UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM N-CSRS
 
 
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
 
Investment Company Act file number:
811-08025
   
 
Self Storage Group, Inc.
(Exact name of registrant as specified in charter)
 
11 Hanover Square, New York, NY 10005
(Address of principal executive offices) (Zipcode)

John F. Ramírez, Esq.
11 Hanover Square
New York, NY 10005
(Name and address of agent for service)
 
Registrant's telephone number, including area code: 1-212-785-0900
 
 
Date of fiscal year end: 12/31
 
Date of reporting period: 1/1/14 - 06/30/14
 
Form N-CSRS is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSRS in its regulatory, disclosure review, inspection, and policy making roles.
 
A registrant is required to disclose the information specified by Form N-CSRS and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSRS unless the Form displays a current valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under clearance requirements of 44 U.S.C. sec. 3507.
 
 
 
 
 

 
 
 
Item 1. Report to Stockholders.


 

 

 


 
 
 

 

 


 
 
 

 
 
PORTFOLIO ANALYSIS  
  June 30, 2014

   
 
June 30, 2014
TOP TEN
HOLDINGS
1
SSG Bolingbrook LLC
2
SSG Dolton LLC
3
SSG Merrillville LLC
4
SSG Rochester LLC
5
SSG Sadsbury LLC
6
SSG Summerville I LLC
7
SSG Summerville II LLC
8
Extra Space Storage, Inc.
9
Sovran Self Storage, Inc.
10
Public Storage
 
Top ten holdings comprise approximately 87% of total assets.

Holdings are subject to change. The above portfolio information should not be considered as a recommendation to purchase or sell a particular security and there is no assurance whether or not any securities will be retained.

 
 
1

 
 
 
 
TO OUR STOCKHOLDERS     
August 12, 2014  
 
 
 
Dear Fellow Stockholders:
 
It is a pleasure to welcome the new stockholders who have made their investment in Self Storage Group, Inc. (Ticker: SELF) (hereafter referred to as “the Company”) since our last report. The Company currently is a non-diversified closed end fund whose common stock is traded over the counter. As a closed end fund, the primary investment objective of the Company is to provide a high level of income, with capital appreciation as a secondary objective. The Company has filed a deregistration application with the Securities and Exchange Commission for an order declaring that the Company has ceased to be an investment company. After the Company deregisters, it will no longer be a closed end fund subject to its current investment objectives. Although the investment objectives will no longer be controlling, the Company currently intends to continue to operate to provide a high level of income and capital appreciation. The Company currently pursues its investment objectives by investing in self storage facilities and shares of real estate investment trusts (“REITs”).
 
Corporate Conversion Progress
 
As previously reported, on February 29, 2012, the Company’s stockholders voted to approve the proposal to change the company’s business from an investment company to an operating company that owns, operates, manages, acquires, develops, and redevelops self storage facilities and, in connection therewith, to amend the Company’s fundamental investment restrictions to permit the Company to pursue its new business (“Business Proposal”).
 
Initially, to effect the Business Proposal, the company invested predominantly in publicly traded “REITs” and sold substantially all assets in its portfolio that were not “Real Estate Assets” (which consist of real property and other investments in the real estate investment, service and related industries). Over time, the Company has divested most of its holdings in such REITs and acquired and operates self storage facilities. Until the Business Proposal is fully implemented, the Company’s Board of Directors has the power to change or modify the Business Proposal if it concludes that doing so would be in the best interests of the Company and its stockholders.
 
Also as previously announced, effective July 1, 2012, the Company is being internally managed by its executive officers and other employees, and portfolio management of the Company has been transferred from the Investment Policy Committee of the former investment manager to me, as President of the Company. The Company’s Board of Directors approved the termination of the Company’s Investment Agreement with CEF Advisers, Inc. effective June 30, 2012 as well as the termination of the Company’s dividend reinvestment plan.


GLOBAL SELF STORAGE FACILITIES
(as of June 30, 2014)

Property
Address
Number
Net Rentable
Dec. 31, 2013
June 30, 2014
   
of Units
Square Feet (1)
Square Foot
Square Foot
       
Occupancy %
Occupancy %
SSG SADSBURY LLC
21 Aim Boulevard Sadsburyville, PA 19369
480
62,248
88%
92%
SSG ROCHESTER LLC
2255 Buffalo Road Rochester, NY 14624
649
67,574
74%
94%
SSG BOLINGBROOK LLC
296 North Weber Road Bolingbrook, IL 60440
597
99,550
88%
93%
SSG DOLTON LLC
14900 Woodlawn Avenue Dolton, IL 60419
651
87,325
74%
90%
SSG MERRILLVILLE LLC
6590 Broadway Street Merrillville, IN 46410
506
71,070
90%
92%
SSG SUMMERVILLE I LLC
1713 Old Trolley Road Summerville, SC 29485
558
72,800
60%
69%
SSG SUMMERVILLE II LLC
900 North Gum Street Summerville, SC 29483
256
42,058
93%
93%
TOTAL
 
3,697
502,625
79.3%
88.9%
(1) Includes outside auto/RV/boat storage space of approximately 13,000 square feet at SSG Sadsbury LLC, 45,300 square feet at SSG Bolingbrook LLC, 9,900 square feet at SSG Dolton LLC, 11,170 square feet at SSG Merrillville LLC and 5,300 square feet at SSG Summerville II LLC.
 

 
 
2

 
 
   
  President's Letter
 
Self Storage Group, Inc. Files Deregistration Application
 
As part of this process to implement the Business Proposal, on March 28, 2014 the Company applied to the Securities and Exchange Commission to deregister as an investment company. After the Company deregisters, it will no longer be a closed end fund governed by the Investment Company Act of 1940, as amended.
 
Self Storage Group, Inc. Reports Operational Progress with its Global Self Storage facilities
 
The Company currently owns, operates and manages seven self storage facilities comprising approximately 80% of its net assets. All together, these facilities total 502,625 net rentable square feet and offer 3,697 storage units. In addition to traditional and climate-controlled units, many of the facilities feature both covered and outside auto/RV/boat storage.
 
As of June 30, 2014, the average overall square foot occupancy for all of the Global Self Storage facilities combined was 88.9%, up from 79.3% on December 31, 2013. Some of this increase in overall occupancy could be ascribed to seasonal factors, such as the annual boost in net leasing results during the spring and early summer months, which are traditionally the best months for net move-ins. Additionally, one of our properties enjoys strong annual demand from the local student population who usually rent only during the summer months. However, we believe that through our various marketing initiatives we have attracted a number of long term value tenants who we expect will be storing with us for years. Currently, our average tenant duration of stay is over two years.
 
Our storage facilities are located in the Northeast, Mid-Atlantic and Mid-West regions of the country in generally highly populated and high traffic areas. In each of these areas, our marketing efforts are very focused on attracting quality, long term and credit worthy tenants. This “tenant quality over tenant quantity” focus extends to all of our marketing and customer service efforts, especially reflected in our referral marketing program.
 
We have developed the brand “Global Self Storage” and have renamed and re-branded each of the Company’s self storage facilities to “Global Self Storage”. We have developed the corporate logo (as displayed on left) and have incorporated it on all of our on-site signage, advertising and other marketing materials. This branding process has included the creation and development of the www.GlobalSelfStorage.us website, whereby prospective customers can click through and read and learn about the features of any of our self storage facilities in their various locations. Existing self storage customers may pay their storage unit rent on-line as well as through www.GlobalSelfStorage.us. We are continuing to develop the Global Self Storage web presence through selected internet advertising and search engine optimization work. Concomitantly, we continue to solicit reviews from our customers for posting on the “Testimonials” section of our website. We have found that our most reliable source of new tenants is from our roster of current tenants through referrals. In all of our marketing efforts, nothing seems to be as productive as asking happy, satisfied tenants to recommend Global Self Storage to their family, friends, colleagues and others. All of our Property Managers’ attention to detail – maintaining security, cleanliness and attentive customer service – can reap benefits for the Company in the long term in terms of more and longer-lived self storage tenants.
 
Each of the Global Self Storage facilities features a 24/7 Rental and Payment Center Kiosk where prospective tenants may rent a unit at any hour of the day and current tenants may pay their rent. All of our facilities have on-site Property Managers who are committed to delivering the finest customer service. Our customer Call Center handles telephone inquiries from current and prospective tenants whenever our Property Managers are not available, can respond to questions about our facilities and storage features, and can take storage unit reservations. We are committed to delivering convenience and care to our storage customers as well as maintaining clean and secure self storage facilities at all times.
 
Importantly, we have implemented an ongoing revenue management program which includes regular internet data scraping of local competitors’ prices. We do this in order to maintain our competitive market price advantage for our various sized storage units at our Global Self Storage properties. This program helps us maximize and realize our properties’ occupancies and our self storage revenue and net operating income.
 
