<PAGE>
As filed with the Securities and Exchange Commission on April 30, 1997
Securities Act File No. 2-96141
Investment Company Act File No. 811-4244
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 18
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15
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SOUND SHORE FUND, INC.
(Exact Name of Registrant as Specified in its Charter)
Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: 203-629-1980
------------------------------------------------------------
Max Berueffy
c/o Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)
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It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485, paragraph (b)
-----
X on May 1, 1997 pursuant to Rule 485, paragraph (b)
-----
60 days after filing pursuant to Rule 485, paragraph (a)(i)
-----
on [ ] pursuant to Rule 485, paragraph (a)(i)
-----
<PAGE>
75 days after filing pursuant to Rule 485, paragraph (a)(ii)
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on [ ] pursuant to Rule 485, paragraph (a)(ii)
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this post-effective amendment designates a new effective date for
-----
a previously filed post-effective amendment
The Registrant has registered an indefinite number of shares of common stock
under the Securities Act of 1933 pursuant to Section 24(f) of the Investment
Company Act of 1940. Accordingly, no fee is payable herewith. Registrant filed
a Rule 24f-2 notice for its most recent fiscal year on February 26, 1997.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404 (c))
PART A
Form N-1A Location in Prospectus
Item No. (Caption)
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Item 1. Cover Page Cover Page
Item 2. Synopsis Prospectus Summary -- Highlights of
the Fund, --; Expenses of Investing
in the Fund
Item 3. Financial Highlights Financial Highlights; Other
Information -Performance
Item 4. General Description of Investment Objective,
Registrant Policies and Restrictions; Other
Information
Item 5. Management of the Fund Management; Purchases and
Redemptions of Shares
Item 5A. Management's Discussion of Not Applicable
Fund Performance
Item 6. Capital Stock and Other Other Information;
Securities Dividends and Tax Matters
Item 7. Purchase of Securities Purchases and Redemptions of Shares
-- Purchase of Shares, Retirement
Plans, Exchange Privileges
Item 8. Redemption or Repurchase Purchases and Redemptions of Shares
-- Redemption of Shares
Item 9. Pending Legal Proceedings Not Applicable
<PAGE>
PART B
Location in Statement of
Form N-1A Additional Information
Item No. (Caption)
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Investment Policies;
Policies Special Investment Methods;
Investment Restrictions
Item 14. Management of the Fund Management
Item 15. Control Persons and Principal Management;
Holders of Securities Description of Common
Stock
Item 16. Investment Advisory and Other Management
Services
Item 17. Brokerage Allocation Portfolio Transactions
and Brokerage
Item 18. Capital Stock and Other Net Asset Value
Securities
Item 19. Purchase, Redemption and Pricing Redemption of Shares;
of Securities Being Offered Net Asset Value
Item 20. Tax Status Not Applicable
Item 21. Underwriters Management -Administrator and
Distributor
Item 22. Calculation of Performance Data Performance
Item 23. Financial Statements Financial Statements
<PAGE>
[LOGO]
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PROSPECTUS
MAY 1, 1997
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.
Sound Shore Management, Inc. serves as Investment Adviser to the Fund.
Forum Administrative Services, LLC serves as Administrator of the Fund and
Forum Financial Services, Inc. serves as 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, 1997, containing additional and more detailed information about the
Fund (the "SAI"), has been filed with the Securities and Exchange Commission
(the "SEC") and is available together with other related materials for reference
on the SEC's Internet Web Site (http://www.sec.gov). The SAI 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 at (800) 551-1980.
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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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<PAGE>
1. PROSPECTUS SUMMARY
HIGHLIGHTS OF THE FUND
INVESTMENT OBJECTIVE AND STRATEGY. 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 that 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, Policies and Restrictions."
RISK CONSIDERATIONS. 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.
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
"Management -- Investment Adviser."
ADMINISTRATOR. The administrator of the Fund is Forum Administrative Services,
LLC, which serves as administrator to other mutual funds. For serving as
administrator of the Fund, Forum Administrative Services, LLC, receives a fee at
the annual rate of 0.10% of the average daily net assets of the Fund. See
"Management -- Administrator."
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.
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 certain
broker-dealers. A $250 minimum initial investment applies to IRAs. See
"Purchases and Redemptions of Shares -- Purchase of Shares."
INVESTMENT FEATURES. Investors may elect TELEPHONE PRIVILEGES to make
purchases, redemptions and exchanges over the telephone. Investors that elect
telephone privileges may elect to use ELECTRONIC FUNDS TRANSFER as the payment
method for telephone transactions. Investors also may purchase shares by making
systematic monthly investments into the Fund with the Fund's AUTOMATIC
INVESTMENT PLAN. IRAS and other RETIREMENT PLANS utilizing the Fund as an
investment vehicle provide Federal income tax benefits for qualified
participants. The Fund also offers EXCHANGE PRIVILEGES whereby shareholders of
the Fund are entitled to exchange some or all of their shares in the Fund for
shares of certain bond and money market mutual funds. For information concerning
these and other investment features of the Fund see "Purchases and Redemptions
of Shares."
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2
<PAGE>
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)
<TABLE>
<S> <C>
Management Fees....................................................................... 0.74%
Other Expenses........................................................................ 0.41%
---------
Total Fund Operating Expenses......................................................... 1.15%
</TABLE>
The amounts of expenses and fees are those incurred during the Fund's most
recent fiscal year ending December 31, 1996. Absent fee waivers, the expenses
for the Fund would have been: Management Fees, 0.75% and Total Fund Operating
Expenses 1.16%. For a further description of these fees, see "Management."
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming a 5% annual return
and redemption at the end of each period: $ 12 $ 37 $ 63 $ 140
</TABLE>
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.
