2009.

     Revenues for the Same Store  Facilities  decreased 3.5% or $12.6 million in
the three months ended June 30, 2009 as compared to the same period in 2008, due
to a 2.9% reduction in realized rent per occupied  square foot,  combined with a
1.1%  reduction in average  occupancies.  Cost of operations  for the Same Store
Facilities declined 3.4% or $4.1 million in the three months ended June 30, 2009
as  compared  to the  same  period  in 2008,  due  primarily  to a $2.6  million
reduction  in media  advertising  and a $1.5  million  reduction  in repairs and
maintenance, offset by a 4.3% ($1.5 million) increase in property tax expense.

     For the three  months  ended June 30,  2009,  net income  allocable  to our
common  shareholders  (after  allocating  net income to our preferred and equity
shareholders)  was $135.5  million or $0.80 per common share on a diluted  basis
compared to $68.0  million or $0.40 per common share on a diluted  basis for the
same period in 2008,  representing  an  increase  of $67.5  million or $0.40 per
common share on a diluted basis. These increases are primarily due to the impact
of the factors described above.

     Weighted average diluted common shares were 168,528,000 and 168,479,000 for
the three months ended June 30, 2009 and 2008, respectively.

     OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2009:
     ---------------------------------------------------------

     Net income to our  shareholders  for the six months ended June 30, 2009 was
$416.2  million  compared  to  $646.2  million  for the  same  period  in  2008,
representing a decrease of $230.0 million. This decrease is primarily due to (i)
a gain of $341.8  million in the six months  ended June 30, 2008  related to our
disposition  of an  interest in Shurgard  Europe and (ii) an  impairment  charge
included in discontinued  operations with respect to intangible  assets totaling
$8.2  million in the six months ended June 30,  2009,  (iii) a foreign  exchange
gain of $41.0  million  during the same period in 2008,  and (iv) a reduction in
Same Store  operations,  partially  offset by (v) a $72.0  million  reduction in
earnings allocated to our preferred  partnership  unitholders in the first three
months of 2009 associated with the redemption of securities, (vi) a reduction in
general  and   administrative   expenses  due  to  $27.9  million  in  incentive

                                       40


compensation  incurred  in the six  months  ended June 30,  2008  related to our
disposition  of an  interest  in  Shurgard  Europe,  and  (vii) a $26.5  million
reduction in  depreciation  and  amortization  related to our  domestic  assets,
primarily representing reduced intangible amortization.

     Revenues for the Same Store  Facilities  decreased 2.2% or $15.4 million in
the six months  ended June 30, 2009 as compared to the same period in 2008,  due
to a 1.5% reduction in realized rent per occupied  square foot,  combined with a
1.1%  reduction in average  occupancies.  Cost of operations  for the Same Store
Facilities  declined  1.2% or $2.9 million in the six months ended June 30, 2009
as  compared  to the  same  period  in 2008,  due  primarily  to a $1.4  million
reduction  in media  advertising  and a $2.2  million  reduction  in repairs and
maintenance, offset by a 4.1% ($2.9 million) increase in property tax expense.

     For the six months ended June 30, 2009, net income  allocable to our common
shareholders   (after   allocating  net  income  to  our  preferred  and  equity
shareholders)  was $295.0  million or $1.75 per common share on a diluted  basis
compared to $512.8  million or $3.04 per common share on a diluted basis for the
same  period in 2008,  representing  a decrease  of $217.8  million or $1.29 per
common share on a diluted basis. These decreases are primarily due to the impact
of the factors described above.

     Weighted average diluted common shares were 168,501,000 and 168,731,000 for
the six months ended June 30, 2009 and 2008, respectively.

REAL ESTATE OPERATIONS
--------------------------------------------------------------------------------

     SELF-STORAGE OPERATIONS: Our self-storage operations are by far the largest
component of our operating  activities,  representing  approximately  91% of our
total  revenues  generated  for each of the three and six months  ended June 30,
2009 and  2008.  Net  operating  income  (after  depreciation  and  amortization
expense) with respect to our self-storage  operations  increased by $5.6 million
and $13.0  million  during the three and six months  ended June 30,  2009,  when
compared to the same  periods in 2008 due to  decreased  amortization  of tenant
intangible  assets,  offset partially by the  deconsolidation of Shurgard Europe
effective April 1, 2008.

     To enhance year-over-year comparisons,  the following table summarizes, and
the  ensuing  discussion  describes  the  operating  results of three  groups of
facilities  that management  analyzes with respect to the Company's  performance
for our  self-storage  segment,  which  includes:  (i)  the  Same  Store  group,
representing our domestic  facilities that we have owned and have been operating
on a stabilized  basis since January 1, 2007,  (ii) the  facilities  operated by
Shurgard  Europe which were  deconsolidated  effective March 31, 2008, and (iii)
all other facilities included in our financial  statements,  which are primarily
those facilities that we have not owned and operated at a stabilized basis since
January 1, 2007 such as newly acquired,  newly developed,  or recently  expanded
facilities.

                                       41



 SELF-STORAGE OPERATIONS
 SUMMARY                                    Three Months Ended June 30,                  Six Months Ended June 30,
                                    -----------------------------------------    -----------------------------------------
                                                                  Percentage                                  Percentage
                                        2009           2008          Change          2009          2008          Change
                                    -----------    -----------   ------------    -----------    -----------   ------------
                                                                 (Dollar amounts in thousands)

 Rental income:
                                                                                                
   Same Store Facilities..........  $   346,839    $   359,461        (3.5)%     $   694,024   $   709,452        (2.2)%
   Other Facilities ..............       24,791         21,309        16.3%           48,845        40,869        19.5%
   Shurgard Europe Facilities (a).            -              -         -                   -        54,722      (100.0)%
                                    -----------    -----------   ------------    -----------   -----------   ------------
     Total rental income..........      371,630        380,770        (2.4)%         742,869       805,043        (7.7)%
                                    -----------    -----------   ------------    -----------   -----------   ------------
Cost of operations:
   Same Store Facilities..........      116,426        120,526        (3.4)%         241,433       244,382        (1.2)%
   Other Facilities...............        8,052          7,598         6.0%           16,519        15,743         4.9%
   Shurgard Europe Facilities (a).            -              -         -                   -        24,654      (100.0)%
                                    -----------    -----------   ------------    -----------   -----------   ------------
      Total cost of operations....      124,478        128,124        (2.8)%         257,952       284,779        (9.4)%
                                    -----------    -----------   ------------    -----------   -----------   ------------
Net operating income (b):
   Same Store Facilities..........      230,413        238,935        (3.6)%         452,591       465,070        (2.7)%
   Other Facilities...............       16,739         13,711        22.1%           32,326        25,126        28.7%
   Shurgard Europe Facilities (a).            -              -         -                   -        30,068      (100.0)%
                                    -----------    -----------   ------------    -----------   -----------   ------------
       Total net operating income.      247,152        252,646        (2.2)%         484,917       520,264        (6.8)%
   Total depreciation and
     amortization expense ........      (83,124)       (94,177)      (11.7)%        (167,110)     (215,475)      (22.4)%
                                    -----------    -----------   ------------    -----------   -----------   ------------
   Total net income...............  $   164,028    $   158,469         3.5%      $   317,807   $   304,789         4.3%
                                    ===========    ===========   ============    ===========   ===========   ============

Data for Same Store and Other Facilities:
Weighted average square foot
 occupancy during the period (c):
  Same Store Facilities...........      90.0%          91.0%          (1.1)%          88.9%         89.9%         (1.1)%
  Other Facilities................      84.4%          79.2%           6.6%           82.2%         76.0%          8.2%
Realized rents per occupied square
  foot during the period (d)(e):
  Same Store Facilities...........  $   12.52      $   12.90          (2.9)%     $    12.69    $    12.88         (1.5)%
  Other Facilities................  $   13.27      $   13.51          (1.8)%     $    13.46    $    13.71         (1.8)%
Number of facilities at period end:
  Same Store Facilities...........                                                    1,899         1,899            -
  Other Facilities................                                                       92            86          7.0%
Net rentable square footage at
  period end (in thousands):
  Same Store Facilities...........                                                  117,462       117,462            -
  Other Facilities................                                                    8,499         7,682         10.6%
Square foot occupancy at period end:
  Same Store Facilities...........                                                    90.7%         91.7%         (1.1)%
  Other Facilities................                                                    86.3%         84.6%          2.0%
In place rents per square foot at
  period end:
  Same Store Facilities...........                                               $   13.61     $    14.20         (4.2)%
  Other Facilities................                                               $   14.65     $    15.35         (4.6)%



     (a)  Represents  the results with respect to Shurgard  Europe's  properties
          for the periods consolidated in our financial statements.  We acquired
          these  facilities on August 22, 2006 in  connection  with the Shurgard
          Merger.  As  described  in  Note  3 to our  June  30,  2009  condensed
          consolidated  financial  statements,  effective  March  31,  2008,  we
          deconsolidated  Shurgard Europe.  See also "Equity in Earnings of Real
          Estate Entities - Investment in Shurgard  Europe" for further analysis
          of the historical same store property operations of Shurgard Europe.

     (b)  See "Net Operating income or NOI" below.

     (c)  Square foot occupancies  represent  weighted average  occupancy levels
          over the entire period.

     (d)  Realized   annual  rent  per  occupied  square  foot  is  computed  by
          annualizing  the result of dividing rental income (which excludes late
          charges and  administrative  fees) by the  weighted  average  occupied
          square feet for period.  Realized annual rent per occupied square foot

                                       42


          takes into  consideration  promotional  discounts and other items that
          reduce rental income from the contractual amounts due.

     (e)  Late charges and administrative fees are excluded from the computation
          of realized annual rent per occupied  square foot.  Exclusion of these
          amounts  provides a better  measure of our ongoing level of revenue by
          excluding  the  volatility  of  late  charges,   which  are  dependent
          principally upon the level of tenant  delinquency,  and administrative
          fees,  which are  dependent  principally  upon the  absolute  level of
          move-ins for a period.

     NET OPERATING INCOME
     --------------------

     Throughout the discussion  that follows,  we refer to net operating  income
("NOI") of our self-storage facilities,  which is a non-GAAP (generally accepted
accounting   principles)   financial   measure  that   excludes  the  impact  of
depreciation and amortization  expense.  Although  depreciation and amortization
are a component of GAAP net income, we believe that NOI is a meaningful  measure
of  operating  performance,  because we  utilize  NOI in making  decisions  with
respect  to   capital   allocations,   property   performance,   and   comparing
period-to-period and  market-to-market  property operating results. In addition,
we believe the  investment  community  utilizes NOI in  determining  real estate
values,  and  does  not  consider  depreciation  expense  as  it is  based  upon
historical  cost.  NOI  is not a  substitute  for  net  operating  income  after
depreciation and amortization in evaluating our operating results. The following
reconciles NOI generated by our self-storage and Shurgard Europe segments to our
consolidated  net income in our June 30, 2009 condensed  consolidated  financial
statements.


                                           Three Months Ended June 30,    Six Months Ended June 30,
                                           ---------------------------   --------------------------
                                               2009           2008           2009           2008
                                           -----------    -----------    ------------   -----------
                                                            (Amounts in thousands)

Net operating income:
                                                                            
   Same-store facilities.................  $   230,413    $   238,935    $   452,591    $   465,070
   Other facilities......................       16,739         13,711         32,326         25,126
   Shurgard Europe facilities............            -              -              -         30,068
                                           -----------    -----------    ------------   -----------
      Total net operating income.........      247,152        252,646        484,917        520,264
Ancillary operating revenue..............       28,106         26,710         53,941         56,747
Interest and other income................        7,516         11,014         15,149         13,858
Ancillary cost of operations.............      (10,374)       (12,064)       (20,027)       (23,368)
Depreciation and amortization............      (83,796)       (94,829)      (168,762)      (217,069)
General and administrative expense.......       (8,199)       (33,173)       (17,878)       (48,089)
Interest expense.........................       (7,288)        (9,601)       (15,416)       (26,088)
Equity in earnings of real estate
     entities............................        7,398          4,632         30,209          7,361
 Gain (loss) on disposition of real
     estate investments..................            -            (92)         2,722        341,773
Gain on early debt retirement............            -              -          4,114              -
Foreign currency exchange gain (loss)....       33,205             (2)        (1,528)        40,969
Discontinued operations..................       (8,333)        (1,286)        (8,625)        (2,462)
                                           -----------    -----------    ------------   -----------
Net income of the Company................  $   205,387    $   143,955    $   358,816    $   663,896
                                           ===========    ===========    ===========    ===========



     Same Store Facilities

     The "Same  Store  Pool"  represents  those  1,899  facilities  that we have
owned, and have been operated on a stabilized  basis,  since January 1, 2007 and
therefore  provide  meaningful  comparisons  for 2007,  2008, and 2009. The Same
Store Pool  increased from 1,789 at December 31, 2008 to 1,899 at June 30, 2009,
as we added  facilities that are now stabilized and owned since January 1, 2007,
and removed  facilities from the previous Same Store Pool that, due primarily to
construction  activities,  are  no  longer  expected  to be  stabilized  through
December 31, 2009.  The following  table  summarizes  the  historical  operating
results of these 1,899 facilities  (117.5 million net rentable square feet) that
represent  approximately  93% of the aggregate  net rentable  square feet of our
U.S. consolidated self-storage portfolio at June 30, 2009.

