As filed with the Securities and Exchange Commission on April 30, 1998
File Nos. 2-96141 and 811-4244
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 19
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 16
SOUND SHORE FUND, INC.
Two Portland Square
Portland, Maine 04101
203-629-1980
Max Berueffy, Esquire
c/o Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to Rule 485, paragraph (b)
[X] on May 1, 1998 pursuant to Rule 485, paragraph (b)
[ ] 60 days after filing pursuant to Rule 485, paragraph (a)(1)
[ ] on __________ pursuant to Rule 485, paragraph (a)(1)
[ ] 75 days after filing pursuant to Rule 485, paragraph (a)(2)
[ ] on ___________pursuant to Rule 485, paragraph (a)(2)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Sound Shore Fund
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(A))
PART A
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FORM N-1A
ITEM NO. LOCATION IN PROSPECTUS
Item 1. Cover Page Cover Page
Item 2. Synopsis Prospectus Summary; Highlights of the Fund;
Expenses of Investiing in the Fund
Item 3. Condensed Financial Information Financial Highlights; Other Information;
Performance
Item 4. General Description of Registrant Investment Objective; Policies, and
Restrictions; Other Information
Item 5. Management of the Fund Management; Purchases of Shares
Item 5A. Management's Discussion of Fund Performance Not Applicable
Item 6. Capital Stock and Other Securities Other Information; Dividends and tax Matters
Item 7. Purchase of Securities Being Offered Purchases and Redemtion of Shares; Purchase of
Shares; Retirement Plans; Exchange Privileges
Item 8. Redemption or Repurchase Purchase and Redemption of Shares; Redemption of
Shares
Item 9. Pending Legal Proceedings Not Applicable
</TABLE>
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(A))
PART B
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FORM N-1A ITEM NO. LOCATION IN STATEMENT OF ADDITIONAL INFORMATION
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 Other Policies Investment Policies; Special Investment
Methods; Investment Restrictions
Item 14. Management of the Fund Management
Item 15. Control Persons and Principal Holders of Management; Description of Common Stock
Securities
Item 16. Investment Advisory and Other Services Management
Item 17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities Net Asset Value
Item 19. Purchase, Redemption and pricing of Redmption of Shares; Net Asset Value
Securities Being Offered
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
</TABLE>
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SOUND SHORE FUND
2 Portland Square, Portland, Maine 04101 - 1-800-754-8758
================================================================================
PROSPECTUS
MAY 1, 1998
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, 1998, 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.
- --------------------------------------------------------------------------------
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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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 Shareholder Services, LLC, 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 $2,000 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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EXPENSES OF INVESTING IN THE FUND
The purpose of the following table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly.
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees.......................................................... 0.75%
Other Expenses........................................................... 0.33%
-------
Total Fund Operating Expenses..............................................1.08%
The amounts of expenses and fees are those incurred during the Fund's most
recent fiscal year ending December 31, 1997. Absent fee waivers, the Total Fund
Operating Expenses for the Fund would have been 1.10%. For a further description
of these fees, see "Management."
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EXAMPLE
You would pay the following expenses on a
1 Year 3 Years 5 Years 10 Years
$1,000 investment assuming a 5% annual return ------ ------- ------- --------
and redemption at the end of each period: $11 $34 $59 $132
</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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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, 1997 and
independent auditors' report thereon are contained in the Annual Report of the
Fund 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>
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
Beginning net asset
value per share $21.71 $18.16 15.46 $16.50 $16.24 $15.17
Net investment
income 0.12 0.13 0.25 0.22 0.14 0.17
Net realized and
unrealized
investment gain
(loss) on securities 7.75 5.90 4.33 (0.17) 1.80 3.02
Dividends paid from
net investment
income (0.12) (0.13) (0.21) (0.22) (0.14) (0.175)
Distributions from
net realized gains (0.87) (2.35) (1.67) (0.87) (1.54) (1.95)
Distributions in excess of
net realized gains (0.02) - - - - -
------ ------- ------ ------ ------ ------
Ending net asset
value per share $28.57 $21.71 $18.16 $15.46 $16.50 $16.24
======= ====== ====== ====== ====== ======
Ratios to average net
assets:
Expenses 1.08% 1.15% 1.15% 1.22% 1.27% 1.37%
Net investment
income 0.62% 0.70% 1.41% 1.32% 0.88% 1.10%
Total return 36.40% 33.27% 29.87% 0.30% 11.96% 21.17%
Portfolio turnover rate 53.39% 69.31% 53.01% 75.52% 90.99% 88.33%
Net assets at end of
year (000's omitted) $1,313,686 $132,862 $67,602 $59,993 $58,179 $39,974
Average Brokerage
Commission Rate (a) $0.0568 $0.0563 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>
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YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1991 1990 1989 1988
---- ---- ----- ----
Beginning net asset
value per share $11.77 $13.73 $12.67 $11.58
Net investment
income 0.30 0.51 0.33 0.21
Net realized and
unrealized
investment gain
(loss) on securities 3.48 (1.95) 2.50 2.24
Dividends paid from
net investment
income (0.285) (0.52) (0.35) (0.18)
Distributions from
net realized gains (0.095) - (1.42) (1.18)
-------- ------ ------- -------
Ending net asset
value per share $15.17 $11.77 $13.73 $12.67
======== ====== ======= =======
Ratios to average net
assets:
Expenses 1.30% 1.33% 1.24% 1.40%
Net investment
income 2.10% 3.55% 2.37% 1.57%
Total return 32.24% (10.64%) 22.42% 21.14%
Portfolio turnover
rate 100.01% 105.20% 90.83% 134.30%
Net assets at end of
year (000's omitted) $32,211 $28,470 $42,470 $28,512
</TABLE>
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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 Index. 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 (1) short-term obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
(2) commercial paper rated Prime-1 by Moody's Investors Service or A-1 by
Standard & Poor's, (3) certificates of deposit and bankers' acceptances issued
by domestic banks having total assets in excess of one billion dollars, (4)
money market mutual funds, and (5) 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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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 (1) the short-term credits from banks referred to in
paragraph 3 above and (2) 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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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, 1998, investment adviser for
assets aggregating in excess of $4.5 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, 1997, 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.
YEAR 2000. Like other mutual funds, financial and other business organizations
and individuals around the world, the Fund could be adversely affected if the
computer systems used by the Adviser and other service providers to the Fund do
not properly process and calculate date-related information and data from and
after January 2000. The Adviser and the administrator are taking steps to
address the Year 2000 issue with respect to the computer systems that it uses
and to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. Neither the Adviser nor the administrator
anticipates that the arrival of the Year 2000 will have a material impact on its
ability to continue to provide the Fund with service at current levels.
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, 1998, the
Administrator and its affiliates provided management,
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administrative and distribution services to registered investment companies and
collective investment funds with assets of approximately $48 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 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 the fiscal year ended December 31, 1997, the
Administrator received 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 Shareholder Services, LLC (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 or may
not be its affiliates, 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 0.10% of the annual average daily net assets of
the Fund.
Under a Fund Accounting Agreement, Forum Accounting Services, LLC, an affiliate
of the Transfer Agent, the Distributor and the Administrator, performs portfolio
accounting services for the Fund for a fee equal to $60,000 per year.
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.
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For each shareholder of record, the Transfer Agent, as the shareholder's agent,
establishes an open account to which all shares purchased are credited, together
with any dividends and capital gain distributions which are paid in additional
shares. See "Dividends and Distributions." Although most shareholders elect not
to receive stock certificates, certificates for full shares can be obtained on
specific written request to the Transfer Agent. No certificates are issued for
fractional shares.
MINIMUM INVESTMENT. There is a $10,000 minimum for an initial investment made
directly and a $5,000 minimum initial investment on purchases made through
certain broker-dealers. The minimum initial investment for individual retirement
accounts is $2,000. 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 Shareholder Services, LLC
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:
BankBoston
Boston, Massachusetts
ABA # 011000390
For Credit To: Forum Shareholder Services, LLC
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.
