As filed with the Securities and Exchange Commission on March 6, 2008
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4244
SOUND SHORE FUND, INC.
3435 Stelzer Road
Columbus, OH 43219
(800) 754-8758
T. Gibbs Kane, Jr., President
8 Sound Shore Drive
Greenwich, CT 06830
(203) 629-1980
Date of fiscal year end: December 31
Date of reporting period: January 1, 2007 - December 31, 2007
ITEM 1. REPORT TO STOCKHOLDERS.
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3435 STELZER ROAD, COLUMBUS, OH 43219 1-800-754-8758
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December 31, 2007
Dear Shareholder:
The Sound Shore Fund ended December 31, 2007 with a net asset value of
$35.68 following year-end per share distributions of $0.09577 in dividends,
$0.38487, in short-term capital gains, and $3.94957 in long-term capital gains.
In the fourth quarter of 2007, the Fund declined by 4.18% versus a decline of
3.33% for the Standard & Poor's 500 Index ("S&P 500"). This was the first year
since 1999 that the Fund has trailed the S&P 500. For the Year 2007, the Fund
posted a gain of 2.58% versus 5.49% for the S&P 500, while the S&P Equal Weight
Index gained only 1.53%.
We are required by the SEC to say that: PERFORMANCE DATA QUOTED REPRESENTS
PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN ORIGINAL COST. THE FUND'S 1, 5, 10, AND 15-YEAR
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED DECEMBER 31, 2007 WERE 2.58%,
14.18%, 7.41%, AND 11.92%, RESPECTIVELY. AS STATED IN THE CURRENT PROSPECTUS,
THE FUND'S ANNUAL OPERATING GROSS EXPENSE RATIO IS .93%. FOR THE MOST RECENT
MONTH-END PERFORMANCE, PLEASE VISIT THE FUND'S WEBSITE AT
WWW.SOUNDSHOREFUND.COM.
The S&P 500 pierced its prior 2000 high midway through 2007, but the year
ended up more noteworthy for its increased volatility. The accelerating real
estate and credit crises combined with record high commodity prices created
significant concerns about Gross Domestic Product ("GDP") and corporate profit
growth. In a year where the financial sector of the S&P 500 performed the
worst, declining 19%, we managed to avoid stepping on any of the really painful
rakes in the banking/housing arena. As well, we sold Morgan Stanley profitably
early in 2007 and Citicorp at mid-year avoiding more severe price erosion in
the 4/th/ quarter.
Insurance broker AON Corp. ("AON") was one of our best stocks last year,
gaining 35% and well outpacing its financial peers. We started our investment
in AON in early 2005 with the stock down 50% from its peak and valued at less
than 12x forward earnings. Previously settled, industry-wide regulatory issues
had raised concerns about the company's ability to regain its historical growth
rates. By contrast, our discussions with corporate insurance brokerage
customers indicated that AON had actually used the industry turmoil to
strengthen its network by adding several large producers. Since 2005, AON's
earnings power has increased by 75% as it has gained significant market share
and rationalized its business lines, including the 2007 announced sale of its
insurance subsidiary. As a result, the stock has more than doubled since our
initial purchase.
Apollo Group, the leading US education services company, was another strong
contributor for the year increasing by more than 50% in the several months
after our purchase. After an extended run as a great growth stock through the
late 1990s and early 2000s, Apollo shares showed up in our process after
declining by more than one-half and reaching a price to earnings (P/E) multiple
less than the S&P 500. Despite consensus concerns that renewed growth was
unlikely, our research concluded that management's recent
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initiatives to lower student attrition rates through dedicated "enrollment
counselors" and also to overhaul their online classrooms would yield better
than expected revenues and margins. Through late 2007, Apollo's progress was
well ahead of forecast and as the shares reached our target price we sold our
position.
Our biggest contributor for the year was Barrick Gold Corp. ("Barrick"),
the world's largest gold miner. In early 2007, Barrick's stock was down 20% due
to concerns about gold prices, which had dropped by as much as 25% from peak,
and higher operating costs. At that time its valuation was at the very bottom
of its historical P/E multiple range and less than 10x EBITDA. Our analysis
suggested that Barrick's cash margins were positioned to expand even in a flat
gold price environment due to both improved price realizations through
de-hedging and lower unit costs via upgraded ores at existing and new mines.
Management's solid execution has combined with an equally solid tailwind from
gold prices and the shares have increased.
In 2007, we were disappointed by several of our media and cable investments
which we expected would better weather any potential consumer slowdown. In
addition to Time Warner, Inc. ("Time Warner") and Interpublic Group of Cos.,
Inc. ("Interpublic Group"), this group included Comcast Corp. ("Comcast")
which, despite our purchasing it after a 22% decline, was our biggest detractor
for the year. Although revenue growth slowed in 2007, Comcast's cash flow
continued to grow and free cash flow is poised to expand in 2008 and 2009 as
the company completes its investment in triple play, video-telephony-broadband
capability. Comcast's stock is now valued at less than 7x cash flow for 2008.
Meanwhile, media giant Time Warner met its financial targets in 2007, has a $25
per share breakup value, and now has new leadership. And ad agency Interpublic
continues to win new business, has an opportunity to expand operating margins,
and generates over 40% of its revenue outside of the US. For all three, we
believe value is building, making their risk/reward profiles attractive.