Operationally throughout 2013 and continuing into the first half of 2014, the self storage industry continued to enjoy positive trends. Demand for self storage space was sustained by the recovering job and housing markets. The industry experienced generally higher occupancies which led to higher asking rental rates in many markets. Rental rate discounting (“$1 Move-In”, “First Month Free”) was widely reported to be reduced due to higher occupancies. Finally, there continued to be a relatively low number of newly developed self storage properties available, further bolstering demand for existing self storage space by storage customers. It is management’s expectation that this rise in demand, coupled with limited new construction, should continue to support positive absorption across all markets. The Company’s management has noted in certain markets among certain well-capitalized self storage players a recent renewed interest in developing new self storage properties, in expanding existing self storage properties and in converting and re-purposing existing well-located retail and other buildings to climate-controlled and traditional storage unit properties. We can report that Self Storage Group, Inc. is and will continue to be a part of these new developments in self storage.

 
 
3

 
TO OUR STOCKHOLDERS     
 
 
 
 
The positive operational trends described above combined with continued low interest rates have led new investors into the self storage real property market. Capitalization rates have compressed for high-quality class A institutional size properties traditionally in demand by REITs and private equity groups. This phenomenon of many players seeking and bidding up relatively few available class A assets have sent yield-seeking investors down the quality scale to capture higher returns in stabilized assets in one-off markets and class B and C assets located in secondary and tertiary cities. We expect these trends to continue through 2014. As such, the Company intends to continue seeking investment opportunities in real property self storage facilities and to employ its strict standards in evaluating all new opportunities. Also, we intend to expand by new construction some of our self storage facilities wherever economically feasible. Our properties in Sadsburyville, PA and Bolingbrook, IL currently present our best opportunities for site expansion and we intend to proceed accordingly; next up for expansion review are the Merrillville and Summerville II Global Self Storage facilities.
 
Risk Factors
 
Stockholders should note that there are a number of risks related to the Company’s business during the implementation and following the consummation of the Business Proposal. These include risks related to the operating performance of the Company’s self storage facilities and risks associated with the Company’s real estate investments. There are also risks related to the Company’s organization and structure and risks related to the Company’s tax status as a REIT.
 
 
GLOBAL SELF STORAGE PROPERTIES
SUMMARY FINANCIAL INFORMATION
(Year-to-date unaudited results through June 30, 2014)(1)

Property
Address
Total
Revenues
Funds From
Property
Operations
Depreciation &
Amortization
Carrying Value
SSG SADSBURY LLC
21 Aim Boulevard
Sadsburyville, PA 19369
$272,851
$112,767
$43,158
$4,500,000
SSG ROCHESTER LLC
2255 Buffalo Road
Rochester, NY 14624
$377,789
$125,289
$41,885
$4,650,000
SSG BOLINGBROOK LLC
296 North Weber Road
Bolingbrook, IL 60440
$331,480
$181,572
$89,771
$5,700,000
SSG DOLTON LLC
14900 Woodlawn Avenue
Dolton, IL 60419
$311,642
$153,593
$81,244
$5,100,000
SSG MERRILLVILLE LLC
6590 Broadway Street
Merrillville, IN 46410
$288,646
$178,547
$78,678
$4,825,000
SSG SUMMERVILLE I LLC
1713 Old Trolley Road
Summerville, SC 29485
$169,345
$69,059
$42,664
$2,300,000
SSG SUMMERVILLE II LLC
900 North Gum Street
Summerville, SC 29483
$102,834
$51,805
$25,832
$1,400,000
TOTAL
 
$1,854,587
$872,632
$403,232
$28,475,000
 
 
(1)
The table above is not a full and complete financial presentation of the Company’s results in accordance with U.S. generally accepted accounting principles (“GAAP”), but is rather a summary of certain of its self storage properties’ financial highlights. For example, certain expense and income items such as “Corporate over- head expense”,” Securities dividends and interest income” and “Realized gain (or losses) on securities” are not included, presented or discussed in this table. Funds From Operations (“FFO”) is defined by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) as net income computed in accordance with GAAP, excluding gains or losses on sales of operating properties and impairment write downs of depreciable real estate assets, plus depreciation and amorti- zation and after adjustments to record unconsolidated partnerships and joint ventures on the same basis. The Company believes that to further understand the Company’s performance, FFO should be considered along with the reported net income and cash flows in accordance with GAAP, as presented in the Company’s consolidated financial statements. FFO does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to net income as an indication of the Company’s performance, as an alternative to net cash flow from operating activities as a measure of liquidity, or as an indicator of the Company’s ability to make cash distributions.

 
4

 

   
  President's Letter
 
 

The foregoing is qualified by reference to a more complete statement of applicable risks contained on page 22 of this report under “Risk Factors” and in the Company’s Proxy Statement dated November 9, 2011 and Supplemental Questions & Answers Regarding the Business Proposal dated November 23, 2011 which are available at http://www.SelfStorageGroupInc.com/prox-ystatement. html and upon request by contacting the Company.
 
Portfolio Investment Strategy and Net Asset Value Calculation and Publication
 
The Company’s strategy in 2014 continues to be to invest in self storage facilities and maintain certain investments in the securities of large, quality companies in the REIT universe. The Company’s current strategy has resulted in a year-to-date total return through June 30, 2014 based on net asset value of 9.24% and a total return based on market price value of -7.76%. Year-to-date through June 30, 2014, distributions paid totaled $0.13 per share. As previously announced in its August 30, 2013 press release, the Company will publish its net asset value as of the end of each calendar quarter. As of June 30, 2014, the Company’s net asset value per share was $4.82 and its share closing market price was $3.19. While investment return and value will vary and shares of the Company may subsequently be worth more or less than original cost, this represents an opportunity for investors to purchase the Company’s shares at a discount to their underlying value.
 
Distribution Policy and Tax Treatment
 
The current distribution policy is to provide investors with a stable quarterly distribution out of current income, supplemented by realized capital gains, and to the extent necessary, paid in capital. Year-to-date through June 30, 2014, distributions paid totaled $0.13 per share. The majority of these distributions is estimated to be comprised of net capital gains and return of capital. The estimated components of each quarterly distribution, which may include a potential return of capital, are provided to stockholders of record in a notice accompanying the distributions. The Company qualified for treatment as a REIT for federal tax purposes in fiscal year 2013 and intends to qualify for treatment as a REIT for federal tax purposes in fiscal year 2014.
 
Stockholder Rights Plan
 
On August 1, 2014, the Company announced that its Board of Directors, after careful consideration and based on the recommendation of a special committee comprised solely of the independent directors, by the unanimous vote of the directors present, adopted a stockholder rights plan (the “Plan”). This action has been taken in furtherance of implementing the Company’s Business Proposal. In approving the Plan, the Board seeks to preserve the Company’s ability to fully implement the Business Proposal and to discourage the accumulation of shares by persons or groups of persons to such an extent that concentrated ownership may adversely affect the Company’s ability to and qualify as a REIT for federal tax purposes and deregister as an investment company.
 
To implement the Plan, the Board of Directors declared a special dividend distribution of one non-transferable right for each outstanding share of the Company’s common stock, par value $.01 per share, to stockholders of record at the close of business on August 1, 2014. Each right entitles the registered holder to purchase from the Company one share of its common stock, par value $.01 per share, subject to adjustment. The rights will be distributed as a non-taxable dividend and will expire at the close of business on November 28, 2014, unless earlier redeemed or exchanged by the Company. The rights will be evidenced by the underlying Company common stock and no separate rights certificates will presently be distributed.
 
Subject to certain exceptions in the rights agreement (“Rights Agreement”), the rights will become exercisable 10 days following a public announcement that a “person” (as defined in the Rights Agreement) or a group of affiliated or associated persons have acquired “beneficial ownership” (as defined in the Rights Agreement) of 19% or more of the outstanding shares of the Company’s common stock. In this event, any person who “beneficially owns” (as defined in the Rights Agreement) more than 17% of the outstanding common shares of the Company’s common stock will not be permitted to exercise any rights associated with common shares beneficially owned in excess of 17% of the outstanding common shares of the Company, and those additional rights will be deemed null and void. The Board of Directors may terminate the Plan at any time or redeem the rights, for $.01 per right, at any time before a person or a group of affiliated or associated persons beneficially owns 19% or more of the Company’s common stock.
 
The Company’s website, www.SelfStorageGroupInc.com, provides investors with investment information, news, and other material regarding the Company.
 
As always, we are grateful to the Company’s long standing stockholders for their continuing support.
 
Sincerely,
 
 
Mark C. Winmill
President
 
 
 
5

 

SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2014 (Unaudited)
  Financial Statements
 

 
Member
         
Equity Interest
     
Value
 
           
   
REAL ESTATE OWNED (79.60%)
     
   
Self Storage Properties (79.60%)
     
  100 %
SSG Bolingbrook LLC (a) (b)
  $ 5,700,000  
  100 %
SSG Dolton LLC (a) (b)
    5,100,000  
  100 %
SSG Merrillville LLC (a) (b)
    4,825,000  
  100 %
SSG Rochester LLC (a) (b)
    4,650,000  
  100 %
SSG Sadsbury LLC (a) (b)
    4,500,000  
  100 %
SSG Summerville I LLC (a) (b)
    2,300,000  
  100 %
SSG Summerville II LLC (a) (b)
    1,400,000  
               
     
Total real estate owned (Cost $27,075,000)
    28,475,000  
               
Shares
 
COMMON STOCKS (15.81%)
       
     
Real Estate Investment Trusts (15.81%)
       
     
Diversified (2.82%)
       
  19,900  
British Land Company plc ADR (c) (d)
    238,402  
  4,500  
Public Storage (d)
    771,075  
            1,009,477  
     
Industrial (7.62%)
       
  40,000  
CubeSmart (d)
    732,800  
  20,000  
Extra Space Storage, Inc. (d)
    1,065,000  
  12,000  
Sovran Self Storage, Inc. (d)
    927,000  
            2,724,800  
     
Office (1.92%)
       
  11,000  
Kilroy Realty Corp. (d)
    685,080  
               
     
Operators of Nonresidential Buildings (0.09%)
       
  1,750  
Washington Prime Group Inc.
    32,795  
               
     
Retail (3.36%)
       
  27,000  
Kimco Realty Corp. (d)
    620,460  
  3,500  
Simon Property Group, Inc. (d)
    581,980  
               
     
Total retail
    1,202,440  
               
     
Total common stocks (Cost $3,941,422)
    5,654,592  
               

 
See notes to financial statements.
 