                                       43



SAME STORE FACILITIES                                      Three Months Ended June 30,               Six Months Ended June 30,
                                                     --------------------------------------     ------------------------------------
                                                                                 Percentage                               Percentage
                                                         2009          2008         Change         2009          2008       Change
                                                     ----------     ----------   ----------     ----------    ----------  ----------

Revenues:                                                     (Dollar amounts in thousands, except weighted average amounts)
                                                                                                            
    Rental income..................................  $  330,854     $  344,703       (4.0)%     $  662,393    $  680,256      (2.6)%
    Late charges and admin fees collected..........      15,985         14,758        8.3%          31,631        29,196       8.3%
                                                     ----------     ----------   ----------     ----------    ----------  ----------
   Total revenues (a)..............................     346,839        359,461       (3.5)%        694,024       709,452      (2.2)%
                                                     ----------     ----------   ----------     ----------    ----------  ----------
Cost of operations:
    Property taxes.................................      36,659         35,156        4.3%          74,421        71,505       4.1%
    Direct property payroll........................      23,339         23,329        0.0%          47,699        47,706       0.0%
    Media advertising..............................       7,224          9,836      (26.6)%         15,382        16,783      (8.3)%
    Other advertising and promotion................       5,967          5,027       18.7%          10,581         9,453      11.9%
    Utilities......................................       7,899          8,360       (5.5)%         17,497        17,797      (1.7)%
    Repairs and maintenance........................       9,159         10,679      (14.2)%         19,875        22,077     (10.0)%
    Telephone reservation center...................       2,817          3,318      (15.1)%          5,611         6,441     (12.9)%
    Property insurance.............................       2,566          2,911      (11.9)%          5,264         6,124     (14.0)%
    Other cost of management.......................      20,796         21,910       (5.1)%         45,103        46,496      (3.0)%
                                                     ----------     ----------   ----------     ----------    ----------  ----------
   Total cost of operations (a)....................     116,426        120,526       (3.4)%        241,433       244,382      (1.2)%
                                                     ----------     ----------   ----------     ----------    ----------  ----------
Net operating income (b)...........................     230,413        238,935       (3.6)%        452,591       465,070      (2.7)%
Depreciation and amortization expense (c)..........     (75,200)       (85,178)     (11.7)%       (150,486)     (174,536)    (13.8)%
                                                     ----------     ----------   ----------     ----------    ----------  ----------
Net income.........................................  $  155,213     $  153,757        0.9%      $  302,105    $  290,534        4.0%
                                                     ==========     ==========   ==========     ===========   =========== ==========

Gross margin (before depreciation and amortization
expense)...........................................       66.4%          66.5%       (0.2)%         65.2%         65.6%       (0.6)%

Weighted average for the period:
   Square foot occupancy (d).......................       90.0%          91.0%       (1.1)%         88.9%         89.9%       (1.1)%
   Realized annual rent per occupied square
   foot(e)(f)......................................  $    12.52     $    12.90       (2.9)%     $   12.69     $   12.88       (1.5)%
   REVPAF (f)(g)...................................  $    11.27     $    11.74       (4.0)%     $   11.28     $   11.58       (2.6)%

 Weighted average at June 30:
   Square foot occupancy...........................                                                 90.7%         91.7%       (1.1)%
   In place annual rent per occupied square foot (h)                                            $   13.61    $    14.20       (4.2)%
Total net rentable square feet (in thousands)......                                               117,462       117,462         -
Number of facilities...............................                                                 1,899         1,899         -



     (a)  Revenues and cost of operations do not include ancillary  revenues and
          expenses   generated  at  the   facilities   with  respect  to  tenant
          reinsurance,   retail  sales  and  truck  rentals.   "Other  costs  of
          management" included in cost of operations  principally represents all
          the  indirect  costs  incurred in the  operations  of the  facilities.
          Indirect costs  principally  include  supervisory  costs and corporate
          overhead  cost  incurred to support the  operating  activities  of the
          facilities.

     (b)  See "Net Operating Income" above.

     (c)  Depreciation  and  amortization  expense  for the three and six months
          ended  June  30,  2009  decreased  primarily  due  to a  reduction  in
          amortization  expense related to intangible assets that we obtained in
          the Shurgard Merger.

     (d)  Square foot occupancies  represent  weighted average  occupancy levels
          over the entire period.

     (e)  Realized   annual  rent  per  occupied  square  foot  is  computed  by
          annualizing  the result of dividing rental income (which excludes late
          charges and  administrative  fees) by the  weighted  average  occupied
          square feet for the period.  Realized  annual rent per occupied square
          foot takes into  consideration  promotional  discounts and other items
          that reduce rental income from the contractual amounts due.

     (f)  Late charges and administrative fees are excluded from the computation
          of realized annual rent per occupied square foot and REVPAF. Exclusion
          of these  amounts  provides a better  measure of our ongoing  level of
          revenue,  by  excluding  the  volatility  of late  charges,  which are
          dependent  principally  upon the  level  of  tenant  delinquency,  and
          administrative fees, which are dependent principally upon the absolute
          level of move-ins for a period.

     (g)  Realized  annual  rent per  available  foot or "REVPAF" is computed by
          dividing rental income (which excludes late charges and administrative
          fees) by the total available net rentable square feet for the period.

                                       44


     (h)  In place annual rent per occupied  square foot  represents  annualized
          contractual  rents per  occupied  square foot without  reductions  for
          promotional  discounts  and excludes  late charges and  administrative
          fees.

     Revenues  generated by our Same Store  facilities  decreased  approximately
3.5% and 2.2% in the three and six months ended June 30, 2009, respectively,  as
compared  to the same  periods in 2008.  These  decreases  were  caused by lower
rental  income  generated  by  these  facilities  as a result  of lower  average
realized  annual  rental  rates per  occupied  square foot  combined  with lower
average  occupancy  levels.  For the three months  ended June 30, 2009,  average
realized  annual  rental  rates per  occupied  square  foot were 2.9%  lower and
average occupancy levels were 1.1% lower as compared to the same period in 2008,
resulting in a 4.0%  reduction in rental  income.  For the six months ended June
30, 2009,  average  realized  annual rental rates per occupied  square foot were
1.5% lower and average  occupancy levels were 1.1% lower as compared to the same
period in 2008, resulting in a 2.6% reduction in rental income.

     Demand for self-storage space has been negatively  impacted by recessionary
pressures, including increased unemployment,  reduced housing sales, and reduced
moving activity,  in each of the markets in which we operate.  In the top twenty
markets  in which we have the  highest  concentration  of  facilities,  only two
markets (New York and Houston) had positive  year-over-year  revenue  growth for
the three months ended June 30, 2009. This compares to the first three months of
the year,  where seven markets (New York,  Houston,  San  Francisco,  Washington
D.C.,  Chicago,  Minneapolis  and Dallas) had positive  year-over-year  revenues
growth.  Accordingly,  the  operating  trends,  with  respect to  year-over-year
revenue growth, have progressively declined.

     From a  geographic  standpoint,  we are  experiencing  levels  of  greatest
year-over-year  revenue declines in our Southeast markets,  located in North and
South Carolina,  Georgia,  and Florida, as well as the Pacific Northwest,  which
includes  Seattle and  Portland.  See  Analysis of  Regional  Trends  table that
follows.

     The following  summarizes Same Store quarterly  revenue growth trends, on a
year-over-year basis:

                                                            Same Store
                                                            Year-over-Year
                           Three Months Ended:              Revenue Growth
                           ---------------------------      -----------------
                           March 31, 2008                        3.4%
                           June 30, 2008                         3.5%
                           September 30, 2008                    2.6%
                           December 31, 2008                     1.7%
                           March 31, 2009                       (0.8)%
                           June 30, 2009                        (3.5)%

     As indicated in the table above,  during the first three  quarters of 2008,
we generated  relatively  strong  year-over-year  revenue  growth.  Beginning in
September  2008,  we began to  experience  a notable  decline in  year-over-year
move-ins that continued through October 2008, which we believe reflected general
economic  conditions.  To offset the decline in new  rentals,  we  significantly
reduced rental rates,  increased  promotional discounts to new incoming tenants,
and increased  marketing efforts.  These actions have stabilized move-in volumes
on a year-over-year  basis; however, we have not yet been able to restore rental
rates to the levels experienced in the prior year. We believe overall demand for
self-storage  space in  virtually  all of our  markets in which we  operate  has
decreased due to current  economic  conditions,  and coupled with an increase in
the number of  self-storage  operators over the past 10 years,  will continue to
foster a very  difficult  operating  environment,  at least in the near term. In
addition,  increased  move-out activity beginning in August 2008 exacerbated the
downward  pressure on occupancy levels created by reduced demand. In March 2009,
the increase in move-out  activity began to subside to the extent that move-outs
during the three months ended June 30, 2009 were less than the comparable period
in 2008.

     Based upon certain  comparative key operating metrics as of June 30, 2009 -
the 1.1%  decline in square foot  occupancy  and 4.2% lower in place annual rent
per occupied square foot detailed in the Self Storage  Operations  Summary table
above - we expect  that the revenue  decline for our Same Store  facilities

                                       45


for the three months ended  September 30, 2009 as compared to the same period in
2008 will  surpass 5%. Our  operating  strategy  will be to continue to focus on
maintaining  occupancy levels by adjusting rental rates,  promotional  discounts
and  marketing  activities.  It is  unclear  to us how much the above  mentioned
factors will impact our revenues beyond the third quarter of 2009.

     Cost of  operations  decreased by 3.4% and 1.2% in the three and six months
ended June 30, 2009,  as compared to the same periods in 2008.  These  decreases
were driven by  reduction in repairs and  maintenance,  media  advertising,  and
property insurance expenses, partially offset by increases in property taxes and
other advertising and promotion activities.

     Direct property  payroll expense  remained flat in the three and six months
ended June 30,  2009,  as compared to the same  periods in 2008.  This  reflects
minimal growth in average wage rates and lower hours incurred due to adjustments
in staffing levels.  For the remainder of 2009, we expect moderate growth trends
in payroll.

     Property tax expense increased by 4.3% and 4.1% in the three and six months
ended June 30,  2009,  respectively,  as compared  to the same  periods in 2008.
These increases are due to increases in assessments of property values. While we
expect  property  tax expense  growth of  approximately  4% in 2009,  the actual
growth could be higher or lower because there are several jurisdictions where we
have not yet received tax bills or assessment  information  for 2009, or appeals
or assessments are pending.

     Repairs  and  maintenance  expenditures  declined by 14.2% and 10.0% in the
three and six months ended June 30, 2009, respectively,  as compared to the same
periods in 2008. Repairs and maintenance expenditures are dependent upon several
factors, such as weather, the timing of periodic needs throughout our portfolio,
inflation,  and  random  events  and  accordingly  are  difficult  to project in
quarterly or annual  periods.  However,  we expect that repairs and  maintenance
expenditures will continue to moderate for the remainder of 2009.

     Media advertising for the Same Store facilities decreased 26.6% and 8.3% in
the three and six months ended June 30, 2009,  respectively,  as compared to the
same periods in 2008, as we realized cost reductions from more competitive media
rates and narrowed our media focus to selected  markets which we believe respond
most effectively to media efforts. We expect aggregate media advertising for the
quarter  ending  September  30, 2009 to be  approximately  $1.5  million to $2.0
million higher than the same period in 2008. Other  advertising and promotion is
comprised principally of yellow page and internet  advertising,  which increased
18.7% and 11.9% in the three and six months ended June 30,  2009,  respectively,
as compared to the same periods in 2008.

     Due to current  market  conditions  we expect  that we will  continue to be
aggressive  with media  advertising in the near term, and expect our media costs
to be approximately $4.1 million in the third quarter of 2009 as compared to the
low level of spending incurred in the third quarter of 2008. Our future spending
on yellow page, media, and internet  advertising  expenditures will be driven in
part by demand for our self-storage  spaces,  our current occupancy levels,  and
the  relative  efficacy  of  each  type of  advertising.  Media  advertising  in
particular  can be  volatile  and  increase  or  decrease  significantly  in the
short-term.

     Utility expenses  decreased 5.5% and 1.7% in the three and six months ended
June 30,  2009,  respectively,  as compared to the same  periods in 2008.  It is
difficult to estimate  future  utility  cost levels  because  utility  costs are
dependent upon changes in demand driven by weather and  temperature,  as well as
fuel prices, both of which are volatile and not predictable.

     Property  insurance  expense decreased 11.9% and 14.0% in the three and six
months  ended June 30,  2009,  respectively,  as compared to the same periods in
2008.  This  decline is  primarily  due to softer  insurance  markets as lack of
hurricane  activity and  additional  competition  from  insurance  providers has
benefited us. We expect  insurance  expense to be down slightly in the remainder
of 2009, as compared to the same period in 2008.

     Telephone  reservation  center costs decreased 15.1% and 12.9% in the three
and six months  ended  June 30,  2009,  respectively,  as  compared  to the same
periods in 2008, as we adjusted staffing levels to expected inquiry volumes.  We
expect future telephone reservation center costs to remain flat.

