SOUND SHORE FUND INC, 497, 1996-05-16

SOUND SHORE FUND INC
497, 1996-05-16

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PROSPECTUS
MAY 1, 1996

Sound Shore Fund, Inc. (the "Fund") is a no-load, open-end, diversified,
management investment company. The Fund's investment objective is to seek
growth of capital, and investments will be made based upon their potential for
capital growth. Current income, while considered important, will be secondary
to the objective of capital growth.

There are no purchase or redemption charges imposed by the Fund;
nor does the Fund incur any Rule 12b-1 fees.

Sound Shore Management, Inc. serves as Investment Adviser to the Fund.
Forum Financial Services, Inc. serves as Administrator and Distributor of the
Fund.

This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
dated May 1, 1996, containing additional and more detailed information about the
Fund (the "Statement of Additional Information"), has been filed with the
Securities and Exchange Commission (the "SEC") and is hereby incorporated by
reference into this Prospectus. It is available without charge and can be
obtained by writing the Fund at the address set forth above or by calling the
Fund's Investment Adviser at (800) 551-1980. Investors desiring more
information about the Fund may call the Fund's Investment Adviser at the same
number.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION; NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

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PROSPECTUS SUMMARY

THE FUND. Sound Shore Fund is a diversified mutual fund whose shares are
offered without a sales charge.

INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek growth of
capital, and investments will be made based upon their potential for capital
growth. In seeking to meet this objective the Fund intends to purchase
securities which management believes display good growth potential and are
selling at a discount to perceived value in the marketplace. Current income,
while considered important, will be secondary to the objective of capital
growth. The Fund may invest in common stocks, preferred stocks and fixed income
securities. See "Investment Objective and Policies."

NO SALES CHARGES. There are no sales charges, redemption fees or Rule 12b-1
fees. Shares may be purchased and redeemed at net asset value.

INVESTMENT ADVISER. The investment adviser to the Fund is Sound Shore
Management, Inc. (the "Adviser"), which also serves as investment adviser to
individuals and institutional clients. The investment advisory fee is at the
annual rate of 0.75% of the average daily net assets of the Fund. See
"Investment Adviser."

ADMINISTRATOR. The administrator of the Fund and distributor of its shares is
Forum Financial Services, Inc., which serves as administrator and distributor to
other mutual funds. For serving as administrator of the Fund, Forum Financial
Services, Inc. receives a fee at the annual rate of 0.10% of the average daily
net assets of the Fund. See "Administrator."

PURCHASE OF SHARES. Shares may be purchased directly through the Fund's
transfer agent, Forum Financial Corp., or through certain broker-dealers. There
is a $10,000 minimum initial investment on shares purchased directly, and a
$5,000 minimum initial investment on shares purchased through broker-dealers.
See "Purchase of Shares."

SHARE VALUE. The value of Fund shares will fluctuate with changes in the market
value of the Fund's portfolio securities and is consequently subject to the
usual market risks of investment.

SYSTEMATIC WITHDRAWAL PLAN. The Systematic Withdrawal Plan permits a
shareholder owning Fund shares with a value of $20,000 or more to redeem on a
regular basis a portion of the shares having a specified value and receive
checks for the proceeds. See "Redemption of Shares - Systematic Withdrawal
Plan."

IRA AND RETIREMENT PLANS. IRA and other retirement plans utilizing the Fund as
an investment vehicle provide Federal income tax benefits for qualified
participants. See "Retirement Plans."

EXCHANGE PRIVILEGES. Exchange privileges are offered whereby shareholders of
the Fund are entitled to exchange some or all of their shares in the Fund for
shares of certain money market and bond mutual funds. See "Exchange
Privileges."

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DIVIDENDS AND DISTRIBUTIONS. Dividends of net investment income will normally
be paid semi-annually. Capital gain distributions, if any, will be paid at
approximately the end of the Fund's fiscal year. Income dividends and capital
gain distributions are automatically reinvested in additional shares of the Fund
unless the shareholder instructs otherwise. See "Dividends and Distributions."

EXPENSES OF INVESTING IN THE FUND

The purpose of the following table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly.

ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75%
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.40%

Total Fund Operating Expenses. . . . . . . . . . . . . . . . . . . . . . . 1.15%

EXAMPLE
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming a 5% annual return 1 Year 3 Years 5 Years 10 Years
and redemption at the end of each period: $12 $37 $63 $140
</TABLE>
The amounts of expenses and fees are those incurred during the Fund's most
recent fiscal year. For a further description of these fees, see "Investment
Adviser" and "Administrator." The example is based on the expenses listed in
the table and assumes the reinvestment of all dividends. THE FIGURES REFLECTED
IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS THAN
INDICATED.

FINANCIAL HIGHLIGHTS

The following information represents selected data for a single share
outstanding of the Fund. The information has been audited by Deloitte & Touche
LLP, Independent Certified Public Accountants. The Fund's financial statements
for the fiscal year ended December 31, 1995 and independent auditors' report
thereon are contained in the Fund's Annual Report and are incorporated by
reference into the Statement of Additional Information. Further information
about the performance of the Fund is contained in the Annual Report, which may
be obtained from the Fund without charge.

Year Ended December 31,
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Beginning net asset value per share $15.46 $16.50 $16.24 $15.17 $11.77 $13.73
Net investment income 0.25 0.22 0.14 0.17 0.30 0.51
Net realized and unrealized
investment gain (loss) on securities 4.33 (0.17) 1.80 3.02 3.48 (1.95)
Dividends paid from net
investment income (0.21) (0.22) (0.14) (0.175) (0.285) (0.52)
Distributions from net realized gains (1.67) (0.87) (1.54) (1.95) (0.095) -

Ending net asset value per share $18.16 $15.46 $16.50 $16.24 $15.17 $11.77

Ratios to average net assets:
Expenses 1.15% 1.22% 1.27% 1.37% 1.30% 1.33%
Net investment income 1.41% 1.32% .88% 1.10% 2.10% 3.55%
Total return 29.87% 0.30% 11.96% 21.17% 32.24% (10.64%)

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Portfolio turnover rate 53.01% 75.52% 90.99% 88.33% 100.01% 105.20%
Net assets at end of year
(000's omitted) $67,602 $59,993 $58,179 $39,974 $32,211 $28,470

Nine Months Year May 3, 1985
Year Ended December 31, December 31, March 31, March 31,
1989 1988 1987 1987 1986
<S> <C> <C> <C> <C> <C>
Beginning net asset value per share $12.67 $11.58 $15.97 $13.67 $10.00
Net investment income 0.33 0.21 0.11 0.14 0.15
Net realized and unrealized
investment gain (loss) on securities 2.50 2.24 (3.11) 2.63 3.66
Dividends paid from net
investment income (0.35) (0.18) (0.18) (0.08) (0.14)
Distributions from net realized gains (1.42) (1.18) (1.21) (0.39) -

Ending net asset value per share $13.73 $12.67 $11.58 $15.97 $13.67

Ratios to average net assets:
Expenses 1.24% 1.40% 1.36%* 1.45% 1.48%*+
Net investment income 2.37% 1.57% 1.06%* 1.14% 2.55%*+
Total return 22.42% 21.14% (19.87%)* 21.01% 38.10%*
Portfolio turnover rate 90.83% 134.30% 85.05% 91.21% 81.74%
Net assets at end of year
(000's omitted) $42,470 $28,512 $23,798 $31,487 $13,857
</TABLE>

* Annualized
+ Net of advisory and administration fees waived equivalent to 0.72% of
average net assets.

INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek growth of capital and
investments will be made based upon their potential for capital growth. Current
income, while considered important, will be secondary to the objective of
capital growth. There is no assurance that the Fund will achieve its investment
objective.