As the developed world's economies continue to slow, the US Federal Reserve
and other central banks seem likely to provide substantial incremental
liquidity. It remains to be seen how extensive or effective these prospective
moves will be given fairly low real interest rates and accelerating inflation
indicators. Whether or not the market backdrop stays tumultuous and uncertain,
our focus remains on out of favor stocks with sound underlying fundamentals
which should yield good investment returns.
This year marks the 30/th/ anniversary of the formation of Sound Shore
Management, Inc., the adviser to the Sound Shore Fund. While founded in January
1978, the firm "started" in August 1978 with our first client, a $2 million
pension account. Today, this Fortune 100 pension fund remains one of our
largest accounts. In our letter to this client in 1979, we described our
inaugural year's investments as " . . . well capitalized companies with
reasonable expectations of a positive earnings stream and whose stocks were
selling far below the price earnings ratios that had been established for them
in the past. We believed these stocks had already endured a long and severe
change in investor sentiment as reflected in their low relative multiple
valuations and appeared to have discounted the uncertainty ahead." After three
decades of
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investing through a myriad of markets, we remain confident in our contrarian
value approach and steadfast in our resolve to:
. Be focused - Having one process throughout our history has kept us
fixated on researching stocks in order to make successful individual
investment decisions.
. Be independent - Sound Shore has been owned by its partners since
inception and is committed to staying so. Independence reinforces and
facilitates our ability to invest with a contrarian and long-term mindset
and stay fully aligned with our client base.
. Be neither bullish nor bearish, but skittish - As the former CEO of
Intel, Andrew Grove, said "Only the paranoid survive."
We thank you for placing your confidence and your investment alongside us
in Sound Shore.
Sincerely,
SOUND SHORE FUND
HARRY BURN, III
JOHN P. DEGULIS
T. GIBBS KANE, JR.
CO-PORTFOLIO MANAGERS
FUND RETURNS ASSUME THE REINVESTMENT OF ALL DIVIDEND AND CAPITAL GAIN
DISTRIBUTIONS. THE S&P EQUAL WEIGHT INDEX (S&P EWI) IS THE EQUAL-WEIGHT VERSION
OF THE WIDELY REGARDED S&P 500. THE INDEX HAS THE SAME CONSTITUENTS AS THE
CAPITALIZATION WEIGHTED S&P 500, BUT EACH COMPANY IN THE S&P EWI IS ALLOCATED A
FIXED WEIGHT OF .20%, REBALANCED QUARTERLY. IT IS NOT POSSIBLE TO INVEST
DIRECTLY IN AN INDEX. EBITDA REPRESENTS EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION, AND AMORTIZATION.
PRICE TO EARNINGS (P/E) RATIO IS THE VALUE OF A COMPANY'S STOCK PRICE
RELATIVE TO COMPANY EARNINGS. FREE CASH FLOW YIELD IS THE OVERALL RETURN
EVALUATION RATIO OF A STOCK, WHICH STANDARDIZES THE FREE CASH FLOW PER SHARE A
COMPANY IS EXPECTED TO EARN AGAINST ITS MARKET PRICE PER SHARE. PERCENT OF NET
ASSETS AS OF 12/31/07: AON CORP.: 2.96%; APOLLO GROUP, INC.: 0.00%; BARRICK
GOLD CORP.: 2.22%; COMCAST CORP.: 0.87%; INTERPUBLIC GROUP OF COS., INC.:
1.11%; TIME WARNER, INC.: 3.98%; AND MORGAN STANLEY: 0.00%.
THE FUND MAY INVEST IN MEDIUM-SIZED COMPANIES, WHICH INVOLVES GREATER RISK
THAN INVESTING IN LARGER, MORE ESTABLISHED COMPANIES SUCH AS INCREASED
VOLATILITY OF EARNINGS AND PROSPECTS, HIGHER FAILURE RATES, AND LIMITED
MARKETS, PRODUCT LINES OR FINANCIAL RESOURCES.
THE VIEWS IN THIS LETTER WERE THOSE OF THE FUND MANAGERS AS OF 12/31/07 AND
MAY NOT NECESSARILY REFLECT THEIR VIEWS ON THE DATE THIS LETTER IS FIRST
PUBLISHED OR ANYTIME THEREAFTER. THESE VIEWS (I) ARE INTENDED TO ASSIST
SHAREHOLDERS IN UNDERSTANDING THE FUND'S PRESENT INVESTMENT METHODOLOGY AND
(II) DO NOT CONSTITUTE INVESTMENT ADVICE. THIS LETTER MUST BE PRECEDED OR
ACCOMPANIED BY A CURRENT FUND PROSPECTUS. DISTRIBUTED BY FORESIDE FUND
SERVICES, LLC.
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The following chart reflects a ten-year comparison in the change in value
of a hypothetical $10,000 investment in Sound Shore Fund, Inc. (the "Fund")
including reinvested dividends and distributions, compared with a broad-based
securities market index. The Standard and Poor's 500 Index (the "S&P 500") is a
market-weighted index composed of 500 large capitalization companies and
reflects the reinvestment of dividends. The Fund is professionally managed,
while the S&P 500 is unmanaged and is not available for investment. The S&P 500
excludes the effect of any expenses, which have been deducted from the Fund's
return. The performance table and graph do not reflect the deduction of taxes
that a shareholder would pay on Fund distributions or the redemption of Fund
shares. During the period, certain fees were waived and/or expenses reimbursed;
otherwise, returns would have been lower. PAST PERFORMANCE CANNOT PREDICT NOR
GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE FUND'S HISTORICAL
PERFORMANCE. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE
DATA QUOTED.