 
6

 
 
SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 2014 (Unaudited)
  Financial Statements
 

Shares
     
Value
 
   
PREFERRED STOCKS (4.35%)
     
   
Real Estate Investment Trusts (4.35%)
     
   
Industrial (1.10%)
     
  15,000  
CubeSmart 7.75%, Series A (d)
  $ 394,650  
               
     
Office (1.05%)
       
  15,000  
Duke Realty Corp. 6.50%, Series K (d)
    374,400  
               
     
Retail (2.20%)
       
  15,000  
Pennsylvania Real Estate Investment Trust, 8.25%, Series A (d)
    395,235  
  15,000  
Realty Income Corp., 6.625%, Series F (d)
    392,250  
            787,485  
               
     
Total preferred stocks (Cost $1,538,520)
    1,556,535  
               
Units
 
OTHER (0.26%)
       
  349,000  
DWS RREEF Real Estate Fund Liquidating Trust (b) (e)
    15,356  
  1,100,066  
DWS RREEF Real Estate Fund II Liquidating Trust (b) (e)
    79,205  
  2  
RMR Asia Pacific Fund Fractional shares (b)
    0  
               
     
Total other (Cost $0)
    94,561  
               
Principal
           
Amount
 
SHORT-TERM INVESTMENT (0.31%)
       
$ 109,186  
State Street Bank and Trust Company
       
     
Euro Time Deposit 0.01% (Cost $109,186)
    109,186  
               
     
Total investments (Cost $32,664,128) (100.33%)
    35,889,874  
               
     
Liabilities in excess of other assets (-0.33%)
    (116,176 )
               
     
Net assets (100.00%)
  $ 35,773,698  
               

 
(a)Controlled affiliate.
 
(b)Illiquid and/or restricted security that has been fair valued.
 
(c)The company is organized as a real estate investment trust as defined by the laws of its country of domicile.
 
(d)All or a portion of these securities have been segregated as collateral pursuant to the bank credit facility and lending agreement. As of June 30, 2014, the value of securities pledged as collateral was $7,178,347 and there were no securities on loan under the lending agreement.
 
(e)Non-income producing.

ADR
American Depositary Receipt
LLC
Limited Liability Company
REIT
Real Estate Investment Trust
plc
Public limited company


 
 
See notes to financial statements
 
 
 
7

 
 
STATEMENTS OF ASSETS AND LIABILITIES (Unaudited)
  Financial Statements
 


   
June 30, 2014
 
Assets
     
Investments, at value
     
Wholly-owned subsidiaries (cost $27,075,000)
  $ 28,475,000  
Unaffiliated issuers (cost $5,589,128)
    7,414,874  
         
      35,889,874  
         
Cash
    9,754  
Dividends receivable
    18,386  
Due from wholly-owned subsidiaries
    3,372  
Other assets
    5,275  
         
Total assets
    35,926,661  
         
Liabilities
       
Accounts payable and accrued expenses
    81,615  
Due to affiliates
    71,348  
         
Total liabilities
    152,963  
         
Net Assets
  $ 35,773,698  
         
Net Asset Value Per Share
       
(applicable to 7,416,766 shares outstanding:
       
20,000,000 shares of $.01 par value authorized)
  $ 4.82  
Net Assets Consist of
       
Paid in capital
  $ 32,536,923  
Undistributed net investment loss
    (230,150 )
Undistributed net realized gains
    241,179  
Net unrealized appreciation on investments and foreign currencies
    3,225,746  
         
    $ 35,773,698  
 
See notes to financial statements.
 
 
8

 
 
STATEMENTS OF OPERATIONS (Unaudited)
  Financial Statements


   
Six Months Ended
 
   
June 30, 2014
 
Investment Income
     
Dividends
     
Wholly-owned subsidiaries
  $ 1,425,000  
Unaffiliated issuers (net of $1,595 foreign tax withholding)
    140,397  
Interest
    7  
         
Total investment income
    1,565,404  
         
Expenses
       
Compensation and benefits
    436,495  
Legal
    77,645  
Occupancy and other office expenses
    70,999  
Bookkeeping and pricing
    37,267  
Directors
    21,316  
Auditing
    17,825  
Shareholder communications
    14,604  
Insurance
    7,155  
Transfer agent
    6,480  
Custodian
    4,795  
Interest on bank credit facility
    3,356  
Other
    1,427  
         
Total expenses
    699,364  
         
Net investment income
    866,040  
         
Realized and Unrealized Gain (Loss)
       
Net realized gain on investments in unaffiliated issuers
    241,179  
Net unrealized appreciation
       
Wholly-owned subsidiaries
    937,500  
Unaffiliated issuers
    752,680  
         
Net realized and unrealized gain
    1,931,359  
         
Net increase in net assets resulting from operations
  $ 2,797,399  
         

 
See notes to financial statements.
 
 
 
9

 
 
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
  Financial Statements


   
Six Months Ended
June 30, 2014
   
Year Ended
December 31, 2013
 
             
Operations
           
Net investment income (loss)
  $ 866,040     $ (677,093 )
Net realized gain
    241,179       2,458,952  
Unrealized appreciation (depreciation)
    1,690,180       (422,429 )
                 
Net increase in net assets resulting from operations
    2,797,399       1,359,430  
                 
Distributions To Stockholders
               
Net investment income
    (75,483 )     (430,633 )
Net realized gains
    (240,703 )     (2,142,985 )
Return of capital
    (647,994 )     -  
                 
Total distributions
    (964,180 )     (2,573,618 )
                 
Total increase (decrease) in net assets
    1,833,219       (1,214,188 )
                 
Net Assets
               
Beginning of period
    33,940,479       35,154,667  
                 
End of period
  $ 35,773,698     $ 33,940,479  
                 
Undistributed net investment loss at end of period
  $ (230,150 )   $ (791,761 )
                 
 
 
See notes to financial statements.
 
 
10

 
 
STATEMENT OF CASH FLOWS (Unaudited)
  Financial Statements


   
Six Months Ended
June 30, 2014
 
       
Cash Flows From Operating Activities
     
Net increase in net assets resulting from operations
  $ 2,797,399  
Adjustments to reconcile increase in net assets resulting from operations 
 to net cash provided by (used in) operating activities:
       
Unrealized appreciation of investments
    (1,690,180 )
Net realized gain on sales of investment securities
    (241,179 )
Capital invested in wholly-owned subsidiaries
    (100,000 )
Proceeds from sales of investment securities
    1,410,966  
Net sales of short term investments
    427,438  
Decrease in due from subsidiaries
    53,465  
Decrease in dividends receivable
    32,250  
Decrease in other assets
    7,155  
Decrease in accrued expenses
    (11,847 )
Increase in due to affiliates
    5,507  
         
Net cash provided by operating activities
    2,690,974  
         
Cash Flows from Financing Activities
       
Cash distributions paid
    (964,180 )
Bank credit facility repayment, net
    (1,717,040 )
         
Net cash used in financing activities
    (2,681,220 )
         
Net change in cash
    9,754  
         
Cash
       
Beginning of period
    -  
         
End of period
  $ 9,754  
         
Supplemental disclosure of cash flow information:
       
Cash paid for interest on bank credit facility
  $ 3,303  


 
See notes to financial statements.
 
 
11

 
 
NOTES TO FINANCIAL STATEMENTS June 30, 2014 (Unaudited)
  Financial Statements

 

1.  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Self Storage Group, Inc. (the “Company”), is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the “Act”), as a non-diversified, closed end management investment company. The Company is internally managed by its officers under the direction of its Board of Directors. The Company has applied to the Securities and Exchange Commission to deregister as an investment company. Its shares are quoted over the counter under the ticker symbol SELF.
 
On February 29, 2012, stockholders voted to approve a proposal to change the Company’s business from an investment company investing primarily in closed end funds that invest significantly in income producing securities and a global portfolio of investment grade fixed income securities to an operating company that owns, operates, manages, acquires, develops and redevelops self storage properties. In connection therewith, the Company has amended its fundamental investment restrictions to permit it to pursue its new business. The Company is currently implementing its business strategy to acquire and operate self storage properties.
 