BY 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
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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. The Fund has authorized various brokers to accept on its behalf
purchase and redemption orders. These brokers may designate other intermediaries
to accept purchase and redemption orders. The Fund will be deemed to have
received a purchase or redemption order when an authorized broker, or its
authorized designee, accepts the order. An order placed through an authorized
broker or its designee will be executed at the Fund's NAV next computed after it
is accepted by the broker or its designee.
BY 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.
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 Shareholder Services, LLC
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,
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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 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 (1) record name or address, (2) ACH bank or bank account
information, (3) Systematic Withdrawal information, (4) dividend election or (5)
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.
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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 (1) trading
on the New York Stock Exchange is restricted or the Exchange is closed, other
than customary weekend and holiday closings, (2) the SEC has by order permitted
such suspension or (3) an emergency, as defined by rules of the SEC, exists
making disposal of portfolio investments or determination of the value of the
net assets of the Fund not reasonably practicable.
To be in a position to eliminate excessive expenses, the Fund reserves the right
to redeem upon not less than 30 days' notice all shares of the Fund in an
account (other than an IRA) which has a value below $1,000. However, a
shareholder will be allowed to make additional investments prior to the date
fixed for redemption to avoid liquidation of the account.
Proceeds of redemptions normally are paid by check, 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 may be a suitable investment vehicle for part or all of the assets held
in Traditional or Roth individual retirement accounts (collectively "IRAs"). An
IRA account application form may be obtained by contacting the Trust at (800)
551-1980. Generally, all contributions and investment earnings in an IRA will be
tax-deferred until withdrawn. In the case of a Roth IRA, if certain requirements
are met, investment earnings will not be taxed even when withdrawn. Individuals
may make IRA contributions of up to a maximum of $2,000 annually. Only
contributions to Traditional IRAs may be tax-deductible. However, the deduction
will be reduced 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 and has adjusted gross income above certain
levels. The ability of an individual to make contributions to a Roth IRA is
restricted if the individual (or, in come cases, a married couple) has adjusted
gross income above certain levels.
The foregoing discussion regarding IRAs is based on regulations in effect as of
January 1, 1998 and summarizes only some of the important federal tax
considerations generally affecting IRA contributions made by individuals or
their employers. It is not intended as a substitute for tax planning. Investors
should consult their tax advisors with respect to their specific tax situations
as well as with respect to state and local taxes.
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 Government Fund (a money market fund), each a
separate series of
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Forum 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 investment company relieves the Fund of
Federal
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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,
Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor 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 in good faith deems
appropriate to reflect their fair value.
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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
BANKBOSTON, N.A. in 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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TABLE OF CONTENTS
- ---------------------------------------------------------
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
SOUND
SHORE
FUND
PROSPECTUS
MAY 1, 1998
Sound Shore Fund, Inc.
Two Portland Square
Portland, Maine 04101
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SOUND SHORE FUND, INC.
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
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, 1998 (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 at (800) 551-1980.
<TABLE>
TABLE OF CONTENTS
<S> <C> <C> <C>
Investment Policies................................ 2 Redemption of Shares............................... 9
Special Investment Methods......................... 2 Description of Common Stock........................ 9
Investment Restrictions............................ 2 Performance........................................ 9
Management ........................................ 3 Net Asset Value.................................... 10
Expenses........................................... 7 Counsel and Auditors............................... 11
Portfolio Transactions Financial Statements............................... 11
and Brokerage.................................... 8
</TABLE>
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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 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;
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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.
DR. D. KENNETH BAKER (74), 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.* (54), 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 (80), 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.* (50), 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 (64), 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 (60), 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 Stanwich
Road, Greenwich, Connecticut 06830.
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WALTER R. NELSON (65), 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 (55), Vice President, has been President and Director of Forum
Financial Services, Inc. for more than five years. He is also the sole
shareholder (directly and indirectly) and Director of Forum Financial Group,
LLC, which owns (directly or indirectly) Forum Administrative Services, LLC,
Forum Shareholder Services, LLC and Forum Investment Advisors, LLC (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.
SARA M. MORRIS (34), Treasurer, is a Managing Director, Forum Financial
Services, Inc., with which she has been associated since 1994. Prior thereto,
from 1991 to 1994, Ms. Morris was Controller of Wright Express Corporation (a
national credit card company) and for six years prior thereto was employed at
Deloitte & Touche LLP as an accountant. Ms. Morris is also an officer of various
registered investment companies for which Forum Administrative Services, LLC or
Forum Financial Services, Inc. serves as manager, administrator and/or
distributor. Her address is Two Portland Square, Portland, Maine 04101.
PAMELA J. WHEATON (38), Assistant Treasurer, is a Manager of the Tax and
Compliance Group, Forum Financial Services, Inc., with which she has been
associated since 1989. Ms. Wheaton is also an officer of various registered
investment companies for which Forum Administrative Services, LLC or Forum
Financial Services, Inc. serves as manager, administrator and/or distributor.
Her address is Two Portland Square, Portland, Maine 04101.
SHANNA S. SULLIVAN (52), 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 (39), 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 (46), 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. Mr. Berueffy is
also an officer of various registered investment companies for which Forum
Administrative Services, LLC or Forum Financial Services, Inc. serves as
manager, administrator and/or distributor. His address is Two Portland Square,
Portland, Maine 04101.
STEPHEN J. BARRETT (29), 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, 1997. Mssrs. Burn and Kane are not compensated as
Directors of the Fund.
4
23
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Name of Person, Position Aggregate Pension or Estimated Annual Total Compensation
Compensation From Retirement Benefits Benefits Upon From Fund Paid To
Fund Accrued As Part of Retirement Directors
Fund Expenses
- ------------------------------- -------------------- --------------------- -------------------- ---------------------
Dr. D. Kenneth Baker
Director $5,500.00 $0.00 $0.00 $5,500.00
Charles J. Hedlund
Director $6,000.00 $0.00 $0.00 $6,000.00
John L. Lesher
Director $5,500.00 $0.00 $0.00 $5,500.00
John J. McCloy II
Director $5,000.00 $0.00 $0.00 $5,000.00
Walter R. Nelson
Director $5,000.00 $0.00 $0.00 $5,000.00
</TABLE>
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, 1998, investment adviser for
assets aggregating in excess of $4.5 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 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, 1995, December 31, 1996 and
December 31, 1997, the fees under the Investment Advisory Agreement were
$485,139, $614,941 and $5,000,341, respectively.
The Investment Advisory Agreement was approved on April 3, 1985 by the Board,
including a majority of the directors who are not interested persons (as defined
in the 1940 Act) of the Fund or the Adviser and by the sole
5
24
<PAGE>
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 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 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 years ended December 31, 1996 and December 31, 1997,
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 year ended December 31, 1995, the fee under the then existing
Administration Agreement was $161,713. For the fiscal years ended December 31,
1996 and December 31, 1997, the fees payable to FAS were $81,993 and $666,712,
respectively. For the fiscal year ended December 31, 1997, FAS waived fees in
the amount of $114,906. 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
(directly or indirectly) by John Y. Keffer, Vice President of the Fund. As of
May 1,
6
25
<PAGE>
1998, FAS and FFSI provided management, administrative and distribution services
to registered investment companies and collective investment funds with assets
of approximately $48 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.
TRANSFER AGENT
Forum Shareholder Services, LLC (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, 1995, December 31, 1996 and December 31,
1997, fees paid by the Fund and received by the Transfer Agent were $12,000,
$74,231 and $512,034, 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 Accounting Agreement.
For the fiscal years ended December 31, 1996 and December 31, 1997, the Fund
paid fees in the amount of $61,494 and $500,034, respectively, 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
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26
<PAGE>
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 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
8
27
<PAGE>
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, 1995, December 31, 1996 and December 31,
1997, the Fund paid a total of $145,962, $264,939 and $2,392,468, respectively,
in brokerage commissions with respect to portfolio transactions aggregating
$63,613,535, $86,699,731 and $1,383,395,176, respectively. Such transactions
were placed with brokers or dealers who provide research and investment
services.
REDEMPTION OF SHARES
Payment of the redemption price for shares redeemed may be made either in cash
or in portfolio securities (selected in the discretion of the Board and taken at
their value used in determining the Funds net asset value per share as described
under "Net Asset Value"), or partly in cash and partly in portfolio securities.