SOUND SHORE FUND VS.S&P 500 INDEX
AVERAGE ANNUAL TOTAL RETURN
---------------------------
One Year Five Year Ten Year
-------- ---------- --------
Sound Shore Fund 2.58% 14.18% 7.41%
S&P 500 Index 5.49% 12.82% 5.91%
Value on 12/31/07
Sound Shore Fund:$20,432
S&P 500 Index :$17,756
[CHART]
SOUND SHORE S&P 500
FUND INDEX
----------- --------
12/31/1997 $10,000 $10,000
1/31/1998 9,962 10,111
2/28/1998 10,707 10,840
3/31/1998 11,075 11,395
4/30/1998 11,145 11,510
5/31/1998 10,686 11,312
6/30/1998 10,496 11,771
7/31/1998 10,012 11,646
8/31/1998 8,679 9,962
9/30/1998 8,977 10,600
10/31/1998 9,949 11,463
11/30/1998 10,219 12,157
12/31/1998 10,441 12,858
1/31/1999 10,243 13,396
2/28/1999 9,810 12,979
3/31/1999 10,000 13,498
4/30/1999 10,775 14,021
5/31/1999 10,793 13,690
6/30/1999 11,107 14,450
7/31/1999 10,732 13,999
8/31/1999 10,064 13,929
9/30/1999 9,735 13,548
10/31/1999 10,145 14,405
11/30/1999 10,184 14,698
12/31/1999 10,446 15,563
1/31/2000 10,027 14,781
2/29/2000 9,758 14,502
3/31/2000 10,935 15,920
4/30/2000 10,694 15,441
5/31/2000 10,662 15,124
6/30/2000 10,311 15,497
7/31/2000 10,531 15,255
8/31/2000 11,391 16,203
9/30/2000 11,632 15,347
10/31/2000 12,133 15,282
11/30/2000 11,646 14,078
12/31/2000 12,554 14,146
1/31/2001 12,028 14,648
2/28/2001 12,230 13,313
3/31/2001 12,297 12,469
4/30/2001 12,442 13,438
5/31/2001 12,833 13,528
6/30/2001 12,634 13,199
7/31/2001 12,717 13,069
8/31/2001 12,578 12,251
9/30/2001 11,727 11,262
10/31/2001 11,545 11,479
11/30/2001 12,157 12,357
12/31/2001 12,452 12,465
1/31/2002 12,122 12,283
2/28/2002 12,131 12,049
3/31/2002 12,762 12,504
4/30/2002 12,595 11,741
5/31/2002 12,717 11,655
6/30/2002 11,456 10,825
7/31/2002 10,405 9,981
8/31/2002 10,698 10,046
9/30/2002 9,582 8,955
10/31/2002 10,067 9,746
11/30/2002 10,747 10,316
12/31/2002 10,530 9,714
1/31/2003 10,196 9,456
2/28/2003 9,771 9,314
3/31/2003 9,800 9,404
4/30/2003 10,510 10,179
5/31/2003 11,624 10,721
6/30/2003 11,930 10,853
7/31/2003 12,061 11,043
8/31/2003 12,473 11,268
9/30/2003 12,265 11,139
10/31/2003 12,763 11,773
11/30/2003 13,061 11,883
12/31/2003 13,873 12,493
1/31/2004 14,262 12,732
2/29/2004 14,485 12,906
3/31/2004 14,365 12,703
4/30/2004 14,055 12,508
5/31/2004 14,204 12,691
6/30/2004 14,575 12,926
7/31/2004 14,153 12,498
8/31/2004 14,107 12,549
9/30/2004 14,588 12,684
10/31/2004 14,567 12,888
11/30/2004 15,383 13,399
12/31/2004 16,001 13,855
1/31/2005 15,464 13,518
2/28/2005 15,896 13,802
3/31/2005 15,534 13,558
4/30/2005 15,172 13,300
5/31/2005 15,669 13,724
6/30/2005 15,807 13,743
7/31/2005 16,435 14,254
8/31/2005 16,552 14,124
9/30/2005 17,089 14,239
10/31/2005 16,679 14,001
11/30/2005 17,080 14,531
12/31/2005 17,089 14,536
1/31/2006 17,351 14,921
2/28/2006 17,542 14,961
3/31/2006 17,635 15,147
4/30/2006 18,004 15,351
5/31/2006 17,593 14,909
6/30/2006 17,353 14,929
7/31/2006 17,549 15,021
8/31/2006 18,077 15,379
9/30/2006 18,568 15,775
10/31/2006 19,064 16,289
11/30/2006 19,471 16,599
12/31/2006 19,919 16,832
1/31/2007 20,158 17,086
2/28/2007 19,833 16,752
3/31/2007 19,878 16,939
4/30/2007 20,514 17,690
5/31/2007 21,388 18,307
6/30/2007 21,218 18,003
7/31/2007 20,642 17,445
8/31/2007 20,631 17,706
9/30/2007 21,325 18,368
10/31/2007 21,523 18,661
11/30/2007 20,662 17,880
12/31/2007 20,432 17,756
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SOUND SHORE FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 2007
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SHARE MARKET
AMOUNT VALUE
--------- --------------
COMMON STOCK (97.8%)
-----------------------------------------------------------
AUTO (1.3%)
Goodyear Tire & Rubber Co. + 1,296,200 $ 36,578,764
--------------
CONSUMER DISCRETIONARY (14.4%)
Comcast Corp., Class A + 1,303,100 23,794,606
Interpublic Group of Cos., Inc. + 3,724,600 30,206,506
Time Warner, Inc. 6,584,400 108,708,444
Time Warner Cable, Inc., Class A + 1,618,700 44,676,120
