<PAGE>
- --------------------------------------------------------------------------------
[LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
June 30, 1996
Dear Shareholder,
The Sound Shore Fund gained 7.3% for the quarter and 13.9% for the six
months, outperforming the Standard & Poor's 500 total returns of 4.4% and 10.0%.
These advances came despite increasing competition from longer-term interest
rates. The Fund's 1, 5, and 10 year returns, as of June 30, 1996, are 26.0%,
17.4%, and 12.8%, respectively. The Fund's net asset value ended the quarter at
$20.63 after a quarter-end income distribution of $0.06.
The economic expansion, now over five years old, has been characterized by
moderate growth and low inflation. However, the current Gross Domestic Product
boomlet, the strongest quarter in two years, has rekindled inflation fears and
the seers (most of whom missed even the interest rate direction) are now
awaiting the Federal Reserve's response. Rather than attempting to extrapolate
stock selection from a maze of macro economic predictions, we prefer to focus on
what we have found works for us -- identifying specific stock opportunities with
out-of-favor companies that we believe are undergoing a positive turn in their
fortunes.
Our strong relative performance this year has largely been a function of the
resurgence of several previously unpopular retailing and computer software
stocks, as investors began to reflect on the companies' strong earnings. Unlike
some investors, we are never certain if, or when, any one of our fallen angels
will regain its luster. We strive to own about three dozen securities that are
capable of outperforming the market based on their achievement of earnings goals
(confirmed by management) and the market returning their P/Es to historic norms.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Our contrarian strategy, while not superior in all marking periods, has been
the mainstay of our approach for over ten years. We appreciate the confidence
placed in our efforts and we will strive to improve further upon the results.
Sincerely,
[SIG]
T. GIBBS KANE, JR.
PRESIDENT
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE FUND'S AVERAGE
ANNUAL TOTAL RETURN ASSUMES REINVESTMENT OF ALL DIVIDEND AND CAPITAL GAIN
DISTRIBUTIONS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT,
WHEN REDEEMED, AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. FORUM FINANCIAL SERVICES, INC. IS THE FUND'S DISTRIBUTOR.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
STATEMENT OF NET ASSETS
JUNE 30, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
FACE AMOUNT MARKET VALUE
------------ ------------
<S> <C> <C>
COMMON STOCKS (91.0%)
- -----------------------------------------------------------------------------------------
AIRLINES (2.6%)
AMR Corporation* 22,000 $ 2,002,000
------------
BANKING (7.6%)
Banc One Corporation 37,400 1,271,600
Mellon Bank Corporation 40,500 2,308,500
Republic New York Corporation 35,000 2,178,750
------------
5,758,850
------------
BUILDING MATERIALS (2.6%)
Masco Corporation 65,500 1,981,375
------------
CHEMICALS AND ALLIED PRODUCTS (1.3%)
Lubrizol Corporation 34,000 1,032,750
------------
CONSUMER PRODUCTS (1.0%)
Philip Morris Companies, Inc. 7,500 780,000
------------
CONSUMER/FOODS (1.9%)
Interstate Bakeries Corporation 55,400 1,481,950
------------
ELECTRONICS (8.4%)
Amphenol Corporation* 76,000 1,748,000
Intel Corporation 11,500 844,532
KLA Instruments Corporation* 59,500 1,383,375
Texas Instruments, Inc. 48,000 2,394,000
------------
6,369,907
------------
ENERGY (2.8%)