However, payments will be made wholly in cash unless the Board believes that
economic conditions exist which would make such a practice detrimental to the
best interests of the Fund. If payment for shares redeemed is made wholly or
partly in portfolio securities, brokerage costs may be incurred by the investor
in converting the securities to cash. The Fund will not distribute in kind
portfolio securities that are not readily marketable. The Fund has filed a
formal election with the SEC pursuant to which the Fund will only effect a
redemption in portfolio securities where the particular stockholder of record is
redeeming more than $250,000 or 1% of the Fund's total net assets, whichever is
less, during any 90-day period. In the opinion of the Fund's management,
however, the amount of a redemption request would have to be significantly
greater than $250,000 or 1% of total net assets before a redemption wholly or
partly in portfolio securities would be made.
DESCRIPTION OF COMMON STOCK
As of March 31, 1998, 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 March 31, 1998:
<TABLE>
<S> <C> <C>
Nature
Name and Address % of Shares of Ownership
- ---------------- ----------- ------------
Charles Schwab & Co., Inc. 48.75% Beneficial
101 Montgomery Street
San Francisco, California
94104
National Financial Services Corp. 22.40% 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 the most recent 12-month, 5-year and 10-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
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28
<PAGE>
the end of the period. For purposes of computing total return, income dividends
and capital gains distributions paid on shares of the Fund are assumed to have
been reinvested when received.
The Fund's total return for the fiscal year ended December 31, 1997 was 36.40%.
The Fund's average annual total returns for the 5 year and 10 year periods ended
December 31, 1997 were 21.52% and 18.84%, 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 Index, the Standard & Poor's 100 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, Martin Luther King, Jr. 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.
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.
10
29
<PAGE>
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, 125 Summer Street, Boston, Massachusetts 02110,
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, 1997; Statement of Net Assets as of December 31,
1997; Statement of Operations for the year ended December 31, 1997; Statement of
Changes in Net Assets for the years ended December 31, 1997 and 1996; Notes to
Financial Statements; and Financial Highlights for the year ended December 31,
1997, which are included in the Annual Report to Shareholders of the Fund and
delivered along with this Statement of Additional Information, are incorporated
herein by reference.
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30
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements
Prospectus: Financial Highlights
Statement of Additional Information: Audited
financial statements includingStatement of Net Assets
December 31, 1997, Statement of Operations for the
year ended December 31, 1997, Statement of Changes in
Net Assets for the years ended December 31, 1997 and
1996, Notes to Financial Statements, Financial
Highlights, and Independent Auditor's Report were
filed with the Securities and Exchange Commission via
EDGAR on March 3, 1998 (accession number
0001047469-98-008706) pursuant to Rule 30b2 under the
Investment Company Act of 1940 , as amended, and
incorporated herein by reference.
(b) Exhibits
(1) Articles of Incorporation of Registrant dated
February 15, 1985
(2) By-Laws of Registrant.
(3) Not Applicable.
(4) See the following Articles and Sections of the
Articles of Incorporation filed as Exhibit 1: Article
FIFTH, Sections (3), (4) and (5); Article SEVENTH,
Sections (b), (c) and (d); Article NINTH, Sections
(a), (b), (c) and (f) and Article TENTH.*
(5) Investment Advisory Agreement between Registrant and
Sound Shore Management, Inc. dated May 3, 1985 and
restated March 14, 1995.*
(6) Distribution Agreement between Registrant and Forum
Financial Services, Inc. dated June 8, 1993.*
(7) Not Applicable.
(8) Custodian Agreement between Registrant and The First
National Bank of Boston dated April 30, 1993.*
(9)
(a) Administration Agreement Between Registrant
and Forum Financial Services, Inc. dated
January 1, 1996.*
(b) Transfer Agency Agreement between Registrant
and Forum Shareholder Services, LLC dated
January 29, 1998 (filed herewith).
(c) Fund Accounting Agreement between Registrant
and Forum Accounting Services, LLC dated
January 1, 1996.*
31
<PAGE>
(d) Administration Agreement between Registrant
and Forum Administrative Services, LLC dated
January 24, 1997.+
(10) Opinion of Seward & Kissel dated April 29, 1985
(filed herewith).
(11)
(a) Opinion of Messrs. Venable, Baetjer and
Howard dated April 29, 1985 (filed
herewith).
(b) Independent Auditors' Consent (filed herewith).
(12) Not Applicable.
(13) Investment representation letter of Employees' Profit
Sharing Plan of McConnell & Miller, Inc. as initial
purchaser of shares of stock of Registrant dated
April 22, 1985 (filed herewith).
(14) Not Applicable.
(15) Distribution Plan Pursuant to Rule 12b-1 Under the
Investment Company Act of 1940 adopted by Registrant
(filed herewith).
(16) Schedule of Sample Performance Calculations (filed
herewith).
(17) Financial Data Schedule (filed herewith)
(18) Not Applicable.
Other Exhibits:
Powers of Attorney of T. Gibbs Kane, Harry Burn, III,
John L. Lesher, Charles J. Hedlund, D. Kenneth Baker,
John J. McCloy and Walter R. Nelson.*
(*) Exhibit incorporated by reference as filed on PEA No. 16 via
EDGAR on May 1, 1996, accession number 0000912057-96-007773
(+) Exhibit incorporated by reference as filed on PEA No 18 via
EDGAR on April 30, 1997, accession number 000091257-97-014939
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<S> <C>
- ---------------------------------------- -----------------------------------
Title of Class (Fund) Number of Recordholders
as of 3/31/98
- ---------------------------------------- -----------------------------------
Sound Shore Fund 9211
- ---------------------------------------- -----------------------------------
</TABLE>
ITEM 27. INDEMNIFICATION
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<PAGE>
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 Shareholder Services, LLC ("FSS") 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 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
FSS provides generally that FSSshall not be liable for any
non-negligent action taken in good faith and reasonably believed by FSS
to be within the powers conferred upon it by the agreement, and that
the Registrant shall indemnify FSS 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 ofFSS '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.
33
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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 are the directors and principal executive
officers of the Adviser, including their titles and other business
connections that are of a substantial nature.
<TABLE>
<S> <C> <C>
--------------------------- ---------------------------------------- ----------------------------------------
Name Title Business Connections
--------------------------- ---------------------------------------- ----------------------------------------
Harry Burn, III Chairman and Director Sound Shore Management, Inc.
---------------------------------------- ----------------------------------------
Chairman and Director Sound Shore Fund, Inc.
--------------------------- ---------------------------------------- ----------------------------------------
T. Gibbs Kane, Jr. President and Director Sound Shore Management, Inc.
---------------------------------------- ----------------------------------------
President and Director Sound Shore Fund, Inc.
--------------------------- ---------------------------------------- ----------------------------------------
Shanna S. Sullivan Vice President, Treasurer, Secretary Sound Shore Management, Inc.
and Director
---------------------------------------- ----------------------------------------
Secretary Sound Shore Fund, Inc.
--------------------------- ---------------------------------------- ----------------------------------------
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS
a) Forum Financial Services, Inc., Registrant's underwriter, serves as
underwriter for the following registered investment companies:
The CRM Funds
The Cutler Trust
Forum Funds
Flag Investor Family of Funds
The Glenmede Fund, Inc.
The Glenmede Portfolios
Memorial Funds
Monarch Funds
Norwest Advantage Funds
Norwest Select Funds
Sound Shore Fund, Inc.
(b) The following directors and officers of Forum Financial Services,
Inc. hold the following positions with Registrant. Their business
address is Two Portland Square, Portland, Maine 04101.
<TABLE>
<S> <C> <C>
Name Position with Underwriter Position with Registrant
---- ------------------------- ------------------------
John Y. Keffer President Vice President
Sara M. Morris Treasurer Treasurer
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
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Accounts and records 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 ForumShareholder Services, LLC., Two
Portland Square, Portland, Maine 04101 except that certain items are
maintained at the following locations:
(a) Bank Boston, Boston, Massachusetts (journals of receipts and
disbursements of cash).