Walt Disney Co. 3,081,500 99,470,820
Washington Post Co., Class B 108,348 85,749,858
--------------
392,606,354
--------------
CONSUMER STAPLES (3.3%)
Kimberly-Clark Corp. 497,100 34,468,914
Unilever NV NY 1,511,800 55,120,228
--------------
89,589,142
--------------
DIVERSIFIED FINANCIALS (7.7%)
Bank of America Corp. 987,500 40,744,250
Credit Suisse Group ADR 1,176,700 70,719,670
Invesco, Ltd. 3,134,900 98,373,162
--------------
209,837,082
--------------
ENERGY (12.6%)
El Paso Corp. 5,435,700 93,711,468
Halliburton Co. 1,739,500 65,944,445
Pioneer Natural Resources Co. 1,342,900 65,587,236
Royal Dutch Shell plc ADR 570,900 48,069,780
Spectra Energy Corp. 2,788,200 71,991,324
--------------
345,304,253
--------------
HEALTH CARE (11.2%)
Baxter International, Inc. 1,368,300 79,429,815
Boston Scientific Corp. + 5,799,100 67,443,533
CIGNA Corp. 1,777,700 95,515,821
Kinetic Concepts, Inc. + 1,168,100 62,563,436
--------------
304,952,605
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SEE NOTES TO FINANCIAL STATEMENTS.
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SOUND SHORE FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 2007
================================================================================
SHARE MARKET
AMOUNT VALUE
--------- --------------
INDUSTRIALS (9.1%)
General Electric Co. 2,894,900 $ 107,313,943
Southwest Airlines Co. 5,567,400 67,922,280
Waste Management, Inc. 2,249,800 73,500,966
--------------
248,737,189
--------------
INSURANCE (8.1%)
AON Corp. 1,692,800 80,729,632
Marsh & McLennan Cos., Inc. 1,865,900 49,390,373
Unum Group 3,826,100 91,022,919
--------------
221,142,924
--------------
MATERIALS (6.1%)
Barrick Gold Corp. 1,440,300 60,564,615
Cytec Industries, Inc. 774,400 47,687,552
Newmont Mining Corp. 1,174,000 57,326,420
--------------
165,578,587
--------------
PHARMACEUTICALS (6.3%)
Barr Pharmaceuticals, Inc. + 1,716,700 91,156,770
Pfizer, Inc. 3,605,000 81,941,650
--------------
173,098,420
--------------
TECHNOLOGY (14.3%)
Flextronics International, Ltd. + 7,896,400 95,230,584
Hewlett Packard Co. 1,101,200 55,588,576
Sun Microsystems, Inc. + 2,889,700 52,390,261
Symantec Corp. + 3,188,200 51,457,548
Texas Instruments, Inc. 2,337,300 78,065,820
Western Digital Corp. + 1,899,800 57,392,958
--------------
390,125,747
--------------
UTILITIES (3.4%)
AES Corp. + 4,374,800 93,576,972
--------------
TOTAL COMMON STOCK (COST $2,386,356,038) $2,671,128,039
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SEE NOTES TO FINANCIAL STATEMENTS.
6
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SOUND SHORE FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 2007
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SHARE MARKET
AMOUNT VALUE
---------- --------------
SHORT-TERM INVESTMENTS (4.1%)
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MONEY MARKET FUND (3.6%)
Citi/SM/ Institutional Liquid Reserves, Class A, 4.90% (cost $97,088,313) 97,088,313 $ 97,088,313
--------------
PRINCIPAL
----------
MONEY MARKET DEPOSIT ACCOUNT (0.5%)
Citibank Money Market Deposit Account, 4.13% (cost $15,453,037) 15,453,037 $ 15,453,037
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $112,541,350) $ 112,541,350
--------------
TOTAL INVESTMENTS (101.9%) (COST $2,498,897,388)* $2,783,669,389
OTHER ASSETS LESS LIABILITIES (-1.9%) (52,741,565)
--------------
NET ASSETS (100.0%) (SHARES OUTSTANDING 76,543,507) $2,730,927,824
==============
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE) $ 35.68
==============
+ Non-income producing security.
ADR -- American Depository Receipt.
* Cost for Federal income tax purposes is $2,498,897,388 and net unrealized
appreciation consists of:
Gross Unrealized Appreciation $348,290,210
Gross Unrealized Depreciation (63,518,209)
------------
Net Unrealized Appreciation $284,772,001
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SOUND SHORE FUND, INC.