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Company:
 
Valuation of Investments – Portfolio securities are valued by various methods depending on the primary market or exchange on which they trade. Most equity securities for which the primary market is in the United States are valued at the official closing price, last sale price or, if no sale has occurred, at the closing bid price. Most equity securities for which the primary market is outside the United States are valued using the official closing price or the last sale price in the principal market in which they are traded. If the last sale price on the local exchange is unavailable, the last evaluated quote or closing bid price normally is used. Debt obligations with remaining maturities of 60 days or less are valued at cost adjusted for amortization of premiums and accretion of discounts. Certain of the securities in which the Company may invest are priced through pricing services that may utilize a matrix pricing system which takes into consideration factors such as yields, prices, maturities, call features, and ratings on comparable securities. Bonds may be valued according to prices quoted by a bond dealer that offers pricing services. Open end investment companies are valued at their net asset value. Foreign securities markets may be open on days when the U.S. markets are closed. For this reason, the value of any foreign securities owned by the Company could change on a day when stockholders cannot buy or sell shares of the Company. Securities for which market quotations are not readily available or reliable and other assets may be valued as determined in good faith by the Valuation Committee (“VC”) of the Company under the direction of or pursuant to procedures approved by the Company’s Board of Directors, called fair value pricing. Due to the inherent uncertainty of valuation, fair value pricing values may differ from the values that would have been used had a readily available market for the securities existed. These differences in valuation could be material. A security’s valuation may differ depending on the method used for determining value. The use of fair value pricing by the Company may cause the net asset value of its shares to differ from the net asset value that would be calculated using market prices. A fair value price is an estimate and there is no assurance that such price will be at or close to the price at which a security is next quoted or next trades.
 
Foreign Currency Translation – Securities denominated in foreign currencies are translated into U.S. dollars at prevailing exchange rates. Realized gain or loss on sales of such investments in local currency terms is reported separately from gain or loss attributable to a change in foreign exchange rates for those investments.
 
Forward Foreign Currency Contracts – Forward foreign currency contracts are marked to market and the change in market value is recorded by the Company as an unrealized gain or loss. When a contract is closed, the Company records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The Company could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if the value of the currency changes unfavorably.
 
Investments in Other Investment Companies – The Company may invest in shares of other investment companies (the “Acquired Fund”) in accordance with the Act and related rules. Stockholders in the Company bear the pro rata portion of the fees and expenses of an Acquired Fund in addition to the Company’s expenses. Expenses incurred by the Company that are disclosed in the statement of operations do not include fees and expenses incurred of an Acquired Fund. The fees and expenses of an Acquired Fund are reflected in such Acquired Fund’s total returns.
 
Investments in Real Estate Investment Trusts – Dividend income is recorded based on the income included in distributions received from the REIT investments using published REIT reclassifications including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year end, and may differ from the estimated amounts.


 
12

 
 
NOTES TO FINANCIAL STATEMENTS (Unaudited) continued
  Financial Statements


 
Real Estate Owned - Self Storage Properties – The Company owns, operates, manages, acquires, develops and redevelops self storage properties through wholly-owned subsidiaries.
 
Short Sales – The Company may sell a security short it does not own in anticipation of a decline in the market value of the security. When the Company sells a security short, it must borrow the security sold short and deliver it to the broker/dealer through which it made the short sale. The Company is liable for any dividends or interest paid on securities sold short. A gain, limited to the price at which the Company sold the security short, or a loss, unlimited in size, will be recognized upon the termination of the short sale. Securities sold short result in off balance sheet risk as the Company’s ultimate obligation to satisfy the terms of the sale of securities sold short may exceed the amount recognized in the statement of assets and liabilities.
 
Investment Transactions – Investment transactions are accounted for on the trade date (the date the order to buy or sell is executed). Realized gains or losses are determined by specifically identifying the cost basis of the investment sold.
 
Investment Income – Interest income is recorded on the accrual basis. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income is recorded on the ex-dividend date or, in the case of foreign securities, as soon as practicable after the Company is notified. Taxes withheld on income from foreign securities have been provided for in accordance with the Company’s understanding of the applicable country’s tax rules and rates.
 
Expenses – Expenses deemed by the Company to have been incurred solely by the Company are borne by the Company. Expenses deemed by the Company to have been incurred jointly by the Company and one or more of the investment companies for which its affiliates serve as investment manager or other entities are allocated on the basis of relative net assets, except where a more appropriate allocation can be made fairly in the judgment of the Company.
 
Expense Reduction Arrangement – Through arrangements with the Company’s custodian, credits realized as a result of uninvested cash balances are used to reduce custodian expenses. No credits were realized by the Company during the periods covered by this report.
 
Distributions to Stockholders – Distributions to stockholders are determined in accordance with income tax regulations and are recorded on the ex-dividend date.
 
Income Taxes – The Company has elected to be treated as a REIT under the Internal Revenue Code (“IRC”). In order to maintain its qualification as a REIT, among other things, the Company is required to distribute at least 90% of its REIT taxable income to its stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income tax with respect to that portion of its income which meets certain criteria and is distributed annually to stockholders. The Company plans to continue to operate so that it meets the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. If the Company were to fail to meet these requirements, it would be subject to federal income tax. The Company is subject to certain state and local taxes.
 
Foreign securities held by the Company may be subject to foreign taxation. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Company invests.
 
The Company recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The Company has reviewed its tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on federal, state, and local income tax returns for open tax years (2011 – 2013), or expected to be taken in the Company’s 2014 tax returns.
 
2.  RELATED PARTY TRANSACTIONS Certain officers and directors of the Company also serve as officers and directors of Winmill & Co. Incorporated (“Winco”), Bexil Corporation, Tuxis Corporation, and their affiliates (collectively with the Company, the “Affiliates”). As of June 30, 2014, certain Affiliates of the Company owned approximately 2% of the Company’s outstanding common stock. Pursuant to an arrangement between a professional employer organization (“PEO”) and the Affiliates, the PEO provides payroll, benefits, compliance, and related services for employees of the Affiliates in accordance with applicable rules and regulations under the IRC and, in connection therewith, Midas Management Corporation (“MMC”), a subsidiary of Winco, acts as a conduit payer of compensation and benefits to the Affiliates’ employees including those who are concurrently employed by the Company and its Affiliates. Rent expense of concurrently used office space and overhead expenses for various concurrently used administrative and support functions incurred by the Affiliates are allocated at cost among them. The Affiliates participate in a 401(k) retirement savings plan for substantially all qualified employees. A matching expense based upon a percentage of contributions to the plan by eligible employees is incurred and allocated among the Affiliates. The matching expense is accrued and funded on a current basis and may not exceed the amount permitted as a deductible expense under the IRC. The aggregate compensation accrued and paid by the Company for the six months ended June 30, 2014 was $440,668. The aggregate rent and overhead accrued and paid by the Company for the six months ended June 30, 2014 was $40,713. As of June 30, 2014, the Company had reimbursements payable to MMC and Winco for compensation and benefits and rent and overhead of $61,174 and $4,130, respectively.
 
 
13

 
 
NOTES TO FINANCIAL STATEMENTS (Unaudited) continued
  Financial Statements

As of June 30, 2014, the Company had an aggregate receivable for expenses paid on behalf of its wholly-owned subsidiaries of $3,372.
 
Under the terms of the Company’s employment agreement with its President Mark C. Winmill, the minimum monthly automobile allowance is $1,000 per month. To the extent that the monthly minimum payment under the Company’s automobile lease exceeds the monthly allowance, Mr. Winmill must reimburse the Company for the excess amount. In this regard, Mr. Winmill has reimbursed the Company $1,722 for the automobile payments paid and due in 2014.
 
3.  DISTRIBUTIONS TO STOCKHOLDERS AND DISTRIBUTABLE EARNINGS  For the six months ended June 30, 2014, the Company paid distributions totaling $964,180. As of June 30, 2014, the distribution is estimated to be comprised of $75,483, $240,703, and $647,994 of net investment income, net realized gains, and return of capital, respectively, based on information available at this time and is subject to change. The classification of these distributions for federal income tax purposes will be determined after the Company’s fiscal year ending December 31, 2014. Actual amounts may be recharacterized among net investment income, net realized gains, and return of capital for tax purposes after year end 2014, although the exact amount is not estimable as of June 30, 2014.
 
For the year ended December 31, 2013, the Company paid distributions comprised of the following:

Distributions paid from:
     
       
Net investment income
  $ 430,633  
Net realized gains
    2,142,985  
 
Total distributions
  $ 2,573,618  

 
As of December 31, 2013, the component of distributable earnings on a tax basis was as follows:

Undistributed net investment income
  $ 5,877  
Unrealized appreciation
    737,928  
         
    $ 743,805  

The difference between book and tax unrealized appreciation is attributable to income of the Company’s wholly-owned unconsolidated subsidiaries.
 
Federal income tax regulations permit post-October net capital losses, if any, to be deferred and recognized on the tax return of the next succeeding taxable year.
 
4.  VALUE MEASUREMENT  GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:
 
• Level 1 –  unadjusted quoted prices in active markets for identical assets or liabilities including securities actively traded on a securities exchange.
 
• Level 2 –  observable inputs other than quoted prices included in level 1 that are observable for the asset or liability which may in-clude quoted prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data.
 
 
14

 
 
NOTES TO FINANCIAL STATEMENTS (Unaudited) continued
  Financial Statements
 
 
 
• Level 3 –  unobservable inputs for the asset or liability including the Company’s own assumptions about the assumptions a market participant would use in valuing the asset or liability.
 