                                       46


     The following  table  summarizes  selected  quarterly  financial  data with
respect to the Same Store facilities:


                                               For the Quarter Ended
                      ----------------------------------------------------------------------
                         March 31            June 30         September 30        December 31        Entire Year
                      ------------         -----------      ------------        ------------       ------------
                                       (Amounts in thousands, except for per square foot amount)

Total revenues:
                                                                                 
     2009             $   347,185          $ 346,839
     2008             $   349,991          $ 359,461        $   368,976         $   357,202         $1,435,630

Total cost of operations:
     2009             $   125,007          $ 116,426
     2008             $   123,856          $ 120,526        $   113,972         $   104,442         $  462,796

Property tax expense:
     2009             $    37,762          $  36,659
     2008             $    36,349          $  35,156        $    36,161         $    28,159         $  135,825

Media advertising expense:
     2009             $     8,158          $   7,224
     2008             $     6,947          $   9,836        $     2,148         $       922         $   19,853

Other advertising and promotion expense:
     2009             $     4,614          $   5,967
     2008             $     4,426          $   5,027        $     4,645         $     4,137         $   18,235

REVPAF (a):
     2009             $    11.29           $  11.27
     2008             $    11.43           $  11.74         $     12.03         $     11.65         $    11.71

Weighted average realized annual rent per occupied square foot (a):
     2009             $    12.84          $   12.52
     2008             $    12.87          $   12.90         $    13.29          $     13.27         $    13.08

Weighted average occupancy levels for the period (a):
     2009                 87.9%              90.0%
     2008                 88.8%              91.0%               90.5%               87.8%              89.5%


     (a)  See  "Same  Store  Facilities"  table  above for  further  information
          regarding these measures, which are derived from non-GAAP measures.

                                       47


ANALYSIS OF REGIONAL TRENDS
---------------------------

     The  following   table  sets  forth  regional  trends  in  our  Same  Store
Facilities:


                                             Three Months Ended June 30,              Six Months Ended June 30,
                                        --------------------------------------- --------------------------------------
                                           2009         2008         Change        2009         2008        Change
                                        ------------ ------------ ------------- ------------ ------------ ------------
                                                  (Amounts in thousands, except for weighted average data)

SAME STORE FACILITIES OPERATING
TRENDS BY REGION
Revenues:
                                                                                            
   Southern California  (176
   facilities)......................    $    51,019  $    53,105      (3.9)%    $   102,757  $   105,252      (2.4)%
   Northern California  (167
   facilities)......................         37,310       38,372      (2.8)%         74,736       75,611      (1.2)%
   Texas  (231 facilities)..........         34,877       35,291      (1.2)%         69,471       69,484       0.0%
   Florida  (182 facilities)........         33,454       35,445      (5.6)%         67,257       70,530      (4.6)%
   Illinois  (119 facilities).......         21,869       22,457      (2.6)%         43,832       44,304      (1.1)%
   Washington (88 facilities).......         17,705       18,922      (6.4)%         35,610       37,228      (4.3)%
   Georgia  (86 facilities).........         12,028       12,893      (6.7)%         24,220       25,575      (5.3)%
   All other states  (850 facilities)       138,577      142,976      (3.1)%        276,141      281,468      (1.9)%
                                        ------------ ------------ ------------- ------------ ------------ ------------
Total revenues......................        346,839      359,461      (3.5)%        694,024      709,452      (2.2)%

Cost of operations:
   Southern California..............         11,523       11,870      (2.9)%         23,672       23,517       0.7%
   Northern California..............         10,081       10,429      (3.3)%         20,783       20,876      (0.4)%
   Texas............................         14,025       14,101      (0.5)%         28,220       28,421      (0.7)%
   Florida..........................         12,426       13,143      (5.5)%         24,893       25,899      (3.9)%
   Illinois.........................          9,693       10,384      (6.7)%         20,704       21,482      (3.6)%
   Washington.......................          4,528        4,550      (0.5)%          9,282        9,400      (1.3)%
   Georgia..........................          4,219        4,325      (2.5)%          8,526        8,543      (0.2)%
   All other states.................         49,931       51,724      (3.5)%        105,353      106,244      (0.8)%
                                        ------------ ------------ ------------- ------------ ------------ ------------
Total cost of operations............        116,426      120,526      (3.4)%        241,433      244,382      (1.2)%

Net operating income (a):
   Southern California..............         39,496       41,235      (4.2)%         79,085       81,735      (3.2)%
   Northern California..............         27,229       27,943      (2.6)%         53,953       54,735      (1.4)%
   Texas............................         20,852       21,190      (1.6)%         41,251       41,063       0.5%
   Florida..........................         21,028       22,302      (5.7)%         42,364       44,631      (5.1)%
   Illinois.........................         12,176       12,073       0.9%          23,128       22,822       1.3%
   Washington.......................         13,177       14,372      (8.3)%         26,328       27,828      (5.4)%
   Georgia..........................          7,809        8,568      (8.9)%         15,694       17,032      (7.9)%
   All other states.................         88,646       91,252      (2.9)%        170,788      175,224      (2.5)%
                                        ------------ ------------ ------------- ------------ ------------ ------------
Total net operating income..........    $   230,413  $   238,935      (3.6)%    $   452,591  $   465,070      (2.7)%

Weighted average occupancy (a):
   Southern California..............         90.2%        90.8%       (0.7)%         90.4%        90.5%       (0.1)%
   Northern California..............         89.6%        91.1%       (1.6)%         88.9%        90.0%       (1.2)%
   Texas............................         90.4%        91.9%       (1.6)%         89.5%        90.1%       (0.7)%
   Florida..........................         89.6%        89.2%        0.4%          88.9%        88.1%        0.9%
   Illinois.........................         88.9%        90.5%       (1.8)%         87.6%        88.9%       (1.5)%
   Washington.......................         89.6%        91.6%       (2.2)%         88.6%        90.6%       (2.2)%
   Georgia..........................         88.3%        90.6%       (2.5)%         87.0%        89.6%       (2.9)%
   All other states.................         90.4%        91.2%       (0.9)%         88.9%        89.9%       (1.1)%
                                        ------------ ------------ ------------- ------------ ------------ ------------
Total weighted average occupancy....         90.0%        91.0%       (1.1)%         88.9%        89.9%       (1.1)%



                                       48




   SAME STORE FACILITIES OPERATING
   TRENDS BY REGION (CONTINUED)               Three Months Ended June 30,              Six Months Ended June 30,
                                         -------------------------------------   ------------------------------------
                                            2009         2008         Change        2009         2008        Change
                                         -----------  ----------    ----------   ----------   ----------    ---------
                                                   (Amounts in thousands, except for weighted average data)

Realized annual rent per occupied square foot (a):
                                                                                             
   Southern California..............     $    18.76   $    19.41       (3.3)%    $    18.83   $    19.30       (2.4)%
   Northern California..............          16.66        16.86       (1.2)%         16.83        16.80        0.2%
   Texas............................           9.78         9.81       (0.3)%          9.85         9.76        0.9%
   Florida..........................          11.97        12.88       (7.1)%         12.14        12.97       (6.4)%
   Illinois.........................          12.74        12.93       (1.5)%         12.98        12.99       (0.1)%
   Washington.......................          13.48        14.16       (4.8)%         13.70        14.08       (2.7)%
   Georgia..........................           9.50        10.01       (5.1)%          9.71        10.04       (3.3)%
   All other states.................          11.43        11.75       (2.7)%         11.59        11.74       (1.3)%
                                         -----------  ----------    ----------   ----------   ----------    ---------
Total realized rent per square foot.     $    12.52   $    12.90       (2.9)%    $    12.69   $    12.88       (1.5)%
                                         ===========  ==========    ==========   ==========   ==========    =========

REVPAF (a):
   Southern California..............     $    16.92   $    17.63       (4.0)%    $    17.03   $    17.46       (2.5)%
   Northern California..............          14.93        15.36       (2.8)%         14.95        15.12       (1.1)%
   Texas............................           8.84         9.02       (2.0)%          8.82         8.87       (0.6)%
   Florida..........................          10.73        11.49       (6.6)%         10.79        11.44       (5.7)%
   Illinois.........................          11.33        11.70       (3.2)%         11.37        11.55       (1.6)%
   Washington.......................          12.08        12.97       (6.9)%         12.15        12.75       (4.7)%
   Georgia..........................           8.38         9.07       (7.6)%          8.44         8.99       (6.1)%
   All other states.................          10.33        10.72       (3.6)%         10.30        10.56       (2.5)%
                                         -----------  ----------   ----------    ----------   ----------    ---------
Total REVPAF........................     $    11.27   $    11.74       (4.0)%    $    11.28   $    11.58       (2.6)%
                                         ===========  ==========   ==========    ==========   ==========    =========


     (a)  See  "Same  Store  Facilities"  table  above for  further  information
          regarding these measures, which represent or are derived from non-GAAP
          measures.

     We believe  that our  geographic  diversification  and scale  provide  some
insulation from localized  economic effects and add to the stability of our cash
flows. It is difficult to predict  localized  trends in short-term  self-storage
demand and operating  results.  We believe that each market has been  negatively
impacted  to  some  degree  by  general  economic  trends  and may  continue  to
experience  negative  operating  trends  until such time that  general  economic
trends improve.

                                       49


     OTHER FACILITIES
     ----------------

     In  addition  to the Same Store  facilities,  at June 30,  2009,  we had an
additional  92  self-storage  facilities.   These  facilities  include  recently
acquired  facilities,  recently  developed  facilities and facilities  that were
recently  expanded  by  adding  additional  storage  units.  In  general,  these
facilities are not stabilized  with respect to occupancies or rental rates. As a
result of the fill-up  process and timing of when the  facilities  were put into
place, year-over-year changes can be significant.

     Rental income,  cost of  operations,  depreciation,  net operating  income,
weighted  average square foot  occupancies and realized rents per square foot in
the  table  above  represent  the  operating  results  following  the date  each
particular facility began to be included in our consolidated  operating results,
and in the case of acquired  facilities,  do not include any  operating  results
prior to our acquisition of these facilities.

     In the six  months  ended  June 30,  2009,  we  completed  three  expansion
projects to existing real estate  facilities  (75,000 net rentable  square feet)
for an aggregate cost of $13.6 million,  and did not acquire any new properties.
Also  during  the three and six  months  ended June 30,  2009,  we  discontinued
operations at one of our  self-storage  facilities in connection with an eminent
domain  proceeding,  resulting in an  impairment  charge of $8.2  million.  This
impairment charge along with the historical  operations of this facility for all
periods  presented  is  included in  discontinued  operations  on our  condensed
consolidated statements of income.

     We believe our presence in and knowledge of substantially  all of the major
markets in the U.S.  enhances  our  ability to identify  attractive  acquisition
opportunities  and  capitalize  on the  overall  fragmentation  in  the  storage
industry.  Our acquisitions consist of facilities that have been operating for a
number of years as well as newly constructed facilities that were in the process
of filling up to stabilized  occupancy levels. In either case, we have been able
to leverage off of our operating  strategies and improve the occupancy levels of
the facilities or, with respect to the newly developed facilities,  we have been
able to accelerate the fill-up pace.

     We expect  that the Other  Facilities  will  continue  to provide  earnings
growth  during  the  remainder  of 2009 as these  facilities  continue  to reach
stabilization.  However,  the Other Facilities are subject to the same occupancy
and rate pressures that our Same Store  facilities are facing as a result of the
recession,   and   accordingly  the  pace  at  which  these   facilities   reach
stabilization,  and  the  ultimate  level  of  cash  flows  to be  reached  upon
stabilization, may be negatively impacted by the current economic trends.

     Our  development  pipeline is nominal at June 30, 2009.  Our level of newly
developed  facilities  has declined  significantly  in the last few years due to
increases  in  construction   cost,   increases  in  competition   with  retail,
condominium,  and apartment  operators for quality  construction  sites in urban
locations, and more difficult zoning and permitting  requirements.  In addition,
we eliminated our development  pipeline in late 2008 due to reduced self-storage
demand and our belief that our capital can be put to use in a more  advantageous
manner.  It is  unclear  when we might  change  our  strategy  with  respect  to
development activities.

                                       50


     ANCILLARY  OPERATIONS:  Ancillary  revenues  and expenses  include  amounts
associated with (i) the  reinsurance of policies  against losses to goods stored
by  tenants  in our  self-storage  facilities,  (ii)  merchandise  sales,  (iii)
commercial  property  operations,  and (iv)  management of facilities  for third
parties and facilities owned by the Unconsolidated Entities.

     During the three months ended March 31, 2009,  we decided to terminate  our
truck  rental  and  containerized  operations.  Accordingly,  the  revenues  and
expenses of these  operations  are included in  discontinued  operations  on our
condensed  consolidated  statements of income for the three and six months ended
June 30, 2009 and 2008.

     The following table sets forth our ancillary operations as presented on our
condensed consolidated statement of operations:


                                                  Three Months Ended June 30             Six Months Ended June 30,
                                            -----------------------------------       --------------------------------
                                                2009          2008       Change        2009         2008       Change
                                            ------------    ---------   --------     -----------  ---------   --------
                                                                       (Amounts in thousands)

Ancillary Revenues:
                                                                                           
    Tenant reinsurance premiums ........       $  15,979    $  14,186   $  1,793      $  31,082    $ 28,008  $  3,074
    Merchandise sales...................           7,808        8,106       (298)        14,235      14,695      (460)
    Other ancillary operations .........           4,319        4,418        (99)         8,624       9,131      (507)
                                               ---------    ---------   --------      ---------    --------  --------
      Total ancillary segment revenues (a)        28,106       26,710      1,396         53,941      51,834     2,107
    Shurgard Europe merchandise and tenant
      insurance (b).....................               -            -          -              -       4,913    (4,913)
                                               ---------    ---------   --------      ---------    --------  --------
       Total  revenues..................          28,106       26,710      1,396         53,941      56,747    (2,806)
                                               ---------    ---------   --------      ---------    --------  --------
Ancillary Cost of operations:
    Tenant reinsurance premiums.........           3,211        3,916       (705)         6,438       6,939      (501)
    Merchandise sales...................           5,658        6,457       (799)        10,609      11,670    (1,061)
    Other ancillary operations..........           1,505        1,691       (186)         2,980       3,350      (370)
                                               ---------    ---------   --------      ---------    --------  --------
      Total ancillary cost of operations (a)      10,374       12,064     (1,690)        20,027      21,959    (1,932)
                                               ---------    ---------   --------      ---------    --------  --------
    Shurgard Europe merchandise and tenant
      insurance (b).....................               -            -          -              -       1,409    (1,409)
                                               ---------    ---------   --------      ---------    --------  --------
       Total cost of operations.........          10,374       12,064     (1,690)        20,027      23,368    (3,341)
                                               ---------    ---------   --------      ---------    --------  --------
Depreciation - Other ancillary operations (a):       672          652         20          1,652       1,594        58

Ancillary net income:
    Tenant reinsurance premiums.........          12,768       10,270      2,498         24,644      21,069     3,575
    Merchandise sales ..................           2,150        1,649        501          3,626       3,025       601
    Other ancillary operations .........           2,142        2,075         67          3,992       4,187      (195)
                                               ---------    ---------   --------      ---------    --------  --------
      Total ancillary segment net income (c)      17,060       13,994      3,066         32,262      28,281     3,981
    Shurgard Europe merchandise and tenant
      insurance (b).....................               -            -          -              -       3,504    (3,504)
                                               ---------    ---------   --------      ---------    --------  --------
       Total ancillary net income.......       $  17,060    $  13,994   $  3,066      $  32,262    $ 31,785  $    477
                                               =========    =========   ========      =========    ========  ========


     (a)  Revenues and expenses for these items are a component of our Ancillary
          segment,  which is described and reconciled to  consolidated  revenues
          and expenses,  respectively, in Note 11 to our June 30, 2009 condensed
          consolidated financial statements.