STATEMENT OF NET ASSETS (CONCLUDED)
DECEMBER 31, 2007
================================================================================
AT DECEMBER 31, 2007 NET ASSETS CONSISTED OF:
------------------------------------------------------------
Par Value (100,000,000 shares authorized) $ 76,544
Paid in Capital 2,446,079,279
Unrealized Appreciation on Investments 284,772,001
--------------
NET ASSETS $2,730,927,824
==============
PORTFOLIO HOLDINGS
% OF NET ASSETS
Auto 1.3%
Consumer Discretionary 14.4%
Consumer Staples 3.3%
Diversified Financials 7.7%
Energy 12.6%
Health Care 11.2%
Industrials 9.1%
Insurance 8.1%
Materials 6.1%
Pharmaceuticals 6.3%
Technology 14.3%
Utilities 3.4%
Short-Term Investments 4.1%
Other Assets less Liabilities (1.9)%
------
100.0%
======
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SEE NOTES TO FINANCIAL STATEMENTS.
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SOUND SHORE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
================================================================================
INVESTMENT INCOME
Income:
Dividends (net of foreign withholding taxes $799,304) $ 41,428,349
Interest 383,702
-------------
Total Income 41,812,051
-------------
Expenses:
Advisory fee (Note 3) 22,040,598
Administrator fee 1,069,745
Transfer Agency fee 2,938,725
Custodian fee 242,482
Accountant fee 59,718
Professional fees 141,777
Directors' fees and expenses (Note 3) 113,762
Compliance services fees (Note 3) 172,935
Miscellaneous 219,297
-------------
Total Expenses 26,999,039
-------------
Net Investment Income 14,813,012
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments sold 300,272,997
Net change in unrealized appreciation (depreciation) on investments (234,691,808)
-------------
Net realized and unrealized gain (loss) on investments 65,581,189
-------------
Net increase in net assets from operations $ 80,394,201
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SOUND SHORE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
INCREASE (DECREASE) IN NET ASSETS
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006
-------------- --------------
Operations:
Net investment income $ 14,813,012 $ 14,077,163
Net realized gain on investments sold 300,272,997 223,926,028
Net change in unrealized appreciation (depreciation) on
investments (234,691,808) 168,531,226
-------------- --------------
Increase in net assets from operations 80,394,201 406,534,417
-------------- --------------
Dividends to shareholders from net investment income (14,841,050) (14,075,600)
Dividends to shareholders from net realized gains (299,146,427) (224,129,404)
-------------- --------------
Total distributions to shareholders (313,987,477) (238,205,004)
-------------- --------------
Capital share transactions (Note 6) 88,185,609 439,772,270
-------------- --------------
Total increase (decrease) (145,407,667) 608,101,683
Net assets:
Beginning of the year 2,876,335,491 2,268,233,808
-------------- --------------
End of the year (Including line (A)) $2,730,927,824 $2,876,335,491
============== ==============
(A) Accumulated undistributed net investment income $ -- $ 12,624
============== ==============
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SEE NOTES TO FINANCIAL STATEMENTS.
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SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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1. ORGANIZATION
Sound Shore Fund, Inc. (the "Fund") was incorporated under the laws of the
State of Maryland on February 19, 1985 and is registered as a no-load,
diversified, open-end management investment company under the Investment
Company Act of 1940 (the "Act"), as amended. The investment objective of the
Fund is growth of capital.
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America ("generally
accepted accounting principles"), which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent liabilities at the date of the financial statements,
and the reported amounts of increase and decrease in net assets from operations
during the fiscal period. Actual results could differ from those estimates.
The following represent significant accounting policies of the Fund:
A) SECURITY VALUATION
Exchange traded securities (including those traded on the National
Association of Securities Dealers' Automated Quotation system) not subject
to restrictions against resale are valued at the last sale price, as
provided by independent pricing services as of the close of trading on the
market or exchange for which they are primarily traded, on each Fund
business day. In the absence of a sale, such securities are valued at the
mean of the last bid and asked price. Non-exchange traded securities for
which over-the-counter market quotations are readily available are generally
valued at the mean between the current bid and asked prices provided by
independent pricing services. Debt securities may be valued at prices
supplied by a Fund's pricing agent based on broker or dealer supplied
valuations or matrix pricing, a method of valuing securities by reference to
the value of other securities with similar characteristics, such as rating,
interest rate and maturity. Investments in other investment companies are
valued at net asset value. Money market instruments that mature in sixty
days or less are valued at amortized cost.
Securities (including restricted securities) for which market quotations are
insufficient or not readily available, or in the judgment of the Fund's
investment adviser, the prices or values available do not represent the fair
value of the instrument, are valued in good faith, pursuant to procedures
adopted by the Fund's Board of Directors (the "Board"). Fair valuation is
based on subjective factors and as a result, the fair value price of an
asset may differ from the asset's market price and may not be the price at
which the asset may be sold. Fair valuation could result in a different net
asset value ("NAV") than a NAV determined by using market quotes.
B) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Dividend income is recorded on the ex-dividend date. Interest income is
recorded on an accrual basis. Foreign dividend income is recorded on the
ex-dividend date or as soon as practical after the Fund determines the
existence of a dividend declaration after exercising reasonable due
diligence. Income and capital gains on some
- --------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
foreign securities may be subject to foreign withholding tax, which is
accrued as applicable. Security transactions are recorded on a trade date
basis. Realized gain and loss on investments sold are recorded on the basis
of identified cost.
C) DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid
semi-annually. Capital gains, if any, are distributed to shareholders at
least annually. The Fund determines its net investment income and capital
gains distributions in accordance with income tax regulations, which may
differ from generally accepted accounting principles. These differences are
due primarily to differing treatments of income and gains on various
investment securities held by the Fund, timing differences and differing
characterizations of distributions made by the Fund.
D) FEDERAL TAXES
The Fund intends to qualify each year as a regulated investment company and
distribute all of its taxable income. In addition, by distributing in each
calendar year substantially all of its net investment income, capital gain
and certain other amounts, if any, the Fund will not be subject to a federal
excise tax. Therefore, no federal income or excise tax provision is required.
NEW ACCOUNTING PRONOUNCEMENTS - In June 2006, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation No. 48 ("FIN 48"),
"ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES - an interpretation of FASB
Statement No. 109". FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in accordance with FASB Statement No. 109, "Accounting for
Income Taxes". This interpretation prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. It also
provides guidance on de-recognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. FIN 48 is effective
on the last business day of the first required financial reporting period for
fiscal years beginning after December 15, 2006. Management has concluded that
as of December 31, 2007, there are no uncertain tax positions that would
require financial statement recognition, de-recognition, or disclosure. Each of
the Fund's Federal tax returns filed in the 3-year period ended December 31,
2007 remains subject to examination by the Internal Revenue Service.
In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157 "FAIR VALUE MEASUREMENTS" ("SFAS 157"), which is effective for fiscal
years beginning after November 15, 2007 and for interim periods within those
fiscal years. SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. Management is currently evaluating
the application of SFAS 157, and has not at this time determined the impact, if
any, resulting from the adoption on the Fund's future financial statements.
- --------------------------------------------------------------------------------
12
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The Fund's investment adviser is Sound Shore Management, Inc. (the "Adviser").
Pursuant to an investment advisory agreement, the Adviser receives an advisory
fee at an annual rate of 0.75% of the Fund's average daily net assets.
Fees due to the Adviser in the amount of $1,777,114 are payable at December 31,
2007.
OTHER SERVICES
Citi Fund Services, LLC ("Citi") provides certain administration, portfolio
accounting and transfer agency services to the Fund.
Foreside Fund Services, LLC is the Fund's distributor (the "Distributor"). The
Distributor is not affiliated with the Adviser, Citi or its affiliated
companies. The Distributor receives no compensation from the Fund for its
distribution services.
Under a Compliance Services Agreement with the Fund, the Distributor provided a
Chief Compliance Officer, Treasurer and Anti-Money Laundering Officer to the
Fund as well as some additional compliance support functions ("Compliance
Services") until January 24, 2007. Since January 25, 2007, the Compliance
Services have been provided by Foreside Compliance Services, LLC ("FCS"), an
affiliate of the Distributor, pursuant to a Compliance Services Agreement
between FCS and the Fund. The Treasurer of the Fund is an affiliate of the
Distributor due to his ownership interest in the Distributor. Neither the
Distributor nor FCS has any role in determining the investment policies or
which securities are to be purchased or sold by the Fund.
Compliance Services fees due to FCS in the amount of $14,485 are payable at
December 31, 2007.
The Fund pays each director who is not an "interested person" of the Fund as
defined in Section 2(a)(19) of the Act ("Independent Director") $5,000 per
year, payable quarterly, plus $5,000 for each Board meeting attended in person
and $2,000 for each Board meeting attended by telephone.
Certain Officers and Directors of the Fund are officers, directors, or
employees of the aforementioned companies.
4. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and the proceeds from sales of securities
(excluding short-term investments) for the year ended December 31, 2007
aggregated $2,382,415,425 and $2,557,191,479, respectively. Securities
purchased in the amount of $48,862,784 are payable at December 31, 2007.
- --------------------------------------------------------------------------------
13
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
================================================================================
5. FEDERAL INCOME TAX AND INVESTMENT TRANSACTIONS
Distributions during the fiscal years ended as noted were characterized for tax
purposes as follows:
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------- -----------------
Ordinary Income $ 41,403,302 $ 34,545,453
Long-Term Capital Gain 272,584,175 203,659,551
As of December 31, 2007, the components of distributable earnings on a tax
basis were as follows:
Net Unrealized Appreciation $284,772,001
On the Statement of Net Assets, as a result of permanent book to tax
differences, certain amounts have been reclassified for the year ended
December 31, 2007. The following was the result of distributions in excess of
earnings and has no impact on the net assets of the Fund.