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets for the security, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for investments categorized in level 3.
 
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
 
The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those securities.
 
The following is a description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a recurring basis:
 
Equity securities (common and preferred stock) – Most publicly traded equity securities are valued normally at the most recent official closing price, last sale price, evaluated quote, or closing bid price. To the extent these securities are actively traded and valuation adjustments are not applied, they may be categorized in level 1 of the fair value hierarchy. Equities on inactive markets or valued by reference to similar instruments may be categorized in level 2.
 
Restricted and/or illiquid securities – Restricted and/or illiquid securities for which quotations are not readily available or reliable may be valued with fair value pricing as determined in good faith by the VC under the direction of and pursuant to procedures approved by the Company’s Board of Directors. Restricted securities issued by publicly traded companies are generally valued at a discount to similar publicly traded securities. Restricted or illiquid securities issued by nonpublic entities may be valued by reference to comparable public entities or fundamental data relating to the issuer or both similar inputs. Depending on the relative significance of valuation inputs, these instruments may be categorized in either level 2 or level 3 of the fair value hierarchy.
 
Real estate assets – Real estate assets, including self storage facilities held indirectly through one or more wholly owned and controlled subsidiaries, are valued using fair value pricing as determined in good faith by the VC under the direction of or pursuant to procedures approved by the Company’s Board of Directors. Real estate assets may be valued by reference to, among other things, quarterly appraisals by an independent third party and additional factors which may include assessment of comparable recent acquisitions, changes in cash flows from the operation of the subject property, and material events affecting the operation of the property.
 
The following is a summary of the inputs used as of June 30, 2014 in valuing the Company’s assets. Refer to the schedule of portfolio investments for detailed information on specific investments.

ASSETS
 
Level 1
   
Level 2
   
Level 3
   
Total
 
Investments, at value
                       
Real estate owned
  $ -     $ -     $ 28,475,000     $ 28,475,000  
Common stocks
    5,654,592       -       -       5,654,592  
Preferred stocks
    1,556,535       -       -       1,556,535  
Other
    -       -       94,561       94,561  
Short term investment
    -       109,186       -       109,186  
Total investments, at value
  $ 7,211,127     $ 109,186     $ 28,569,561     $ 35,889,874  
                                 

There were no securities transferred from level 1 at December 31, 2013 to level 2 at June 30, 2014.
 
 
15

 

 
NOTES TO FINANCIAL STATEMENTS (Unaudited) continued
  Financial Statements
 
 
The following is a reconciliation of level 3 assets including securities valued at zero:

   
Real Estate Owned
   
Other
   
Total
 
Balance of level 3 assets at December 31, 2013
  $ 27,437,500     $ 94,561     $ 27,532,061  
Cost of purchases
    100,000       -       100,000  
Sales
    -       -       -  
Transfers in to (out of) level 3
    -       -       -  
Change in unrealized appreciation
    937,500       -       937,500  
                         
Balance at June 30, 2014
  $ 28,475,000     $ 94,561     $ 28,569,561  
                         
Net change in unrealized appreciation attributable to assets held as level 3 at June 30, 2014
  $ 937,500     $ -     $ 937,500  
                         

Unrealized gains (losses) are included in the related amounts on investments in the statement of operations.
 
The VC, under the direction of the Company’s Board of Directors, considers various valuation approaches for valuing assets categorized within level 3 of the fair value hierarchy. The factors used in determining the value of such assets may include, but are not limited to: marketability, professional appraisals of portfolio companies, company and industry results and outlooks, and general market conditions. The VC then recommends a value for each asset in light of all the information available. The determination of fair value involves subjective judgments. As a result, using fair value to price an investment may result in a price materially different from the price used by other investors or the price that may be realized upon the actual sale of the asset. Significant changes in any of those inputs in isolation may result in a significantly lower or higher value measurement. The pricing of all fair value assets is reported to the Company’s Board of Directors.
 
In valuing the self storage properties owned through the Company’s wholly-owned subsidiaries as of June 30, 2014, the VC used a number of significant unobservable inputs to develop a range of possible values for the properties. It used a sales comparison approach which looks at recent sales of self storage properties considered similar to the subject property, an income capitalization approach which looks at discounted cash flow analysis based on certain assumptions regarding the property’s trend in income and expenses, and a cost approach which looks at recent comparable land sales in the subject area and the estimated replacement value of the existing buildings and site improvements.
 
The values obtained from weighting the three methods described above, with greater weight given to the sales comparison approach, were then discounted for the lack of marketability of the Company’s membership interest in each subsidiary, which represents the range of rates the VC believes market participants may apply. The resulting range of values, together with the underlying support, other information about each underlying property’s financial condition and results of operations and its industry outlook, were considered by the VC, which recommended a value for each subsidiary.
 
The following table presents additional information about valuation methodologies and inputs used for investments that are measured at fair value and categorized as level 3 as of June 30, 2014:

June 30, 2014
Fair Value
Primary
Valuation Technique
Unobservable Input
Input
Range
REAL ESTATE OWNED Self Storage Properties
$ 28,475,000
Income capitalization approach
Capitalization rates
 
6% - 8%
OTHER
$         94,561
Liquidating value
Discount rate for lack
of marketability
80% - 100%
         

 
 
16

 
 
NOTES TO FINANCIAL STATEMENTS (Unaudited) continued
  Financial Statements
 
 

 
5.  INVESTMENTS IN WHOLLY-OWNED SUBSIDIARIES  The following summary sets forth the Company’s membership equity ownership including membership equity capital additions and reductions, cash dividends received by the Company, and the value of each wholly-owned subsidiary as recorded in the schedule of portfolio investments as of and for the six months ended June 30, 2014.

 
Beginning
Equity Interest Percentage
Membership Equity
Ending
Dividend
Value
Gross
Additions
Gross Reductions
Equity Interest Percentage
Income
June 30, 2014
SSG
Rochester LLC
100%
$ -
$ -
100%
$ 286,000
$ 4,650,000
SSG
Sadsbury LLC
100%
    $ 100,000
$ -
100%
$ 257,000
$ 4,500,000
SSG
Bolingbrook LLC
100%
$ -
$ -
100%
$ 319,000
$ 5,700,000
SSG
Dolton LLC
100%
$ -
$ -
100%
$ 275,000
$ 5,100,000
SSG
Merrillville LLC
100%
$ -
$ -
100%
$ 253,000
$ 4,825,000
SSG
Summerville I LLC
100%
$ -
$ -
100%
$ 13,000
$ 2,300,000
SSG
Summerville II LLC
100%
$ -
$ -
100%
$ 22,000
$ 1,400,000

The Company’s wholly-owned subsidiaries are each a controlled affiliate as defined under the Act. A controlled affiliate is an issuer in which the Company’s holdings represent 25% or more of the outstanding voting securities of such issuer.
 
6.  SUMMARIZED FINANCIAL INFORMATION OF WHOLLY-OWNED SUBSIDIARIES Each of the Company’s wholly-owned subsidiaries owns and operates a self storage facility business. The following sets forth unaudited summarized information as to assets, liabilities, and results of operations for each wholly-owned subsidiary as of and for the six months ended June 30, 2014:

Dollars in thousands
 
SSG
Bolingbrook LLC
   
SSG
Dolton LLC
   
SSG
Merrillville LLC
   
SSG
 Rochester LLC
   
SSG
Sadsbury LLC
   
SSG
Summerville I LLC
   
SSG
Summerville II LLC
 
OPERATING DATA
                                         
Six months ended June 30,2014
                                         
Rental income
  $ 331     $ 312     $ 288     $ 378     $ 273     $ 169     $ 103  
Net income
  $ 92     $ 72     $ 100     $ 83     $ 70     $ 26     $ 26  
BALANCE SHEET DATA June 30, 2014 
                                                       
Real estate assets, net
  $ 5,575     $ 5,016     $ 4,741     $ 3,525     $ 3,760     $ 2,261     $ 1,271  
Total assets
  $ 5,661     $ 5,114     $ 4,829     $ 3,730     $ 3,914     $ 2,307     $ 1,309  
Total liabilities
  $ 143     $ 131     $ 108     $ 61     $ 25     $ 38     $ 33  
                                                         
 
 
17

 
 
NOTES TO FINANCIAL STATEMENTS (Unaudited) continued
  Financial Statements
 
 
 
7.  ILLIQUID AND RESTRICTED INVESTMENTS  The Company holds investments that have a limited trading market and/or certain restrictions on trading and, therefore, may be illiquid and/or restricted. These investment holdings have been valued at fair value. Due to the inherent uncertainty of valuation, fair value pricing values may differ from the values that would have been used had a readily available market for the securities existed. These differences in valuation could be material. Illiquid and/or restricted investment holdings owned at June 30, 2014, were as follows:

 
Acquisition Date
 
Cost
   
Value
 
SSG Rochester LLC
12/5/12
  $ 3,750,000     $ 4,650,000  
SSG Sadsbury LLC
12/24/12
    4,100,000       4,500,000  
SSG Bolingbrook LLC
6/27/13
    5,700,000       5,700,000  
SSG Dolton LLC
6/27/13
    5,100,000       5,100,000  
SSG Merrillville LLC
6/27/13
    4,825,000       4,825,000  
SSG Summerville I LLC
7/12/13
    2,300,000       2,300,000  
SSG Summerville II LLC
8/20/13
    1,300,000       1,400,000  
DWS RREEF Real Estate Fund Liquidating Trust
2009
    0       15,356  
DWS RREEF Real Estate Fund II Liquidating Trust
2009
    0       79,205  
RMR Asia Pacific Fund Fractional shares
2010
    0       0  
                   
Total
    $ 27,075,000     $ 28,569,561  
                   
Percent of net assets
      75.68 %     79.86 %
                   

8.  INVESTMENT TRANSACTIONS  Purchases and proceeds of investments, excluding short term investments, were $100,000 and $1,410,966, respectively, for the six months ended June 30, 2014. As of June 30, 2014, for federal income tax purposes subject to change, the aggregate cost of investments was $32,664,128 and net unrealized appreciation was $3,225,746, comprised of gross unrealized appreciation of $3,229,781 and gross unrealized depreciation of $4,035. The aggregate cost of investments for tax purposes will depend upon the Company’s investment experience during the entirety of its fiscal year and may be subject to changes based on tax regulations.
 