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3
<PAGE>
2. FINANCIAL HIGHLIGHTS
The following information represents selected data for a single share
outstanding of the Fund. The information for the past five years has been
audited by Deloitte & Touche LLP, Independent Certified Public Accountants. The
Fund's financial statements for the fiscal year ended December 31, 1996 and
independent auditors' report thereon are contained in the Annual Report of the
Funds 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.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Beginning net asset value per share $ 18.16 $ 15.46 $ 16.50 $ 16.24 $ 15.17 $ 11.77
Net investment income 0.13 0.25 0.22 0.14 0.17 0.30
Net realized and unrealized investment gain (loss)
on securities 5.90 4.33 (0.17) 1.80 3.02 3.48
Dividends paid from net investment income (0.13) (0.21) (0.22) (0.14) (0.175) (0.285)
Distributions from net realized gains (2.35) (1.67) (0.87) (1.54) (1.95) (0.095)
---------- --------- --------- --------- --------- ---------
Ending net asset value per share $ 21.71 $ 18.16 $ 15.46 $ 16.50 $ 16.24 $ 15.17
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
Ratios to average net assets:
Expenses 1.15% 1.15% 1.22% 1.27% 1.37% 1.30%
Net investment income 0.70% 1.41% 1.32% 0.88% 1.10% 2.10%
Total return 33.27% 29.87% 0.30% 11.96% 21.17% 32.24%
Portfolio turnover rate 69.31% 53.01% 75.52% 90.99% 88.33% 100.01%
Net assets at end of year (000's omitted) $ 132,862 $ 67,602 $ 59,993 $ 58,179 $ 39,974 $ 32,211
Average Brokerage Commission Rate $ 0.0563(a) N/A N/A N/A N/A N/A
</TABLE>
(a) Amount represents the average commission per share paid to brokers on the
purchase or sale of equity securities.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS YEAR ENDED
------------------------------- ENDED DECEMBER MARCH 31,
1990 1989 1988 31, 1987 1987
--------- --------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Beginning net asset value per share $ 13.73 $ 12.67 $ 11.58 $ 15.97 $ 13.67
Net investment income 0.51 0.33 0.21 0.11 0.14
Net realized and unrealized investment gain (loss) on
securities (1.95) 2.50 2.24 (3.11) 2.63
Dividends paid from net investment income (0.52) (0.35) (0.18) (0.18) (0.08)
--------- --------- --------- -------------- -----------
Distributions from net realized gains - (1.42) (1.18) (1.21) (0.39)
--------- --------- --------- -------------- -----------
--------- --------- --------- -------------- -----------
Ending net asset value per share $ 11.77 $ 13.73 $ 12.67 $ 11.58 $ 15.97
Ratios to average net assets:
Expenses 1.33% 1.24% 1.40% 1.36%(a) 1.45%
Net investment income 3.55% 2.37% 1.57% 1.06%(a) 1.14%
Total return (10.64%) 22.42% 21.14% (19.87%)(a) 21.01%
Portfolio turnover rate 105.20% 90.83% 134.30% 85.05% 91.21%
Net assets at end of year (000's omitted) $ 28,470 $ 42,470 $ 28,512 $ 23,798 $ 31,487
</TABLE>
(a) Annualized.
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4
<PAGE>
3. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
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'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").
EQUITY INVESTMENTS. The Fund will invest in 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 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.
OTHER INVESTMENTS. 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, however, 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.
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.
The Fund may also invest up to 10% of its total assets in the securities of
other investment companies. To the extent the Fund does so, it would bear its
pro rata share of the other investment company's expenses, such as investment
advisory and distributions fees, and operating expenses.
CASH AND TEMPORARY DEFENSIVE POSITIONS. The Fund may hold cash or cash
equivalents pending investment and to retain flexibility in meeting redemptions
and paying expenses. Cash equivalents may include (i) short-term obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
(ii) commercial paper rated Prime-1 by Moody's Investors Service or A-1 by
Standard & Poor's, (iii) certificates of deposit and bankers' acceptances issued
by domestic banks having total assets in excess of one billion dollars, (iv)
money market mutual funds, and (v) repurchase agreements covering any of the
securities in which the Fund may invest directly. A repurchase agreement is an
instrument under
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5
<PAGE>
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.
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 cash equivalents.
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;
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.
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6
<PAGE>
4. MANAGEMENT
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, 1997, investment adviser for
assets aggregating in excess of $1.7 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.
For the fiscal year ended December 31, 1996, 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
Pursuant to an Administration Agreement dated January 24, 1997, the
Administrator for the Fund is Forum Administrative Services, LLC, a Delaware
limited liability company with principal offices at Two Portland Square,
Portland, Maine 04101 (the "Administrator"). As of May 1, 1997, the
Administrator and its affiliates provided management, administrative and
distribution services to registered investment companies and collective
investment funds with assets of approximately $17 billion.
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
management of the Fund (including the Fund's receipt of services for which it
must
- --------------------------------------------------------------------------------
7
<PAGE>
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, 1996, the Fund's previous administrator,
Forum Financial Services, Inc. received a fee of 0.10% of the average daily net
assets of the Fund for its services under an Administration Agreement effective
January 1, 1996. Under the current Administration Agreement effective January
24, 1997, the Administrator receives a fee of 0.10% of the Fund's average daily
net assets.
DISTRIBUTOR
Pursuant to a Distribution Agreement with the Fund, Forum Financial Services,
Inc. (the "Distributor"), an affiliate of the Administrator acts as the
distributor of the Fund's shares. The Distributor acts as the agent of the Fund
in connection with the offering of shares of the Fund. The Distributor receives
no compensation for its services under the Distribution Agreement. The
Distributor is a registered broker-dealer and investment adviser and is a member
of the National Association of Securities Dealers, Inc.
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 Fund (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. The Transfer Agent provides transfer agency
services for the Fund for a fee equal to 0.075% of the annual average daily net
assets of the Fund plus $12,000 per year.
Under a Fund Accounting Agreement dated January 1, 1996, Forum Accounting
Services, LLC, an affiliate of the Transfer Agent, the Distributor and the
Administrator, performs portfolio accounting services for the Fund. Forum
Accounting Services, LLC provides portfolio accounting services for the Fund for
a fee equal to 0.075% of the Fund's average daily net assets.
5. PURCHASES AND REDEMPTIONS OF SHARES
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 listed on
the cover of this Prospectus or by calling (800) 551-1980.
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
- --------------------------------------------------------------------------------
8
<PAGE>
accounts is $250. There is no minimum for subsequent investments made by check
or bank wire and a $50 minimum for subsequent telephone purchases made by
electronic funds transfer and for monthly transfers under the Automatic
Investment Plan. 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 -- BY MAIL. 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.
BY BANK WIRE. To purchase shares of the Fund using the wire system for
transmittal of money among banks, an investor should first telephone the
Transfer Agent at (800) 754-8758, 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, by mailing a
check to the Transfer Agent at the address listed above or by electronic funds
transfer, described immediately below. 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.
BY AUTOMATED CLEARING HOUSE ("ACH"). An investor that elects telephone purchase
privileges may purchase shares by telephone with payment by ACH, electronically
transferring funds from the investor's designated bank account. An investor may
purchase additional shares by telephone using ACH for purchases greater than
$50. In order to purchase shares by telephone and make payment by ACH, an
investor must complete the appropriate sections of the subscription order form.
Shareholders who have authorized telephone purchases may effect purchases by
telephoning the Transfer Agent at (800) 754-8758.
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.
AUTOMATIC INVESTMENT PLAN. Investors may also purchase shares by arranging
systematic monthly investments into the Fund with the Fund's Automatic
Investment Plan ("AIP"). The minimum initial investment is $10,000 and the
minimum subsequent investment is $50. After investors give the Fund proper
authorization, their bank accounts, which must be with banks that are members of
Automated Clearing House, will be debited accordingly to purchase shares.
Investors will receive a confirmation for every transaction, and a withdrawal
will appear on their bank statements.
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9
<PAGE>
To participate in the AIP, investors must complete the appropriate sections of
the Subscription Order Form or the Automatic Investment Plan Form. These forms
may be obtained by calling the Fund's Transfer Agent at (800) 754-8758. The
amount investors specify will automatically be invested in shares at the Fund's
net asset value per share next determined after payment is received by the Fund.