The Fund expects that for most periods a substantial portion, if not all, of its
assets will be invested in a diversified portfolio of common stocks judged by
the Adviser to have favorable value to price characteristics. The Fund may also
invest in U.S. Government or Government agency obligations, investment grade
corporate bonds, preferred stocks, convertible securities, and/or short-term
money market instruments when the Adviser believes that investment in these
securities, in light of current market conditions, is consistent with the Fund's
investment objectives. When business or financial conditions warrant, the Fund
may take a defensive position and invest temporarily without limit in investment
grade debt securities, preferred stocks or in money market instruments. Money
market instruments for this purpose include obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities (including such
obligations subject to repurchase agreements), commercial paper rated Prime-1 by
Moody's Investors Service, or A-1 by Standard & Poor's, and certificates of
deposit and bankers' acceptances issued by domestic banks having total assets in
excess of one billion dollars. A repurchase agreement is an instrument under
which an investor (e.g., the Fund) purchases a U.S. Government security from a
vendor, with an agreement by the vendor to repurchase the security at the same
price, plus interest at a specified rate. Repurchase agreements usually have a
short duration, often less than one week. The Fund may invest in warrants which
entitle the holder to buy equity securities at a specific price for a specific
period of time. The Fund will not, however, purchase any warrant if, as a
result of such purchase, more than 5% of the Fund's total assets would be
invested in warrants.

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The Fund will make equity investments in, among others, securities listed on a
securities exchange or included in the National Association of Securities
Dealers Automated Quotation (NASDAQ) National Market System or National List.
As a matter of policy, not all aspects of the national economy will be
represented in the Fund's portfolio and the portfolio will not have the same
diversification as the broad market averages such as the Dow Jones Industrial
Average and the Standard & Poor's 500. Therefore, its results should differ
from these market averages. The Fund may invest up to 10% of its total assets
in the securities of other investment companies, in which case the Fund would in
effect pay duplicate fees for such services as investment advice, administration
and distribution.

The Adviser seeks investments in equity securities based on its judgment of
fundamental value. Factors deemed particularly relevant include price, earnings
expectations, earnings and price histories, balance sheet characteristics and
perceived management skills. Changes in the economic and political outlooks as
well as individual corporate developments influence specific security prices.
When the Fund's investments lose their perceived value relative to other similar
investments and investment alternatives, they are sold. It is the Adviser's
expectation, based on its experience, that most of the holdings will be long-
term in nature (greater than a six-month holding period) and that the annual
turnover of the Fund should not exceed 100%. A portfolio turnover rate of 100%
would occur, for example, if all the stocks in the portfolio were replaced in a
one year period.

The Fund's investment objective is fundamental and may not be changed without
shareholder approval. The Fund's investment policies may be changed by the
Fund's Board of Directors (the "Board").

INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions which may not be changed
without the approval of the Fund's shareholders. Briefly, these restrictions
provide that the Fund may not:

1. Purchase the securities of any one issuer, other than the U.S. Government
or any of its agencies or instrumentalities, if immediately after such purchase
more than 5% of the value of its total assets would be invested in such issuer
or the Fund would own more than 10% of the outstanding voting securities of such
issuer, except that up to 25% of the value of the Fund's total assets may be
invested without regard to such 5% and 10% limitations;

2. Invest more than 25% of the value of its total assets in any particular
industry;

3. Purchase securities on margin, but it may obtain such short-term credits
from banks as may be necessary for the clearance of purchases and sales of
securities;

4. Make loans of its assets to any person, except for the purchase of debt
securities as discussed under "Investment Objective and Policies;"

5. Borrow money except for (i) the short-term credits from banks referred to
in paragraph 3 above and (ii) borrowings from banks for temporary or emergency
purposes, including the meeting of redemption requests which might require the
untimely disposition of securities. Borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed 5%
of the value of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made. Outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any subsequent investments are made;

<PAGE>

6. Mortgage, pledge or hypothecate any of its assets, except as may be
necessary in connection with permissible borrowings mentioned in paragraph 5
above;

7. Purchase the securities of any other investment company, except that the
Fund may invest up to 10% of its total assets in such securities through
purchases in the open market where to the best information of the Fund no
commission or profit to a sponsor or dealer (other than the customary broker's
commission) results from such purchase, or except when such purchase is part of
a merger, consolidation or acquisition of assets; or

8. Act as an underwriter of securities of other issuers, except that the Fund
may acquire restricted or not readily marketable securities under circumstances
where, if such securities were sold, the Fund might be deemed to be an
underwriter for purposes of the Securities Act of 1933. The Fund will not,
however, invest more than 10% of the value of its total assets in the aggregate
in restricted or not readily marketable securities or in repurchase agreements
maturing or terminable in more than seven days.

If a percentage restriction or a rating on investment is adhered to at the time
an investment is made, a later change in percentage resulting from changes in
the value of the Fund's portfolio securities or a later change in the rating of
a portfolio security will not be considered a violation of the Fund's policies
or restrictions.

INVESTMENT ADVISER
The investment adviser to the Fund is Sound Shore Management, Inc., a Delaware
corporation with its principal office at 8 Sound Shore Drive, Greenwich,
Connecticut 06836. The Adviser was, at May 1, 1996, investment adviser for
assets aggregating in excess of $1 billion. In addition to the Fund, the
Adviser's advisory clients include individuals, pension trusts, profit-sharing
trusts and endowments. Most of the accounts which are managed or advised by the
Adviser for these clients have investment objectives which may vary only
slightly from those of each other and those of the Fund. The Adviser expects to
invest assets of such accounts in investments substantially similar to those
which constitute the principal investments of the Fund. Such accounts are
supervised by officers and employees of the Adviser who may also be acting in
similar capacities for the Fund. It is the policy of the Adviser to allocate
advisory recommendations and the placing of orders in a manner which is deemed
equitable by the Adviser to the accounts involved, including the Fund.

Pursuant to an Investment Advisory Agreement, the Adviser furnishes a continuous
investment program for the Fund's portfolio, makes the day-to-day investment
decisions for the Fund, executes the purchase and sale orders for the portfolio
transactions of the Fund and generally manages the Fund's investments in
accordance with the stated policies of the Fund, subject to the general
supervision of the Board. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. and subject to seeking best
execution, the Adviser may consider sales of shares of the Fund as a factor in
the selection of brokers to execute portfolio transactions for the Fund. The
Adviser provides persons satisfactory to the Board to serve as officers of the
Fund. Such officers, as well as certain other employees and directors of the
Fund, may be directors, officers, or employees of the Adviser. Messrs. Harry
Burn III and T. Gibbs Kane, Jr. may be deemed "controlling persons" of the
Adviser on the basis of their ownership of the Adviser's stock.

While the Adviser's full staff contributes to the investment services provided
to the Fund, Mr. Kane, President of the Fund and of the Adviser, and Mr. Burn,
Chairman of the Fund and of the Adviser, are primarily responsible for the day
to day management of the Fund. They have served as portfolio managers for the
Fund since its inception.

<PAGE>

For the fiscal year ended December 31, 1995, the Adviser, for its services under
the Investment Advisory Agreement, received an amount equal to 0.75% of the
Fund's average daily net assets.

ADMINISTRATOR
The Administrator for the Fund is Forum Financial Services, Inc., a Delaware
corporation with principal offices at Two Portland Square, Portland, Maine 04101
(the "Administrator"). As of May 1, 1996, Forum Financial Services, Inc.
provided management, administrative and distribution services to registered
investment companies and collective investment funds with assets of
approximately $15.5 billion. The Administrator is a registered broker-dealer
and investment adviser and is a member of the National Association of Securities
Dealers, Inc.

The Administrator administers all aspects of the Fund's operations subject to
the supervision of the Board except as set forth under "Investment Adviser."
Because of the services rendered the Fund by the Administrator and the Fund's
Adviser, the Fund itself requires no employees other than its officers, none of
whom receives compensation from the Fund and all of whom are employed by the
Adviser, the Administrator or their affiliates. In connection with its
responsibilities as Administrator and in consideration of its administrative
fee, the Administrator is responsible for the supervision of the overall
administration of the Fund (including the Fund's receipt of services for which
it must pay), providing the Fund with general office facilities and providing
persons satisfactory to the Board of Directors to serve as officers of the Fund.