     (b)  Shurgard  Europe's  ancillary  revenues  and  expenses are included in
          Shurgard Europe Net Segment Income,  which is described and reconciled
          to net income in Note 11 to our June 30, 2009  condensed  consolidated
          financial statements.

     (c)  Ancillary net income as presented herein represents Net Segment Income
          prior to equity in earnings of real estate  entities  associated  with
          our  investment  in PS  Business  Parks.  Net  Segment  Income for our
          ancillary segment is described and reconciled to net income in Note 11
          to our June 30, 2009 condensed consolidated financial statements.

                                       51


     Tenant  reinsurance  operations:  We reinsure  policies  offered  through a
non-affiliated  insurance  company  against  losses to goods  stored by tenants,
primarily in our domestic self-storage  facilities.  The revenues that we record
are based upon premiums that we reinsure.  Cost of operations primarily includes
claims paid that are not covered by our outside third-party insurers, as well as
claims adjustment expenses.

     The  increase  in  tenant  reinsurance  revenues  over  the  past  year was
attributable  to higher rates combined with an increase in the percentage of our
existing  tenants  retaining  such  policies.  Approximately  58% and 53% of our
tenants had such policies at June 30, 2009 and 2008, respectively.

     The future level of tenant  reinsurance  revenues is largely dependent upon
the number of new tenants electing to purchase  policies,  the level of premiums
charged  for  such   insurance,   and  the  number  of  tenants  that   continue
participating  in the  insurance  program.  Future  cost of  operations  will be
dependent  primarily upon the level of losses  incurred,  including the level of
catastrophic events, such as hurricanes, that occur and affect our properties.

     Merchandise  sales:  We sell  locks,  boxes,  and  packing  supplies at the
self-storage  facilities that we operate. The primary factor impacting the level
of  merchandise  sales is the  level of  customer  traffic  at our  self-storage
facilities, including the level of move-ins.

     Other Ancillary:  We also operate  commercial  facilities,  primarily small
storefronts  and  office  space  located  on or near our  existing  self-storage
facilities  that are rented to third  parties,  and we also manage  self-storage
facilities with our existing management infrastructure, to third party owners as
well as to the Unconsolidated Entities. These businesses are largely independent
of the  self-storage  operations at our  facilities  and have  remained  largely
unchanged  in scope.  We do not expect any  significant  changes in  revenues or
profitability from these ancillary businesses.

     EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: In addition to our ownership of
equity  interests  in PSB  and  Shurgard  Europe,  we had  general  and  limited
partnership  interests in five limited partnerships at June 30, 2009. Due to our
limited  ownership  interest and limited  control of these  entities,  we do not
consolidate the accounts of these entities for financial reporting purposes, and
account for such investments using the equity method.

     Equity in  earnings of real  estate  entities  for the three and six months
ended June 30, 2009 and 2008,  consists of our pro-rata  share of the net income
of the Unconsolidated Entities based upon our ownership interest for the period.
The following table sets forth the significant  components of equity in earnings
of real estate entities. Amounts with respect to PSB, Shurgard Europe, and Other
Investments are included in our Ancillary,  Shurgard  Europe,  and  Self-Storage
segments,  respectively,  as described in Note 11 to our June 30, 2009 condensed
consolidated financial statements.

                                       52



HISTORICAL SUMMARY:                                Three Months Ended June 30,                 Six Months Ended June 30,
------------------                            -----------------------------------        ----------------------------------
                                                 2009         2008        Change           2009         2008        Change
                                              ---------     ---------   ---------        ---------    ---------    ---------
                                                                           (Amounts in thousands)

Net operating income (1):
                                                                                                 
  PSB....................................     $  20,983     $  22,119   $  (1,136)       $  42,536    $  43,898    $  (1,362)
  Shurgard Europe........................        10,427        13,757      (3,330)          20,439       13,757        6,682
  Other Investments......................           679         1,101        (422)           1,332        2,250         (918)
                                              ---------     ---------   ---------        ---------    ---------    ---------
                                                 32,089        36,977      (4,888)          64,307       59,905        4,402
                                              ---------     ---------   ---------        ---------    ---------    ---------
Depreciation:
  PSB....................................        (9,639)      (11,412)      1,773          (19,870)     (23,003)       3,133
  Shurgard Europe .......................        (7,106)      (10,856)      3,750          (14,315)     (10,856)      (3,459)
  Other Investments......................          (194)         (553)        359             (386)      (1,134)         748
                                              ---------     ---------   ---------        ---------    ---------    ---------
                                                (16,939)      (22,821)      5,882          (34,571)     (34,993)         422
                                              ---------     ---------   ---------        ---------    ---------    ---------
Other:(2):
  PSB (3)................................        (6,143)       (7,860)      1,717            3,001      (15,703)      18,704
  Shurgard Europe........................        (1,612)       (1,444)       (168)          (2,516)      (1,444)      (1,072)
  Other Investments .....................             3          (220)        223              (12)        (404)         392
                                              ---------     ---------   ---------        ---------    ---------    ---------
                                                 (7,752)       (9,524)      1,772              473      (17,551)      18,024
                                              ---------     ---------   ---------        ---------    ---------    ---------

Total equity in earnings of real estate entities:
  PSB....................................         5,201         2,847       2,354           25,667        5,192       20,475
  Shurgard Europe .......................         1,709         1,457         252            3,608        1,457        2,151
  Other Investments .....................           488           328         160              934          712          222
                                              ---------     ---------   ---------        ---------    ---------    ---------
                                              $   7,398     $   4,632   $   2,766        $  30,209    $   7,361    $  22,848
                                              =========     =========   =========        =========    =========    =========


     (1)  These amounts represent our pro-rata share of the net operating income
          of the Unconsolidated  Entities. See also "net operating income" above
          for a discussion of this non-GAAP measure.

     (2)  "Other"  reflects  our share of general  and  administrative  expense,
          interest  expense,  interest  income,  gains  on sale  of real  estate
          assets,  and other  non-property;  non-depreciation  related operating
          results of these entities.

     (3)  Includes  our pro rata share of benefit  totaling  $16.3  million from
          PSB's  preferred  stock and  preferred  unit  repurchases  for the six
          months ended June 30, 2009.


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

     Throughout  each of the three and six months  ended June 30, 2009 and 2008,
we owned  5,418,273  common shares and  7,305,355  operating  partnership  units
(units which are  convertible  into common shares on a one-for-one  basis) in PS
Business Parks, Inc., a public REIT (NYSE: PSB) representing a 46% common equity
interest in PSB. At June 30 2009,  PSB owned and operated 19.6 million  rentable
square  feet of  commercial  space  located in eight  states.  PSB also  manages
commercial  space owned by the Company and affiliated  entities at June 30, 2009
pursuant to property management agreements.

     Our future  equity  income from PSB will be dependent  entirely  upon PSB's
operating results.  Our investment in PSB provides us with some  diversification
into another asset type. We have no plans of disposing of our investment in PSB.
PSB's filings and selected  financial  information  can be accessed  through the
Securities and Exchange Commission, and on its website, www.psbusinessparks.com.

Investment in Shurgard Europe
-----------------------------

     As  described  in  Note 3 to  our  June  30,  2009  condensed  consolidated
financial  statements,  due to the  disposition  of a 51%  interest  in Shurgard
Europe,  our pro-rata  share of the operating  results of Shurgard  Europe after
March 31, 2008 is  included  in "equity in  earnings  of real estate  entities."
Subsequent to March 31, 2008, we no longer consolidate the revenues and expenses
of Shurgard Europe on our consolidated  statements of income. Selected financial

                                       53


data for  Shurgard  Europe for each of the three and six  months  ended June 30,
2009 and 2008 is included in Note 5 to our June 30, 2009 condensed  consolidated
financial statements.

     We  originally  acquired our 100%  interest in Shurgard  Europe  during our
merger with Shurgard,  which occurred in August 2006. Our primary  objective for
merging  with  Shurgard was to acquire  Shurgard's  U.S.  domestic  assets which
accounted  for  approximately  484  facilities  in the U.S.  as  compared to 149
facilities  in  Europe at the time of the  Shurgard  Merger.  Subsequent  to the
Shurgard Merger, management of Public Storage determined that it was in the best
interests of Public Storage to reduce our investment in Shurgard  Europe.  There
were many reasons for that  decision,  most relating to the fact that  continued
growth of  Shurgard  Europe  would  require a  significant  capital  commitment.
Movement  of capital  from  Public  Storage  (in the U.S.) to  various  European
countries would have exposed Public Storage to currency fluctuation risks and to
potential  tax burdens  when Public  Storage  wished to  repatriate  its capital
investment. Accordingly, in March 2008, we sold 51% of our ownership interest in
Shurgard Europe,  which helped to limit our capital  requirements to continue to
grow  Shurgard  Europe  and to  limit  our  exposure  to other  risks of  owning
operations in foreign  countries.  We do not intend to sell any of our remaining
interest  in  Shurgard  Europe.  In the  future,  we expect  Shurgard  Europe to
function as a stand-alone entity and to fund its capital requirements  primarily
with its  retained  operating  cash flow,  bank  borrowings  and,  to the extent
available, public or private equity.

     This transaction has resulted in the operations of Shurgard Europe having a
less significant impact on our operating results,  as we have a 49% interest and
a loan receivable from Shurgard  Europe upon which we receive  interest  income,
rather  than the 100% equity  interest  in Shurgard  Europe we held prior to the
transaction.  Our future  operating  results  will be impacted  by the  ultimate
returns realized on the reinvestment of the cash proceeds received in connection
with this transaction.

     At June 30, 2009, Shurgard Europe's operations comprise 184 facilities with
an aggregate of 9,783,000 net rentable  square feet.  The portfolio  consists of
112  wholly  owned  facilities  and 72  facilities  owned by two  joint  venture
partnerships, in which Shurgard Europe has a 20% equity interest.

     Equity in earnings  from our  investment  in Shurgard  Europe for the three
months ended June 30, 2009 was  $1,709,000  compared to $1,457,000  for the same
period  in 2008,  representing  an  increase  of  $252,000.  This  increase  was
primarily  due to a  $3,750,000  reduction  in our pro rata  share  of  Shurgard
Europe's depreciation expense,  offset partially by a $3,330,000 decrease in our
pro rata share of the net  operating  income of Shurgard  Europe's  self-storage
facilities,  see further  discussion of operating  results at Shurgard  Europe's
Same Stores below.  The reduction in depreciation  expense was due to reductions
in the amount of  amortization  associated with tenant  intangibles  acquired in
August 2006.

     Equity in  earnings  from our  investment  in  Shurgard  Europe for the six
months ended June 30, 2009 was  $3,608,000  compared to $1,457,000  for the same
period in 2008, representing an increase of $2,151,000.  This increase is due to
the timing of our disposition of the 51% interest in Shurgard Europe.  Equity in
earnings for the six month period in 2008 only  includes  amounts for the period
of April 1, 2008  through June 30, 2008 while the 2009 period  includes  amounts
for the entire six month period.

     Key metrics that we use to evaluate the  performance  of our  investment in
Shurgard  Europe are the  performance  metrics of Shurgard  Europe's  Same Store
Facilities.

     The Shurgard  Europe Same Store  Facilities  represent  those 94 facilities
that are  stabilized  and owned  since  January  1, 2007 and  therefore  provide
meaningful comparisons for 2007, 2008, and 2009. The number of facilities in the
Shurgard  Europe Same Store Pool  declined from 96 at December 31, 2008 to 94 at
June 30, 2009, as we removed  facilities from the previous  Shurgard Europe Same
Store  Pool  that,  due  primarily  to  construction  activities,  are no longer
expected to be stabilized  through  December 31, 2009, and added facilities that
are now stabilized and owned since January 1, 2007. The following table reflects
the operating results of these 94 facilities.