To change the amount invested, written instructions must be received by the Fund
at least seven Business Days in advance of the next transfer. If the bank or
bank account number is changed, instructions must be received by the Fund at
least 20 Business Days in advance. If there are insufficient funds in the
investor's designated bank account to cover the shares purchased using AIP, the
investor's bank may charge the investor a fee or may refuse to honor the
transfer instruction (in which case no Fund shares will be purchased).
Investors should check with their banks to determine whether they are members of
the Automatic Clearing House and whether their banks charge a fee for
transferring funds through the Automatic Clearing House. Expenses incurred by
the Fund related to AIP are borne by the Fund and therefore there is no direct
charge by the Fund to investors for use of these services.
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 -- WRITTEN REQUESTS. 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). A signature guarantee is required for any written
redemption request for an amount greater than $50,000. Signature guarantees are
described more fully under "Signature Guarantees" below.
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.
BY TELEPHONE. Shareholders who wish to redeem shares by telephone must elect
this option by properly completing the appropriate section of their Subscription
Order Form. This privilege may not be available until several weeks after a
shareholder's application is received. Shares for which certificates have been
issued may not be redeemed by telephone.
A shareholder who has elected telephone redemption privileges may make a
telephone redemption request by calling the Transfer Agent at (800) 754-8758 and
providing the shareholder's account number, the exact name in which the
shareholder's shares are registered and the shareholder's social security or
taxpayer identification number. In response to the telephone redemption
instruction, the Fund will mail a check to the shareholder's record address, or,
if a shareholder has provided bank wire or ACH redemption authorization, the
Fund will wire or electronically transfer the
- --------------------------------------------------------------------------------
10
<PAGE>
proceeds to the shareholder's designated bank account. Shareholders must
complete the appropriate sections of the Subscription Order Form to authorize
receipt of redemption proceeds by bank wire or ACH. Redemptions for amounts less
than $5,000 will be made by check or by ACH. Redemptions of $5,000 or more may
be made by bank wire.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, the Transfer Agent will follow reasonable procedures to confirm that
such instructions are genuine. If such procedures are followed, neither the
Transfer Agent, the Administrator, the Investment Advisor nor the Fund will be
liable for any losses due to unauthorized or fraudulent redemption requests.
In times of drastic economic or market changes, it may be difficult to make
redemptions by telephone. If a shareholder cannot reach the Transfer Agent by
telephone, redemption requests may be mailed or hand-delivered to the Transfer
Agent.
SIGNATURE GUARANTEES. A signature guarantee is required for any written request
to redeem an amount greater than $50,000 and for any endorsement on a stock
certificate. In addition, a signature guarantee is required for instructions to
change a shareholder's (i) record name or address, (ii) ACH bank or bank account
information, (iii) Systematic Withdrawal information, (iv) dividend election or
(v) telephone purchase, redemption or exchange options. 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 $10,000 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, and bank wire or ACH redemption payments will normally be made,
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.
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
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11
<PAGE>
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, electronic transfer or bank
wire. 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 Fund 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.
In general, individuals earning compensation may make tax deductible IRA
contributions of up to $2,000 per year. 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 $4,000 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.
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
- --------------------------------------------------------------------------------
12
<PAGE>
Funds. Shareholders interested in exchanging their shares should obtain 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 necessary to open
an account in the Fund through an exchange from another fund 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.
6.DIVIDENDS AND TAX MATTERS
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.
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
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13
<PAGE>
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.
7.OTHER INFORMATION
DETERMINATION OF 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
days when the New York Stock Exchange is closed. Fund Business Day does not
include New Year's Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Thanksgiving Day and Christmas. 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 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
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14
<PAGE>
in good faith deems appropriate to reflect their fair value.
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 recent one-, five-, and ten-year 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 Sound Shore Fund, Inc., Two
Portland Square, Portland, Maine 04101, (800) 551-1980. The Fund sends to all
its shareholders semi-annual unaudited and annual audited reports, including a
list of investment securities held.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND THE FUND'S OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUND'S SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO
ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
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15
<PAGE>
TABLE OF CONTENTS
- ----------------------------------------------
<TABLE>
<C> <S> <C>
1. PROSPECTUS SUMMARY..................... 2
Highlights of the Fund................. 2
Expenses of Investing in the Fund...... 3
2. FINANCIAL HIGHLIGHTS................... 4
3. INVESTMENT OBJECTIVE, POLICIES AND
RESTRICTIONS........................... 5
Investment Objective and Policies...... 5
Investment Restrictions................ 6
4. MANAGEMENT............................. 7
Investment Adviser..................... 7
Administrator.......................... 7
Distributor............................ 8
Transfer Agent......................... 8
5. PURCHASES AND REDEMPTIONS OF SHARES.... 8
Purchase of Shares..................... 8
Redemption of Shares................... 10
Retirement Plans....................... 12
Exchange Privileges.................... 12
6. DIVIDENDS AND TAX MATTERS.............. 13
Dividends and Distributions............ 13
Taxes.................................. 13
7. OTHER INFORMATION...................... 14
</TABLE>
[LOGO]
PROSPECTUS
MAY 1, 1997
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, 1997
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, 1997 (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 . . . . . . . Redemption of Shares. . . . . . . .
Special Investment Methods. . . . Description of Common Stock . . . .
Investment Restrictions . . . . . Performance . . . . . . . . . . . .
Management . . . . . . . . . . . Net Asset Value . . . . . . . . . .
Expenses. . . . . . . . . . . . . Counsel and Auditors. . . . . . . .
Portfolio Transactions Financial Statements. . . . . . . .
and Brokerage. . . . . . . . . .
<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 US 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 US 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 US 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 than the
<PAGE>
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.
<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.
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 Director of Noise Cancellation Technologies,
Inc., Passenger Express, and EPT Technologies and Geo History and is a Trustee
of the American University in Cairo. His address is 313 Stanwick Road,
Greenwich, Connecticut 06830.
WALTER R. NELSON, Director, has been a Director of the Fund since 1994. Mr.
Nelson is President of W.R. Nelson & Company, a private investment firm and is
the founder and former President of Nelson Publications, an information provider
to the financial services and investment industry. 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 Administrative Services LLC, 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. and Forum Administrative Services LLC. His address is
Two Portland Square, Portland, Maine 04101.
RICHARD C. BUTT, Treasurer, is a Managing Director of Forum Financial Corp. with
which he has been associated since May 1996. Prior thereto, from December 1994
to April 1996 Mr. Butt
was a Director of the Financial Services Consulting Practice, KPMG Peat Marwick
LLP. From November 1993 to August 1994, Mr. Butt was President of 440 Financial
Distributors, Inc. a mutual fund administrator and distributor, and prior
thereto was Senior Vice President of 440 Financial Group, Inc. Mr. Butt is also
an officer of various registered investment companies
<PAGE>
for which Forum Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is Two Portland Square, Portland, Maine 04101.
MICHAEL J. MCKEEN, Assistant Treasurer, is a Fund Accounting Manager of Forum
Financial Corp., with which he has been associated since May 1993. Mr. McKeen
is a 1993 graduate of the University of Maine at Orono. 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 Managing Director and 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.