For the fiscal year ended December 31, 1995, the Administrator received a fee of
0.25% of the average daily net assets of the Fund for administration and
portfolio accounting services under the then-existing Administration Agreement.
Under the new Administration Agreement, effective January 1, 1996, the
Administrator receives a fee of 0.10% of the average daily net assets of the
Fund. Under new Fund Accounting and Transfer Agency Agreements, also dated
January 1, 1996, Forum affiliates, Forum Accounting Services LLC and Forum
Financial Corp., provide portfolio accounting and transfer agency services for
the Fund for total fees of 0.15% of the Fund's average daily net assets.

Pursuant to a separate Distribution Services Agreement, the Administrator acts
as distributor of the Fund's shares. The Administrator is not paid any fee for
its distribution services.

TRANSFER AGENT
Forum Financial Corp. (the "Transfer Agent"), Two Portland Square, Portland,
Maine 04101, a registered transfer agent, acts as the Fund's transfer agent and
dividend disbursing agent. The Transfer Agent maintains an account for each
shareholder of the Funds (unless such accounts are maintained by sub-transfer
agents or processing agents) and performs other transfer agency and related
functions.

The Transfer Agent is authorized to subcontract any or all of its functions to
one or more qualified sub-transfer agents or processing agents, which may be its
affiliates or affiliates of the Adviser, who agree to comply with the terms of
the Transfer Agent's agreement with the Fund. The Transfer Agent may pay those
agents for their services, but no such payment will increase the Transfer
Agent's compensation from the Fund.

PURCHASE OF SHARES
Shares of the Fund are offered at the next determined net asset value without
any sales charge by the Fund as an investment vehicle for individuals,
institutions, fiduciaries and retirement plans. Prospectuses, sales material
and subscription order forms can be obtained from the Fund at the address, or
from the Adviser at the telephone number, listed on the cover of this
Prospectus.

<PAGE>

For each shareholder of record, the Transfer Agent, as the shareholder's agent,
establishes an open account to which all shares purchased are credited, together
with any dividends and capital gain distributions which are paid in additional
shares. See "Dividends and Distributions." Although most shareholders elect
not to receive stock certificates, certificates for full shares can be obtained
on specific written request to the Transfer Agent. No certificates are issued
for fractional shares.

MINIMUM INVESTMENT. There is a $10,000 minimum for an initial investment made
directly and a $5,000 minimum initial investment on purchases made through
certain broker-dealers. The minimum initial investment for individual
retirement accounts is $250. There is no minimum for subsequent investments.
All purchase payments will be invested in full and fractional shares and the
Fund has reserved the right to reject any purchase order.

PURCHASE PROCEDURES. To purchase shares of the Fund an investor should send a
check made payable to "Sound Shore Fund, Inc." and a completed subscription
order form to the Transfer Agent at:

Forum Financial Corp.
ATTN: Transfer Agent
P.O. Box 446
Portland, Maine 04112

Checks are accepted subject to collection at full face value in United States
currency.

To purchase shares of the Fund using the wire system for transmittal of money
among banks, an investor should first telephone Sound Shore Management, Inc. at
(800) 551-1980, to obtain an account number. The investor should then instruct
a member commercial bank to wire funds to:

The First National Bank of Boston
Boston, Massachusetts
ABA # 011000390

For Credit To: Forum Financial Corp.
Account #: 541-54171
Ref: Sound Shore Fund, Inc.
Account of (YOUR NAME)
Fund Account #: (YOUR ACCOUNT NUMBER)
SS # or Tax ID #: (YOUR SS # OR TAX ID #)

The investor should then promptly complete and mail the subscription order form.
Subsequent purchases can be made by bank wire, as indicated above, or by mailing
a check to the Transfer Agent at the address listed above. Each investment in
shares of the Fund, including dividends and capital gain distributions
reinvested, is acknowledged by a statement showing the number of shares
purchased, the net asset value at which the shares were purchased, and the new
balance of Fund shares owned.

PURCHASING THROUGH YOUR BROKER-DEALER. Shareholder accounts may be maintained
through certain broker-dealers. These broker-dealers may make arrangements for
their customers to purchase and redeem Fund shares by telephone and some broker-
dealers may impose a charge for their services. Alternatively, an investor who
has not made his initial purchase through a broker-dealer may purchase and
redeem those shares directly through the Transfer Agent without any such
charges.

<PAGE>

REDEMPTION OF SHARES
Upon receipt by the Transfer Agent of a redemption request in proper form,
shares of the Fund will be redeemed at their next determined net asset value.

REDEMPTION PROCEDURES. Redemptions may be made by letter to the Transfer Agent
at:

Forum Financial Corp.
ATTN: Transfer Agent
P.O. Box 446
Portland, Maine 04112

The letter must specify the name of the Fund, the dollar amount or number of
shares to be redeemed, and the account number. The letter must be signed in
exactly the same way the account is registered (if there is more than one owner
of the shares, all must sign).

If shares to be redeemed are held in certificate form, the certificates must be
enclosed with the letter. Certificates must be properly endorsed and, for
protection, shareholders should use registered mail.
Further documentation, such as copies of corporate resolutions and instruments
of authority, may be requested from corporations, administrators, executors,
personal representatives, trustees or custodians to evidence the authority of
the person or entity making the redemption request.

Redemptions may be made through the broker-dealer through whom you purchased
your shares.

SIGNATURE GUARANTEES. A signature guarantee is required for any written
redemption request and for any endorsement on a stock certificate. In addition,
a signature guarantee is required for instructions to change a shareholder's
record name or address, Systematic Withdrawal information, dividend election or
telephone exchange option. Signature guarantees may be provided by a bank, a
broker-dealer, a national securities exchange, a credit union, or a savings
association that is authorized to guarantee signatures, acceptable to the Fund's
transfer agent. Whenever a signature guarantee is required, each person
required to sign for the account must have his signature guaranteed. Signature
guarantees by notaries public are not acceptable.

SYSTEMATIC WITHDRAWAL PLAN. Any shareholder who owns shares of the Fund with an
aggregate value of $20,000 or more may establish a Systematic Withdrawal Plan
under which the shareholder offers to sell to the Fund at net asset value the
number of full and fractional shares which will produce the monthly, or
quarterly, payments specified (minimum $100.00 per payment). Depending on the
amounts withdrawn, systematic withdrawals may deplete the investor's principal.
Investors contemplating participation in this Plan should consult their tax
advisers.

Shareholders wishing to utilize this Plan may do so by completing an application
which may be obtained by writing or calling the Transfer Agent at (800) 754-
8758. No additional charge to the shareholder is made for this service.

OTHER REDEMPTION INFORMATION. The proceeds of a redemption may be more or less
than the amount invested and, therefore, a redemption may result in a gain or
loss for Federal income tax purposes. Checks for redemption proceeds normally
will be mailed within seven days, but will not be mailed until all checks
(including a certified or cashier's check) in payment for the purchase of the
shares to be redeemed have been cleared, currently considered by the Fund to
occur 15 days after investment. Unless other instructions are given, a check
for the proceeds of a redemption will be sent to the shareholder's address of
record.

<PAGE>

The Fund may suspend the right of redemption during any period when (i) trading
on the New York Stock Exchange is restricted or the Exchange is closed, other
than customary weekend and holiday closings, (ii) the SEC has by order permitted
such suspension or (iii) an emergency, as defined by rules of the SEC, exists
making disposal of portfolio investments or determination of the value of the
net assets of the Fund not reasonably practicable.

To be in a position to eliminate excessive expenses, the Fund reserves the right
to redeem upon not less than 30 days' notice all shares of the Fund in an
account (other than an IRA) which has a value below $1,000. However, a
shareholder will be allowed to make additional investments prior to the date
fixed for redemption to avoid liquidation of the account.

Proceeds of redemptions normally are paid by check. However, payments may be
made wholly or partially in portfolio securities if the Board determines that
payment in cash would be detrimental to the best interests of the Fund. The
Company has filed a formal election with the SEC pursuant to which the Fund will
only effect a redemption in portfolio securities if the particular shareholder
is redeeming more than $250,000 or 1% of the Fund's total net assets, whichever
is less, during any 90-day period.

RETIREMENT PLANS
The Fund has a master IRA plan described briefly below. Detailed information
concerning the IRA plan including related documentation on applications and
charges of the custodian may be obtained from the Fund. Contributions to these
plans are deductible for Federal income tax purposes for certain investors and
become taxable only upon withdrawal. In addition, income and capital gains
earned by these plans are sheltered from taxation until withdrawal.