(b) Sound Shore Management, Inc., 8 Sound Shore Drive, Greenwich,
Connecticut 06836 (brokerage orders, portfolio purchases or
sales, and quarterly records showing the basis for the
allocation of orders).
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.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement under 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, duly
authorized in the City of New York, State of New York on the 30th day of April,
1998.
SOUND SHORE FUND, INC.
By:/s/ T. Gibbs Kane, Jr.
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, 1998.
(a) Principle Executive Officer
/S/ T. GIBBS KANE, JR.
T. Gibbs Kane, Jr., President and Director
(b) Principle Financial and Accounting Officer
/S/ SARA MORRIS
SARA MORRIS, Treasurer
(c) Majority of the Directors
/S/ T GIBBS KANE, JR.
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*
36
<PAGE>
INDEX TO EXHIBITS
Exhibit Sequential Page Number
9(b) Transfer Agency Agreement between Registrant
and Forum Shareholder Services, LLC
10 Opinion of Seward & Kissel
11(a) Opinion of Messrs. Venable, Baetjer and Howard
11(b) Independent Auditors' Consent.
13 Investment representation letter of Employees' Profit Sharing Plan
of McConnell & Miller, Inc. as initial purchaser of shares of stock
of Registrant
15 Distribution Plan Pursuant to Rule 12b-1Under the
Investment Company Act of 1940 adopted by Registrant
16 Schedule of Sample Performance Calculations
17 Financial Data Schedule
37
EXHIBIT 9(B)
SOUND SHORE FUND, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of January 29, 1998, 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, and Forum Shareholder Services, LLC ("FSS"), a
corporation organized under the laws of the State of Delaware.
WHEREAS, FSS has agreed to act as Transfer Agent for the Fund for the
purpose of recording the transfer, issuance and redemption of Shares of the
Fund, transferring the Shares of the Fund and disbursing dividends and other
distributions to Shareholders;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the parties do hereby agree as follows:
SECTION 1. The Fund hereby appoints FSS as its Transfer Agent and FSS
agrees to act in such capacity upon the terms set forth in this Agreement.
SECTION 2. The Fund shall furnish to FSS a supply of blank Share
Certificates and, from time to time, will renew such supply upon FSS's request.
Blank Share Certificates shall be signed manually or by facsimile signatures of
officers of the Fund authorized to sign by law or the By-Laws of the Fund and,
if required by FSS, shall bear the Fund's seal or a facsimile thereof.
SECTION 3. FSS shall make original issues of Shares in accordance with
Section 13 below and the Fund's then current prospectus (the "Prospectus"), upon
receipt of (i) Written Instructions requesting the issuance, (ii) a certified
copy of a resolution of the Fund's Board of Directors authorizing the issuance,
(iii) necessary funds for the payment of any original issue tax applicable to
such Shares, and (iv) an opinion of the Fund's counsel as to the legality and
validity of the issuance, which opinion may provide that it is contingent upon
the filing by the Fund of an appropriate notice with the Securities and Exchange
Commission, as required by Rule 24f-2 of the Investment Company Act of 1940, as
amended from time to time. If the opinion described in (iv) above is contingent
upon a filing under such rule, the Fund shall fully indemnify FSS for any
liability arising from the failure of the Fund to comply with such rule.
SECTION 4. Transfers of Shares shall be registered and, subject to the
provisions of Section 10, new Share Certificates shall be issued by FSS upon
surrender of outstanding Share Certificates in the form deemed by FSS to be
properly endorsed for transfer, which form shall include (i) all necessary
endorsers' signatures guaranteed by a member firm of a national securities
exchange or a domestic commercial bank, (ii) such assurances as FSS may deem
necessary to evidence the genuineness and effectiveness of each endorsement and
(iii) satisfactory evidence of compliance with all applicable laws relating to
the payment or collection of taxes.
SECTION 5. FSS shall forward Share Certificates in "non-negotiable"
form by first-class or registered mail, or by whatever means FSS deems equally
reliable and expeditious. While in transit to the addressee, all deliveries of
Share Certificates shall be insured by FSS as it deems appropriate. FSS shall
not mail Share Certificates in "negotiable" form, unless requested in writing by
the Fund and fully indemnified by the Fund to FSS's satisfaction.
SECTION 6. In registering transfers of Shares, FSS may rely upon the
Uniform Commercial Code as in effect in the State of Maine, or any other
statutes that, in the opinion of FSS's counsel, protect FSS and the Fund from
liability arising from (i) not requiring complete documentation, (ii)
registering a transfer without an adverse claim inquiry, (iii) delaying
registration for purposes of such inquiry or (iv) refusing registration whenever
an adverse claim requires such refusal.
38
<PAGE>
SECTION 7. FSS may issue new Share Certificates in place of those lost,
destroyed or stolen, upon receiving indemnity satisfactory to FSS, and may issue
new Share Certificates in exchange for, and upon surrender of, mutilated Share
Certificates as FSS deems appropriate.
SECTION 8. Unless otherwise directed by the Fund, FSS may issue or
register Share Certificates reflecting the signature, or facsimile thereof, of
an officer who has died, resigned or been removed by the Fund. The Fund shall
file promptly with FSS approval, adoption or ratification of such action as may
be required by law or by FSS.
SECTION 9. FSS shall maintain customary stock registry records for the
Fund, noting the issuance, transfer or redemption of Shares and the issuance and
transfer of Share Certificates. FSS may also maintain an account entitled
"Unissued Certificate Account," in which it will record the Shares, and
fractions thereof, issued and outstanding from time to time for which issuance
of Share Certificates has not been requested. FSS is authorized to keep records
containing the names and addresses of record of Shareholders, and the number of
Shares, and fractions thereof, from time to time owned by them for which no
Share Certificates are outstanding. Each Shareholder will be assigned a single
account number even though Shares for which Certificates have been issued will
be accounted for separately.
SECTION 10. FSS shall issue Share Certificates for Shares only upon
receipt of a written request from a Shareholder. If Shares are purchased without
such request, FSS shall merely note on its stock registry records the issuance
of the Shares and fractions thereof and credit the Unissued Certificate Account
and the respective Shareholders' accounts with the Shares. Whenever Shares, and
fractions thereof, owned by Shareholders are surrendered for redemption, FSS may
process the transactions by making appropriate entries in the stock transfer
records, and debiting the Unissued Certificate Account (if appropriate) and the
record of issued Shares outstanding; it shall be unnecessary for FSS to reissue
Share Certificates in the name of the Fund.
SECTION 11. FSS shall also perform the usual duties and functions
required of a stock transfer agent for a corporation, including but not limited
to (i) issuing Share Certificates as treasury shares, as directed by Written
Instructions, and (ii) transferring Share Certificates from one Shareholder to
another in the usual manner. FSS may rely conclusively and act without further
investigation upon any list, instruction, certification, authorization, Share
Certificate or other instrument or paper reasonably believed by it in good faith
to be genuine and unaltered, and to have been signed, countersigned or executed
or authorized by a duly authorized person or persons, or by the Fund, or upon
the advice of counsel for the Fund or for FSS. FSS may record any transfer of
Share Certificates which it reasonably believes in good faith to have been duly
authorized, or may refuse to record any transfer of Share Certificates if, in
good faith, it deems such refusal necessary in order to avoid any liability on
the part of either the Fund or FSS. The Fund agrees to indemnify and hold
harmless FSS from and against any and all losses, costs, claims, and liability
that it may suffer or incur by reason of such good faith reliance, action or
failure to act.
SECTION 12. FSS shall notify the Fund of any request or demand for the
inspection of the Fund's share records. FSS shall abide by the Fund's
instructions for granting or denying the inspection; provided, however, FSS may
grant the inspection without such instructions if it is advised by its counsel
that failure to do so will result in liability to FSS.