Accumulated Net Investment Loss $ 15,414
Undistributed Net Realized Loss 479
Paid-In-Capital (15,893)
6. CAPITAL STOCK
As of December 31, 2007, 100,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $2,446,155,823. Capital shares
redeemed in the amount of $9,693,263 are payable at December 31, 2007. Capital
shares sold in the amount of $4,787,402 are receivable by the Fund at
December 31, 2007. Transactions in capital stock were as follows:
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
Sale of shares 11,804,776 $ 474,406,610 19,715,944 $ 753,490,576
Reinvestment of dividends 8,546,609 307,497,611 5,945,394 233,674,228
Redemption of shares (17,207,498) (693,718,612) (14,181,752) (547,392,534)
----------- ------------- ----------- -------------
Net increase from capital transactions 3,143,887 $ 88,185,609 11,479,586 $ 439,772,270
=========== ============= =========== =============
Of the 76,543,507 shares outstanding as of December 31, 2007, the Employees'
Profit Sharing Plan of the Adviser owned 505,875 shares.
7. OTHER INFORMATION
On December 31, 2007, three shareholders held approximately 75% of the
outstanding shares of the Fund. These shareholders are comprised of omnibus
accounts, Charles Schwab, National Financial Services Corp., and JPMorgan Chase
Bank, which are held on behalf of numerous individual shareholders.
- --------------------------------------------------------------------------------
14
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
FINANCIAL HIGHLIGHTS
================================================================================
These financial highlights reflect selected data for a share outstanding
throughout each period.
2007 2006 2005 2004 2003
---------- ---------- ---------- ---------- ----------
Net Asset Value, Beginning of Period $ 39.19 $ 36.63 $ 36.71 $ 33.51 $ 25.81
---------- ---------- ---------- ---------- ----------
Investment Operations
Net investment income 0.20(a) 0.21(a) 0.07(a) 0.10 0.05
Net realized and unrealized gain (loss) on
investments 0.83 5.86 2.43 5.05 8.14
---------- ---------- ---------- ---------- ----------
Total from Investment Operations 1.03 6.07 2.50 5.15 8.19
---------- ---------- ---------- ---------- ----------
Distributions from
Net investment income (0.21) (0.21) (0.07) (0.10) (0.05)
Net realized gains (4.33) (3.30) (2.51) (1.85) (0.44)
---------- ---------- ---------- ---------- ----------
Total Distributions (4.54) (3.51) (2.58) (1.95) (0.49)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 35.68 $ 39.19 $ 36.63 $ 36.71 $ 33.51
========== ========== ========== ========== ==========
Total Return 2.58% 16.56% 6.81% 15.37% 31.74%
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $2,730,928 $2,876,335 $2,268,234 $1,698,232 $1,014,412
Ratios to Average Net Assets:
Expenses (net of reimbursement) 0.92% 0.92% 0.98% 0.98% 0.98%
Expenses (gross)(b) 0.92% 0.92% 0.99% 0.99% 1.00%
Net Investment Income 0.50% 0.54% 0.20% 0.33% 0.18%
Portfolio Turnover Rate 84% 66% 62% 50% 62%
(a)Calculated using the average shares outstanding for the period.
(b)Reflects expense ratio in the absence of expense waiver and reimbursement.
- --------------------------------------------------------------------------------
15
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
================================================================================
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SOUND SHORE FUND, INC.:
We have audited the accompanying statement of net assets of Sound Shore Fund,
Inc. (the "Fund") as of December 31, 2007, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Fund is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2007, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Sound
Shore Fund, Inc. as of December 31, 2007, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 25, 2008
- --------------------------------------------------------------------------------
16
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
DECEMBER 31, 2007 (UNAUDITED)
================================================================================
SHAREHOLDER EXPENSE EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees and other Fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The following example is based on $1,000 invested at the beginning of the
period and held for the entire period from July 1, 2007 through December 31,
2007.
ACTUAL EXPENSES - The first line of the table below provides information about
actual account values and actual expenses. You may use the information in this
line, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES - The second line of the table
below provides information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of other funds.
Expenses shown in the table are meant to highlight your ongoing costs only and
do not reflect any transactional costs. Therefore, the second line of the table
is useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID
JULY 1, 2007 DECEMBER 31, 2007 DURING PERIOD*
------------- ----------------- --------------
Actual Return $1,000.00 $ 962.97 $4.55
Hypothetical Return $1,000.00 $1,020.57 $4.69
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.92%,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE
NUMBER OF DAYS IN MOST RECENT FISCAL HALF-YEAR DIVIDED BY 365 TO REFLECT THE
HALF-YEAR PERIOD.
FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR
INCOME DIVIDENDS - For Federal income tax purposes, dividends from short-term
capital gains are classified as ordinary income. All net investment income
dividends were ordinary income. The Fund paid income dividends of $41,403,302
for the tax year ended December 31, 2007, of which $26,562,252 were short term
capital gain dividends. The Fund designates 74.41% of its income dividend
distributed as qualifying for the corporate dividends-
- --------------------------------------------------------------------------------
17
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
DECEMBER 31, 2007 (UNAUDITED) (CONTINUED)
================================================================================
received deduction (DRD) and 88.47% for the qualified dividend rate (QDI) as
defined in Section 1(h)(11) of the Internal Revenue Code. The Fund also
designates 1.56% of its income dividends as qualified interest income (QII) and
100.00% as qualified short-term capital gain dividends exempt from U.S. tax for
foreign shareholders (QSD).
CAPITAL GAIN DIVIDENDS - The Fund paid long-term capital gain dividends of
$272,584,175 for the tax year ended December 31, 2007.