Individuals earning compensation generally may make IRA contributions of up to
$2,000 annually. However, the deductibility of an individual's IRA contribution
may be reduced or eliminated if the individual or, in the case of a married
individual, either the individual or the individual's spouse is an active
participant in an employer-sponsored retirement plan. In the case of an active
participant, the deduction will not be available for an individual with adjusted
gross income above $35,000, a married couple filing a joint return with adjusted
gross income above $50,000 and a married individual filing separately with
adjusted gross income above $10,000. In addition, an individual with a non-
working spouse may establish a separate IRA for the spouse and annually
contribute a total of up to $2,250 to the two IRAs, provided that no more than
$2,000 may be contributed to the IRA of either spouse. The minimum investment
to establish an IRA is $250 - there is no minimum for subsequent investments.

The master IRA plan also permits an IRA rollover of a lump sum distribution from
a qualified pension or profit-sharing plan. The participant may roll over all
or part of such a distribution into an IRA plan and thereby postpone Federal
income tax on that part of the distribution. The rollover must be made within
60 days after receipt of the distribution. Rollovers must be made directly from
the plan to avoid certain withholding taxes.

Withdrawals from an IRA, other than that portion, if any, of the withdrawal
considered to be a return of the investor's non-deductible IRA contribution, are
taxed as ordinary income when received. Such withdrawals may be made without
penalty after the participant reaches age 59 1/2, and must commence shortly
after age 70 1/2. Withdrawals before age 59 1/2 or the failure to commence
withdrawals on a timely basis after age 70 1/2 may involve the payment of
certain penalties.

The Fund may also be used as a funding vehicle for 401(k) and other retirement
plans.

For more information call the Adviser at (800) 551-1980 or write to the Fund.

<PAGE>

EXCHANGE PRIVILEGES
Other Funds. Shareholders of the Fund are entitled to exchange their shares for
shares of certain other investment companies managed by the Administrator which
participate in the exchange privilege program. Currently, the exchange
privilege program has been established between the Fund and Investors Bond Fund,
TaxSaver Bond Fund and Daily Assets Treasury Fund (a money market fund), each a
separate series of Forum Funds, Inc. Shareholders may receive a copy of those
funds' prospectuses by writing the Transfer Agent or calling the Transfer Agent
at (800) 754-8758. These funds currently impose no exchange fee or sales charge
on Fund shareholders who exchange into them.

EXCHANGE PROCEDURES. Instructions for exchanges may be made in writing to
Transfer Agent at the address listed above. The minimum amount for an exchange
to open an account in those funds is $2,500. Exchanges may only be made between
identically registered accounts. A new account application is required to open
a new account through an exchange only if different shareholder privileges are
requested for the new account. The Fund reserves the right to reject any
exchange request and may modify or terminate the exchange privilege at any time.
There is no charge for the exchange privilege or limitation as to frequency of
exchanges.

An exchange of shares in the Fund pursuant to the exchange privilege is, in
effect, a redemption of Fund shares (at net asset value) followed by the
purchase of shares of the investment company into which the exchange is made (at
net asset value) and may result in a shareholder realizing a taxable gain or
loss for Federal income tax purposes. The exchange privilege is available to
shareholders residing in any state in which the investment company shares being
acquired may legally be sold.

TELEPHONE EXCHANGES. Shareholders who have elected telephone exchange
privileges may effect an exchange by telephoning the Transfer Agent at (800)
754-8758. The Fund and the Transfer Agent will employ reasonable procedures in
order to verify that telephone requests for exchanges are genuine, including
recording telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. Shareholders should verify
the accuracy of telephone instructions immediately upon receipt of confirmation
statements.

DIVIDENDS AND DISTRIBUTIONS
Each dividend and capital gain distribution, if any, declared by the Fund on its
outstanding shares will, at the election of each shareholder, be paid in cash or
in additional shares of common stock of the Fund having an aggregate net asset
value as of the payment date of such dividend or distribution equal to the cash
amount of such dividend or distribution. Election to receive dividends and
distributions in cash or shares is made at the time shares are subscribed for
and may be changed by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution. If the shareholder makes
no election the Fund will make all distributions in shares. There is no sales
or other charge in connection with the reinvestment of dividends and capital
gain distributions.

While it is the intention of the Fund to distribute to its shareholders
substantially all of each fiscal year's net income (on a semi-annual basis) and
net realized capital gain, if any (on an annual basis), the amount and time of
any such distribution must necessarily depend upon the realization by the Fund
of income and capital gains from investments. There is no fixed dividend rate,
and there can be no assurance that the Fund will pay any dividends or distribute
any capital gains.

<PAGE>

Reports containing appropriate information with respect to the Federal income
tax status of dividends and distributions paid during the year by the Fund will
be mailed to shareholders shortly after the close of each year.

TAXES
The Fund has qualified and intends to continue to qualify for tax treatment as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended. Qualification as a regulated investment company relieves the Fund of
Federal income tax on that part of its net ordinary income and net realized
capital gain which it pays out to its shareholders. Dividends out of net
ordinary income and distributions of net short-term capital gains are taxable to
the recipient shareholders as ordinary income. In the case of corporate
shareholders, such distributions are eligible for the dividends-received
deduction, to the extent that such dividends and distributions are derived from
qualifying dividends received by the Fund from domestic corporations. A
corporation's dividends-received deduction will be disallowed unless the
corporation holds shares in the Fund more than 46 days. Furthermore, a
corporation's dividends-received deduction will be disallowed to the extent a
corporation's investment in shares of the Fund is financed with indebtedness.

The excess of net long-term capital gain over net short-term capital loss
realized and distributed by the Fund to its shareholders as capital gain
distributions are taxable to the shareholders as long-term capital gain,
irrespective of the length of time a shareholder may have held his stock. Such
long-term capital gain distributions are not eligible for the dividends-received
deduction referred to above. If a shareholder held shares less than six months
and during that period received a distribution taxable to such shareholder as
long-term capital gain, any loss realized on the sale of such shares during such
six month period would be a long-term loss to the extent of such distribution.

Any dividend or distribution received by a shareholder on shares of the Fund
shortly after the purchase of the shares by him will have the effect of reducing
the net asset value of the shares by the amount of the dividend or distribution.
Furthermore, such dividend or distribution, although in effect a return of
capital, is subject to applicable taxes to the extent that the investor is
subject to such taxes regardless of the length of time he may have held his
stock.

Dividends and distributions declared by the Fund may be subject to state and
local taxes. Prior to investing in shares of the Fund a prospective shareholder
may wish to consult his tax adviser concerning the Federal, state and local tax
consequences of such an investment.

The Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemptions) paid
to shareholders who have not complied with IRS regulations. In connection with
this withholding requirement, a shareholder will be asked to certify on his
application that the social security or tax identification number provided is
correct and that the shareholder is not subject to backup withholding for
previous under reporting to the IRS.

NET ASSET VALUE
The Fund determines the net asset value per share of the Fund on each Fund
Business Day as of 4:00 p.m., New York City time. Fund Business Day for this
purpose means weekdays (Monday through Friday) except customary national
business holidays and Good Friday. Net asset value per share is determined by
dividing the value of the Fund's net assets (i.e., the value of its securities
and other assets less its liabilities) by the number of shares outstanding at
the time the determination is made. Purchases and redemptions will be effected
at the time of determination

<PAGE>

of net asset value next following the receipt of any purchase or redemption
order. See "Purchase of Shares" and "Redemption of Shares."

Portfolio securities for which market quotations are readily available are
valued at market value. All other investment assets of the Fund are valued in
such manner as the Board of Directors of the Fund in good faith deems
appropriate to reflect their fair value.

GENERAL INFORMATION

DESCRIPTION OF COMMON STOCK. The Fund was incorporated in Maryland on
February 19, 1985. The authorized capital stock of the Fund consists of one
hundred million shares of common stock having a par value of one-tenth of one
cent ($.001) per share. Each share has equal dividend, distribution,
liquidation and voting rights. There are no conversion or preemptive rights in
connection with any shares of the Fund. All shares when issued in accordance
with the terms of the offering will be fully paid and non-assessable.