STEPHEN J. BARRETT, Assistant Secretary, is Manager of Client Services, Forum
Financial Services, Inc., with which he has been associated since September
1996. Prior to joining Forum, Mr. Barrett spent two and a half years at
Fidelity Investments where he served as a Senior Product Manager. Prior to
that, he was a Securities Analyst for two and a half years with Bingham, Dana &
Gould in Boston, Massachusetts. Mr. Barrett also is 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.
The following table provides the fees paid to each Director of the Fund for the
fiscal year ended December 31, 1996. Mssrs. Burn and Kane are not compensated
as Directors of the Fund.
<PAGE>
<TABLE>
<CAPTION>
Name of Person, Aggregate Pension or Estimated Total
Position Compensation Retirement Annual Benefits Compensation
From Fund Benefits Upon From Fund Paid
Accrued As Retirement To Directors
Part of Fund
Expenses
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dr. D. Kenneth Baker
Director $5,000.00 $0.00 $0.00 $5,000.00
Dr.Mark P. Figgie
Director* $4,000.00 $0.00 $0.00 $4,000.00
Charles J.Hedlund
Director $5,000.00 $0.00 $0.00 $5,000.00
John L.Lesher
Director $4,000.00 $0.00 $0.00 $4,000.00
John J. McCloy II
Director $4,500.00 $0.00 $0.00 $4,500.00
Walter R. Nelson
Director $4,000.00 $0.00 $0.00 $4,000.00
</TABLE>
* The Board accepted the resignation of Dr. Mark P. Figgie as a Director of the
Fund on January 24, 1997. Dr. Figgie is a Physician in Orthopedic 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.
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 $1.7 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.
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
<PAGE>
manages the Fund's investments in accordance with the stated policies of the
Fund, subject to the general supervision of the Board.
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, 1994, December 31, 1995,
and December 31, 1996, the fees under the Investment Advisory Agreement were
$452,025, $485,139 and $614,941 respectively. For the fiscal year ended
December 31, 1996, the Adviser waived fees in the amount of $7,254.
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 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 30 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
Pursuant to an Administration Agreement effective January 24, 1997, the
administrator of the
Fund is Forum Administrative Services, LLC, a Delaware limited liability company
with principal offices at Two Portland Square, Portland, Maine 04101 ("FAS").
As administrator, FAS 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 FAS and the Adviser, the Fund itself requires
no employees other than its officers, none of whom
<PAGE>
receives compensation from the Fund and all of whom are employed by the Adviser
or FAS. In connection with its responsibilities as administrator and in
consideration of its administrative fee, FAS 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, FAS 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
FAS, the Adviser or their affiliates.
For its services under the Administration Agreement, FAS 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. FAS is obligated to reimburse the
Fund in the event certain of the Fund's exceed certain prescribed limits. See
"Expenses." For the fiscal year ended December 31, 1996, the Fund's former
administrator, Forum Financial Services, Inc. received a fee under the then
existing Administration Agreement of 0.10%.
Prior to January 1, 1996, the controlling Administration Agreement with Forum
Financial Services, Inc. provided for fees of 0.25% of the Fund's average daily
net assets for administration as well as portfolio accounting services. For the
fiscal years ended December 31, 1994 and December 31, 1995, the fees under the
then existing Administration Agreement
were $150,675 and $161,713, respectively. For the fiscal year ended December
31, 1996 the fees payable to FAS were $81,993; FAS waived fees in the amount of
$2,418. Under both the new Administration Agreement, effective January 24,
1997, and the prior Administration Agreement in effect on January 1, 1996,
pursuant to which the administrator receives a fee of 0.10%, the administrator
is not responsible for providing portfolio accounting services.
Forum Financial Services, Inc. ("FFSI") acts as distributor of the Fund's shares
pursuant to a Distribution Agreement. Under the Distribution Agreement, FFSI
offers shares of the Fund on a best efforts basis. FFSI does not receive any
fee for its services under the Distribution Agreement. FFSI 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, FAS and FFSI are controlled
by John Y. Keffer, Vice President of the Fund. As of May 1, 1997, FAS and FFSI
provided management, administrative and distribution services to registered
investment companies and collective investment funds with assets of
approximately $17 billion.
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 FAS or FFSI, respectively, or of reckless disregard of
its obligations thereunder, FAS and FFSI shall not be liable for any action or
failure to act in accordance with its duties thereunder.
<PAGE>
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.
For the fiscal years ended December 31, 1994, December 31, 1995 and December 31,
1996, fees paid by the Fund and received by the Transfer Agent were, $12,000,
$12,000 and $74,231, respectively.
PORTFOLIO ACCOUNTING
Forum Accounting Services LLC ("Fund Accountant"), 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, the Fund Accountant 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.
The Fund Accountant 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.
The Fund Accountant 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 arising out of
or in any way related to the Fund Accountant'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 the Fund Accountant by a
duly authorized officer of the Fund. This indemnification does not apply to the
Fund Accountant's actions or failures to act in cases of the Fund Accountant's
own bad faith, willful misconduct or gross negligence.
The Fund Accounting Agreement became effective on January 1, 1996. Prior
thereto, FFSI 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
<PAGE>
Accounting Agreement. For the fiscal year ended December 31, 1996, the Fund
paid fees in the amount of $61,494 to the Fund Accountant.
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 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
<PAGE>
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, 1994, December 31, 1995 and December 31,
1996 the Fund paid a total of $152,332, $145,962 and $264,939, respectively, in
brokerage commissions with respect to portfolio transactions aggregating
$65,729,499, $63,613,535 and $86,699,731 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
<PAGE>
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 15, 1997, the amount of shares owned by all officers and directors
of the Fund, as a group, was less than 1% 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 15, 1997:
<TABLE>
<CAPTION>
<S> <C> <C>
Nature
Name and Address % of Shares of Ownership
- ---------------- ----------- -------------
Charles Schwab & Co., Inc. 43.51% Beneficial
Montgomery Street
San Francisco, California
94104
National Financial Service Corp. 19.75% Beneficial
P.O. Box 3908
Church Street Station
New York, New York
10008-3908
</TABLE>
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 gains distributions paid on shares of
the Fund are assumed to have been reinvested when received.
<PAGE>
The Fund's total return for the fiscal year ended December 31, 1996 was 33.27%.
The Fund's average annual total returns for the 5 year and 10 year periods ended
December 31, 1996 were 18.66% and 14.76%, 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,
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, US Treasury bonds,
bills or notes and changes in the Consumer Price Index as published by the US
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 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.
<PAGE>
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, 30 Rockefeller Plaza, New York,
New York 10112.
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 including the Independent Auditors' Report
for the year ended December 31, 1996; Statement of Net Assets as of December 31,
1996; Statement of Operations for the year ended December 31, 1996; Statement of
Changes in Net Assets for the years ended December 31, 1996 and 1995; Notes to
Financial Statements; and Financial Highlights for the year ended December 31,
1996, which are included in the Annual Report to Shareholders of the Company and
delivered along with this Statement of Additional Information, are incorporated
herein by reference.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Included in Prospectus: Financial Highlights.