SECTION 13. As soon as possible after 4:00 p.m., Eastern Time or such
other time as the Fund may specify (the "Valuation Time") on each business day,
FSS shall obtain from the Fund's Administrator a quotation (on which it may
conclusively rely) of the net asset value, determined as of the Valuation time
on that day. On each business day, FSS shall use the net asset value determined
by the Fund's Administrator to compute the number of Shares and fractional
Shares to be purchased and the aggregate purchase proceeds to be deposited with
the Custodian. Having made these calculations, FSS shall upon receipt of Federal
funds pay the Custodian the aggregate net asset value of Shares purchased. The
aggregate number of Shares and fractional Shares purchased shall be issued on
the day net asset value is determined and credited by FSS to the Unissued
Certificate Account (if appropriate) and the individual account of the
Shareholder. FSS shall also credit each Shareholder's separate account with the
number of Shares purchased by such Shareholder. FSS shall promptly thereafter
mail written confirmation of the purchase to each Shareholder and to the Fund if
requested. Each confirmation shall indicate the
39
<PAGE>
prior Share balance, the new Share balance, the Shares for which Stock
Certificates are outstanding (if any), the amount invested and the price paid
for the newly-purchased Shares.
SECTION 14. Prior to the Valuation Time on each business day, as
specified in accordance with Section 13 above, FSS shall process all requests to
redeem Shares in accordance with Section 10, and shall advise the Custodian of
(i) the total number of Shares available for redemption and (ii) the number of
Shares and fractional Shares requested to be redeemed. Upon confirmation of the
net asset value by the Fund's Administrator, FSS shall notify the Fund and the
Custodian of the redemption, apply the redemption proceeds in accordance with
Section 15 and the Fund's Prospectus, record the redemption in the stock
registry books, and debit the redeemed Shares from the Unissued Certificate
Account (if appropriate) and the individual account of the Shareholder.
In lieu of carrying out the redemption procedures described in the
preceding paragraph, FSS may, at the request of the Fund, sell Shares to the
Fund as repurchases from Shareholders, provided that the sale price is not less
than the applicable redemption price. The redemption procedures shall then be
appropriately modified.
SECTION 15. The proceeds of redemption shall be remitted by FSS in
accordance with the Prospectus as follows:
(a) By check mailed to the Shareholder at his address of record. Unless
a Shareholder shall have authorized telephone redemptions or other forms of
redemption permitted by the Prospectus, the redemption request and Share
Certificates, if any, for Shares being redeemed must reflect a guarantee of the
owner's signature by a domestic commercial bank or trust company or a member
firm of a national securities exchange. Any officer of the Fund may authorize
FSS in writing to waive the signature guarantee for any specific transaction or
classes of transactions; or
(b) By other procedures commonly followed by mutual funds, as set forth
in the Prospectus and in a Written Instruction from the Fund and mutually agreed
upon by the Fund and FSS.
For purposes of redemption of Shares that have been purchased by check
within fifteen (15) days prior to receipt of the redemption request, the Fund
shall provide FSS with Written Instructions concerning the time within which
such requests may be honored.
The authority of FSS to perform its responsibilities under Sections 14
and 15 shall be suspended if FSS receives notice of the suspension of the
determination of the Fund's net asset value.
SECTION 16. Upon the declaration of each dividend and each capital
gains distribution by the Fund's Board of Directors, the Fund shall notify FSS
of the date of such declaration, the amount payable per Share, the record date
for determining the Shareholders entitled to payment and the payment date.
SECTION 17. On or before each payment date, the Fund will transfer, or
cause the Custodian to transfer, to FSS the total amount of the dividend or
distribution currently payable subject to such netting arrangements as may be
agreed to between the Fund and the Custodian. FSS will, on the designated
payment date, reinvest all dividends in additional Shares and, to the extent
provided by the Prospectus covering the Shares, mail to each Shareholder at his
address of record a statement showing the number of full and fractional Shares
(rounded to three decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a Shareholder elects to
receive dividends in cash, FSS shall prepare a check in the appropriate amount
and mail it to him at his address of record within five (5) business days after
the designated payment date.
SECTION 18. FSS shall maintain records regarding the issuance and
redemption of Shares and dividend reinvestments. Such records will list the
transactions effected for each Shareholder and the number of Shares and
fractional Shares owned by each for which no Share Certificates are outstanding.
FSS agrees to make available upon request, and to preserve for the periods
prescribed in Rule 31a-2 adopted pursuant to the Investment Company Act of 1940,
any records related to services provided under this Agreement and required to be
maintained by Rule 31a-1 of such Act.
40
<PAGE>
SECTION 19. FSS shall maintain those records necessary to enable the
Fund to file, in a timely manner, Form N-SAR (Semi-Annual Report) or any
successor monthly, quarterly or annual report required by the Investment Company
Act of 1940, or rules and regulations thereunder.
SECTION 20. FSS shall cooperate with the Fund's independent public
accountants and shall take reasonable action to make all necessary information
available to such accountants for the performance of their duties.
SECTION 21. In addition to the services described above, FSS will
perform other services for the Fund as mutually agreed upon in writing from time
to time, including but not limited to preparing and filing Federal tax forms
with the Internal Revenue Service, and, subject to supervisory oversight by the
Fund's Administrator, mailing Federal tax information to Shareholders, mailing
semi-annual Shareholder reports, preparing the annual list of Shareholders,
mailing notices of Shareholders' meetings, proxies and proxy statements and
tabulating proxies. FSS shall answer Shareholder inquiries related to their
share accounts and other correspondence requiring an answer from the Fund. FSS
shall maintain dated copies of written communications from Shareholders, and
replies thereto.
SECTION 22. Nothing contained in this Agreement is intended to or shall
require FSS, in any capacity hereunder, to perform any functions or duties on
any day other than a business day (as disclosed in the Fund's prospectus).
Functions or duties normally scheduled to be performed on any day which is not a
business day shall be performed on, and as of, the next business day, unless
otherwise required by law.
SECTION 23. The Fund agrees to pay to FSS as compensation for its
services the fees set forth in Schedule A to this Agreement, or as shall be set
forth in written amendments to Schedule A approved by the parties from time to
time. Such 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. Fees will begin to accrue on the
effective date of this Agreement. FSS shall also be reimbursed for its
out-of-pocket costs incurred in providing any services hereunder, including but
not limited to the cost of any and all forms and stationery used, or specially
prepared for use, in connection with its services hereunder, as well as the cost
of postage, telephone, bank fees and electronic or facsimile transmission.
SECTION 24. FSS shall not be liable for any taxes, assessments or
governmental charges that may be levied or assessed on any basis whatsoever in
connection with the Fund or any Shareholder, excluding taxes assessed against
FSS for compensation received by it hereunder.
SECTION 25. FSS shall not be liable for any non-negligent action taken
in good faith and reasonably believed by FSS to be within the powers conferred
upon it by this Agreement. The Fund shall indemnify FSS and hold it harmless
from and against any and all losses, claims, damages, liabilities or expenses
(including reasonable expenses for legal counsel) arising directly or indirectly
out of or in connection with this Agreement; provided such loss, claim, damage,
liability or expense is not the result of FSS's gross negligence or willful
misconduct, and provided further that FSS shall give the Fund notice and
reasonable opportunity to defend any such loss, claim, etc. in the name of the
Fund or FSS, or both. Without limiting the foregoing:
(a) FSS may rely upon the advice of the Fund or counsel to the Fund or
FSS, and upon statements of accountants, brokers and other persons believed by
FSS in good faith to be expert in the matters upon which they are consulted. FSS
shall not be liable for any action taken in good faith reliance upon such advice
or statements;
(b) FSS shall not be liable for any action reasonably taken in good
faith reliance upon any Written Instructions or certified copy of any resolution
of the Fund's Board of Directors; provided, however, that upon receipt of a
Written Instruction countermanding a prior Instruction that has not been fully
executed by FSS, FSS shall verify the content of the second Instruction and
honor it, to the extent possible. FSS may rely upon the genuineness of any such
document, or copy thereof, reasonably believed by FSS in good faith to have been
validly executed;
41
<PAGE>
(c) FSS may rely, and shall be protected by the Fund in acting, upon
any signature, instruction, request, letter of transmittal, certificate, opinion
of counsel, statement, instrument, report, notice, consent, order, or other
paper or document reasonably believed by it in good faith to be genuine and to
have been signed or presented by the purchaser, Corporation or other proper
party or parties; and
(d) FSS may, with the consent of the Fund, subcontract the performance
of all, or any portion of, the services to be provided hereunder with respect to
any Shareholder or group of shareholders to any agent of FSS and may reimburse
any such agent for the services it performs; provided that no such reimbursement
will increase the amount payable by the Fund pursuant to this Agreement.