Westcoast Energy, Inc. 140,000 2,100,000
------------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
FACE AMOUNT MARKET VALUE
------------ ------------
<S> <C> <C>
FINANCE (3.2%)
Federal National Mortgage Association 72,000 $ 2,412,000
------------
FINANCIAL SERVICES (5.2%)
Lehman Brothers Holdings, Inc. 55,000 1,361,250
MBIA, Inc. 33,000 2,569,875
------------
3,931,125
------------
FOOD, RETAIL (3.5%)
Vons Companies, Inc.* 70,500 2,634,937
------------
HEALTH SERVICES (3.1%)
Beverly Enterprises, Inc.* 65,000 780,000
Columbia HCA Healthcare Corporation 29,000 1,547,875
------------
2,327,875
------------
INDUSTRIAL SERVICES (4.0%)
ADT, Ltd.* 122,000 2,302,750
Hanson plc 53,500 762,375
------------
3,065,125
------------
INSURANCE (14.1%)
Allstate Corporation 57,700 2,632,563
Health Systems International, Inc.* 39,800 1,079,575
John Alden Financial Corporation 77,000 1,703,625
Loews Corporation 40,000 3,155,000
PartnerRe Holdings, Ltd. 74,000 2,210,750
------------
10,781,513
------------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
FACE AMOUNT MARKET VALUE
------------ ------------
<S> <C> <C>
MACHINERY AND COMPUTER EQUIPMENT (3.8%)
Albany International Corporation 37,500 $ 848,437
International Business Machines Corporation 21,000 2,079,000
------------
2,927,437
------------
MANUFACTURING SYSTEMS (1.0%)
Gerber Scientific, Inc. 49,000 790,125
------------
MEDICAL SUPPLIES (2.5%)
Bard (C.R.), Inc. 56,500 1,921,000
------------
PETROLEUM REFINING (3.1%)
MAPCO, Inc. 13,000 732,875
Tosco Corporation 32,000 1,608,000
------------
2,340,875
------------
RETAIL (2.4%)
Fred Meyer, Inc.* 39,000 1,145,625
TJX Companies, Inc. 19,000 641,250
------------
1,786,875
------------
SOFTWARE (5.1%)
Compuware Corporation* 80,000 3,160,000
Sterling Software, Inc.* 9,500 731,500
------------
3,891,500
------------
STEEL (0.9%)
Birmingham Steel Corporation 39,700 650,087
------------
TOYS (2.0%)
Hasbro, Inc. 43,000 1,537,250
------------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
FACE AMOUNT MARKET VALUE
------------ ------------
<S> <C> <C>
TRANSPORTATION (2.4%)
Arkansas Best Corporation* 250,100 $ 1,844,487
------------
TRANSPORTATION EQUIPMENT (2.1%)
Cummins Engine Company, Inc. 39,000 1,574,625
------------
UTILITIES (3.2%)
BCE, Inc. 62,500 2,468,750
------------
WHOLESALE TRADE-DURABLE GOODS (1.2%)
Borg Warner Automotive, Inc. 23,000 908,500
------------
TOTAL COMMON STOCKS (COST $52,104,984) $ 69,300,918
------------
U.S. GOVERNMENT OBLIGATIONS (1.3%)
- -----------------------------------------------------------------------------------------
U.S. Treasury Bills, 4.903% yield, due 7/25/96 1,000,000 996,800
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $996,800) $ 996,800
------------
SHORT-TERM HOLDINGS (8.2%)
- -----------------------------------------------------------------------------------------
1784 U.S. Treasury Money Market Fund 1,443,627 $ 1,443,627
Dreyfus Government Cash Management Fund 3,736,480 3,736,480
Forum Daily Assets Treasury Fund 1,129,286 1,129,286
------------
TOTAL SHORT-TERM HOLDINGS (COST $6,309,393) $ 6,309,393
------------
TOTAL INVESTMENTS (100.5%) (COST $59,411,177)+ $ 76,607,111
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.5%) (360,378)
------------
NET ASSETS (100%) (3,696,465 SHARES OUTSTANDING) $ 76,246,733
------------
------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE) $ 20.63
------------
------------
</TABLE>
* Non-income producing security.
+ Aggregate cost for federal income tax purposes.
Aggregate appreciation and depreciation are $18,586,020 and $1,390,086,
respectively.