Included in the Statement of Additional Information:
Independent Auditors' Report for the year ended December 31, 1996;
Statement of Net Assets as of December 31, 1996; Statement of Operations
for the year ended December 31, 1996; Statement of Changes in Net Assets
for the years ended December 31, 1996 and 1995; Notes to Financial
Statements; Financial Highlights are incorporated herein by reference from
the Sound Shore Fund Annual Report dated December 31, 1996, filed with the
Securities and Exchange Commission pursuant to Section 30(b) of the
Investment Company Act of 1940 and Rule 30b-2 thereunder on March 7, 1997
(accession number 0000912057-97-008086).
(b) Exhibits:
Note: * Indicates that the exhibit is incorporated herein by reference. All
references to a Post-Effective Amendment ("PEA") or Pre-Effective Amendment
("PreEA") are to PEAs and PreEAs to Registrant's Registration Statement on Form
N-1A, File No. 2-96141.
(1)* Articles of Incorporation of Registrant (filed as Exhibit (1) to PEA No.
16).
(2)* By-Laws of Registrant (filed as Exhibit (2) to PEA No. 16).
(3) None.
(4)* Form of certificate for shares of stock of Registrant (filed as Exhibit (4)
to PEA No. 16).
(5)* Investment Advisory Agreement between Registrant and Sound Shore
Management, Inc. dated May 3, 1985 and restated March 14, 1995 (filed as
Exhibit (5) to PEA No. 16).
(6)* Distribution Agreement between Registrant and Forum Financial Services,
Inc. dated June 8, 1993 (filed as Exhibit (6) to PEA No. 16).
(7) None.
(8)* Custody Agreement between the Registrant and The First National Bank of
Boston dated April 30, 1993 (filed as Exhibit (8) to PEA No. 16).
C-1
<PAGE>
(9) (a)* Administration Agreement between the Registrant and Forum
Financial Services, Inc. dated January 1, 1996 (filed as Exhibit
(9)(a) to PEA No. 16).
(b)* Transfer Agency Agreement between the Registrant and Forum
Financial Corporation dated January 1, 1996 (filed as Exhibit (9)(b)
to PEA No. 16).
(c)* Transfer Agency Agreement between the Registrant and Forum
Accounting Services LLC dated January 1, 1996 (filed as Exhibit (9)(c)
to PEA No. 16).
(d) Administration Agreement between the Registrant and Forum
Administrative Services LLC, dated January 24, 1997 (filed herewith)
(10)*Opinion of Seward & Kissel (filed as Exhibit 10 to PreEA No. 1 to
Registration Statement on April 30, 1985 (File Nos. 2-96141 and 811-4244)
(11) (a)* Opinion of Messrs. Venable, Baetjer and Howard (filed as Exhibit 11(a)
to PreEA No. 1 to Registration Statement on April 30, 1985 (File Nos. 2-
96141 and 811-4244).
(b) Consent of Independent Auditors (filed herewith).
(13)*Investment representation letter of Employees' Profit-Sharing Plan of
McConnell & Miller, Inc. as initial purchaser of shares of stock of the
Registrant (filed as Exhibit 13 to PreEA No. 1 Registration Statement on
April 30, 1985 (File Nos. 2-96141 and 811-4244).
(14) None.
(15)*Revised Rule 12b-1 Plan adopted by Registrant (filed Exhibit 15 to PreEA
No. 1 to Registration Statement on April 30, 1985 (File Nos. 2-96141 and
811-4244).
(16) Not Applicable.
Other Exhibits:*
Powers of Attorney of T. Gibbs Kane, Harry Burn, III, John L. Lesher,
Charles J. Hedlund, Mark P. Figgie, D. Kenneth Baker, John J. McCloy and
Walter R. Nelson (filed as Other Exhibits to PEA No. 16).
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
C-2
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
The following information is furnished as of April 15, 1997:
Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, par value $.001 per share 2,422
ITEM 27. INDEMNIFICATION
The Registrant's Articles of Incorporation and Maryland law provide for
indemnification by the Registrant of officers and directors under certain
circumstances. In accordance with Section 2-418 of the General Corporation Law
of the State of Maryland, Article EIGHTH of the Registrant's Articles of
Incorporation provides as follows:
"EIGHTH: To the maximum extent permitted by the General Corporation Law
of the State of Maryland as from time to time amended, the Corporation shall
indemnify its currently acting and its former directors and officers and those
persons who, at the request of the Corporation, serve or have served another
corporation, partnership, joint venture, trust or other enterprise in one or
more of such capacities."
Further, the Registrant has agreed to indemnify (1) Sound Shore Management,
Inc. ("Sound Shore Management") in the Investment Advisory Agreement, (2) Forum
Financial Services, Inc. ("Forum") in the Distribution Agreement, (3) Forum in
the Distribution Agreement, (4) Forum Financial Corp. ("FFC") in the Transfer
Agency Agreement, and (5) Forum Accounting Services LLC ("FAS") in the Fund
Accounting Agreement for certain liabilities and expenses arising out of their
acts or omissions under the respective agreements.
Paragraph 4 of the Investment Advisory Agreement between the Registrant and
Sound Shore Management provides generally that Sound Shore Management will not
be liable for any mistake of judgment or for any other cause but shall not be
protected against any liability due to willful misfeasance, bad faith or gross
negligence in the performance of or reckless disregard of the adviser's duties.
Section 2(f) of the Distribution Agreement the Registrant and Forum
provides generally that the Registrant will indemnify, defend and hold harmless
from and against any and all claims, demands, liabilities and expenses which
Forum may incur arising out of or based upon any alleged untrue statement of a
material fact contained in the Registrant's Registration Statement or Prospectus
or arising out of or based upon any alleged omission to state a material fact,
provided that Forum will not be protected against any liability to the
Registrant or its security holders to which Forum would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of or reckless disregard of the Forum's duties.
Section 3(a) of the Administration Agreement between the Registrant and
Forum provides generally that Forum shall not be liable to the Registrant for
any action or inaction of Forum in the
C-3
<PAGE>
absence of bad faith, willful misconduct or gross negligence or based upon
information, instructions or requests made to Forum by an officer of the
Registrant duly authorized or caused by circumstances beyond Forum's reasonable
control. Section 3(b) provides that the Registrant will indemnify and hold
harmless Forum from and against any and all claims, demands, liabilities and
expenses arising out of any action or inaction for which Forum is not liable
under the agreement.
Section 25 of the Transfer Agency Agreement between the Registrant and FFC
provides generally that FFC shall not be liable for any non-negligent action
taken in good faith and reasonably believed by FFC to be within the powers
conferred upon it by the agreement, and that the Registrant shall indemnify FFC
and hold it harmless from and against any and all claims, damages, liabilities
and expenses arising out performance of the agreement; provided such loss,
claim, damage, liability or expense is not the result of FFC's gross negligence
or willful misconduct.