SECTION 26. Upon receipt of Written Instructions, FSS is authorized to
make payment upon redemption of Shares without a signature guarantee, and the
Fund hereby agrees to indemnify and hold FSS harmless from any and all expenses,
damages, claim, suits liabilities, actions, demands or losses whatsoever arising
out of or in connection with such payment if made in accordance with such
Written Instructions. Upon the request of FSS, the Fund shall assume the entire
defense of any such action, suit or claim. FSS shall notify the Fund in a timely
manner of any such action, suit or claim.
SECTION 27. The Fund shall deliver, or cause to be delivered, over to
FSS (i) an accurate list of Shareholders of the Fund, showing each Shareholder's
address of record, number of Shares owned and whether such Shares are
represented by outstanding Share Certificates or by non-certificate Share
accounts and (ii) all Shareholder records, files, and other materials necessary
or appropriate for proper performance of the functions assumed by FSS under this
Agreement (collectively referred to as the "Materials"). The Fund shall
indemnify and hold FSS harmless from any and all expenses, damages, claims,
suits, liabilities, actions, demands and losses arising out of or in connection
with any error, omission, inaccuracy or other deficiency of such Materials, or
out of the failure of the Fund to provide any portion of the Materials or to
provide any information in the Fund's possession needed by FSS to knowledgeably
perform its functions.
SECTION 28. FSS shall, at all times, act in good faith and shall use
whatever methods it deems appropriate to ensure the accuracy of all services
performed under this Agreement. FSS shall be liable only for loss or damage due
to errors caused by FSS's negligence, bad faith or willful misconduct, or that
of its employees.
SECTION 29. This Agreement may be amended from time to time by a
written supplemental agreement executed by the Fund and FSS and without notice
to or approval of the Shareholders; provided this Agreement may not be amended
in any manner which would substantially increase the Fund's obligations
hereunder unless the amendment is first approved by the Fund's Board of
Directors. The parties hereto may adopt procedures as may be appropriate or
practical under the circumstances, and FSS may conclusively rely on the
determination of the Fund that any procedure that has been approved by the Fund
does not conflict with or violate any requirement of its Articles of
Incorporation, By-Laws or Prospectus, or any rule, regulation or requirement of
any regulatory body.
SECTION 30. The Fund shall file with FSS a certified copy of the
operative resolution of its Board of Directors authorizing the execution of
Written Instructions or the transmittal of Oral Instructions.
SECTION 31. The terms, as defined in this Section, whenever used in
this Agreement or in any amendment or supplement hereto, shall have the meanings
specified below, insofar as the context will allow.
(a) The Fund: The term Fund shall mean Sound Shore Fund, Inc. as
defined in the preamble of this Agreement.
(b) Custodian; Custodian Agreement: The term Custodian shall mean The
First National Bank of Boston or any successor or other custodian acting as such
for the Fund. The term Custodian Agreement shall mean the agreement or
agreements between the Fund and the Custodian or Custodians providing for
custodial services to the Fund.
42
<PAGE>
(c) Securities: The term Securities shall mean bonds, debentures,
notes, stocks, shares, evidences of indebtedness, and other securities and
investments from time to time owned by the Fund.
(d) Share Certificates: The term Share Certificates shall mean the
stock certificates for the Shares of the Fund.
(e) Shareholders: The term Shareholders shall mean the registered
owners from time to time of the Shares of the Fund, as reflected on the stock
registry records of the Fund.
(f) Shares: The term Shares shall mean the issued and outstanding
shares of common stock of the Fund.
(g) Oral Instructions: The term Oral Instructions shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to FSS in person or by telephone, vocal telegram or other
electronic means, by a person or persons reasonably believed in good faith by
FSS to be a person or persons authorized by a resolution of the Board of
Directors of the Fund to give Oral Instructions on behalf of the Fund.
(h) Written Instructions: The term Written Instructions shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to FSS in original writing containing original signatures, or a
copy of such document transmitted by telecopy, including transmission of such
signature, or other mechanical or documentary means, at the request of a person
or persons reasonably believed in good faith by FSS to be a person or persons
authorized by a resolution of the Board of Directors of the Fund to give Written
Instructions on behalf of the Fund.
(i) Corporation's Administrator: The term Corporation's Administrator
shall mean Forum Administrative Services, LLC., or any successor thereto who
acts as the administrator of the Fund.
SECTION 32. In the event that any check or other order for the payment
of money is returned unpaid for any reason, FSS shall promptly notify the Fund
of the non-payment.
SECTION 33. Either party may give sixty (60) days written notice to the
other of the termination of this Agreement, such termination to take effect at
the time specified in the notice. Upon notice of termination, the Fund shall use
its best efforts to obtain a successor transfer agent. If a successor transfer
agent is not appointed within ninety (90) days after the date of the notice of
termination, the Board of Directors of the Fund shall, by resolution, designate
the Fund as its own transfer agent. Upon receipt of written notice from the Fund
of the appointment of the successor transfer agent and upon receipt of Oral or
Written Instructions, FSS shall, upon request of the Fund and the successor
transfer agent and upon payment of FSS's reasonable charges and disbursements,
promptly transfer to the successor transfer agent the original or copies of all
books and records maintained by FSS hereunder and cooperate with, and provide
reasonable assistance to, the successor transfer agent in the establishment of
the books and records necessary to carry out its responsibilities hereunder.
SECTION 34. Any notice or other communication required by or permitted
to be given in connection with this Agreement shall be in writing, and shall be
delivered in person or sent by first-class mail, postage prepaid, to the
respective parties.
Notice to the Fund shall be given as follows until further notice:
Sound Shore Fund, Inc.
Two Portland Square
Portland, Maine 04101
43
<PAGE>
Notice to FSS shall be given as follows until further notice:
Forum Shareholder Services, LLC
Two Portland Square
Portland, Maine 04101
Attn.: John Y. Keffer
Copies of any notice delivered under this section shall be sent to:
Sound Shore Management, Inc.
8 Sound Shore Drive
Greenwich, Connecticut 06836
Attn.: T. Gibbs Kane, Jr.
SECTION 35. The Fund represents and warrants to FSS that the execution
and delivery of this Agreement by the undersigned officer of the Fund has been
duly and validly authorized by resolution of the Fund's Board of Directors. FSS
represents and warrants to the Fund that the execution and delivery of this
Agreement by the undersigned officer of FSS has also been duly and validly
authorized.
SECTION 36. This Agreement may be executed in more than one
counterpart, each of which shall be deemed to be an original, and shall become
effective on the date first written above unless otherwise agreed by the
parties. Unless sooner terminated pursuant to Section 33, this Agreement will
continue for a period of two years from the date hereof and will continue in
effect thereafter only if such continuance is specifically approved at least
annually by the Board of Directors or by a vote of the Shareholders of the Fund.
SECTION 37. This Agreement shall extend to and shall bind the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the written consent of FSS
or by FSS without the written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Directors. Notwithstanding the foregoing,
either party may assign this Agreement without the consent of the other party so
long as the assignee is an affiliate, parent or subsidiary of the assigning
party and is qualified to act under the Investment company Act of 1940, as
amended from time to time.
SECTION 38. This Agreement shall be governed by the laws of the State
of New York.
WITNESS the following signatures:
SOUND SHORE FUND, INC.
------------------------
T. Gibbs Kane, Jr.
President
FORUM SHAREHOLDER SERVICES, LLC.
------------------------
John Y. Keffer
President
44
<PAGE>
SOUND SHORE FUND, INC.
TRANSFER AGENCY AGREEMENT
SCHEDULE A
FEES
For its services hereunder, FSS will receive fees equal to 0.10% of the
annual average daily net assets of the Fund. Such fees shall be payable monthly
in arrears on the first day of each calendar month for services performed during
the prior calendar month.
45
EXHIBIT 10
SEWARD & KISSEL
WALL STREET PLAZA
NEW YORK, N.Y. 10005
212 248-2800
April 29, 1985
Sound Shore Fund, Inc.