                                       54


SELECTED OPERATING DATA FOR THE 94 FACILITIES OPERATED
------------------------------------------------------
BY SHURGARD EUROPE ON A STABILIZED BASIS SINCE JANUARY
------------------------------------------------------
1, 2007 ("EUROPE SAME STORE FACILITIES"):                 Three Months Ended June 30,                Six Months Ended June 30,
-----------------------------------------           ---------------------------------------   --------------------------------------
                                                                                 Percentage                               Percentage
                                                       2009          2008          Change        2009          2008         Change
                                                    -----------   -----------    ---------    -----------   -----------    --------
                                                               (Dollar amounts in thousands, except weighted average data,
                                                                        utilizing constant exchange rates) (a) (b)

Revenues:
                                                                                                            
     Rental income.................................. $    27,815   $    29,224      (4.8)%     $    54,422   $    57,052      (4.6)%
     Late charges and administrative fees collected.         451           517     (12.8)%             886           996     (11.0)%
                                                     -----------   -----------    ---------    -----------   -----------    --------
   Total revenues...................................      28,266        29,741      (5.0)%          55,308        58,048      (4.7)%

Cost of operations (excluding depreciation and
  amortization expense):
     Property taxes ................................       1,460         1,422       2.7%            2,833         2,748       3.1%
     Direct property payroll........................       3,387         3,315       2.2%            6,671         6,468       3.1%
     Advertising and promotion......................       1,498         1,073      39.6%            2,941         1,802      63.2%
     Utilities......................................         640           694      (7.8)%           1,504         1,364      10.3%
     Repairs and maintenance........................         725           803      (9.7)%           1,527         1,562      (2.2)%
     Property insurance.............................         179           188      (4.8)%             343           363      (5.5)%
     Other costs of management......................       4,127         3,986       3.5%            7,860         7,923      (0.8)%
                                                     -----------   -----------    ---------    -----------   -----------    --------
  Total cost of operations..........................      12,016        11,481       4.7%           23,679        22,230       6.5%
                                                     -----------   -----------    ---------    -----------   -----------    --------
   Net operating income (c)......................... $    16,250   $    18,260     (11.0)%     $    31,629   $    35,818     (11.7)%
                                                     ===========   ===========    =========    ===========   ===========    ========

Gross margin........................................       57.5%         61.4%      (6.4)%           57.2%         61.7%      (7.3)%
Weighted average for the period:
     Square foot occupancy (d)......................       86.1%         86.9%      (0.9)%           85.4%         87.3%      (2.2)%
     Realized annual rent per occupied square
     foot (e)(f)....................................      $25.04        $26.07      (4.0)%          $24.70        $25.33      (2.5)%
     REVPAF (f)(g)..................................      $21.56        $22.65      (4.8)%          $21.09        $22.11      (4.6)%

Weighted average at June 30:
     Square foot occupancy..........................                                                 87.0%         87.4%      (0.5)%
     In place annual rent per occupied square foot (h)                                              $26.63        $27.66      (3.7)%
Total net rentable square feet (in thousands).......                                                 5,160         5,160        -


     (a)  The majority of Shurgard Europe's operations are denominated in Euros.
          For comparative  purposes,  amounts for the three and six months ended
          June 30,  2009 and 2008 are  translated  at  constant  exchange  rates
          representing  the average  exchange rates for the three and six months
          ended June 30, 2009,  respectively.  The average exchange rate for the
          Euro was  approximately  1.3606  and  1.3334  during the three and six
          months  ended June 30,  2009,  respectively, as  compared to 1.563 and
          1.530, respectively, for the same periods in 2008.

     (b)  Only the amounts for the period  ended March 31, 2008 are  included in
          our consolidated  financial statements.  We include our pro-rata share
          of these operating  results for periods after March 31, 2008 in Equity
          in Earnings of Real Estate Entities.  The amounts  incorporated in our
          financial  statements,  either  consolidated or equity method amounts,
          are based upon the actual  weighted  average  exchange  rates for each
          period.

     (c)  We  present  net  operating   income  "NOI"  of  the  Shurgard  Europe
          same-store  facilities,  which is a non-GAAP  financial  measure  that
          excludes the impact of depreciation and amortization expense. Although
          depreciation  and  amortization is a component of GAAP net income,  we
          believe  that NOI is a meaningful  measure of  operating  performance,
          because we utilize  NOI in making  decisions  with  respect to capital
          allocations,  segment performance,  and comparing period-to-period and
          market-to-market   property  operating  results.   In  addition,   the
          investment  community  utilizes NOI in determining real estate values,
          and  does  not  consider  depreciation  expense  as it is  based  upon
          historical  cost.  NOI is not a substitute  for net  operating  income
          after  depreciation  and  amortization  in  evaluating  our  operating
          results.

     (d)  Square foot occupancies  represent  weighted average  occupancy levels
          over the entire period.

     (e)  Realized   annual  rent  per  occupied  square  foot  is  computed  by
          annualizing  the result of dividing  rental income before late charges
          and  administrative  fees by the weighted average occupied square feet
          for the period.  Realized  annual rent per occupied  square foot takes
          into consideration  promotional  discounts and other items that reduce
          rental income from the contractual amounts due.

                                       55


     (f)  Late charges and administrative fees are excluded from the computation
          of realized annual rent per occupied square foot and REVPAF. Exclusion
          of these  amounts  provides a better  measure of our ongoing  level of
          revenue,  by  excluding  the  volatility  of late  charges,  which are
          dependent  principally  upon the  level  of  tenant  delinquency,  and
          administrative fees, which are dependent principally upon the absolute
          level of move-ins for a period.

     (g)  Realized  annual  rent per  available  foot or "REVPAF" is computed by
          dividing rental income before late charges and admin fees by the total
          available net rentable square feet for the period.

     (h)  In place annual rent per occupied  square foot  represents  annualized
          contractual  rents per  occupied  square foot without  reductions  for
          promotional  discounts  and excludes  late charges and  administrative
          fees.

     We have  recently  seen  softness in Shurgard  Europe's  operations,  as it
appears  to be  impacted  by the same  trends in  self-storage  demand  that our
domestic  facilities  are facing,  but to a larger  degree.  In addition to Same
Store  NOI  growth  being  negative  for the six  months  ended  June 30,  2009,
occupancies as well as rates charged to new customers are below that of the same
periods in 2008, continuing a trend that began in the fourth quarter of 2008. We
expect  continued  declines  in  operating  results for the  remainder  of 2009.
Shurgard Europe has ceased commencement of new development projects. At June 30,
2009,  Shurgard Europe has two newly developed  facilities and two expansions to
existing facilities under construction  (210,000 net rentable square feet), with
costs  incurred of $24.8  million and $14.5  million in costs to  complete.  The
development of these projects is subject to various risks and contingencies.

Shurgard Europe's Condensed Consolidated Operating Results
----------------------------------------------------------

     In Note 5 to our June 30, 2009 condensed consolidated financial statements,
we disclose Shurgard Europe's condensed  consolidated  operating results for the
three and six months ended June 30, 2009 and 2008.  Shurgard Europe's  condensed
consolidated operating results include additional facilities that are not Europe
Same Store Facilities,  and are based upon historical exchange rates rather than
constant exchange rates for each of the respective periods.

     In addition,  for the reasons  denoted above under NET OPERATING  INCOME OR
"NOI",  we present  net  operating  income for the  Shurgard  Europe  Same-Store
facilities, which is a non-GAAP measure excluding the impact of depreciation and
amortization.

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

     The "Other  Investments"  at June 30, 2009 are  comprised  primarily of our
equity in earnings from entities that own 19  self-storage  facilities.  Amounts
included in the tables above also include our equity in earnings with respect to
three facilities  owned by the  Unconsolidated  Entities,  until we acquired the
remaining  interest we did not own in these entities  during 2008, and commenced
consolidating these facilities. Our future earnings with respect to the other 19
facilities  will be dependent upon the operating  results of the facilities that
these  entities  own.  See Note 5 to our June 30,  2009  condensed  consolidated
financial  statements for the operating results of these 19 facilities under the
"Other Investments."

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

     INTEREST AND OTHER  INCOME:  Interest and other income was  $7,516,000  and
$15,149,000  in three and six  months  ended  June 30,  2009,  respectively,  as
compared  to  $11,014,000  and  $13,858,000  in the same  periods  in 2008.  The
increase is principally as a result of (i) interest income with respect to notes
receivable  from Shurgard  Europe  (described  below),  offset by lower interest
income on our cash reserve balances.  While we had higher average cash balances,
interest rates were  significantly  lower in the three and six months ended June
30,  2009,  as compared to the same periods in 2008.  We have $584.9  million in
cash on hand at June 30, 2009 invested  primarily in money-market  funds,  which
earn nominal rates of interest in the current interest rate environment.  Future
interest  income will depend upon the level of interest  rates and the timing of
when the cash on hand is ultimately invested.

     We have a loan  receivable  from Shurgard Europe totaling $550.5 million as
of June 30,  2009 that bears  interest  at a fixed  rate of 7.5% per  annum.  We
received  interest  income  with  respect  to this loan of  approximately  $11.4
million  and $21.5  million  in the three and six months  ended  June 30,  2009,

                                       56


respectively, as compared to $12.4 million for each of the same periods in 2008,
however,  for financial  reporting purposes due to our 49% ownership interest in
Shurgard  Europe,  51% of this amount  ($5.8  million and $11.0  million for the
three and six months  ended June 30,  2009,  respectively,  as  compared to $6.3
million for each of the same  periods in 2008) is included in interest and other
income and the remainder  was recorded as additional  equity in earnings for the
three and six  months  ended  June 30,  2009 and  2008.  No  interest  income in
connection with this loan was recorded in the three months ended March 31, 2008,
as such interest income was fully  eliminated in  consolidation  until March 31,
2008. The level of interest income recorded in connection with this loan will be
dependent upon the average  outstanding  balance as well as the exchange rate of
the Euro versus the U.S. Dollar.  All such interest has been paid currently when
due and we expect the  interest to  continue  to be paid when due with  Shurgard
Europe's operating cash flow.

     DEPRECIATION AND  AMORTIZATION:  Depreciation and amortization  expense was
$83,796,000 and  $168,762,000  for the three and six months ended June 30, 2009,
respectively,  as compared to $94,829,000 and  $217,069,000 for the same periods
in 2008.

     The decrease in depreciation and  amortization  expense in the three months
ended June 30, 2009,  as compared to the same period in 2008 is due  principally
to declines in amortization of tenant intangible amortization. We expect minimal
amortization  expense of our existing  intangibles during the remainder of 2009,
and future  intangible  amortization  will be dependent upon our future level of
acquisition of facilities with existing tenants in place.

     Effective  March 31,  2008,  depreciation  and  amortization  ceased on the
facilities owned by Shurgard Europe,  which was  deconsolidated  effective March
31, 2008.  Included in our  depreciation  and  amortization  related to Shurgard
Europe's facilities were $21,871,000 for the three months ended March 31, 2008.

     GENERAL AND ADMINISTRATIVE EXPENSE:  General and administrative expense was
$8,199,000,  and  $17,878,000  for the three and six months ended June 30, 2009,
respectively, as compared to $33,173,000 and $48,089,000 for the same periods in
2008. General and administrative  expense  principally  consists of state income
taxes,  investor relations expenses,  and corporate and executive  salaries.  In
addition,  general  and  administrative  expenses  includes  expenses  that vary
depending on our activity levels in certain areas,  such as overhead  associated
with the acquisition and development of real estate facilities, certain expenses
related to capital  raising and merger and  acquisition  activities,  litigation
expenditures,   employee  severance,  stock-based  compensation,  and  incentive
compensation.

     General and administrative  expense for the three and six months ended June
30,  2008  includes   $25,440,000  and   $27,900,000  in  additional   incentive
compensation  incurred  related to our  disposition  of an  interest in Shurgard
Europe. Following March 31, 2008 we record no further general and administrative
expense incurred by Shurgard Europe's operations.

     We expect  ongoing  general and  administrative  expense to  approximate $8
million to $10 million per quarter.

     INTEREST  EXPENSE:  Interest expense was $7,288,000 and $15,416,000 for the
three  and six  months  ended  June  30,  2009,  respectively,  as  compared  to
$9,601,000  and  $26,088,000  for the same  periods  in 2008.  The  decrease  in
interest   expense  in  the   six-month   periods  is  due   primarily   to  the
deconsolidation of Shurgard Europe. Interest expense was also reduced due to our
early retirement in February 2009 of $110.2 million face amount of senior notes.
See Note 6 to the condensed  consolidated financial statements for a schedule of
our notes  payable  balances,  principal  repayment  requirements,  and  average
interest rates.

     Capitalized  interest  expense totaled  $157,000 and $347,000 for the three
and six months  ended June 30, 2009,  respectively,  as compared to $434,000 and
$1,182,000  for the same periods in 2008,  in  connection  with our  development
activities.

                                       57


     Interest  expense  for the  three  months  ended  March 31,  2008  included
$6,892,000 incurred by Shurgard Europe,  relative to third-party debt (excluding
the debt  payable to Public  Storage).  Interest  expense  incurred  by Shurgard
Europe after March 31, 2008 is no longer reflected in our financial statements.

     FOREIGN  EXCHANGE GAIN (LOSS):  Our loan receivable from Shurgard Europe is
denominated  in Euros but has not been hedged.  The amount of U.S.  Dollars that
will be received on repayment  will depend upon the currency  exchange  rates at
the time.  Based upon the change in estimated U.S. Dollars to be received caused
by fluctuation in currency rates during the three months ended June 30, 2009, we
recorded  foreign  currency  translation  gains of  $33,205,000,  as compared to
foreign  currency  translation  losses of $2,000 for the three months ended June
30,  2008.  During  the six months  ended June 30,  2009,  we  recorded  foreign
currency  translation  losses of  $1,528,000,  as compared  to foreign  currency
translation  gains of  $40,969,000  for the six months ended June 30, 2008.  The
U.S. Dollar exchange rate relative to the Euro was  approximately  1.405,  1.320
and 1.409 at June 30, 2009, March 31, 2009 and December 31 2008, respectively.