PERFORMANCE. From time to time the Fund may distribute sales literature or
publish advertisements containing "total return" quotations for the Fund. Such
sales literature or advertisements will disclose the Fund's average annual
compounded total return for a recent 12-month period and the period since the
Fund's inception, and may include total return information for other periods.
The Fund's total return for each period is computed, through use of a formula
prescribed by the SEC, by finding the average annual compounded rates of return
over the period that would equate an assumed initial amount invested to the
value of the investment at the end of the period. For purposes of computing
total return, income dividends and capital gain distributions paid on shares of
the Fund are assumed to have been reinvested when received.

The Fund's advertisements may reference ratings and rankings among similar funds
by independent evaluators such as Morningstar, Value Line, Lipper Analytical
Services, Inc. or CDA/Wiesenberger. In addition, the performance of the Fund
may be compared to recognized indices of market performance. The comparative
material found in the Fund's advertisements, sales literature or reports to
shareholders may contain performance ratings. These are not to be considered
representative or indicative of future performance.

CUSTODIAN. The First National Bank of Boston, Boston, Massachusetts, is
custodian for the Fund's cash and securities.

INFORMATION FOR SHAREHOLDERS. All shareholder inquiries regarding
administrative procedures should be directed to the Adviser, Sound Shore
Management, Inc., P.O. Box 1810, 8 Sound Shore Drive, Greenwich, Connecticut
06836, (800) 551-1980. The Fund sends to all its shareholders semi-annual
unaudited and annual audited reports, including a list of investment securities
held.

<PAGE>

TABLE OF CONTENTS

Prospectus Summary . . . . . . . . . . . . . . . . . . 3
Expenses of Investing in the Fund. . . . . . . . . . . 4
Financial Highlights . . . . . . . . . . . . . . . . . 5

Investment Objective and Policies. . . . . . . . . . . 6
Investment Restrictions. . . . . . . . . . . . . . . . 6
Investment Adviser . . . . . . . . . . . . . . . . . . 7
Administrator. . . . . . . . . . . . . . . . . . . . . 8
Transfer Agent . . . . . . . . . . . . . . . . . . . . 8
Purchase of Shares . . . . . . . . . . . . . . . . . . 9
Redemption of Shares . . . . . . . . . . . . . . . . . 9
Retirement Plans . . . . . . . . . . . . . . . . . . .11
Exchange Privileges. . . . . . . . . . . . . . . . . .11
Dividends and Distributions. . . . . . . . . . . . . .12

Taxes. . . . . . . . . . . . . . . . . . . . . . . . .12
Net Asset Value. . . . . . . . . . . . . . . . . . . .13
General Information. . . . . . . . . . . . . . . . . .13

PROSPECTUS
MAY 1, 1996

Sound Shore Fund, Inc.
Two Portland Square
Portland, Maine 04101

<PAGE>

SOUND SHORE FUND, INC.
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101

STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996

Sound Shore Fund, Inc. (the "Fund") is a no-load, open-end, diversified,
management investment company. The Fund's investment objective is to seek
growth of capital and investments will be made based upon their potential for
capital growth. Therefore, current income, while considered important, will be
secondary to the objective of capital growth.

This Statement of Additional Information is not a Prospectus and is authorized
for distribution only when preceded or accompanied by the Fund's prospectus
dated May 1, 1996 (the "Prospectus"). This Statement of Additional Information
contains additional and more detailed information than that set forth in the
Prospectus and should be read only in conjunction with the Prospectus,
additional copies of which may be obtained without charge by writing the Fund at
the address set forth above or by calling the Fund's Investment Adviser at
(800) 551-1980.

TABLE OF CONTENTS

Investment Policies. . . . . . 2 Redemption of Shares . . . . . . . . . . . 11
Special Investment Methods . . 2 Description of Common Stock. . . . . . . . 11
Investment Restrictions. . . . 3 Performance. . . . . . . . . . . . . . . . 11
Management . . . . . . . . . . 3 Net Asset Value. . . . . . . . . . . . . . 12
Expenses . . . . . . . . . . . 9 Counsel and Auditors . . . . . . . . . . . 13
Portfolio Transactions Financial Statements . . . . . . . . . . . 13
and Brokerage . . . . . . . .10

<PAGE>

INVESTMENT POLICIES

The Fund expects that for most periods, a substantial portion, if not all, of
its assets will be invested in a diversified portfolio of common stocks judged
by Sound Shore Management, Inc. (the "Adviser") to have favorable value to price
characteristics. The Fund may also invest in U.S. government or government
agency obligations, investment grade corporate bonds, preferred stocks,
convertible securities, and/or short-term money market instruments when deemed
appropriate by the Adviser. The investment policies of the Fund set forth
above, and under "Special Investment Methods" below, may be changed or altered
by the Board of Directors of the Fund (the "Board").

SPECIAL INVESTMENT METHODS

WARRANTS

The Fund may invest in warrants which entitle the holder to buy equity
securities at a specific price for a specific period of time. Warrants may be
considered more speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
securities which may be purchased nor do they represent any rights in the assets
of the issuing company. Investments in warrants involve certain additional
risks, including the possible lack of a liquid market for the resale of the
warrants, potential price fluctuations as a result of speculation or other
factors and failure of the price of the underlying security to reach a level at
which the warrant can be prudently exercised (in which case the warrant may
expire without being exercised, resulting in the loss of the Fund's entire
investment therein). The Fund will not invest in warrants if (i) more than 5%
of the Fund's total assets would be invested in warrants or (ii) more than 2% of
the value of the Fund's total assets would be invested in warrants not listed on
the New York Stock Exchange or the American Stock Exchange.

REPURCHASE AGREEMENTS

The Fund may invest in repurchase agreements with major dealers in U.S.
Government securities and member banks of the Federal Reserve System which are
selected by the Adviser in accordance with procedures approved by the Board. A
repurchase agreement is an instrument under which the purchaser (I.E., the Fund)
acquires a debt security and the seller agrees, at the time of the sale, to
repurchase the obligation at a mutually agreed upon time and price, thereby
determining the yield during the purchaser's holding period. This results in a
fixed rate of return insulated from market fluctuations during such period. The
underlying securities are ordinarily U.S. Treasury or other government
obligations or high quality money market instruments and the Fund will monitor
and require that the value of such underlying securities always equal or exceed
the amount of the repurchase obligations of the borrower. While the maturities
of the underlying securities in repurchase agreement transactions may be more
than one year, the term of each repurchase agreement will always be less than
one year. The Fund's risk is limited to the ability of the seller to pay the
agreed upon amount on the delivery date. If the seller defaults, the underlying
security constitutes collateral for the seller's obligation to pay; in such
event, the Fund might suffer a loss to the extent that the proceeds from the
sale of the collateral were less

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<PAGE>

than the repurchase price. If the seller becomes bankrupt, the Fund might be
delayed in selling the collateral. Under the Investment Company Act of 1940
("1940 Act"), repurchase agreements are considered loans. The Fund is not,
however, restricted from investing in repurchase agreements under investment
restriction number 4 listed in the Prospectus. Repurchase agreements usually
are for short periods, such as one week or less, but could be longer. The Fund
will not enter into repurchase agreements of a duration of more than one week
if, taken together with illiquid securities and other securities for which there
are no readily available quotations, more than 10% of its total assets would be
so invested.

INVESTMENT RESTRICTIONS

The Fund has adopted the following investment restrictions which are in addition
to those described in the Prospectus. Under the following restrictions, which
may not be changed without the approval of the Fund's stockholders, the Fund may
not:

1. Purchase or otherwise acquire interests in real estate, real estate
mortgage loans or interests in oil, gas or other mineral exploration or
development programs;

2. Sell securities short or invest in puts, calls, straddles, spreads or
combinations thereof;

3. Purchase or acquire commodities or commodity contracts;

4. Issue senior securities, except insofar as the Fund may be deemed to have
issued a senior security in connection with any permitted borrowing;

5. Participate on a joint, or a joint and several, basis in any securities
trading account; or

6. Invest in companies for the purpose of exercising control.

The Fund has adopted the following nonfundamental investment restrictions, which
may be changed without the approval of the Fund's stockholders. The Fund may
not:

a. Invest in any oil, gas or other mineral lease.

b. Invest in the securities of other investment companies except to the extent
permitted by the 1940 Act.