9.  BORROWING AND SECURITIES LENDING  The Company has entered into a Committed Facility Agreement (the “CFA”) with BNP Paribas Prime Brokerage, Inc. (“BNP”) that allows the Company to adjust its credit facility amount up to $20,000,000, and a Lending Agreement, as defined below. Borrowings under the CFA are secured by assets of the Company that are held with the Company’s custodian in a separate account (the “pledged collateral”). Interest is charged at the 1 month LIBOR (London Inter-bank Offered Rate) plus 0.95% on the amount borrowed and 0.50% on the undrawn balance. Because the Company adjusts the facility amount each day to equal borrowing drawn that day, the 0.50% annualized rate charge on undrawn facility amounts provided for by the CFA has not been incurred. As of June 30, 2014, there was no outstanding loan balance and the value of eligible collateral investments was $7,178,347. The weighted average interest rate and average daily amount outstanding under the CFA for the six months ended June 30, 2014 were 1.11% and $593,518, respectively. The maximum amount outstanding during the six months ended June 30, 2014 was $1,717,823.
 
The Lending Agreement provides that BNP may borrow a portion of the pledged collateral (the “Lent Securities”) in an amount not to exceed the outstanding borrowings owed by the Company to BNP under the CFA. BNP may re-register the Lent Securities in its own name or in another name other than the Company and may pledge, re-pledge, sell, lend, or otherwise transfer or use the Lent Securities with all attendant rights of ownership. The Company may designate any security within the pledge collateral as ineligible to be a Lent Security, provided there are eligible securities within the pledged collateral in an amount equal to the outstanding borrowing owed by the Company. BNP must remit payment to the Company equal to the amount of all dividends, interest, or other distributions earned or made by the Lent Securities.
 
 
18

 
 
NOTES TO FINANCIAL STATEMENTS (Unaudited) continued
  Financial Statements
 
 
 
Under the Lending Agreement, Lent Securities are marked to market daily and, if the value of the Lent Securities exceeds the value of the then-outstanding borrowings owed by the Company to BNP under the CFA (the “Current Borrowings”), BNP must, on that day, either (1) return Lent Securities to the Company’s custodian in an amount sufficient to cause the value of the outstanding Lent Securities to equal the Current Borrowings; or (2) post cash collateral with the Company’s custodian equal to the difference between the value of the Lent Securities and the value of the Current Borrowings. If BNP fails to perform either of these actions as required, the Company will recall securities, as discussed below, in an amount sufficient to cause the value of the outstanding Lent Securities to equal the Current Borrowings. The Company can recall any of the Lent Securities and BNP is obligated, to the extent commercially possible, to return such security or equivalent security to the Company’s custodian no later than three business days after such request. If the Company recalls a Lent Security pursuant to the Lending Agreement, and BNP fails to return the Lent Securities or equivalent securities in a timely fashion, BNP shall remain liable to the Company’s custodian for the ultimate delivery of such Lent Securities, or equivalent securities, and for any buy-in costs that the executing broker for the sales transaction may impose with respect to the failure to deliver. The Company shall also have the right to apply and set-off an amount equal to one hundred percent (100%) of the then-current fair value of such Lent Securities against the Current Borrowings. The Company earns securities lending income consisting of payments received from BNP for lending certain securities, less any rebates paid to borrowers and lending agent fees associated with the loan. As of and for the six months ended June 30, 2014, there were no Lent Securities.
 
10.  INVESTMENT AND SECURITIES RISK
 
Foreign securities risk. Investments in the securities of foreign issuers involve special risks, including changes in foreign exchange rates and the possibility of future adverse political and economic developments, which could adversely affect the value of such securities. Moreover, securities of foreign issuers and traded in foreign markets may be less liquid and their prices more volatile than those of U.S. issuers and markets.
 
Non-diversification risk. The Company is considered non-diversified and can invest a greater portion of assets in securities of individual issuers than a diversified company. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified company.

Equity securities risk. The prices of equity securities change in response to many factors including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
 
Concentration risk. The Company’s assets are concentrated in investments in the real estate industry and, as a result, the value of the Company’s common stock may be subject to greater volatility than an investment company with a portfolio that is less concentrated by industry. If the securities of the real estate industry or self storage companies as a group fall out of favor with investors, the Company could underperform other companies that have greater industry diversification. A more concentrated portfolio may cause the Company’s net asset value to be more volatile and thus may subject stockholders to more risk. As of June 30, 2014, the Company held approximately 79% of its assets in self storage properties. Thus, the volatility of the Company’s net asset value, and its performance in general, depends disproportionately more on the performance of a single industry than that of a more diversified company.
 
REIT risk. The Company’s investments in securities of real estate companies involve risks. The REITs in which the Company invests are subject to risks inherent in the direct ownership of real estate. These risks include, but are not limited to, the risk of a possible lack of mortgage funds and associated interest rate risks, overbuilding, property vacancies, increases in property taxes and operating expenses, changes in zoning laws, losses due to environmental damages and changes in neighborhood values and appeal to purchasers.
 
11. CAPITAL STOCK The Company is authorized to issue 20,000,000 shares of $0.01 par value common stock. There were no transactions in common stock during 2013 or the six months ended June 30, 2014.
 
As of June 30, 2014, certain Affiliates of the Company owned approximately 2% of the Company’s outstanding common stock.
 
12.  STOCKHOLDER RIGHTS PLAN  On April 4, 2014, the Company’s Board of Directors adopted a stockholder rights plan (the “Plan”) dated April 4, 2014. To implement the Plan, the Board of Directors declared a special dividend distribution of one non-transferable right for each outstanding share of the Company’s common stock, par value $.01 per share, to stockholders of record at the close of business on April 4, 2014. Each right entitles the registered holder to purchase from the Company one share of its common stock, par value $.01 per share, subject to adjustment.The rights will be distributed as a non-taxable dividend and will expire at the close of business on August 1, 2014, unless earlier redeemed or exchanged by the Company. The rights will be evidenced by the underlying Company common stock and no separate rights certificates will presently be distributed. Subject to certain exceptions in the rights agreement, (“Rights Agreement”) the rights will become exercisable 10 days following a public announcement that a “person” (as defined in the Rights Agreement) or a group of affiliated or associated persons have acquired “beneficial ownership” (as defined in the Rights Agreement) of 19% or more of the outstanding shares of the Company’s common stock. In this event, however, any person who “beneficially owns” (as defined in the Rights Agreement) more than 17% of the outstanding common shares of the Company’s common stock will not be permitted to exercise any rights associated with common shares beneficially owned in excess of 17% of the outstanding common shares of the Company, and those additional rights will be deemed null and void. The Board of Directors may terminate the Plan at any time or redeem the rights, for $.01 per right, at any time before a person or a group of affiliated or associated persons beneficially owns 19% or more of the Company’s common stock. Under certain circumstances, as set forth in the Rights Agreement, certain rights owned by any person who is or becomes an acquiring person (as defined in the Rights Agreement) shall become null and void.
 
 
19

 
 
NOTES TO FINANCIAL STATEMENTS (Unaudited) concluded
  Financial Statements
 
 
 
13.  SHARE REPURCHASE PROGRAM  In accordance with Section 23(c) of the Act, the Company may from time to time repurchase its shares in the open market at the discretion of and upon such terms as determined by the Board of Directors. The Company did not repurchase any of its shares during 2013 or the six months ended June 30, 2014.
 
14.  COMMITMENTS AND CONTINGENCIES  The Company indemnifies its officers and directors from certain liabilities that might arise from their performance of their duties for the Company. Additionally, in the normal course of business, the Company enters into contracts that contain a variety of representations and warranties and which may provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown as it involves future claims that may be made against the Company under circumstances that have not occurred.
 
The Company leases an automobile under a lease expiring on February 25, 2017. The future minimum lease payments under the lease in aggregate are $41,635 comprised of annual payments of $12,722, $13,878, $ 13,878, and $1,157 for the years ending December 31, 2014, 2015, 2016, and 2017, respectively.

15.  OTHER INFORMATION  The Company may at times raise cash for investment by issuing shares through one or more offerings, including rights offerings. Proceeds from any such offerings will be invested in accordance with the Company’s Business Proposal.
 