P.O. Box 1810
8 Sound Shore Drive
Greenwich, Connecticut 06836
Dear Sirs:
We have acted as counsel for Sound Shore Fund, Inc., a
Maryland corporation (the "Company"), in connection with the organization of the
Company, the registration of the Company under the Investment Company Act of
1940 and the registration of an infinite number of shares of Common Stock (par
value $.001 per share) of the Company under the Securities Act of 1933.
As counsel for the Company we have participated in the
preparation of the Registration Statement on Form N-1A relating to such shares
and have examined and relied upon such corporate records of the Company and such
other documents and certificates as to factual matters as we have deemed to be
necessary to render the opinion expressed herein.
Based on such examination, we are of the opinion that:
1. The Company is a duly organized and validly existing
corporation in good standing under the laws of the State of Maryland.
2. The 10,000 shares of presently issued and outstanding
Common Stock of the Company have been validly and legally issued and are fully
paid and non-assessable shares of Common Stock of the Company.
3. The shares of Common Stock of the Company to be offered for
sale pursuant to the Prospectus and Statement of Additional Information
contained in said Registration Statement are, to the extent of the number of
shares authorized to be issued by the Company in its Articles of Incorporation,
duly authorized and unissued shares and when such shares have been duly sold,
issued and paid for as contemplated in the Prospectus and Statement of
Additional Information, such shares will have been validly and legally issued
and will be fully paid and non-assessable shares of Common Stock of the Company
under the laws of the State of Maryland (assuming that the sale price of each
share is not less than the par value thereof).
As to matters of Maryland law contained in the foregoing
opinion we have relied on the opinion of Messrs. Venable, Baetjer and Howard of
Baltimore, Maryland, dated April 29, 1985, a copy of which is attached hereto.
We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement
and to the reference to our firm under the caption "Counsel and Auditors" in the
related Statement of Additional Information included therein.
Very truly yours,
/S/ Seward + Kissel
46
EXHIBIT 11(A)
VENABLE, BAETJER AND HOWARD
ATTORNEYS AT LAW
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
1800 MERCANTILE BANK & TRUST BUILDING
2 HOPKINS PLAZA
BALTIMORE, MARYLAND 21201
----
(301) 244-7400
TELECOPIER
(301) 244-7742
April 29, 1985
Seward & Kissel
Wall Street Plaza
88 Pine Street
New York, NY 10005
RE: SOUND SHORE FUND, INC.
Gentlemen:
We have acted as Maryland counsel for Sound Shore Fund, Inc.,
a Maryland corporation (the "Company") in connection with the organization of
the Company and the issuance of shares of its Common Stock.
We have examined the Company's Articles of Incorporation, its
By-Laws, the Prospectus and Statement of Additional Information included in its
Registration Statement on Form N-1A, substantially in the form in which it has
or is to become effective (the "Prospectus") and have examined and relied upon
such corporate records of the Company and other documents and certificates as to
factual matters as we have deemed to be necessary to render the opinion
expressed herein. We have assumed without independent verification the
genuineness of the signatures on and the authenticity of all documents furnished
to us.
Based on such examination we are of the opinion that:
1. The Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of Maryland;
2. The 10,000 shares of presently issued and outstanding
shares of Common Stock of the Company have been validly and legally issued and
are fully paid and non-assessable shares under the laws of the State of
Maryland.;
3. The balance of the 100,000,000 shares of Common Stock of
the Company to be offered for sale pursuant to the Prospectus are authorized and
unissued shares, and when such shares have been duly sold, issued and paid for
as contemplated in the Prospectus, such shares will have been validly and
legally issued and will be fully paid and non-assessable shares of Common Stock
of the Company under the laws of the State of Maryland.
This letter expresses our opinion as to the Maryland General
Corporation Law governing matters such as due incorporation and the
authorization and issuance of stock, but does not extend to the securities or
"Blue Sky" laws of Maryland or to federal securities or other laws.
47
<PAGE>
You may rely upon our foregoing opinion in rendering your
opinion to the Company which is to be filed as an exhibit to the Registration
Statement, and we hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement
and to use our name in the Statement of Additional Information under the caption
"Counsel and Auditors." We do not thereby admit that we are "experts" within the
meaning of the Securities Act of 1933 and the regulations thereunder.
Very truly yours
/S/ Venable, Baetjer and Howard
48
EXHIBIT 11(B)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 19 to Registration Statement (No. 2-96141) of Sound Shore Fund, Inc. of our
report dated February 6, 1998 in the Statement of Additional Information, which
is part of such Registration Statement, and to the reference to us under the
heading "Financial Highlights" appearing in the Prospectus, which is also a part
of such Registration Statement.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
April 30, 1998
49
EXHIBIT 13
EMPLOYEES' PROFIT SHARING PLAN OF
McCONNEL & MILLER, INC.
8 Sound Shore Drive
Greenwich, Connecticut 06836
April 22, 1985
Sound Shore Fund Inc.
8 Sound Shore Drive
Greenwich, Connecticut 06836
Gentlemen:
In connection with our purchase of 10,000 shares of Sound
Shore Fund, Inc. common stock for a cash consideration of $10.00 per share, this
will confirm that we are buying such shares for investment for our own account
only, and not with a view to reselling or otherwise distributing them.
Very truly yours,
EMPLOYEES' PROFIT SHARING PLAN
OF McCONNELL & MILLER, INC.
By /S/ Duncan Miller
50
EXHIBIT 15
SOUND SHORE FUND, INC.
Distribution Plan Pursuant to Rule
12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940
This Distribution Plan (the "Plan") is adopted by Sound Shore Fund, Inc. (the
"Fund") in accordance with the provisions of Rule 12b-1 under the Investment
Company Act of 1940 (the "Act").
1. The Fund will enter into an investment advisory contract
with McConnell & Miller, Inc. (the "Adviser") and an administrative services
contract with Reich & Tang, Inc. (the "Administrator"), each in a form
satisfactory to the Fund's Board of Directors, which will provide the Adviser
and the Administrator may make payments from time to time from their own
respective resources, which may include the fees payable to them by the Fund
pursuant to their respective contracts, management and advisory fees received
from other investment companies and past profits, for the following purposes :
(i) to defray the costs of, and to compensate others,
including organizations whose customers or clients are Fund
shareholders ("Participating Intermediaries"), for performing
shareholder servicing and related administrative and accounting
functions on behalf of the Fund;
(ii) to compensate Participating Intermediaries for providing
assistance in distributing the Fund's shares; and
(iii) to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective
shareholders, sales personnel, advertising, and other activities in
connection with the distribution of the Fund's shares.
The investment advisory contract and the administrative services contract will
further provide that the Adviser and the Administrator, as the case may be, will
determine, in their sole discretion, the amount of any payments made thereunder,
provided, however, that no such payment will increase the amount which the Fund
is required to pay under the investment advisory contract or administrative
services contract or otherwise.
2. The Fund may defray the costs of preparing and printing the
Fund's Prospectus, statement of additional information and subscription order
form and of delivering them to existing or prospective shareholders of the Fund
.
3. All written agreements relating to payments hereunder
entered into by the Adviser or the Administrator and any Participating
Intermediary will be in a form satisfactory to the Fund's Board of Directors.
4. The Fund, the Adviser and the Administrator will prepare
and furnish to the Fund's Board of Directors, and the Board of Directors will
review, at least quarterly, written reports setting forth all amounts expended
for distribution purposes by the Fund, the Adviser and the Administrator
pursuant to the Plan and identifying the distribution activities for which such
expenditures were made.
5. The Plan will become effective immediately upon approval by
(i) a majority of the outstanding voting securities of the Fund (as defined in
the Act) and (ii) a majority of the Board of Directors of the Fund, including a
majority of the directors who are not interested persons (as defined in the Act)
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan, pursuant to a
vote cast in person at a meeting called for the purpose of voting on the
approval of the Plan.
6. The Plan will remain in effect until______, 1986, unless
earlier terminated in accordance with its terms, and thereafter may continue in
effect for successive annual periods if approved each year in the manner
described in clause (ii) of paragraph 5 hereof.