MANAGEMENT

DIRECTORS AND OFFICERS

The directors and executive officers of the Fund, and their principal
occupations for the past five years, are listed below. Directors deemed to be
"interested persons" of the Fund for purposes of the 1940 Act are indicated by
an asterisk.

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<PAGE>

DR. D. KENNETH BAKER, Director, is a physicist and is the retired President of
Harvey Mudd College. He is a trustee of the College and serves as a consultant
to several foundations. His address is 3088 Fairway Woods, Carolina Trace,
Sanford, North Carolina 27330.

HARRY BURN, III, M.B.A.*, Chairman and Director, is Chairman and Director of
Sound Shore Management, Inc. with which he has been associated since 1978. He
is a Chartered Financial Analyst. His address is that of the Adviser.

DR. MARK P. FIGGIE, Director, is a Physician in Orthopaedic Surgery at the
Hospital For Special Surgery and Cornell University Medical College and a Vice
President of Clark-Reliance Corp. His address is 535 East 70th Street, New
York, New York 10021.

CHARLES J. HEDLUND, Director, is currently a member of the Board of Trustees of
the American University in Cairo and a member of the Board of Trustees of
Conservation International of Washington, D.C. Mr. Hedlund was previously Vice
President, Exxon Corporation until 1980. His address is Country Club of
Florida, 58 Country Road South, Village of Golf, Florida 33436.

T. GIBBS KANE, JR.*, President and Director, is President and Director of Sound
Shore Management, Inc. with which he has been associated since 1977. He is a
Chartered Financial Analyst. His address is that of the Adviser.

JOHN L. LESHER, Director, is President of Resource Evaluation, Inc. from March
1994. He is also a member of the board of Resource Evaluation, Ltd. as well as
First Industrial Real Estate Trust. Previously, he was Managing Director of Korn
Ferry International from 1989 to 1993. His address is 500 Mamaroneck Avenue,
Harrison, New York 10528.

JOHN J. MCCLOY II, Director, is Co-Chairman of Noise Cancellation Technologies,
Inc. and is a Trustee of the American University in Cairo. His address is 1
Dock Street, Stamford, Connecticut 06901.

WALTER R. NELSON, Director, is President of Nelson Publications, with which he
has been associated since 1974. His address is 60 Kirby Lane, Rye, New York
10580.

JOHN Y. KEFFER, Vice President, has been President and Director of Forum
Financial Services, Inc. for more than five years. He is also President and
Director of Forum Financial Corp. and Forum Advisors, Inc. (a registered
investment adviser). Mr. Keffer is also an officer, director or trustee of
various funds managed and distributed by Forum Financial Services, Inc. His
address is Two Portland Square, Portland, Maine 04101.

MICHAEL D. MARTINS, Treasurer, is Director of Fund Accounting, Forum Financial
Corp., with which he has been associated since 1995. Prior thereto, Mr. Martins
was at the audit firm of Deloitte & Touche LLP. Mr. Martins is also an officer
of various registered investment companies for which Forum Financial Services,
Inc. serves as manager, administrator and/or distributor. His address is Two
Portland Square, Portland, Maine 04101.

-4-
<PAGE>

MICHAEL J. MCKEEN, Assistant Treasurer, is Fund Accounting Manager, Forum
Financial Corp., with which he has been associated since May 1993. Prior
thereto, Mr. McKeen attended college. His address is Two Portland Square,
Portland, Maine 04101.

SHANNA S. SULLIVAN, Secretary, is Vice President, Treasurer, Secretary and
Director of Sound Shore Management, Inc. with which she has been associated
since 1979. Her address is that of the Adviser.

ELLEN S. SMOLLER, Assistant Secretary, is an equity trader at Sound Shore
Management, Inc., with which she has been associated since 1984. Her address is
that of the Adviser.

MAX BERUEFFY, Assistant Secretary, is Counsel, Forum Financial Services, Inc.,
with which he has been associated since 1994. Prior thereto, Mr. Berueffy was
on the staff of the U.S. Securities and Exchange Commission for seven years,
first in the appellate branch of the Office of the General Counsel, then as a
counsel to Commissioner Grundfest and finally as a senior special counsel in the
Division of Investment Management. His address is Two Portland Square,
Portland, Maine 04101.

CHRISTOPHER J. KELLEY, Assistant Secretary, is Assistant Counsel, Forum
Financial Services, Inc., with which he has been associated since 1994. Prior
thereto and subsequent to attending law school, Mr. Kelley was employed at
Putnam Investments in legal and compliance capacities. His address is Two
Portland Square, Portland, Maine 04101.

The following table provides the fees paid to each Director of the Fund for the
fiscal year ended December 31, 1995. Messrs. Burn and Kane are not compensated
as Directors of the Fund.

Name of Person, Position Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
From Fund Benefits Accrued Retirement From Fund Paid
As Part of Fund To Directors
Expenses
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dr. D. Kenneth Baker
Director $4,500.00 $0.00 $0.00 $4,500.00
Dr. Mark P. Figgie
Director $4,500.00 $0.00 $0.00 $4,500.00
Charles J. Hedlund
Director $3,500.00 $0.00 $0.00 $3,500.00
John L. Lesher
Director $4,500.00 $0.00 $0.00 $4,500.00
John J. McCloy II
Director $4,000.00 $0.00 $0.00 $4,000.00
Walter R. Nelson
Director $4,500.00 $0.00 $0.00 $4,500.00

</TABLE>

-5-

<PAGE>

ADVISER

The investment adviser to the Fund is Sound Shore Management, Inc., a Delaware
corporation with principal offices located at 8 Sound Shore Drive, Greenwich,
Connecticut 06836. The Adviser was, at May 1, 1996, investment adviser for
assets aggregating in excess of $1 billion. In addition to the Fund, the
Adviser's advisory clients include individuals, pension trusts, profit-sharing
trusts and endowments. Most of the accounts which are managed or advised by the
Adviser for these clients have investment objectives which may vary only
slightly from those of each other and those of the Fund. The Adviser invests
assets of such accounts in investments substantially similar to, those which
constitute the principal investments of the Fund. Such accounts are supervised
by officers and employees of the Adviser who may also be acting in similar
capacities for the Fund. It is the policy of the Adviser to allocate advisory
recommendations and the placing of orders in a manner which is deemed equitable
by the Adviser to the accounts involved, including the Fund. When two or more
of the clients of the Adviser (including the Fund) are purchasing the same
security on a given day from the same broker-dealer, such transactions may be
averaged as to price.

The Adviser provides persons satisfactory to the Board to serve as officers of
the Fund. Such officers, as well as certain other employees and directors of
the Fund, may be directors, officers or employees of the Adviser. Messrs. Burn
and Kane, who are officers and/or directors of the Fund and officers and/or
directors of the Adviser, may be deemed "controlling persons" of the Adviser on
the basis of their ownership of the Adviser's stock.

As compensation for the services rendered and related expenses borne by the
Adviser under the Investment Advisory Agreement, the Fund pays the Adviser a
fee, computed daily and payable monthly, equal to 0.75% per annum of the Fund's
average daily net assets. The Adviser is obligated to reimburse the Fund in the
event certain of the Fund's expenses exceed certain prescribed limits. See
"Expenses." For the fiscal years ended December 31, 1993, December 31, 1994,
and December 31, 1995, the fees under the Investment Advisory Agreement were
$372,207, $452,025 and $485,139, respectively.

The Investment Advisory Agreement was approved on April 3, 1985 by the Board,
including a majority of the directors who are not interested persons (as defined
in the 1940 Act) of the Fund or the Adviser and by the sole stockholder of the
Fund on May 2, 1985. The Investment Advisory Agreement was also approved by the
Fund's public stockholders at an annual meeting held on July 22, 1986. The
Investment Advisory Agreement will continue in effect from year to year,
provided that continuance is specifically approved annually by the Board or by
vote of the stockholders, and in either case by a majority of the directors who
are not parties to the

-6-
<PAGE>

Investment Advisory Agreement or interested persons of any such party, by vote
cast in person at a meeting called for that purpose.