16.  SUBSEQUENT EVENTS  On August 1, 2014, the Company’s Board of Directors adopted a stockholder rights plan (the “Plan”) dated August 1, 2014. To implement the Plan, the Board of Directors declared a special dividend distribution of one non-transferable right for each outstanding share of the Company’s common stock, par value $.01 per share, to stockholders of record at the close of business on August 1, 2014. Each right entitles the registered holder to purchase from the Company one share of its common stock, par value $.01 per share, subject to adjustment.The rights will be distributed as a non-taxable dividend and will expire at the close of business on November 28, 2014, unless earlier redeemed or exchanged by the Company. The rights will be evidenced by the underlying Company common stock and no separate rights certificates will presently be distributed. Subject to certain exceptions in the rights agreement, (“Rights Agreement”) the rights will become exercisable 10 days following a public announcement that a “person” (as defined in the Rights Agreement) or a group of affiliated or associated persons have acquired “beneficial ownership” (as defined in the Rights Agreement) of 19% or more of the outstanding shares of the Company’s common stock. In this event, however, any person who “beneficially owns” (as defined in the Rights Agreement) more than 17% of the outstanding common shares of the Company’s common stock will not be permitted to exercise any rights associated with common shares beneficially owned in excess of 17% of the outstanding common shares of the Company, and those additional rights will be deemed null and void. The Board of Directors may terminate the Plan at any time or redeem the rights, for $.01 per right, at any time before a person or a group of affiliated or associated persons beneficially owns 19% or more of the Company’s common stock. Under certain circumstances, as set forth in the Rights Agreement, certain rights owned by any person who is or becomes an acquiring person (as defined in the Rights Agreement) shall become null and void. A copy of the rights agreement specifying the terms and conditions of the rights is available on the Company’s website at www.SelfStorageGroupInc.com.

 
 
20

 
 
FINANCIAL HIGHLIGHTS (Unaudited)
  Financial Statements
 

     
Six Months
Ended
                     
Year Ended December 31,
                 
     
June 30, 2014
     
2013
     
2012
     
2011
     
2010
     
2009
 
Per Share Operating Performance
(for a share outstanding throughout each period)
                                               
Net asset value, beginning of period
  $ 4.58     $ 4.74     $ 4.60     $ 5.00     $ 4.43     $ 3.64  
Income from investment operations:
                                               
Net investment income (loss) (1)
    .12       (.09 )     .01       .19       .20       .21  
Net realized and unrealized gain (loss) on investments
    .25       .28       .60       (.33 )     .59       .82  
                                                 
Total income from investment operations
    .37       .19       .61       (.14 )     .79       1.03  
Less distributions:
                                               
Net investment income
    (.01 )     (.06 )     (.02 )     (.26 )     (.22 )     (.24 )
Net realized gains
    (.03 )     (.29 )     (.45 )     -       -       -  
Return of capital
    (.09 )     -               -       -       -  
                                                 
Total distributions
    (.13 )     (.35 )     (.47 )     (.26 )     (.22 )     (.24 )
                                                 
Net asset value, end of period
  $ 4.82     $ 4.58     $ 4.74     $ 4.60     $ 5.00     $ 4.43  
                                                 
Market value, end of period
  $ 3.19     $ 3.59     $ 3.69     $ 3.78     $ 4.17     $ 3.65  
                                                 
Total Return (2)
                                               
    Based on net asset value
    9.24 %     5.70 %     16.22 %     (1.86 )%     19.60 %     31.03 %
    Based on market price
    (7.76 )%     6.43 %     10.10 %     (3.30 )%     21.07 %     45.55 %
Ratios/Supplemental Data (3)
                                               
Net assets at end of period (000s omitted)
  $ 35,774     $ 33,940     $ 35,155     $ 34,102     $ 37,071     $ 32,813  
Ratio of total expenses to average net assets
    4.05 %*     3.14 %     2.60 %     2.31 %     2.00 %     1.62 %
Ratio of net expenses excluding loan interest and
   fees to average net assets
    4.03 %*     3.14 %     2.60 %     2.30 %     1.96 %     1.56 %
Ratio of net investment income (loss) to average net assets
    5.01 %*     (1.88 )%     0.25 %     4.31 %     4.33 %     5.23 %
Portfolio turnover rate
    0 %     57 %     115 %     22 %     55 %     48 %
                                                 

(1)
The per share amounts were calculated using the average number of common shares outstanding during the period.
(2)
Total return on a market value basis is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s dividend reinvestment plan if in effect or, if there is no plan in effect, at the lower of the per share net asset value or the closing market price of the Company’s shares on the dividend/distribution date.
 
Generally, total return on a net asset value basis will be higher than total return on a market value basis in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total return on a net asset value basis will be lower than total return on a market value basis in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods. The calculation does not reflect brokerage commissions, if any.
(3)
Expenses and income ratios do not include expenses incurred by an Acquired Fund in which the Company invests.
* Annualized.
 
See notes to financial statements.

 
 
 
21

 
 
POLICIES AND RISKS (Unaudited)
  Additional Information
 

Investment Objectives And Policies
 
Until the Company’s deregistration as an investment company becomes effective the Company’s primary investment objective is to provide a high level of income. This objective is fundamental and may not be changed with stockholder approval. The Company is also subject to certain investment restrictions, set forth in its most recently effective Statement of Additional Information, that are fundamental and cannot be changed without stockholder approval. The Company’s secondary investment objective of capital appreciation is not fundamental and may be changed by the Board of Directors without stockholder approval. Notice to stockholders of any change in the Company’s secondary investment objective will be provided as required by applicable law. After the Company’s deregistration becomes effective, it will no longer be governed by the Investment Company Act of 1940, as amended. However, the Company currently intends to continue to operate to provide a high level of income and capital appreciation.
 
Risk Factors
 
Stockholders should note that there are a number of risks related to the Company’s business in connection with the implementation of the Business Proposal. Additionally, there are risks related to the operating performance of the Company’s self storage facilities and the Company’s performance will be subject to risks associated with the real estate industry. There are also risks related to the Company’s organization and structure and risks related to the Company’s tax status as a REIT. The summary of risk factors below is qualified by reference to a more complete statement of applicable risks contained in the Company’s Proxy Statement dated November 9, 2011 and Supplemental Questions & Answers Regarding the Business Proposal dated November 23, 2011 which are available at www. selfstoragegroupinc.com/proxy-statement.html and upon request by contacting the Company.
 
There are a number of risks related to the Company’s business in connection with the implementation of the Business Proposal and they should be noted:

The Company is pursuing a business in which it has no operating history.
 
The Company’s investments are subject to concentration risk.
 
The Company’s performance is subject to risks associated with operation of self storage facilities.
 
The following factors, among others, may adversely affect the operating performance of the Company’s self storage facilities:

Perceptions by prospective tenants of the Company’s self storage properties of the safety, convenience, and attractiveness of such properties and the areas in which they are located.
 
A general decline in rental rates or an increase in tenant defaults.
 
Vacancies or inability to rent storage space on favorable terms.
 
Increases in operating costs.
 
Actual or perceived oversupply or declining demand of self storage in a particular area.
 
Difficulties in hiring, training and maintaining skilled field personnel.
 
Competition from other self storage facilities which may adversely impact the markets in which the Company invests and in which the Company’s self storage companies operate.

The Company’s performance may be subject to risks associated with the real estate industry. Some of these risks include:

The Company expects to invest in a limited number of self storage facilities.
 
Prevailing economic conditions may adversely affect the Company’s business, financial condition and results of operations.
 
The Company may be unable to complete acquisitions that would grow its business.
 
The inability to achieve satisfactory completion of due diligence investigations and other customary closing conditions.
 
The consideration paid for properties may exceed their value.
 
The Company may acquire properties subject to liabilities.
 
The Company’s investments in development and redevelopment projects may not yield anticipated returns.
 
The Company may not complete development projects on schedule or within projected budgeted amounts.
 
The Company may encounter delays or refusals in obtaining all necessary zoning, land use, building, occupancy and other required governmental permits and authorizations.
 
The Company may be unable to increase occupancy at a newly acquired property as quickly as expected or at all.
 
The Company may be unable to obtain financing for these projects on favorable terms or at all.
 
The Company may fail to successfully integrate and operate acquired properties.
 
Regulatory compliance costs will reduce the Company’s income.
 
The Company may incur liability from tenant and employment- related claims and litigation.
 
Uninsured losses or losses in excess of the Company’s insurance coverage could adversely affect its financial condition and cash flow.
 
Perceptions of the self storage industry.
 
The Company’s investments will be relatively illiquid.
 
For a time, until the Business Proposal is fully implemented, the Company’s performance may be subject to the risks of investment in publicly traded REITs.
 
 
22

 
 
POLICIES AND RISKS (Unaudited)
  Additional Information
 
 
 
Delays in acquisitions of self storage facilities may adversely affect your investment.
 
The Company may be unable to maintain its current level of distributions or increase distributions over time.
 
There are risks related to the Company’s organization and structure:

Management has no prior experience operating a REIT.
 
The Board may revoke the Company’s REIT election at any time.
 
The Company’s business could be harmed if key personnel with business experience in the self storage industry terminate their employment with the Company.
 