Section 4(a) of the Fund Accounting Agreement between the Registrant and
FAS provides generally that FAS shall not be liable to the Registrant for any
action or inaction of FAS in the absence of bad faith, willful misconduct or
gross negligence or based upon information, instructions or requests made to FAS
by an officer of the Registrant duly authorized or
caused by circumstances beyond FAS's reasonable control. Section 4(b) provides
that the Registrant will indemnify and hold harmless FAS from and against any
and all claims, demands, liabilities and expenses arising out of any action or
inaction for which Forum is not liable under the agreement.
The foregoing references are qualified in their entirety by the
Registrant's Articles of Incorporation and the respective agreements.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The description of Sound Shore Management, Inc. (the "Adviser"), 8 Sound
Shore Drive, Greenwich, Connecticut 06836 under the captions "Investment
Adviser" in the Prospectus and "Management" in the Statement of Additional
Information constituting Parts A and B, respectively, of this Registration
Statement are incorporated herein by reference. The following
C-4
<PAGE>
are the directors and principal executive officers of the Adviser, including
their business connections which are of a substantial nature.
Harry Burn, III, Chairman and a Director, is a Director.
T. Gibbs Kane, Jr., President.
Shanna S. Sullivan, Vice President, Treasurer and Secretary and a Director.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Forum Financial Services, Inc., Registrant's underwriter, serves as
underwriter to Core Trust (Delaware), The CRM Funds, The Cutler Trust, Forum
Funds, The Highland Family of Funds, Monarch Funds, Norwest Advantage Funds,
Norwest Select Funds, Sound Shore Fund, Inc., and Trans Adviser Funds, Inc.
(b) John Y. Keffer, President and Secretary of Forum Financial Services, Inc.,
is the Chairman and President of the Registrant. David R. Keffer is the Vice
President and Treasurer of Forum Financial Services, Inc. Their business address
is Two Portland Square, Portland, Maine.
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained at the offices of Forum Administrative Services, LLC,
Two Portland Square, Portland, Maine 04101 and Forum Financial Corp., Two
Portland Square, Portland, Maine 04104. The records required to be maintained
under Rule 31a-1(b)(1) with respect to journals of receipts and deliveries of
securities and receipts and disbursements of cash are maintained at the offices
of the Registrant's custodian, as listed under "Custodian" in Part B to this
Registration Statement. The records required to be maintained under Rule
31a-1(b)(5), (6) and (9) are maintained at the offices of the Registrant's
adviser, as listed in Item 28 hereof.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders upon
request and without charge.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York, State of New York on the 30th
day of April, 1996.
SOUND SHORE FUND, INC.
By: /s/ T. Gibbs Kane, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement amendment has been signed below by the following persons on the 30th
day of April, 1996.
Signatures Title
---------- -----
(a) Principal Executive Officer
/s/ T. GIBBS KANE, JR. President and Director
(b) Principal Financial and Accounting Officer
/s/ RICHARD C. BUTT Treasurer
(c) Majority of the Directors
/s/ T. GIBBS KANE, JR. Director
DR. D. KENNETH BAKER* Director
HARRY BURN, III* Director
CHARLES J. HEDLUND* Director
JOHN L. LESHER* Director
JOHN J. McCLOY, II* Director
WALTER R. NELSON* Director
By: /s/ T. Gibbs Kane, Jr.
-------------------------------------
T. Gibbs Kane, Jr., Attorney-in-Fact*
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York, State of New York on the 30th
day of April, 1996.
SOUND SHORE FUND, INC.
By:
----------------------
T. Gibbs Kane, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement amendment has been signed below by the following persons on the 30th
day of April, 1996.
Signatures Title
---------- -----
(a) Principal Executive Officer
-------------------------------
T. GIBBS KANE, JR. President and Director
(b) Principal Financial and Accounting Officer
-------------------------------
RICHARD C. BUTT Treasurer
(c) Majority of the Directors
-------------------------------
T. GIBBS KANE, JR. Director
DR. D. KENNETH BAKER* Director
HARRY BURN, III* Director
CHARLES J. HEDLUND* Director
JOHN L. LESHER* Director
JOHN J. McCLOY, II* Director
WALTER R. NELSON* Director
By: -------------------------------------
T. Gibbs Kane, Jr., Attorney-in-Fact*
<PAGE>
INDEX TO EXHIBITS
SEQUENTIAL
EXHIBIT PAGE NUMBER
- ------- -----------
9(d) Administration Agreement between Registrant
and Forum Administrative Services, LLC
11 Consent of Independent Auditors.
<PAGE>
EXHIBIT 9(d)
------------
<PAGE>
SOUND SHORE FUND, INC.
ADMINISTRATION AGREEMENT
AGREEMENT made as of the 24th day of January 1997, by and between Sound
Shore Fund, Inc. (the "Fund"), a corporation operating as an open-end investment
company under the Investment Company Act of 1940, duly organized and existing
under the laws of the State of Maryland, with its principal place of business at
Two Portland Square, Portland, Maine 04101, and Forum Administrative Services,
Limited Liability Company, a Delaware limited liability company with its
principal office and place of business at Two Portland Square, Portland, Maine
04101 ("Forum").
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company and issues
its shares of common stock, $0.001 par value (the "Shares"); and
WHEREAS, the Fund desires that Forum perform certain administrative
services for the Fund and Forum is willing to provide those services on the
terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Fund and Forum hereby agree as follows:
SECTION 1. APPOINTMENT
The Fund hereby appoints Forum, and Forum hereby agrees, to act as
administrator of the Fund for the period and on the terms set forth in this
Agreement. In connection therewith, the Fund has delivered to Forum copies of
its Articles of Incorporation and Bylaws (collectively, as amended from time to
time, "Organic Documents"), the Fund's Registration Statement and all amendments
thereto filed with the U.S. Securities and Exchange Commission ("SEC") pursuant
to the Securities Act of 1933, as amended (the "Securities Act"), or the Act
(the "Registration Statement") and the current Prospectus and Statement of
Additional Information of each Fund (collectively, as currently in effect and as
amended or supplemented, the "Prospectus") and shall promptly furnish Forum with
all amendments of or supplements to the foregoing.
SECTION 2. DUTIES OF FORUM
(a) Subject to the direction and control of the board of directors of the
Fund (the "Board"), Forum shall manage all aspects of the Fund's operations
except those that are the responsibility of Sound Shore Management, Inc. (the
"Adviser"), all in such manner and to such extent as may be authorized by the
Board.