     Future foreign  exchange  gains or losses will be dependent  primarily upon
the  movement  of the Euro  relative  to the U.S.  Dollar,  the amount owed from
Shurgard Europe and our continued expectation with respect to repaying the loan.

     DISCONTINUED  OPERATIONS:  During the six months  ended June 30,  2009,  we
decided to terminate our truck rental and containerized  storage business units,
disposed of a complete  self-storage  facility in connection with a condemnation
proceeding and discontinued  operations on a self-storage facility in connection
with an eminent  domain  proceeding.  As a result,  we  reclassified  all of the
historical revenues and expenses of these operations from revenues and expenses,
into  "discontinued  operations."  Included in  discontinued  operations is $3.5
million in  expenses  incurred  in the six months  ended June 30,  2009  related
primarily to disposing of trucks used in our truck rental operations,  a gain on
sale of the sold self-storage facility of approximately $4.2 million, as well as
an impairment  charge on intangible assets of $8.2 million in connection with an
eminent domain proceeding at one of our self-storage facilities.

                                       58


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

     We have $584.9  million of cash on hand at June 30, 2009,  and believe that
these  funds,  together  with our  internally  generated  net cash  provided  by
operating  activities  will  continue to be  sufficient to enable us to meet our
operating  expenses,   capital  improvements,   debt  service  requirements  and
distributions requirements to our shareholders for the foreseeable future.

     Operating as a REIT,  our ability to retain cash flow for  reinvestment  is
restricted.  In order for us to maintain our REIT status, a substantial  portion
of  our  operating  cash  flow  must  be  used  to  make  distributions  to  our
shareholders (see "REQUIREMENT TO PAY DISTRIBUTIONS"  below).  However,  despite
the  significant  distribution  requirements,  we have  been  able to  retain  a
significant  amount of our operating cash flow. The following  table  summarizes
our  ability  to  fund   distributions  to  the  minority   interests,   capital
improvements to maintain our facilities,  and  distributions to our shareholders
through the use of cash provided by operating  activities.  The  remaining  cash
flow  generated  is  available to make both  scheduled  and  optional  principal
payments on debt and for reinvestment.



                                                                            For the Six Months Ended
                                                                                      June 30,
                                                                         -----------------------------
                                                                             2009             2008
                                                                         -----------       -----------
                                                                              (Amount in thousands)

                                                                                     
Net cash provided by operating activities (a).........................   $   542,248       $   511,190

Capital improvements to maintain our facilities.......................       (32,575)          (31,571)
                                                                         ------------       -----------
Remaining operating cash flow available for distributions to equity
   holders............................................................       509,673           479,619

Distributions to noncontrolling interests in subsidiaries.............        (8,247)           (8,595)
Distribution requirements paid to preferred partnership interests.....        (5,830)          (10,806)
                                                                         ------------       -----------
Cash from operations allocable to Public Storage shareholders.........       495,596           460,218
Distributions paid to Public Storage shareholders:
   Preferred share dividends..........................................      (116,216)         (120,666)
   Equity Shares, Series A dividends..................................       (10,262)          (10,712)
   Common shareholders and restricted share unitholders
   ($1.10 per share)..................................................      (185,850)         (185,602)
                                                                         ------------       -----------
Cash from operations available for principal payments on debt and
   reinvestment (b)...................................................   $   183,268       $   143,238
                                                                         ============      ============


     (a)  Represents  net  cash  provided  by  operating   activities  for  each
          respective  six  month  period  as  presented  in our  June  30,  2009
          Condensed Consolidated Statements of Cash Flows.

     (b)  Cash from  operations  available  for  principal  payments on debt and
          reinvestment  is not a substitute  for cash flows from  operations  in
          evaluating  our  liquidity,  ability to repay our debt, or to meet our
          distribution requirements.

     Cash  from  operations   available  for  principal  payments  on  debt  and
reinvestment increased from $143.2 million in the six months ended June 30, 2008
to $183.3 million in the six months ended June 30, 2009.

     In addition to cash on hand, other sources of readily  available  liquidity
and capital resources include a $300 million revolving line of credit.  The line
of credit expires in March 2012 and there were no outstanding  borrowings on the
line of credit at August 7, 2009.

     We also have a loan receivable from Shurgard Europe totaling $550.5 million
that matures on March 31, 2010.  We expect that this loan will be repaid in full
on the maturity date.

     Significant  requirements on our liquidity and capital  resources  include:
(i)  capital   improvements  to  maintain  our  facilities,   (ii)  distribution
requirements  to our  shareholders  to  maintain  our REIT  status,  (iii)  debt
service,  (iv)  acquisition and  development  commitments and (v) commitments to
provide  funding  to  Shurgard  Europe  for  certain   investing  and  financing
activities.

                                       59


     CAPITAL IMPROVEMENT REQUIREMENTS:  During 2009, we expect approximately $72
million  for  capital  improvements  for our  facilities.  Capital  improvements
include  major  repairs  or  replacements  to the  facilities,  which  keep  the
facilities in good operating condition and maintain their visual appeal. Capital
improvements  do not include costs  relating to the  development or expansion of
facilities.  During the six months  ended June 30,  2009,  we  incurred  capital
improvements of approximately $32.6 million.

     REQUIREMENT TO PAY DISTRIBUTIONS:  We have operated, and intend to continue
to  operate,  in such a manner as to qualify  as a REIT  under the Code,  but no
assurance can be given that we will at all times so qualify.  To the extent that
the Company  continues to qualify as a REIT, we will not be taxed,  with certain
limited  exceptions,  on the REIT  taxable  income  that is  distributed  to our
shareholders, provided that at least 90% of our taxable income is so distributed
to our  shareholders.  We  believe  we  have  satisfied  the  REIT  distribution
requirement since 1981.

     Aggregate  dividends paid during the six months ended June 30, 2009 totaled
$116.2 million to the holders of our Cumulative Preferred Shares, $185.9 million
to the holders of our common shares and restricted share units and $10.3 million
to the holders of our Equity  Shares,  Series A.  Although we have not finalized
the  calculation  of our 2008  taxable  income,  we believe  that the  aggregate
dividends  paid in 2008 to our  shareholders  enable us to  continue to meet our
REIT distribution requirements.

     During the first six months of 2009,  we paid  distributions  totaling $5.8
million with respect to our Preferred Partnership Units. We expect distributions
to the units to be  approximately  $3.6  million for the  remainder  of 2009,  a
reduction from the first half of the year due to unit repurchases. We expect our
annual   distribution   requirement  based  upon  preferred   partnership  units
outstanding at June 30, 2009, to be  approximately  $7.3 million on a go forward
basis.  In  addition,  we estimate  the annual  distribution  requirements  with
respect  to  our  preferred   shares   outstanding  at  June  30,  2009,  to  be
approximately  $232.4 million,  assuming no additional preferred share issuances
or redemptions during 2009.

     For  2009,  distributions  with  respect  to  the  common  shares  will  be
determined  based upon our REIT  distribution  requirements  after  taking  into
consideration  distributions to the preferred shareholders.  We anticipate that,
at a minimum,  quarterly  distributions  per common share for 2009 will be $0.55
per common  share.  For the third quarter of 2009, a quarterly  distribution  of
$0.55 per common share has been declared by our Board of Trustees.

     With  respect to the  depositary  shares  representing  the Equity  Shares,
Series A, we have no obligation to pay  distributions  if no  distributions  are
paid  to  the  common  shareholders.  To  the  extent  that  we  do  pay  common
distributions  in any year, the holders of the depositary  shares receive annual
distributions  equal to the lesser of (i) five times the per share  dividend  on
the common shares or (ii) $2.45. The depositary shares are  non-cumulative,  and
have  no  preference  over  our  Common  Shares  either  as to  dividends  or in
liquidation.

     We are required by the underlying  governing documents to pay distributions
to noncontrolling  interests in subsidiaries based upon the operating cash flows
of the underlying  entities less any required reserves for capital  expenditures
or debt repayment.  Such interests received a total of $8,247,000 during the six
months  ended June 30, 2009 and  $8,595,000  for the same period in 2008,  which
represents our expectations with respect to future distribution levels.

     DEBT SERVICE REQUIREMENTS: At June 30, 2009, we have total outstanding debt
of  approximately  $524.4  million.  See Note 6 to our June 30,  2009  condensed
consolidated  financial statements for approximate  principal maturities of such
borrowings.  It is our current intention to fully amortize and repay the debt at
maturity  and not  seek to  refinance  debt  maturities  with  additional  debt.
Alternatively,  we may prepay debt and finance such  prepayments  with  retained
operating  cash flow or proceeds  from the issuance of preferred  securities  or
common shares.

     Our portfolio of real estate facilities remains substantially unencumbered.
At June 30, 2009,  we have secured debt  outstanding  of $231.8  million,  which
encumbers  90  self-storage  facilities  with an  aggregate  net  book  value of
approximately $567.6 million.

                                       60


     ACQUISITION AND DEVELOPMENT OF FACILITIES: During 2009, we will continue to
seek to acquire additional self-storage facilities from third parties;  however,
it is  difficult  to  estimate  the amount of third party  acquisitions  we will
undertake.  We have a minimal development  pipeline at June 30, 2009 and have no
current plan to expand our development activities.

     EUROPEAN ACTIVITIES:  At the end of February 2009, the maturity date of the
loan owed by Shurgard  Europe to Public  Storage was extended to March 31, 2010.
The loan totaled approximately $550.5 million at June 30, 2009.

     In addition,  if Shurgard Europe acquires its partner's  interests in First
Shurgard and Second Shurgard and is unable to obtain third-party  financing,  we
have agreed to provide additional loans to Shurgard Europe, under the same terms
as the existing  loans,  for up to (euro)185  million ($259.9 million as of June
30, 2009) for the  acquisition.  This  commitment was also extended to March 31,
2010 and was originally for (euro)305 million,  but was reduced as the result of
refinancing one of the joint venture loans. Shurgard Europe has no obligation to
acquire these interests, and the acquisition of these interests is contingent on
a number of items, including whether we assent to the acquisition.

     Shurgard  Europe has a 20%  interest  in two joint  ventures  and one other
partner  owns 80%  interest in each.  The two joint  ventures  collectively  had
approximately  (euro)233  million ($328 million) of outstanding  debt payable to
third parties at June 30, 2009,  which is  non-recourse to Shurgard  Europe.  In
April  2009,  Shurgard  Europe  obtained  loan  extensions  on both of its joint
venture loans. One of the joint venture loans,  totaling (euro)112 million ($158
million),  is now due May  2011  and the  other  joint  venture  loan,  totaling
(euro)121  million ($170  million),  is now due in July 2010. Both joint venture
loans are  secured by the joint  ventures'  respective  facilities,  and are not
guaranteed by Public Storage or any third party.

     We  also  committed  to fund  up to  $88.2  million  of  additional  equity
contributions  to Shurgard  Europe to fund  certain  investing  activities.  Our
remaining  obligation  under this  commitment  totaled $66.4 million at June 30,
2009.

     We expect that Shurgard  Europe will repay the existing loan due to us (and
any additional  borrowings  pursuant to our  commitment) no later than March 31,
2010 or sooner if capital markets become  accessible and Shurgard Europe is able
to raise  capital  on  appropriate  terms.  Given the  difficulty  in the credit
markets,  it is  possible  that  Shurgard  Europe may not able to repay the loan
prior to March 31,  2010.  Our  business  operations  are not  dependent  on the
repayment of such the loan.

     In March 2009,  Shurgard  Europe's  joint  venture  partner  gave its "exit
notice"  with  respect to one of the joint  ventures.  In June  2009,  the joint
venture  partner  withdrew its exit  notice,  with no impact upon the current or
future  operations  or governance of the joint venture or the terms of the joint
venture agreement.

     ACCESS TO CAPITAL: Over the past nine months, accessing capital through the
equity or credit markets has become very  difficult,  in part due to the lack of
liquidity,  particularly with respect to real estate companies. As a result, our
ability to raise additional capital by issuing common or preferred securities is
not currently a viable option. We are not dependent, however, on raising capital
to fund our operations or meet our obligations.

     Our   financial    profile   is   characterized   by   a   low   level   of
debt-to-total-capitalization  and a  conservative  dividend  payout  ratio  with
respect to the common shares.  We expect to fund our long-term growth strategies
and debt  obligations  with (i) cash on hand at June 30, 2009,  (ii)  internally
generated   retained  cash  flows  and  (iii)   depending  upon  current  market
conditions, proceeds from issuing equity securities. In general, our strategy is
to  continue  to finance our growth with  permanent  capital,  either  common or
preferred   equity  to  the  extent  that  market   conditions   are  favorable,
notwithstanding current market conditions are not favorable.

     Historically,  we have funded  substantially  all of our acquisitions  with
permanent capital (both common and preferred securities). We have elected to use
preferred  securities  as a form of leverage  despite the fact that the dividend
rates of our preferred securities exceed the prevailing market interest rates on
conventional  debt.  We have chosen this method of financing  for the  following
reasons:  (i) under the REIT structure,  a significant  amount of operating cash
flow needs to be distributed to our  shareholders,  making it difficult to repay

                                       61


debt with operating cash flow alone, (ii) our perpetual preferred shares have no
sinking fund requirement or maturity date and do not require redemption,  all of
which eliminate any future  refinancing risks, (iii) after the end of a non-call
period,  we have the option to redeem the  preferred  shares at any time,  which
enable us to refinance  higher coupon preferred shares with new preferred shares
at lower rates if appropriate,  (iv) preferred shares do not contain  covenants,
thus  allowing  us  to  maintain  significant  financial  flexibility,  and  (v)
dividends  on  the  preferred   shares  can  be  applied  to  satisfy  our  REIT
distribution requirements.