There may be conflicts of interest resulting from the relationships among the Company and its affiliates and other related parties.
 
The Company may sell its common stock at a price below book value without stockholder approval.
 
Once the Company deregisters under the Investment Company Act of 1940, as amended, and assuming it does not reclassify its Board or list its common stock on NASDAQ, the Company’s reporting obligations to stockholders may be materially affected.
 
Certain provisions of Maryland law and the Company’s Charter and By-laws may prevent changes in control or otherwise discourage takeover attempts that may be beneficial to stockholders.

There are risks related to the Company’s tax status as a REIT:

Even though the Company currently qualifies for federal tax treat- ment as a REIT, it may face tax liabilities that will reduce its cash flow.
 
Complying with the REIT requirements may cause the Company to forego, or to liquidate, otherwise attractive opportunities.
 
Failure to continue to qualify for treatment as a REIT may have adverse tax consequences.
 
The Company’s REIT taxable income may exceed its cash flow for a year, which could necessitate its borrowing funds and/or subject it to tax, thus reducing the cash available for distribution to its stockholders.
 
Distributions or gain on sale of shares may be treated as unrelated business taxable income to tax-exempt investors.
 
Dividends payable by the Company will not qualify for the reduced tax rates available for “qualified dividend income.”
 
REIT restrictions on ownership of shares may delay or prevent its acquisition by a third party.
 
The Company may be subject to adverse legislative or regulatory tax changes.

Proxy Voting
 
The Company’s Proxy Voting Guidelines, as well as its voting record for the most recent 12 months ended June 30, are available without charge by calling the Company collect at 1-212-785-0900, on the SEC’s website at www.sec.gov, and on the Company’s website at www.SelfStorageGroupInc.com.
 
Quarterly Schedule Of Portfolio Holdings
 
The Company files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Company’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Company’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Company makes the Forms N-Q available on its website at www.SelfStorageGroupInc.com.
 
Distributions
 
The Company’s current distribution policy is to provide stockholders with a relatively stable cash flow and attempt to reduce or eliminate the Company’s market price discount to its net asset value per share. The distributions are paid from ordinary income and any net capital gains, with the balance representing return of capital. The policy may be changed or discontinued without notice. The Company’s distributions are not tied to its net investment income and net realized capital gains and do not represent yield or investment return. The Company is subject to U.S. corporate, tax, and securities laws. Under U.S. tax accounting rules, the amount of distributable net income is determined on an annual basis and is dependent during the fiscal year on the aggregate gains and losses realized by the Company and other factors. Therefore, the exact amount of distributable income can only be determined as of the end of the Company’s fiscal year. Under the Investment Company Act of 1940, as amended, however, the Company is required to indicate the source of each distribution to stockholders. The Company estimates that distributions for the period commencing January 1, 2014, including the distributions paid quarterly, will be comprised primarily from net investment income and the balance from paid in capital. This estimated distribution composition may vary from quarter to quarter because it may be materially impacted by future realized gains and losses on securities and other factors. In January, the Company normally sends stockholders a Form 1099-DIV for the prior calendar year stating the amount and composition of distributions and providing information about their appropriate tax treatment.

 
23

 
 
DIVIDENDS (Unaudited)
  Additional Information
 

HISTORICAL DISTRIBUTION SUMMARY
 
PERIOD
 
Investment Income
   
Return of Capital
   
Capital Gains
   
Total
 
6 months ended June 30, 2014*
  $ 0.010     $ 0.090     $ 0.030     $ 0.130  
2013
  $ 0.060     $ 0.000     $ 0.290     $ 0.350  
2012
  $ 0.020     $ 0.000     $ 0.450     $ 0.470  
2011
  $ 0.260     $ 0.000     $ 0.000     $ 0.260  
2010
  $ 0.220     $ 0.000     $ 0.000     $ 0.220  
2009
  $ 0.235     $ 0.000     $ 0.000     $ 0.235  
2008
  $ 0.240     $ 0.000     $ 0.000     $ 0.240  
2007
  $ 0.170     $ 0.050     $ 0.000     $ 0.220  
2006
  $ 0.130     $ 0.150     $ 0.000     $ 0.280  
2005
  $ 0.200     $ 0.080     $ 0.000     $ 0.280  
2004
  $ 0.245     $ 0.090     $ 0.000     $ 0.335  
2003
  $ 0.220     $ 0.140     $ 0.000     $ 0.360  
2002
  $ 0.280     $ 0.220     $ 0.000     $ 0.500  
2001
  $ 0.360     $ 0.200     $ 0.000     $ 0.560  
2000
  $ 0.420     $ 0.160     $ 0.000     $ 0.580  
6 months ended 12/31/99
  $ 0.230     $ 0.070     $ 0.000     $ 0.300  
12 months ended 6/30/99
  $ 0.550     $ 0.130     $ 0.000     $ 0.680  
From June 29, 1998 to November 30, 1998
  $ 0.520     $ 0.320     $ 0.000     $ 0.840  
                                 
                                 
*The classification of these distributions for federal income tax purposes will be determined after the Company’s fiscal year ending December 31, 2014. This is only an estimate based on information available at this time and is subject to change. Actual amounts may be recharacterized between net investment income and return of capital for tax purposes after year end 2014, although the exact amount is not estimable at June 30, 2014.
 




 
24

 

GENERAL INFORMATION (Unaudited)
  Additional Information
 

 
STOCK DATA AT JUNE 30, 2014
     
Market Price per Share
  $ 3.19  
Net Asset Value per Share
  $ 4.82  
Market Price Discount to Net Asset Value
    33.8 %
Ticker Symbol
 
SELF
 
CUSIP Number
    81631Y102  


2014 QUARTERLY DISTRIBUTION DATES
Declaration
Record
Payment
March 3
March 17
March 31
June 2
June 16
June 30
September 2
September 16
September 30
December 1
December 15
December 30


COMPANY INFORMATION
 
Stock Transfer Agent and Registrar
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
www.amstock.com
1-800-278-4353


SELFSTORAGEGROUPINC.COM
 
Visit us on the web at www.SelfStorageGroupInc.com.
The site provides information about the Company, including market performance, net asset value, dividends, press releases, and stockholder reports. For further information, please email us at info@SelfStorageGroupInc.com.
 
 
Cautionary Note Regarding Forward Looking Statements - This report contains “forward looking statements” as defined under the U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will,” and similar expressions identify forward looking statements, which generally are not historical in nature. Forward looking statements are subject to certain risks and uncertainties that could cause actual results to materially differ from the Company’s historical experience and its current expectations or projections indicated in any forward looking statements. These risks include, but are not limited to, equity securities risk, corporate bonds risk, credit risk, interest rate risk, leverage and borrowing risk, additional risks of certain securities or other assets (including real estate) in which the Company invests, market discount from net asset value, distribution policy risk, management risk, and other risks discussed in the Company’s filings with the SEC. You should not place undue reliance on forward looking statements, which speak only as of the date they are made. The Company undertakes no obligation to update or revise any forward looking statements made herein. There is no assurance that the Company’s objectives will be attained.
 
Company Information - This report, including the financial statements herein, is transmitted to the stockholders of the Company for their information. This is not a prospectus, circular, or representation intended for use in the purchase of shares of the Company or any securities mentioned in this report. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state, or an exemption therefrom.
 
Section 23 Notice - Pursuant to Section 23 of the Investment Company Act of 1940, as amended, notice is hereby given that the Company may in the future purchase its own shares in the open market. These purchases may be made from time to time, at such times, and in such amounts, as may be deemed advantageous to the Company, although nothing herein shall be considered a commitment to purchase such shares.


 
 
25

 


 
 
 
 

 
 
 
 
 
 

 

 
Item 2. Code of Ethics.
 
Not applicable.
 
Item 3. Audit Committee Financial Expert.
 
Not applicable.
 
Item 4. Principal Accountant Fees and Services.
 
Not applicable.
 
Item 5. Audit Committee of Listed Registrants.
 
Not applicable.
 
Item 6. Investments.
 
Included as part of the report to stockholders filed under Item 1 of this Form.
 
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
 
Not applicable.
 
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
 
Not applicable.
 
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchase.
 
Not applicable.
 
Item 10. Submission of Matters to a Vote of Security Holders.
 
There were no material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors made or implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407), or this Item.
 
Item 11. Controls and Procedures.
 
(a)
The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the "1940 Act")) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.
 
(b)
There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's second fiscal quarter of the period covered by the report that have materially affected, or are likely to materially affect the registrant's internal control over financial reporting.
 
Item 12. Exhibits.
 
(a)
Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940(17 CFR 270.360a-2) attached hereto as Exhibits EX-31 and certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit EX-32.
 
SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
Self Storage Group, Inc.
   
September 8, 2014
By: /s/ Mark C. Winmill
 
Mark C. Winmill, President
   
   
 
Self Storage Group, Inc.
   
September 8, 2014
By: /s/ Thomas O’Malley
 
Thomas O’Malley, Chief Financial Officer
   
   
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
 
Self Storage Group, Inc.
   
September 8, 2014
By: /s/ Mark C. Winmill
 
Mark C. Winmill, President
   
   
 
Self Storage Group, Inc.
   
September 8, 2014
By: /s/ Thomas O’Malley
 
Thomas O’Malley, Chief Financial Officer