<PAGE>
(b) Forum shall:
(i) oversee (A) the preparation and maintenance by the Adviser and the
Fund's custodian, transfer agent, dividend disbursing agent and fund
accountant in such form, for such periods and in such locations as may be
required by applicable law, of all documents and records relating to the
operation of the Fund required to be prepared or maintained by the Fund or
its agents pursuant to applicable law; (B) the reconciliation of account
information and balances among the Adviser and the Fund's custodian,
transfer agent, dividend disbursing agent and fund accountant; (C) the
transmission of purchase and redemption orders for Shares; (D) the
notification to the Adviser of available funds for investment; and (E) the
performance of fund accounting, including the calculation of the net asset
value of the Shares;
(ii) oversee the performance of administrative and professional services
rendered to the Fund by others, including its custodian, transfer agent and
dividend disbursing agent as well as legal, auditing, shareholder servicing
and other services performed for the Funds;
(iii) file or oversee the filing of each document required to be filed by
the Fund in electronic format with SEC;
(iv) be responsible for and assist in the preparation, filing and printing
and the periodic updating of the Registration Statement and Prospectuses;
(v) prepare and file or oversee the preparation and filing of the Fund's
tax returns;
(vi) oversee the preparation of financial statements and related reports to
the Fund's shareholders, the SEC and state and other securities
administrators;
(vii) be responsible for and assist in the preparation and printing of
proxy and information statements and any other communications to
shareholders;
(viii) provide certain officers of the Fund with adequate general office
space and facilities and provide persons suitable to the Board to serve as
officers of the Fund;
(ix) assist the Adviser in monitoring Fund holdings for compliance with
Prospectus investment restrictions and assist in preparation of periodic
compliance reports;
(x) prepare, file and maintain the Fund's Organic Documents and minutes
of meetings of Directors, Board committees and shareholders;
(xi) with the cooperation of the Fund's counsel, Adviser, the officers of
the Fund and other relevant parties, prepare and disseminate materials for
meetings of the Board;
(xii) maintain the Fund's existence and good standing under applicable
state law;
<PAGE>
(xiii) monitor sales of Shares, ensure that the Shares are properly and
duly registered with the SEC and register, or prepare applicable filings
with respect to, the Shares with the various state and other securities
commissions;
(xiv) oversee the calculation of performance data for dissemination to
information services covering the investment company industry, for sales
literature of the Fund and other appropriate purposes;
(xv) oversee the determination of the amount of and supervise the
declaration of dividends and other distributions to share holders as
necessary to, among other things, maintain the qualification of the Fund
as a regulated investment company under the Internal Revenue Code of 1986,
as amended (the "Code"), and satisfy the diversification requirements
under the Code, and prepare and distribute to appropriate parties notices
announcing the declaration of dividends and other distributions to
shareholders;
(xvi) advise the Fund and the Board on matters concerning the Fund and its
affairs;
(xvii) calculate, review and account for Fund expenses, report on Fund
expenses on a periodic basis and pay all Fund bills;
(xviii) prepare Fund budgets, pro-forma financial statements, expense
and profit/loss projections and fee waiver/expense reimbursement
projections on a periodic basis;
(xix) prepare financial statement expense information; and
(xx) perform the recordkeeping, reporting and other tasks required to be
performed by the Fund's administrator as specified in the various
procedures adopted by the Board; provided, that Forum need not perform any
such task except upon 60 days notice.
(c) Forum shall provide such other services and assistance relating to the
affairs of the Fund as the Fund or an Adviser may, from time to time, reasonably
request.
(d) Forum shall maintain records relating to its services, such as
journals, ledger accounts and other records, as are required to be maintained
under the Act including Rule 31a-1 thereunder. The books and records pertaining
to the Fund that are in possession of Forum shall be the property of the Fund.
The Fund, or the Fund's authorized representatives, shall have access to such
books and records at all times during Forum's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided promptly by Forum to the Fund or the Fund's authorized representatives.
In the event the Fund designates a successor to any of Forum's obligations
hereunder, Forum shall, at the expense and direction of the Fund, transfer to
such successor all relevant books, records and other data established or
maintained by Forum under this Agreement.
<PAGE>
SECTION 3. STANDARD OF CARE; LIMITATION OF LIABILITY.
(a) Forum shall use its best judgment and efforts in rendering the
services described in this Agreement. Forum shall not be liable to the Fund for
any action or inaction of Forum in the absence of bad faith, willful misconduct
or gross negligence or based upon information, instructions or requests made to
Forum by an officer of the Fund duly authorized. Forum
shall not be responsible or liable for any failure or delay in performance of
its obligations under this Agreement caused by circumstances beyond its
reasonable control.
(b) The Fund agrees to indemnify and hold harmless Forum, its employees,
agents, officers and directors against and from any and all claims, judgments,
losses, charges (including attorneys' fees) and other reasonable expenses
arising out of Forum's actions or omissions that are
consistent with the standard of care set forth in paragraph (a) of this section.
(c) Forum agrees 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
arising out of Forum's actions or omissions that are not consistent with the
standard of care set forth in paragraph (a) of this section.
(d) Neither party shall be required to indemnify the other if, prior to
confessing any claim against it which may be subject to indemnification, the
indemnified party does not give the
indemnifying party written notice of, and reasonable opportunity to defend
against, the claim.
SECTION 4. COMPENSATION AND EXPENSES
(a) In consideration of the administrative services provided by Forum
pursuant to this Agreement, the Fund shall pay Forum the fees set forth in
clause (i) of Appendix A hereto ("Administrative Services Fee"). Administrative
Services Fees shall be accrued by the Fund daily and shall be payable monthly in
arrears on the first day of each calendar month for services performed under
this Agreement during the prior calendar month. In consideration of certain
additional services provided by Forum, the Fund shall pay Forum the fees set
forth in clause (ii) of Appendix A hereto. These fees shall be payable (i) for
those services for which an annual fee is charged ("Annual Charges"), in the
same manner and at the same time as the Administrative Services Fees, and (ii)
for other services, five days after notification to the Fund by Forum that the
services were performed. Nothing in this Agreement shall require Forum to
perform any of the services listed in clause (ii) of Appendix A hereto, as such
services may be performed by an outside vendor if appropriate in the judgment of
Forum and the Advisor.
If Administrative Service Fees begin to accrue before the end of any month
or if this Agreement terminates before the end of any month, all Administrative
Services Fees and Annual Charges for the period from that date to the end of
that month or from the beginning of that month to the date of termination, as
the case may be, shall be prorated according to the proportion that the period
bears to the full month in which the effectiveness or termination occurs. Upon
the termination of this Agreement the Fund shall pay to Forum such compensation
as shall be payable prior to the effective date of termination.
<PAGE>
(b) Notwithstanding anything in this Agreement to the contrary, Forum and
its affiliated persons may receive compensation or reimbursement from the Fund
with respect to (i) the provision of services on behalf of the Fund in
accordance with any distribution plan adopted by the Fund pursuant to Rule 12b-1
under the Act, (ii) the provision of shareholder support or other services,
(iii) service as a director or officer of the Fund and (iv) services to the
Fund, which may include the types of services described in this Agreement, with
respect to the creation of any Fund and the start-up of the Fund's operations.
(c) In the event that this Agreement is terminated, Forum shall be
reimbursed for all out-of-pocket costs and reasonable charges associated with
promptly transferring to its successor administrator or such other person as
designated by the Fund the original or copies of all accounts and records
maintained by Forum under this Agreement, and for cooperating with, and
providing reasonable assistance to its successor or other person in the
establishment of the accounts and records necessary to carry out the successor's
or other person's responsibilities.
SECTION 5. EFFECTIVENESS, DURATION, TERMINATION AND
ASSIGNMENT
(a) This Agreement shall become effective as of the date first written
above.