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Dividends..................................... $ 547,388
Interest...................................... 108,036
----------
Total Income.............................. 655,424
----------
Expenses:
Investment advisor............................ 268,129
Administration................................ 35,751
Transfer Agent................................ 32,813
Custodian..................................... 5,781
Legal......................................... 9,845
Directors..................................... 15,672
Other......................................... 42,958
----------
Total expenses............................ 410,949
----------
Net Investment Income............................. 244,475
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments.................. 5,511,341
Net change in unrealized appreciation of
investments...................................... 3,628,210
----------
Net realized and unrealized gain on investments... 9,139,551
----------
Increase in net assets resulting from
operations....................................... $9,384,026
----------
----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1996 AND THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCREASE IN NET ASSETS 1996 1995
---------- ----------
<S> <C> <C>
Operations:
Net investment income..................................... $ 244,475 $ 908,397
Net realized gain on investments.......................... 5,511,341 5,894,436
Net change in unrealized appreciation of investments...... 3,628,210 10,117,906
---------- ----------
Increase in net assets from operations.................... 9,384,026 16,920,739
Dividends to shareholders from net investment income.......... (221,267) (755,501)
Distributions to shareholders from net realized gains......... -- (5,712,224)
Capital share transactions.................................... (517,704) (2,844,493)
---------- ----------
Total increase............................................ 8,645,055 7,608,521
Net assets:
Beginning of the year..................................... 67,601,678 59,993,157
---------- ----------
End of the period......................................... $76,246,733 $67,601,678
---------- ----------
---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Sound Shore Fund, Inc. (the "Fund") is a no-load, diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended. Its financial statements are prepared in accordance with
generally accepted accounting principles, which permit management to make
certain estimates and assumptions at the date of the financial statements and
are based, in part, on the following accounting policies:
A) VALUATION OF SECURITIES
Securities held by the Fund for which market quotations are readily available
are valued using the last reported sales price provided by independent pricing
services. If no sales are reported, the mean of the last bid and asked price
is used. Securities with a maturity of 60 days or less are valued at amortized
cost. In the absence of readily available market quotations, securities are
valued in such manner as the Board of Directors in good faith deem appropriate
to reflect their fair market value.
B) FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements under Subchapter M of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if any.
Therefore, no provision for federal income tax is required.
C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid
semi-annually. Distributions of net capital gains, if any, are declared and
paid annually.
The treatment for financial statement purposes of distributions made during
the year from net investment income or net realized gain may differ from their
ultimate treatment for federal income tax purposes. These differences
primarily are caused by differences in the timing of the recognition of
certain components of income, expense, or capital gain. Where such differences
are permanent in nature, they are reclassified in the components of net assets
based on their ultimate characterization for federal income tax purposes. Any
such reclassifications will have no effect on net assets, results of
operations or net asset value per share of the Fund.
D) GENERAL
Securities transactions are recorded on a trade date basis. Interest income is
accrued as earned and dividend income is recorded on the ex-dividend date.
Realized gain and loss from securities transactions are recorded on the
identified cost basis.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Investment Advisory Agreement, the Fund pays an advisory fee to Sound
Shore Management, Inc. (the "Advisor") equal to .75% of the Fund's average daily
net assets.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In addition, the Fund has an Administration Agreement, under which it pays an
administration fee to Forum Financial Services, Inc. (the "Administrator") equal
to 0.10% of the Fund's average daily net assets.
The Advisor and Administrator have agreed that, if in any fiscal year the Fund's
net expenses exceed the limits prescribed by any state in which the Fund's
shares are qualified for sale, they will waive a portion of their fees or
reimburse the Fund in an amount equal to their portion of the total fees payable
to the Advisor and Administrator under their respective agreements with the
Fund.
Forum Financial Corp., an affiliate of the Administrator, serves as the Fund's
transfer agent and is compensated for those services by the Fund in the amount
of $12,000 per year plus 0.075% of the average annual daily net assets of the
Fund. Forum Financial Corp. also performs portfolio accounting for the Fund and
is compensated by the Fund in the amount of $12,000 per year plus 0.075% of the
average annual daily net assets of the Fund.
Fees are paid to Directors who are unaffiliated with the Advisor or the
Administrator on the basis of $3,000 per annum plus $500 per meeting attended.
Fees for investment advisory and administrative services in the amount of
$46,790 and $6,239, respectively, are payable at June 30, 1996.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term investments,
totaled $18,826,643 and $25,641,016 respectively, for the period ended June 30,
1996.