The Investment Advisory Agreement is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of the Board, or by the
Adviser on sixty days' written notice, and will automatically terminate in the
event of its assignment. The Investment Advisory Agreement provides that in the
absence of willful misfeasance, bad faith or gross negligence on the part of the
Adviser, or of reckless disregard of its obligations thereunder, the Adviser
shall not be liable for any action or failure to act in accordance with its
duties thereunder.

ADMINISTRATOR AND DISTRIBUTOR

The administrator of the Fund is Forum Financial Services, Inc., a Delaware
corporation with principal offices at Two Portland Square, Portland, Maine 04101
("Forum"). As of May 1, 1996, Forum provided management, administrative and
distribution services to registered investment companies and collective
investment funds with assets of approximately $15.5 billion. Forum is a
registered broker-dealer and investment adviser and is a member of the National
Association of Securities Dealers, Inc. As of the date hereof, Forum is
controlled by John Y. Keffer, Vice President of the Fund.

As administrator, Forum administers all aspects of the Fund's operations subject
to the supervision of the Board except as set forth under "Adviser." Because of
the services rendered the Fund by Forum and the Adviser, the Fund itself
requires no employees other than its officers, none of whom receives
compensation from the Fund and all of whom are employed by the Adviser or Forum.
In connection with its responsibilities as administrator and in consideration of
its administrative fee, Forum supervises the overall administration of the Fund
(which includes, among other responsibilities, monitoring of performance and
billing of the transfer agent and custodian and arranging for maintenance of
books and records of the Fund), and provides the Fund with general office
facilities pursuant to an Administration Agreement with the Fund. The
Administration Agreement provides for an initial term of twelve months from its
effective date with respect to a Fund and for its automatic renewal each year
thereafter for an additional term of one year.

At the request of the Board, Forum provides persons satisfactory to the Board to
serve as officers of the Fund. Those officers, as well as certain other
employees and Directors of the Fund, may be directors, officers or employees of
Forum, the Adviser or their affiliates.

For its services under the Administration Agreement, Forum receives with respect
to the Fund an annual fee, computed daily and payable monthly, equal to 0.10% of
the average daily net assets of the Fund. The Administrator is obligated to
reimburse the Fund in the event certain of the Fund's exceed certain prescribed
limits. See "Expenses." For the fiscal years ended December 31, 1993, December
31, 1994 and December 31, 1995, the fees under the Administration Agreement were
$124,069, $150,675 and $161,713, respectively. For the fiscal year ended
December 31, 1995, the Administrator received a fee of 0.25% of the average
daily net assets of

-7-
<PAGE>

the Fund for its services under the then-existing Administration Agreement.
Under the new Administration Agreement, effective January 1, 1996, the
Administrator receives a fee of 0.10% but is no longer responsible for providing
portfolio accounting services.

Forum also acts as distributor of the Fund's shares pursuant to a Distribution
Agreement. Under the Distribution Agreement, Forum offers shares of the Fund on
a best efforts basis. Forum does not receive any fee for its services under the
Distribution Agreement.

The Administration Agreement and the Distribution Agreement are terminable by
either party on sixty days' written notice to the other. Each agreement
provides that in the absence of willful misfeasance, bad faith or gross
negligence on the part of Forum, or of reckless disregard of its obligations
thereunder, Forum shall not be liable for any action or failure to act in
accordance with its duties thereunder.

TRANSFER AGENT

Forum Financial Corp. (the "Transfer Agent") acts as transfer agent and dividend
disbursing agent of the Fund pursuant to a Transfer Agency Agreement. Among the
responsibilities of the Transfer Agent as agent for the Fund are: answering
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares of the Funds may be effected and certain
other matters pertaining to the Fund; assisting shareholders in initiating and
changing account designations and addresses; furnishing periodic statements and
confirmations of purchases and redemptions; and providing such other related
services as the Fund or a shareholder may reasonably request.

PORTFOLIO ACCOUNTING

Forum Accounting Services LLC ("FAS"), an affiliate of Forum, performs portfolio
accounting services for the Fund pursuant to a Fund Accounting Agreement. The
Fund Accounting Agreement will continue in effect only if such continuance is
specifically approved at least annually by the Board or by a vote of the
shareholders of the Fund and in either case by a majority of the Directors who
are not parties to the Fund Accounting Agreement or interested persons of any
such party, at a meeting called for the purpose of voting on the Fund Accounting
Agreement.

Under its agreement, FAS prepares and maintains books and records of the Fund
that are required to be maintained under the 1940 Act, calculates the net asset
value per share of the Fund and dividends and capital gain distributions and
prepares periodic reports to shareholders and the SEC. FAS is required to use
its best judgment and efforts in rendering fund accounting services and is not
liable to the Fund for any action or inaction in the absence of bad faith,
willful misconduct or gross negligence. FAS is not responsible or liable for
any failure or delay in performance of its fund accounting obligations arising
out of or caused, directly or indirectly, by circumstances beyond its reasonable
control and the Fund has agreed to indemnify and hold harmless the Fund, its
employees, agents, officers and Directors against and from any and all claims,
judgments, losses, charges (including attorneys' fees) and other reasonable
expenses

-8-
<PAGE>

arising out of or in any way related to FAS's actions taken or failures to act
with respect to a Fund or based, if applicable, upon information, instructions
or requests with respect to a Fund given or made to FAS by a duly authorized
officer of the Fund. This indemnification does not apply to FAS's actions or
failures to act in cases of FAS's own bad faith, willful misconduct or gross
negligence.

The Fund Accounting Agreement became effective on January 1, 1996. Prior
thereto, Forum was responsible for performing fund accounting services pursuant
to the then-existing Administration Agreement with the Fund, which had
provisions identical in all material respects to the Fund Accounting Agreement.

EXPENSES

Except as set forth above under "Adviser" and "Administrator and Distributor,"
the Fund is responsible for the payment of its expenses. Without limitation,
such expenses include the fees payable to the Adviser and Administrator; the
organizational expenses payable to the Adviser; any brokerage fees and
commissions; taxes; interest; the cost of any liability insurance or fidelity
bonds; legal and auditing fees and expenses; the fees and certain expenses of
the Fund's custodian and transfer and dividend disbursing agent; the fees of any
trade association of which the Fund is a member; the expenses of printing and
mailing reports and notices to the Fund's stockholders; filing fees for the
registration or qualification of Fund shares under federal or state securities
laws; the fees and expenses involved in registering and maintaining registration
of the Fund and of its shares with the SEC; the costs of registering the Fund as
a broker or dealer; the costs of qualifying the Fund's shares under state
securities laws; the expenses of servicing stockholders and stockholder
accounts; and any extraordinary expenses incurred by the Fund.

The Investment Advisory Agreement and the Administration Agreement include
provisions allowing the Adviser and Forum, respectively, to defray the cost of,
or compensate other persons, including banks, broker-dealers and other
organizations whose customers or clients are Fund stockholders, for providing
stockholder servicing and related administrative and accounting functions on
behalf of the Fund. Under such agreements, the Adviser and Forum may also
compensate the foregoing persons and organizations for providing assistance in
distributing the Fund's shares. Such agreements further contemplate that the
Adviser and Forum may arrange to compensate sales personnel and to pay for the
preparation and printing of brochures and other promotional materials, mailings
to prospective stockholders, advertising and other activities in connection with
the distribution of the Fund's shares.

The Adviser and Forum have each agreed that if in any fiscal year the sum of the
Fund's expenses exceeds the limits set by applicable regulations of state
securities commissions, the amounts payable by the Fund to the Adviser for the
advisory fee and to Forum for the administration fee for that year shall each be
reduced by 75% and 25%, respectively, of the amount of such excess. However, if
the excess should be greater than the amounts payable to the Adviser and Forum
in that year, the Adviser and Forum shall each pay to the Fund 75% and 25%,
respectively, of the difference between such excess and the fees of the Adviser
and Administrator for that year. For the purpose of this calculation, expenses
shall include the fees

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payable to the Adviser and Forum and the amortization of organization expenses
paid to the Adviser, but shall exclude taxes, interest, brokerage and
extraordinary expenses.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Adviser is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions. Purchases and sales of securities on a
securities exchange are effected through brokers who charge a commission for
their services. Brokerage commissions on United States securities exchanges are
subject to negotiation between the Adviser and the broker.