(b) This Agreement shall continue in effect with respect to the Fund for a
period of one year from its effectiveness and shall continue in effect for
successive one year periods; provided,
that continuance is specifically approved at least annually by the Board.
(c) This Agreement may be terminated with respect to the Fund at any
time, without the payment of any penalty (i) by the Board on 60 days' written
notice to Forum or (ii) by Forum on 60 days' written notice to the Fund. The
obligations of Sections 3 and 4 shall survive any termination of this
Agreement.
(d) This Agreement and the rights and duties under this
Agreement otherwise shall not be assignable by either Forum or the Fund
except by the specific written consent of the other party. All terms and
provisions of this Agreement shall be binding upon, inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto.
SECTION 6. FORCE MAJEURE
Forum shall not be responsible or liable for any failure or delay in
performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdowns, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply. In addition, to the extent
Forum's obligations hereunder are to oversee or monitor the activities of third
parties, Forum shall not be liable for any failure or delay in the performance
of
<PAGE>
Forum's duties caused, directly or indirectly, by the failure or delay of such
third parties in performing their respective duties or cooperating reasonably
and in a timely manner with Forum.
SECTION 7. ACTIVITIES OF FORUM
(a) Except to the extent necessary to perform Forum's obligations under
this Agreement, nothing herein shall be deemed to limit or restrict Forum's
right, or the right of any of Forum's managers, officers or employees who also
may be a director, officer or employee of the Fund, or persons who are otherwise
affiliated persons of the Fund to engage in any other business or to devote time
and attention to the management or other aspects of any other business, whether
of a similar or dissimilar nature, or to render services of any kind to any
other corporation, fund, firm, individual or association.
(b) Forum may subcontract any or all of its functions or responsibilities
pursuant to this Agreement to one or more corporations, funds, firms,
individuals or associations, which may be affiliates of Forum, who agree to
comply with the terms of this Agreement. Forum may pay
those persons for their services, but no such payment will increase Forum's
compensation from the Fund.
SECTION 8. COOPERATION WITH INDEPENDENT ACCOUNTANTS
Forum shall cooperate, if applicable, with the Fund's independent public
accountants and shall take reasonable action to make all necessary information
available to the accountants for the performance of the accountants' duties.
SECTION 9. SERVICE DAYS
Nothing contained in this Agreement is intended to or shall require Forum,
in any capacity under this Agreement, to perform any functions or duties on any
day other than a business day of the Fund. Functions or duties normally
scheduled to be performed on any day which is not a business day of the Fund
shall be performed on, and as of, the next business day, unless otherwise
required by law.
SECTION 10. CONFIDENTIALITY. Forum agrees to treat all records and other
information related to the Fund as proprietary information of the Fund and, on
behalf of itself and its employees, to keep confidential all such information,
except that Forum may
(a) prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the Securities and Exchange
Commission;
(b) provide information typically supplied in the investment company
industry to companies that track or report price, performance or other
information regarding investment companies; and
<PAGE>
(c) release such other information as approved in writing by the Fund,
which approval shall not be unreasonably withheld and may not be withheld where
Forum may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities or when so requested by the Fund.
SECTION 11. MISCELLANEOUS
(a) Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement.
(b) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto and, if required by the Act, by a vote of a majority of the
outstanding voting securities of the Fund.
(c) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of New York.
(d) This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof, whether oral or written.
(e) This Agreement may be executed by the parties hereto on any number of
counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(f) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(g) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(h) Notices, requests, instructions and communications received by the
parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given.
(i) The terms "vote of a majority of the outstanding voting securities,"
"interested person," and "affiliated person" shall have the meanings ascribed
thereto in the Act.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
SOUND SHORE FUND, INC.
By: /s/ T. Gibbs Kane, Jr.
---------------------------------
T. Gibbs Kane, Jr.
President
FORUM ADMINISTRATIVE SERVICES,
LIMITED LIABILITY COMPANY
By: Forum Advisors, Inc., as Manager
By: /s/ John Y. Keffer
---------------------------------
John Y. Keffer
President
<PAGE>
SOUND SHORE FUND, INC.
ADMINISTRATION AGREEMENT
APPENDIX A
FEES AND EXPENSES
(i) ADMINISTRATION SERVICE FEES
0.10% of the annual average of the daily net assets of the Fund.
(ii) OTHER FEES
Service Provided Fee
---------------- ---
Preparation of Federal income tax and excise $1500/fiscal period/Fund
tax returns and all applicable state income
and other tax returns, including any extensions
or amendments
Preparation and filing of a document with the $200 plus (i) $5/text
SEC in electronic format page and (ii) $15/tabular
page
A-1
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in Post-Effective Amendment No. 16 to Registration
StatementNo. 2-96141 of Sound Shore Fund, Inc. of our report dated February 14,
1997, incorporated by reference in the Statement of Additional Information,
which is a part of such Registration Statement, and to the references to us
under the headings "Financial Highlights" in the Prospectus, which is a part of
such Registration Statement, and "Counsel and Auditors" in the Statement of
Additional Information.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
April 29, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SOUND SHORE
FUND FINANCIAL STATEMENT DATED 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH REPORT
</LEGEND>
<SERIES>
<NUMBER> 0
<NAME> SOUND SHORE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 105,770,245
<INVESTMENTS-AT-VALUE> 130,657,048
<RECEIVABLES> 3,743,536
<ASSETS-OTHER> 6,577
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 134,407,161
<PAYABLE-FOR-SECURITIES> 1,318,887
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 226,386
<TOTAL-LIABILITIES> 1,545,273
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 107,982,113
<SHARES-COMMON-STOCK> 6,120,584
<SHARES-COMMON-PRIOR> 3,722,085
<ACCUMULATED-NII-CURRENT> 3,642
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 10,670
<ACCUM-APPREC-OR-DEPREC> 24,886,803
<NET-ASSETS> 132,861,888
<DIVIDEND-INCOME> 1,211,586
<INTEREST-INCOME> 306,427
<OTHER-INCOME> 0
<EXPENSES-NET> 941,461
<NET-INVESTMENT-INCOME> 576,552
<REALIZED-GAINS-CURRENT> 12,422,759
<APPREC-INCREASE-CURRENT> 11,319,079
<NET-CHANGE-FROM-OPS> 24,318,390
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 574,084
<DISTRIBUTIONS-OF-GAINS> 12,433,396
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 61,386,956
<NUMBER-OF-SHARES-REDEEMED> 19,326,715
<SHARES-REINVESTED> 11,889,059
<NET-CHANGE-IN-ASSETS> 65,260,210
<ACCUMULATED-NII-PRIOR> 1,174
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 33
<GROSS-ADVISORY-FEES> 614,942
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 951,133
<AVERAGE-NET-ASSETS> 81,992,211
<PER-SHARE-NAV-BEGIN> 18.16
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 5.90
<PER-SHARE-DIVIDEND> 0.13
<PER-SHARE-DISTRIBUTIONS> 2.35
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.71
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