4. CAPITAL STOCK
At June 30, 1996, 100,000,000 shares of $.001 par value stock were authorized
and capital paid in amounted to $53,516,250. Transactions in capital stock were
as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
-----------------------------------------------------
JUNE 30, 1996 DECEMBER 31, 1995
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
Sold............................................................. 279,907 $ 6,007,655 315,052 $ 5,545,488
Issued on reinvestment of dividends.............................. 9,386 193,644 329,511 5,922,587
Redeemed......................................................... (314,896) (6,719,003) (802,786) (14,312,568)
---------- ------------- ---------- --------------
Net decrease..................................................... (25,603) $ (517,704) (158,223) $ (2,844,493)
---------- ------------- ---------- --------------
---------- ------------- ---------- --------------
</TABLE>
Of the 3,696,465 shares outstanding at June 30, 1996, the Employees' Profit
Sharing Plan of Sound Shore Management, Inc. owned 294,592 shares.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Beginning net asset value per share......... $ 18.16 $ 15.46 $ 16.50 $ 16.24 $ 15.17
Net investment income....................... 0.07 0.25 0.22 0.14 0.17
Net realized and unrealized investment gain
(loss) on securities...................... 2.46 4.33 (0.17) 1.80 3.02
Dividends paid from net investment income... (0.06) (0.21) (0.22) (0.14) (0.175)
Distributions from net realized gains....... -- (1.67) (0.87) (1.54) (1.95)
------ ------ ------ ------ ------
Ending net asset value per share............ $ 20.63 $ 18.16 $ 15.46 $ 16.50 $ 16.24
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratios to average net assets:
Expenses................................ 1.15%(a) 1.15% 1.22% 1.27% 1.37%
Net investment income................... 0.69%(a) 1.41% 1.32% 0.88% 1.10%
Total return................................ 13.93% 29.87% 0.30% 11.96% 21.17%
Portfolio turnover rate..................... 27.30% 53.01% 75.52% 90.99% 88.33%
Net assets at end of period (000's
omitted).................................. 76,246 67,602 59,993 58,179 39,974
Average commission rate paid on portfolio
investment transactions................... $ 0.056(b) N/A N/A N/A N/A
<CAPTION>
1991
------------
<S> <C>
Beginning net asset value per share......... $ 11.77
Net investment income....................... 0.30
Net realized and unrealized investment gain
(loss) on securities...................... 3.48
Dividends paid from net investment income... (0.285)
Distributions from net realized gains....... (0.095)
------
Ending net asset value per share............ $ 15.17
------
------
Ratios to average net assets:
Expenses................................ 1.30%
Net investment income................... 2.10%
Total return................................ 32.24%
Portfolio turnover rate..................... 100.01%
Net assets at end of period (000's
omitted).................................. 32,211
Average commission rate paid on portfolio
investment transactions................... N/A
</TABLE>
<TABLE>
<S> <C>
(a) annualized
(b) Amount represents the average
commission per share paid to brokers
on the purchase or sale of equity
securities.
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
- ----------------------------------------------
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the Fund
unless preceded or accompanied by an effective prospectus, which includes
information regarding the Fund's objectives and policies, experience of its
management, marketability of shares, and other information.
- ----------------------------------------------
SOUND SHORE FUND, INC.
2 Portland Square
Portland, ME 04101
INVESTMENT ADVISOR
Sound Shore Management, Inc.
P.O. Box 1810
8 Sound Shore Drive
Greenwich, Connecticut 06836
ADMINISTRATOR
Forum Financial Services, Inc.
2 Portland Square
Portland, ME 04101
CUSTODIAN
The First National Bank of Boston
P.O. Box 1959
Boston, Massachusetts 02105
TRANSFER AGENT & DIVIDEND
DISBURSING AGENT
Forum Financial Corp.
2 Portland Square
Portland, Maine 04101
[LOGO]
SEMI-ANNUAL REPORT
JUNE 30, 1996
(UNAUDITED)