     Our credit ratings on each of our series of preferred  shares are "Baa1" by
Moody's and "BBB" by Standard & Poor's.

     ISSUANCE AND REDEMPTION OF PREFERRED  SECURITIES:  We believe that our size
and financial flexibility enables us to access capital when appropriate and when
market conditions are favorable.  However,  over the past six months,  accessing
capital through the credit markets has become very difficult, in part due to the
lack of liquidity.

     As of June 30,  2009,  several  of our  series  of  preferred  shares  were
redeemable  at our  option;  however,  we  have  not  called  these  series  for
redemption.  Although we may acquire these shares on the open market,  it is not
advantageous to redeem these shares at face pursuant to our redemption option at
this time  because,  based  upon  current  market  conditions,  we cannot  issue
additional  preferred securities at a lower coupon rate than the securities that
would be called.  The timing of  redemption  of any of these series of preferred
shares will depend upon many factors  including  when, or if, market  conditions
improve such that we can issue new  preferred  shares at a lower cost of capital
than the shares that would be redeemed.

     In the past we have typically raised  additional  capital in advance of the
redemption  dates  to  ensure  that we have  available  funds  to  redeem  these
securities.  Provided  market  conditions  improve in the  future,  we may raise
capital in advance to fund redemptions.

     REPURCHASES OF THE COMPANY'S EQUITY AND PREFERRED SECURITIES:  Dislocations
in  capital  markets  have  provided  opportunities  for the  repurchase  of our
preferred  and debt  securities.  During the six months ended June 30, 2009,  we
repurchased certain of our Cumulative  Preferred Shares in privately  negotiated
transactions with a liquidation  value of $24.6 million for approximately  $17.5
million, including accrued dividends,  reducing our ongoing dividend requirement
by  approximately  $1.8 million per year.  Also during the six months ended June
30, 2009, we repurchased certain of our Preferred Partnership Units in privately
negotiated transactions with a carrying amount of $225 million for approximately
$153 million,  reducing our ongoing dividend  requirement by approximately $14.4
million per year.

     On February 12, 2009, we acquired approximately $110 million face amount of
our existing senior unsecured notes pursuant to a tender offer. The amounts paid
in the tender were  substantially less than what would have been paid if we were
to repay this debt early subject to the  prepayment  premiums  under the related
debt agreement.

     Our Board of Trustees has authorized the repurchase from time to time of up
to 35,000,000 of our common shares on the open market or in privately negotiated
transactions.  During the six months ended June 30, 2009, we did not  repurchase
any of our common shares.  From the inception of the repurchase  program through
August 7, 2009, we have  repurchased  a total of 23,721,916  common shares at an
aggregate  cost  of  approximately  $679.1  million.  Future  levels  of  common
repurchases   will  be  dependent   upon  our  available   capital,   investment
alternatives, and the trading price of our common shares.

     These  acquisitions  were  funded by us with cash on hand.  We  continue to
monitor  the  existing  trading  ranges of all our  outstanding  debt and equity
securities for potential opportunities.

CONTRACTUAL OBLIGATIONS

     Our significant  contractual  obligations at June 30, 2009 and their impact
on our cash  flows and  liquidity  are  summarized  below  for the years  ending
December 31 (amounts in thousands):

                                       62




                                  Total          2009            2010          2011           2012           2013       Thereafter
                                ----------     ----------     ----------      ---------    ----------      ----------    ----------


                                                                                                    
Long-term debt (1) ............ $  631,423     $   25,977     $   41,643      $ 154,095    $   74,712      $  259,878    $   75,118

Operating leases (2)...........     99,684          3,497          5,858          5,315         5,321           5,201        74,492

Construction commitments (3)...      7,192          6,473            719              -             -               -             -
                                ----------     ----------     ----------      ---------    ----------      ----------    ----------
Total.......................... $  738,299     $   35,947     $   48,220      $ 159,410    $   80,033      $  265,079    $  149,610
                                ==========     ==========     ==========      =========    ==========      ==========    ==========




     (1)  Amounts include interest  payments on our notes payable based on their
          contractual  terms.  See  Note  6  to  our  June  30,  2009  condensed
          consolidated  financial  statements for additional  information on our
          notes payable.

     (2)  We lease land,  equipment  and office  space under  various  operating
          leases. Certain leases are cancelable with substantial penalties.

     (3)  Includes  obligations  for facilities  under  construction at June 30,
          2009.

     We have not included any  additional  funding  requirements  that we may be
required make to Shurgard Europe as a contractual obligation in the table above,
since it is uncertain  whether or not we will be required to fund any additional
amounts and because such funding is subject to our assent.

     We have no substantial construction commitments at June 30, 2009.

     OFF-BALANCE  SHEET  ARRANGEMENTS:  At  June  30,  2009  we had no  material
off-balance sheet arrangements as defined under Regulation S-K 303(a)(4) and the
instructions thereto.

                                       63


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         ----------------------------------------------------------

     To limit our exposure to market risk, we principally finance our operations
and growth with permanent equity capital  consisting either of common shares and
preferred  shares.  At June 30, 2009,  our debt as a percentage  of total equity
(based on book values) was 5.9%.

     Our preferred  shares are not  redeemable at the option of the holders.  At
June 30,  2009,  our Series V,  Series W, Series X, Series Y, Series Z, Series A
and Series B preferred  shares are  currently  redeemable  by us.  Except  under
certain  conditions  relating  to the  Company's  qualification  as a REIT,  the
preferred  shares are not  redeemable by the Company  pursuant to its redemption
option  prior to the dates set  forth in Note 8 to our June 30,  2009  condensed
consolidated financial statements.

     Our market risk sensitive instruments include notes payable,  which totaled
$524,440,000 at June 30, 2009.

     We have foreign  currency  exposures  related to our investment in Shurgard
Europe,  which has a book value of $268.5 million at June 30, 2009. We also have
a loan receivable from Shurgard Europe, which is denominated in Euros,  totaling
(euro)391.9  million  ($550.5  million)  at  June  30,  2009.  We  also  have an
obligation,  in certain  circumstances,  to loan up to an  additional  (euro)185
million to Shurgard Europe.

     The table below  summarizes  annual debt  maturities  and  weighted-average
interest rates on our  outstanding  debt at the end of each year and fair values
required to evaluate  our  expected  cash-flows  under debt  agreements  and our
sensitivity  to  interest  rate  changes  at June 30,  2009  (dollar  amounts in
thousands).



                            2009       2010        2011          2012         2013      Thereafter      Total     Fair Value
                         ----------- ---------- ------------ ------------- ------------ ------------ ------------ ------------


                                                                                          
Fixed rate debt........  $   6,467   $  13,277  $   130,679  $    55,575    $  251,421  $    67,021  $   524,440  $   529,532
Average interest rate..       5.68%       5.68%        5.68%        5.70%         5.62%        5.50%
------------------------------------------------------------------------------------------------------------------------------
Variable rate debt (1).  $       -   $       -  $         -  $         -    $        -  $         -  $         -  $         -
Average interest rate..
------------------------------------------------------------------------------------------------------------------------------



     (1)  Amounts include borrowings under our line of credit,  which expires in
          2012.  As of June 30, 2009,  we have no  borrowings  under our line of
          credit.

                                       64


ITEM 4.  CONTROLS AND PROCEDURES
         -----------------------

     We maintain  disclosure controls and procedures that are designed to ensure
that  information  required to be  disclosed in reports we file and submit under
the Securities  Exchange Act of 1934, as amended  ("Exchange Act"), is recorded,
processed,  summarized  and  reported  within  the  time  periods  specified  in
accordance  with SEC guidelines and that such  information  is  communicated  to
Public  Storage's  management,  including our Chief Executive  Officer and Chief
Financial Officer, to allow timely decisions regarding required disclosure based
on the definition of "disclosure controls and procedures" in Rules 13a-15(e) and
15d-15(e)  of the Exchange  Act. In  designing  and  evaluating  our  disclosure
controls and  procedures,  we recognized  that any controls and  procedures,  no
matter how well designed and operated,  can provide only reasonable assurance of
achieving the desired control objectives and that our management necessarily was
required to apply its judgment in evaluating the  cost-benefit  relationship  of
possible controls and procedures in reaching that level of reasonable assurance.
Also,  we have  investments  in certain  unconsolidated  entities.  Since Public
Storage does not control or manage these entities,  our disclosure  controls and
procedures  with respect to such  entities are  substantially  more limited than
those we maintain with respect to our consolidated subsidiaries.

     Under  the  supervision  and  with  the  participation  of our  management,
including our Chief Executive Officer and Chief Financial Officer,  we evaluated
our the effectiveness of our disclosure controls and procedures,  as required by
Exchange Act Rule 13a-15(b), as of the end of the period covered by this report.
Based on that  evaluation,  our Chief  Executive  Officer  and  Chief  Financial
Officer  concluded that our disclosure  controls and procedures  were effective.
There were no changes in our internal  control over financial  reporting  during
the quarter ended June 30, 2009 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

                                       65


PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS
          -----------------

     The  information  set forth under the heading "Legal Matters" in Note 12 to
the  Condensed   Consolidated   Financial   Statements  in  this  Form  10-Q  is
incorporated by reference in this Item 1.

ITEM 1A.  RISK FACTORS
          ------------

     The risk  factors set forth below update the  corresponding  risk factor in
Part I, "Item 1A. Risk  Factors" in our Annual  Report on Form 10-K for the year
ended  December 31,  2008.  In addition to the risk  factors  below,  you should
carefully consider the other risk factors discussed in our Annual Report on Form
10-K for the year ended  December 31, 2008,  which could  materially  affect our
business, financial position and results of operations.

IF WE FAILED TO QUALIFY AS A REIT FOR INCOME TAX PURPOSES,  WE WOULD BE TAXED AS
A CORPORATION,  WHICH WOULD SUBSTANTIALLY  REDUCE FUNDS AVAILABLE FOR PAYMENT OF
DIVIDENDS.

     Investors  are  subject  to the risk that we may not  qualify as a REIT for
income tax purposes.  REITs are subject to a range of complex organizational and
operational  requirements.  As a REIT, we must  distribute  with respect to each
year at least 90% of our REIT taxable income to our shareholders (which may take
into account certain dividends paid in the subsequent year).  Other restrictions
apply to our income  and  assets.  Our REIT  status is also  dependent  upon the
ongoing  qualification  of our  affiliate,  PSB,  as a REIT,  as a result of our
substantial ownership interest in that company.

     For any  taxable  year that we fail to  qualify as a REIT and are unable to
avail ourselves of relief  provisions set forth in the Code, we would be subject
to  federal  income tax at the  regular  corporate  rates on all of our  taxable
income,  whether or not we make any  distributions  to our  shareholders.  Those
taxes  would  reduce  the  amount  of cash  available  for  distribution  to our
shareholders or for reinvestment  and would adversely affect our earnings.  As a
result,  our failure to qualify as a REIT  during any taxable  year could have a
material  adverse  effect  upon us and  our  shareholders.  Furthermore,  unless
certain relief  provisions  apply, we would not be eligible to elect REIT status
again until the fifth taxable year that begins after the first year for which we
fail to qualify.

     We have also  assumed,  based on Shurgard  Storage  Center,  Inc.'s  public
filings and due  diligence  performed  in  connection  with our  acquisition  of
Shurgard,  that  Shurgard  qualified  as a REIT through the date of the Shurgard
Merger on August 22, 2006.  However, if Shurgard failed to qualify as a REIT, we
generally  would have  succeeded  to or  incurred  significant  tax  liabilities
(including  the  significant  tax  liability  that would have  resulted from the
deemed sale of assets by Shurgard to us as part of the Shurgard Merger).

WE ARE SUBJECT TO GOVERNMENTAL REGULATIONS AND ACTIONS THAT AFFECT OUR OPERATING
RESULTS AND FINANCIAL CONDITION.

     Our business is subject to regulation under a wide variety of U.S. federal,
state and local laws, regulations and policies.  There can be no assurance that,
in response to current economic conditions or the current political  environment
or otherwise,  laws and  regulations  will not be implemented or changed in ways
that adversely  affect our operating  results and financial  condition,  such as
current  federal  legislative  proposals to expand health care coverage costs or
facilitate union activity or otherwise increase operating costs.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
          -----------------------------------------------------------

     Our Board of Trustees has authorized the repurchase from time to time of up
to 35,000,000 of our common shares on the open market or in privately negotiated
transactions.  On May 8, 2008,  the Board of Trustees  authorized an increase in
the total repurchase  authorization  from 25,000,000 common shares to 35,000,000
common shares.  During the six months ended June 30, 2009, we did not repurchase
any of our common shares.  From the inception of the repurchase  program through
August 7, 2009, we have  repurchased  a total of 23,721,916  common shares at an
aggregate cost of  approximately  $679.1  million.  Our common share  repurchase

                                       66


program does not have an expiration date and there are 11,278,084  common shares
that may yet be repurchased  under our  repurchase  program as of June 30, 2009.
During the six months  ended June 30,  2009,  we did not  repurchase  any of our
common shares outside our publicly announced  repurchase program,  except shares
withheld for payment of tax  withholding  in  connection  with our various stock
option plans.  Future levels of common  repurchases  will be dependent  upon our
available capital, investment alternatives,  and the trading price of our common
shares.