51
<PAGE>
7. The Plan may be amended at any time with the approval of
the Board of Directors of the Fund, provided that (i) any material amendments to
the terms of the Plan will be effective only upon approval as provided in clause
(ii) of paragraph 5 hereof, and (ii) any amendment which increases materially
the amount which may be spent by the Fund pursuant to the Plan will be effective
only upon the additional approval as provided in clause (i) of paragraph 5
hereof. For purposes of this paragraph 7, an amendment to either the investment
advisory contract or the administrative services contract providing for an
increase in the investment advisory fee payable to the Adviser or administrative
services fee payable to the Administrator will be deemed an amendment to the
Plan which increases materially the amount which may be spent by the Fund
pursuant to the Plan unless the Plan is amended so that the level of payments
under the Plan will not be increased by virtue of the amendment to the
investment advisory contract to the administrative services contract, as the
case may be.
8. While the Plan is in effect, the selection and nomination
of the directors of the Fund who are not "interested persons" of the Fund (as
defined in the Act) will be committed to the discretion of the Fund's
disinterested directors.
9. The Plan may be terminated without penalty at any time (i)
by a vote of the majority of the entire Board of Directors of the Fund, (ii) by
a vote of a majority of the directors of the Fund who are not interested persons
(as defined by the Act) of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan,
or (iii) by a vote of a majority of the outstanding voting securities of the
Fund (as defined by the Act).
52
EXHIBIT 16
SCHEDULE OF SAMPLE PERFORMANCE QUOTATION CALCULATIONS
SOUND SHORE
Note: All performance is for the period ended: 12/31/97
1. AVERAGE ANNUAL TOTAL RETURN (PURSUANT TO SEC STANDARDIZED FORMULA)
SEC Formula: T = ({{[((ERV/P)-1)(1-S)-S](1-R)-R}+1}1/n)-1
where: T = average annual total return
P = initial payment of $1,000
n = number of years
ERV = ending redeemable value of the initial
payment at the end of the period S = Maximum
initial sales charge R = Maximum redemption
charge (calculated based on _______)(i.e.,
lower of purchase amount or redemption
amount)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
a. AVERAGE ANNUAL TOTAL RETURN (assuming deduction of the maximum sales/purchase/redemption charges)
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
CAL YR 1 MTH 3 MTH 6 MTH 1 YR 3 YR 5 YR 10 YR INCEPT
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
P($) 1000 1000 1000 1000 1000 1000 1000 1000 1000
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
N(YR) 1/12 1/4 1/2 1 3 5 10
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
ERV
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
S
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
R
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
T(%)
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
b. AVERAGE ANNUAL TOTAL RETURN (assuming no deduction of sales/purchase/redemption charges)
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
CAL YR 1 MTH 3 MTH 6 MTH 1 YR 3 YR 5 YR 10 YR INCEPT
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
P($) 1000 1000 1000 1000 1000 1000 1000 1000 1000
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
N(YR) 1 1/12 1/4 1/2 1 3 5 10 12.63
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
ERV 1364.00 1024.40 989.70 1149.60 1364.00 2360.90 2651.00 5629.00 7538.70
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
T(%) 36.40 32.83 (4.01) 31.85 36.40 33.12 21.52 18.84 17.34
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
</TABLE>
53
<PAGE>
2. CUMULATIVE TOTAL RETURN (PURSUANT TO NON-STANDARDIZED FORMULA)
Formula: C = {{[(T+1)n-1-R]/(1-R)}+S}/(1-S)
where: C = cumulative total return of the
investment over the specified period T =
average annual total return (see above) P =
initial payment of $1,000 n = number of
years ERV = ending redeemable value of the
initial payment at the end of the period
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
a. CUMULATIVE TOTAL RETURN (assuming deduction of the maximum sales/purchase/redemption charges)
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
CAL YR 1 MTH 3 MTH 6 MTH 1 YR 3 YR 5 YR 10 YR INCEPT
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
P($) 1000 1000 1000 1000 1000 1000 1000 1000 1000
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
N(YR) 1/12 1/4 1/2 1 3 5 10
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
ERV
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
S
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
R
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
C(%)
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
b. CUMULATIVE OR AGGREGATE TOTAL RETURN (assuming no deduction of sales/purchase/redemption charges)
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
CAL YR 1 MTH 3 MTH 6 MTH 1 YR 3 YR 5 YR 10 YR INCEPT
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
P($) 1000 1000 1000 1000 1000 1000 1000 1000 1000
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
N(YR) 1 1/12 1/4 1/2 1 3 5 10 12.63
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
ERV 1364.00 1024.40 989.70 1149.60 1364.00 2360.90 2651.00 5629.00 7538.70
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
C(%) 36.40 2.44 (1.03) 14.96 36.40 136.09 165.10 462.90 653.87
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
</TABLE>
54
<PAGE>
3. 30 DAY YIELD (PURSUANT TO SEC STANDARDIZED FORMULA)
SEC Formula: Y = 2{[(a - b)/(cd) + 1]6 - 1]}
where: Y = 30 day yield
a = dividends and interest earned during the
period b = expenses accrued for the period
(net of reimbursements) c = the average
daily number of shares outstanding during
the period that were entitled to receive
dividends d = the maximum offering price per
share on the last day of the period
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
A($) B($) C D($) Y(%)
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
N/A N/A N/A N/A N/A
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
</TABLE>
4. 30 DAY TAX-EQUIVALENT YIELD (PURSUANT TO SEC STANDARDIZED FORMULA)
SEC Formula: TEY = Y/(1 - TR)
where: TEY = 30 day tax-equivalent yield
Y = 30 day yield (see above)
TR = assumed applicable tax rate
<TABLE>
<S> <C>
- ----------------------------------------------------------- ---------------------------------------------------------
TR(%) TEY(%)
- ----------------------------------------------------------- ---------------------------------------------------------
N/A N/A
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
5. 30-DAY DISTRIBUTION RATE (PURSUANT TO NON-STANDARDIZED FORMULA)
Formula: 30 Day Distribution Rate ("Rate")= (ab)/c
where: Rate = 30 day distribution rate
a = distributions in last 30 days
b = number of 30 day periods in year
c = maximum offering price per share on last
day of period
<TABLE>
<S> <C> <C> <C>
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
A B C RATE(%)
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
N/A N/A N/A N/A
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
55
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS DOCUMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SOUND SHORE FUND ANNUAL REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> SOUND SHORE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,155,553,771
<INVESTMENTS-AT-VALUE> 1,308,483,901
<RECEIVABLES> 34,542,218
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,343,026,119
<PAYABLE-FOR-SECURITIES> 25,882,249
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,457,902
<TOTAL-LIABILITIES> 29,340,151
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,163,283,737
<SHARES-COMMON-STOCK> 45,979,785
<SHARES-COMMON-PRIOR> 6,120,584
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,487
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,526,412
<ACCUM-APPREC-OR-DEPREC> 152,930,130
<NET-ASSETS> 1,313,685,968
<DIVIDEND-INCOME> 7,706,106
<INTEREST-INCOME> 3,624,078
<OTHER-INCOME> 0
<EXPENSES-NET> 7,193,713
<NET-INVESTMENT-INCOME> 4,136,471
<REALIZED-GAINS-CURRENT> 37,617,224
<APPREC-INCREASE-CURRENT> 128,043,327
<NET-CHANGE-FROM-OPS> 169,797,022
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,159,114
<DISTRIBUTIONS-OF-GAINS> 38,603,309
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,186,548,003
<NUMBER-OF-SHARES-REDEEMED> 172,384,035
<SHARES-REINVESTED> 39,625,513
<NET-CHANGE-IN-ASSETS> 1,180,824,080
<ACCUMULATED-NII-PRIOR> 3,642
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 10,670
<GROSS-ADVISORY-FEES> 5,000,341
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,308,619
<AVERAGE-NET-ASSETS> 666,712,034
<PER-SHARE-NAV-BEGIN> 21.71
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> 7.75
<PER-SHARE-DIVIDEND> .12
<PER-SHARE-DISTRIBUTIONS> .89
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 28.57
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>