In the over-the-counter market, securities are generally traded on a "net" basis
with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to the
dealer. In underwritten offerings, securities are purchased at a fixed price
which includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.

In placing orders for portfolio securities of the Fund, the Adviser is required
to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Adviser will
consider the research and investment services provided by brokers or dealers who
effect or are parties to portfolio transactions of the Fund or the Adviser's
other clients. Such research and investment services are those which brokerage
houses customarily provide to institutional investors and include statistical
and economic data and research reports on particular companies and industries.
Such services are used by the Adviser in connection with all of its investment
activities, and some of such services obtained in connection with the execution
of transactions for the Fund may be used in managing other investment accounts.
Conversely, brokers furnishing such services may be selected for the execution
of transactions of such other accounts, and the services furnished by such
brokers may be used by the Adviser in providing investment management for the
Fund. Commission rates are established pursuant to negotiations with the broker
based on the quality and quantity of execution services provided by the broker
in light of generally prevailing rates. The Adviser's policy is to pay higher
commissions to brokers for particular transactions than might be charged if a
different broker had been selected on occasions when, in the Adviser's opinion,
this policy furthers the objective of obtaining the most favorable price and
execution. In addition, the Adviser is authorized to pay higher commissions on
brokerage transactions for the Fund to brokers in order to secure research and
investment services described above, subject to review by the Board from time to
time as to the extent and continuation of the practice. The allocation of
orders among brokers and the commission rates paid are reviewed periodically by
the Board.

During the fiscal years December 31, 1993, December 31, 1994 and December 31,
1995, the Fund paid a total of $161,628, $152,332 and $145,962, respectively, in
brokerage commissions with respect to portfolio transactions aggregating
$61,728,355, $65,729,499 and $63,613,535,

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respectively. Such transactions were placed with brokers or dealers who provide
research and investment services.

REDEMPTION OF SHARES

Payment of the redemption price for shares redeemed may be made either in cash
or in portfolio securities (selected in the discretion of the Board and taken at
their value used in determining the Funds net asset value per share as described
under "Net Asset Value"), or partly in cash and partly in portfolio securities.
However, payments will be made wholly in cash unless the Board believes that
economic conditions exist which would make such a practice detrimental to the
best interests of the Fund. If payment for shares redeemed is made wholly or
partly in portfolio securities, brokerage costs may be incurred by the investor
in converting the securities to cash. The Fund will not distribute in kind
portfolio securities that are not readily marketable. The Fund has filed a
formal election with the SEC pursuant to which the Fund will only effect a
redemption in portfolio securities where the particular stockholder of record is
redeeming more than $250,000 or 1% of the Fund's total net assets, whichever is
less, during any 90-day period. In the opinion of the Fund's management,
however, the amount of a redemption request would have to be significantly
greater than $250,000 or 1% of total net assets before a redemption wholly or
partly in portfolio securities would be made.

DESCRIPTION OF COMMON STOCK

As of April 10, 1996, the amount of shares owned by all officers and directors
of the Fund, as a group, was 3.09% of the Fund's outstanding shares. Set forth
below is certain information as to persons who owned 5% or more of the Fund's
outstanding common stock as of April 10, 1996:

Nature
Name and Address % of Shares of Ownership
- ---------------- ---------- ------------

Figgie International, Inc. 20.30% Beneficial
Retirement Savings Plan 401(K)
4420 Sherwin Road
Willoughby, OH 44094

Employees Profit Sharing Plan 7.88% Beneficial
of Sound Shore Management, Inc.
P.O. Box 1810
Greenwich, CT 06836

PERFORMANCE

From time to time the Fund may distribute sales literature or publish
advertisements containing "total return" quotations for the Fund. Such sales
literature or advertisements will disclose the Fund's average annual compounded
total return for a recent 12-month period and the period since the Fund's
inception, and may include total return information for other periods. The

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<PAGE>

Fund's total return for each period is computed, through use of a formula
prescribed by the SEC, by finding the average annual compounded rates of return
over the period that would equate an assumed initial amount invested to the
value of the investment at the end of the period. For purposes of computing
total return, income dividends and capital gains distributions paid on shares of
the Fund are assumed to have been reinvested when received.

The Fund's total return for the fiscal year ended December 31, 1995 was 29.87%.
The Fund's average annual total returns for the 5 year and 10 year periods ended
December 31, 1995 were 18.49% and 13.63%, respectively.

The Fund's total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and quality of the
securities in the Fund's portfolio and the Fund's expenses. Total return
information is useful in reviewing the Fund's performance but such information
may not provide a basis for comparison with bank deposits or other investments
which pay a fixed return for a stated period of time. An investor's principal
invested in the Fund is not fixed and will fluctuate in response to prevailing
market conditions.

In performance advertising the Fund may compare any of its performance
information with data published by independent evaluators such as Morningstar,
Value Line, Lipper Analytical Services, Inc., CDA/Wiesenberger or other
companies which track the investment performance of investment companies ("Fund
Tracking Companies"). The Fund may also compare any of its performance
information with the performance of recognized stock, bond and other indexes,
including but not limited to the Standard & Poor's 500 Composite Stock Price
Index, the Standard & Poor's 100 Composite Stock Price Index, the Dow Jones
Industrial Average, the Salomon Brothers Bond Index, the Shearson Lehman Bond
Index, U.S. Treasury bonds, bills or notes and changes in the Consumer Price
Index as published by the U.S. Department of Commerce. The Fund may refer to
general market performances over past time periods. The Fund may also refer in
such materials to mutual fund performance rankings and other data published by
Fund Tracking Companies. Performance advertising may also refer to discussions
of the Fund and comparative mutual fund data and ratings reported in independent
periodicals, such as newspapers and financial magazines.

NET ASSET VALUE

The Fund does not determine its net asset value per share on the following
holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.

For purposes of determining the Fund's net asset value per share, readily
marketable portfolio securities listed on the New York Stock Exchange are
valued, except as indicated below, at the last sale price reflected on the
consolidated tape at the close of the New York Stock Exchange on the business
day as of which such value is being determined. If there has been no sale on
such day, the securities are valued at the mean of the closing bid and asked
prices are quoted on such day, then the security is valued by such method as the
Board shall determine in good faith to reflect its fair market value. Readily
marketable securities not listed on the New York Stock

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<PAGE>

Exchange but listed on other national securities exchanges or admitted to
trading on the National Association of Securities Dealers Automated Quotations,
Inc. ("NASDAQ") National List are valued in like manner. Portfolio securities
traded on more than one national securities exchange are valued at the last sale
price on the business day as of which such value is being determined as
reflected on the tape at the close of the exchange representing the principal
market for such securities.

Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Adviser to be over-
the-counter, but excluding securities admitted to trading on the NASDAQ National
List, are valued at the mean of the current bid and asked prices as reported by
NASDAQ or, in the case of securities not quoted by NASDAQ, the National
Quotation Bureau or such other comparable sources as the Board of Directors
deems appropriate to reflect their fair market value.

United States government obligations and other debt instruments having sixty
days or less remaining until maturity are stated at amortized cost. All other
investment assets, including restricted and not readily marketable securities,
are valued in such manner as the Board in good faith deems appropriate to
reflect their fair market value.

COUNSEL AND AUDITORS

Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Messrs. Dechert Price & Rhoads, 477 Madison Avenue, New York, New
York 10022. Dechert Price & Rhoads has relied upon the opinion of Venable,
Baetjer and Howard, Baltimore, Maryland, for matters relating to Maryland law.

Deloitte & Touche LLP, 2 World Financial Center, New York, NY 10281,
independent certified public accountants, have been selected as auditors for the
Fund.

FINANCIAL STATEMENTS

The financial statements of the Fund for the year ended December 31, 1995, which
are included in the Annual Report to Shareholders of the Fund and delivered
along with this Statement of Additional Information, are incorporated herein by
reference.

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