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

     We  held  our  annual  meeting  of  shareholders  on May 7,  2009,  and the
following matters were voted on at the meeting:

     1.   The election of the following  members of our Board for the succeeding
          year or until their successors are duly qualified and elected:

                                                      Total Votes
                                        ----------------------------------------
           Name                         Total Votes For     Total Votes Withheld
      ---------------------------       ---------------     --------------------
      B. Wayne Hughes                   136,268,892                8,242,045
      Ronald L. Havner, Jr.             141,721,592                2,789,345
      Dann V. Angeloff                  128,731,490               15,779,448
      William C. Baker                  116,886,151               27,624,786
      John T. Evans                     143,192,863                1,318,075
      Tamara Hughes Gustavson           141,107,206                3,403,732
      Uri P. Harkham                    142,348,801                2,162,137
      B. Wayne Hughes, Jr.              141,104,545                3,406,393
      Harvey Lenkin                     141,534,760                2,976,178
      Gary E. Pruitt                    143,224,450                1,286,487
      Daniel C. Staton                  143,124,706                1,386,232




     2.  Our Company's shareholders approved ratification of the appointment of
         Ernst & Young LLP as the Company's independent auditors for the fiscal
         year ended December 31, 2009. There were 142,670,717 votes cast for
         ratification; 1,748,559 votes cast against ratification; 91,661 votes
         abstained; and no broker nonvotes.


ITEM 6.  EXHIBITS
         --------

     Exhibits  required  by Item 601 of  Regulation  S-K are filed  herewith  or
incorporated  herein by reference  and are listed in the attached  Exhibit Index
which is incorporated herein by reference.

                                       67



                                   SIGNATURES

Pursuant  to the  requirement  of the  Securities  Exchange  Act  of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                   DATED: August 7, 2009

                                   PUBLIC STORAGE

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


                                       68



                                 PUBLIC STORAGE

                              INDEX TO EXHIBITS (1)

                           (Items 15(a)(3) and 15(c))


3.1       Articles of  Amendment  and  Restatement  of  Declaration  of Trust of
          Public Storage,  a Maryland real estate investment  trust.  Filed with
          the  Registrant's  Current  Report on Form 8-K dated  June 6, 2007 and
          incorporated by reference herein.

3.2       Bylaws of Public  Storage,  a Maryland real estate  investment  trust.
          Filed with the  Registrant's  Current Report on Form 8-K dated June 6,
          2007 and incorporated by reference herein.

3.3       Articles  Supplementary  for Public Storage  Equity Shares,  Series A.
          Filed with the  Registrant's  Current Report on Form 8-K dated June 6,
          2007 and incorporated by reference herein.

3.4       Articles  Supplementary for Public Storage Equity Shares,  Series AAA.
          Filed with the  Registrant's  Current Report on Form 8-K dated June 6,
          2007 and incorporated by reference herein.

3.5       Articles  Supplementary for Public Storage 7.500% Cumulative Preferred
          Shares,  Series V. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.6       Articles  Supplementary for Public Storage 6.500% Cumulative Preferred
          Shares,  Series W. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.7       Articles  Supplementary for Public Storage 6.450% Cumulative Preferred
          Shares , Series X. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.8       Articles  Supplementary for Public Storage 6.850% Cumulative Preferred
          Shares,  Series Y. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.9       Articles  Supplementary for Public Storage 6.250% Cumulative Preferred
          Shares,  Series Z. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.10      Articles  Supplementary for Public Storage 6.125% Cumulative Preferred
          Shares,  Series A. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.11      Articles  Supplementary for Public Storage 7.125% Cumulative Preferred
          Shares,  Series B. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.12      Articles  Supplementary for Public Storage 6.600% Cumulative Preferred
          Shares,  Series C. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.13      Articles  Supplementary for Public Storage 6.180% Cumulative Preferred
          Shares,  Series D. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.14      Articles  Supplementary for Public Storage 6.750% Cumulative Preferred
          Shares,  Series E. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.15      Articles  Supplementary for Public Storage 6.450% Cumulative Preferred
          Shares,  Series F. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

                                       69


3.16      Articles  Supplementary for Public Storage 7.000% Cumulative Preferred
          Shares,  Series G. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.17      Articles  Supplementary for Public Storage 6.950% Cumulative Preferred
          Shares,  Series H. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.18      Articles  Supplementary for Public Storage 7.250% Cumulative Preferred
          Shares,  Series I. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.19      Articles  Supplementary for Public Storage 7.250% Cumulative Preferred
          Shares,  Series K. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.20      Articles  Supplementary for Public Storage 6.750% Cumulative Preferred
          Shares,  Series L. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.21      Articles  Supplementary for Public Storage 6.625% Cumulative Preferred
          Shares,  Series M. Filed with the Registrant's  Current Report on Form
          8-K dated June 6, 2007 and incorporated by reference herein.

3.22      Articles  Supplementary for Public Storage 7.000% Cumulative Preferred
          Shares,  Series N. Filed with the Registrant's  Current Report on Form
          8-K dated June 28, 2007 and incorporated by reference herein.

4.1       Master  Deposit  Agreement,  dated as of May 31, 2007.  Filed with the
          Registrant's  Current  Report  on Form  8-K  dated  June 6,  2007  and
          incorporated by reference herein.

10.1      Amended  Management  Agreement  between  Registrant and Public Storage
          Commercial Properties Group, Inc. dated as of February 21, 1995. Filed
          with Public  Storage Inc.'s ("PSI") Annual Report on Form 10-K for the
          year ended December 31, 1994 (SEC File No.  001-0839) and incorporated
          herein by reference.

10.2      Second  Amended  and  Restated  Management   Agreement  by  and  among
          Registrant  and the entities  listed  therein dated as of November 16,
          1995.  Filed with PS Partners,  Ltd.'s  Annual Report on Form 10-K for
          the  year  ended  December  31,  1996  (SEC  File No.  001-11186)  and
          incorporated herein by reference.

10.3     Limited Partnership Agreement of PSAF Development Partners, L.P. Filed
         with PSI's Quarterly Report on Form 10-Q for the quarterly period ended
         March 31, 1997 (SEC File No. 001-0839) and incorporated herein by
         reference.

10.4      Agreement of Limited Partnership of PS Business Parks, L.P. Filed with
          PS  Business  Parks,  Inc.'s  Quarterly  Report  on Form  10-Q for the
          quarterly  period  ended June 30,  1998 (SEC File No.  001-10709)  and
          incorporated herein by reference.

10.5      Amended and Restated Agreement of Limited Partnership of Storage Trust
          Properties,  L.P. (March 12, 1999).  Filed with PSI's Quarterly Report
          on Form 10-Q for the  quarterly  period  ended June 30, 1999 (SEC File
          No. 001-0839) and incorporated herein by reference.

10.6      Limited Partnership Agreement of PSAC Development Partners, L.P. Filed
          with PSI's  Current  Report on Form 8-K dated  November  15, 1999 (SEC
          File No. 001-0839) and incorporated herein by reference.

10.7      Agreement  of Limited  Liability  Company of PSAC  Storage  Investors,
          L.L.C.  Filed with PSI's Current Report on Form 8-K dated November 15,
          1999 (SEC File No. 001-0839) and incorporated herein by reference.

10.8      Amended  and  Restated   Agreement  of  Limited   Partnership  of  PSA
          Institutional  Partners,  L.P.  Filed with PSI's Annual Report on Form
          10-K for the year ended December 31, 1999 (SEC File No.  001-0839) and
          incorporated herein by reference.

                                       70


10.9      Amendment to Amended and Restated Agreement of Limited  Partnership of
          PSA Institutional  Partners, L.P. Filed with PSI's Quarterly Report on
          Form 10-Q for the  quarterly  period ended June 30, 2000 (SEC File No.
          001-0839) and incorporated herein by reference.

10.10     Second  Amendment  to  Amended  and  Restated   Agreement  of  Limited
          Partnership  of PSA  Institutional  Partners,  L.P.  Filed  with PSI's
          Quarterly Report on Form 10-Q for the quarterly period ended March 31,
          2004 (SEC File No. 001-0839) and incorporated herein by reference.

10.11     Third   Amendment  to  Amended  and  Restated   Agreement  of  Limited
          Partnership  of PSA  Institutional  Partners,  L.P.  Filed  with PSI's
          Quarterly Report on Form 10-Q for the quarterly period ended September
          30, 2004 (SEC File No. 001-0839) and incorporated herein by reference.

10.12     Limited Partnership Agreement of PSAF Acquisition Partners, L.P. Filed
          with PSI's Annual Report on Form 10-K for the year ended  December 31,
          2003 (SEC File No. 001-0839) and incorporated herein by reference.

10.13     Credit Agreement by and among Registrant,  Wells Fargo Bank,  National
          Association  and  Wachovia  Bank,  National   Association  as  co-lead
          arrangers,  and the other financial  institutions party thereto, dated
          March 27, 2007.  Filed with PSI's Current  Report on Form 8-K on April
          2, 2007 (SEC File No. 001-0839) and incorporated herein by reference.

10.14*    Post-Retirement Agreement between Registrant and B. Wayne Hughes dated
          as of March 11, 2004. Filed herewith.

10.15*    Shurgard Storage Centers,  Inc. 1995 Long Term Incentive  Compensation
          Plan.  Incorporated  by  reference to Appendix B of  Definitive  Proxy
          Statement  dated  June  8,  1995  filed  by  Shurgard  (SEC  File  No.
          001-11455).

10.16*    Shurgard  Storage  Centers,   Inc.  2000  Long-Term   Incentive  Plan.
          Incorporated  by reference to Exhibit 10.27 Annual Report on Form 10-K
          for the year ended  December 31, 2000 filed by Shurgard  (SEC File No.
          001-11455).

10.17*    Shurgard Storage Centers,  Inc. 2004 Long Term Incentive  Compensation
          Plan.  Incorporated  by  reference to Appendix A of  Definitive  Proxy
          Statement  dated  June  7,  2004  filed  by  Shurgard  (SEC  File  No.
          001-11455).

10.18*    Public Storage,  Inc. 1996 Stock Option and Incentive Plan. Filed with
          PSI's Annual Report on Form 10-K for the year ended  December 31, 2000
          (SEC File No. 001-0839) and incorporated herein by reference.

10.19*    Public Storage, Inc. 2000 Non-Executive/Non-Director  Stock Option and
          Incentive Plan.  Filed with PSI's  Registration  Statement on Form S-8
          (SEC File No. 333-52400) and incorporated herein by reference.

10.20*    Public Storage, Inc. 2001 Non-Executive/Non-Director  Stock Option and
          Incentive Plan.  Filed with PSI's  Registration  Statement on Form S-8
          (SEC File No. 333-59218) and incorporated herein by reference.

10.21*    Public  Storage,  Inc.  2001 Stock  Option and  Incentive  Plan ("2001
          Plan"). Filed with PSI's Registration  Statement on Form S-8 (SEC File
          No. 333-59218) and incorporated herein by reference.

10.22*    Form of 2001 Plan  Non-qualified  Stock Option  Agreement.  Filed with
          PSI's  Quarterly  Report on Form 10-Q for the  quarterly  period ended
          September 30, 2004 (SEC File No. 001-0839) and incorporated  herein by
          reference.

                                       71


10.23*    Form of 2001 Plan Restricted  Share Unit  Agreement.  Filed with PSI's
          Quarterly Report on Form 10-Q for the quarterly period ended September
          30, 2004 (SEC File No. 001-0839) and incorporated herein by reference.

10.24*    Form  of  2001  Plan  Non-Qualified   Outside  Director  Stock  Option
          Agreement.  Filed  with  PSI's  Quarterly  Report on Form 10-Q for the
          quarterly  period ended September 30, 2004 (SEC File No. 001-0839) and
          incorporated herein by reference.

10.25*    Public Storage, Inc.  Performance-Based  Compensation Plan for Covered
          Employees.  Filed with PSI's Current  Report on Form 8-K dated May 11,
          2005 (SEC File No. 001-0839) and incorporated herein by reference.

10.26*    Public   Storage   2007   Equity   and   Performance-Based   Incentive
          Compensation  Plan. Filed as Exhibit 4.1 to Registrant's  Registration
          Statement  on Form S-8  (SEC  File No.  333-144907)  and  incorporated
          herein by reference.

10.27*    Form  of  2007  Plan  Restricted  Stock  Unit  Agreement.  Filed  with
          Registrant's  Quarterly Report on Form 10-Q for the quarter ended June
          30, 2007 and incorporated herein by reference.

10.28*    Form of 2007 Plan Stock  Option  Agreement.  Filed  with  Registrant's
          Quarterly  Report on Form 10-Q for the quarter ended June 30, 2007 and
          incorporated herein by reference.

10.29*    Form of Indemnity Agreement.  Filed with Registrant's  Amendment No. 1
          to  Registration  Statement on Form S-4 (SEC File No.  333-141448) and
          incorporated herein by reference.

10.30*    Offer  letter/Employment  Agreement  dated as of July 28, 2008 between
          Registrant  and Mark  Good.  Filed  as  Exhibit  10.1 to  Registrant's
          Current  Report on Form 8-K dated  September 9, 2008 and  incorporated
          herein by reference.

12        Statement  Re:  Computation  of Ratio of Earnings to Fixed Charges and
          Preferred Stock Dividends. Filed herewith.

31.1      Rule 13a - 14(a) Certification. Filed herewith.

31.2      Rule 13a - 14(a) Certification. Filed herewith.

32        Section 1350 Certifications. Filed herewith.


     _    (1) SEC File No. 001-33519 unless otherwise indicated.

* Denotes management compensatory plan agreement or arrangement.



                                       72