- --------------------------------------------------------------------------------
18
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
DECEMBER 31, 2007
================================================================================
PROXY VOTING INFORMATION
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to securities held in the Fund's portfolio is
available, without charge and upon request, by calling (800) 551-1980 or by
visiting the Fund's web site at http://www.soundshorefund.com. This information
is also available from the EDGAR database on the SEC's Web site at
http://www.sec.gov.
The Fund's proxy voting record for the most recent 12-month period ended
June 30 is available, without charge and upon request, by calling
(800) 551-1980 or by visiting the Fund's web site at
http://www.soundshorefund.com. This information is also available from the
EDGAR database on the SEC's Web site at http://www.sec.gov.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q
is available on the SEC's website at http://www.sec.gov or may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
(800) SEC-0330.
DIRECTORS AND OFFICERS OF THE FUND
The following is relevant information regarding each Director and Officer of
the Fund:
OTHER
NAME, ADDRESS POSITION(S) LENGTH OF TIME PRINCIPAL OCCUPATION(S) DIRECTORSHIPS
AND AGE WITH THE FUND SERVED DURING THE PAST FIVE YEARS HELD BY DIRECTOR
- ------------- ------------------------- ---------------- ------------------------------------------- ----------------
INDEPENDENT DIRECTORS
Dr. D. Kenneth Baker Director, Audit Committee March 1987 Retired, since 1999; Consultant, Princeton
c/o Sound Shore Fund, (member); Nominating to present University, 1990 - 1998; Consultant,
Inc. Committee (Chair); University of Pennsylvania, 1992 - 1998.
3435 Stelzer Road Valuation Committee
Columbus, OH 43219 (member)
Age: 84
Harry W. Clark Director; Audit Committee January 23, 2006 Managing Partner, Stanwich Group LLC
c/o Sound Shore Fund, (member); Nominating to present (public policy consulting firm) since
Inc. Committee (member); January 2001; Managing Partner, Clark &
3435 Stelzer Road Valuation Committee Weinstock (policy and communications
Columbus, OH 43219 (member) consulting firm) July 1987 - December 2001.
Age: 58
- --------------------------------------------------------------------------------
19
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
DECEMBER 31, 2007
================================================================================
DIRECTORS AND OFFICERS OF THE FUND (CONTINUED)
NAME, ADDRESS POSITION(S) LENGTH OF TIME PRINCIPAL OCCUPATION(S)
AND AGE WITH THE FUND SERVED DURING THE PAST FIVE YEARS
- ------------- -------------------------- ---------------- --------------------------------------------
H. Williamson Director; Audit Committee January 23, 2006 Director/Portfolio Management, First
Ghriskey Jr. (Chair); Nominating to present Republic Investment Management
c/o Sound Shore Fund, Committee (member); (investment counseling firm) September
Inc. Valuation Committee 1978 to present (Director since September
3435 Stelzer Road (member) 1997).
Columbus, OH 43219
Age: 63
David Blair Kelso Director; Audit Committee January 23, 2006 Managing Partner, Kelso Advisory Services
c/o Sound Shore Fund, (member); Nominating to present (consulting firm) since October 2003;
Inc. Committee (member); Executive Vice President, Strategy &
3435 Stelzer Road Valuation Committee Finance, Aetna, Inc. (insurance firm)
Columbus, OH 43219 (member) September 2001 - September 2003); Chief
Age: 55 Financial Officer, Executive Vice President,
and Managing Director, Chubb, Inc.
(insurance firm) August 1996 - August 2001;
Director, Aspen Holdings, Inc. (insurance
firm) June 2005 to present; Director, Kelso
Risk Management (insurance brokerage)
September 1990 to present.
John J. McCloy II Director; Audit Committee April 1985 Director, Clean Diesel Technology, Inc.
c/o Sound Shore Fund, (member, previously Chair to present (environmental technology firm) since 2005;
Inc. through January 23, 2006); Director, Ashland Management (investment
3435 Stelzer Road Nominating Committee management) since 2003; Chairman,
Columbus, OH 43219 (member); SpringerRun, Inc. (marketing) since 2002;
Age: 70 Valuation Committee Director, American Council on Germany
(member) (non-profit entity) since 2002; Chairman,
Gravitas Technologies, Inc. (information
technology) since 2001; Entrepreneur, J.J.
McCloy II, Inc. (investment management)
since 1980.
INTERESTED DIRECTORS
Harry Burn, III, Chairman and Director; April 1985 Chairman and Director, Sound Shore
M.B.A. Valuation Committee to present Management, Inc. since 1978; Chartered
8 Sound Shore Drive (member) (Chairman Financial Analyst.
Greenwich, September 1992
Connecticut 06830 to present)
Age: 64
OTHER
NAME, ADDRESS DIRECTORSHIPS
AND AGE HELD BY DIRECTOR
- ------------- --------------------
H. Williamson
Ghriskey Jr.
c/o Sound Shore Fund,
Inc.
3435 Stelzer Road
Columbus, OH 43219
Age: 63
David Blair Kelso Director (Since July
c/o Sound Shore Fund, 2006) of Exl Service
Inc. Holdings, Inc.;
3435 Stelzer Road Director (Since May
Columbus, OH 43219 2006) Assurant, Inc.
Age: 55
John J. McCloy II
c/o Sound Shore Fund,
Inc.
3435 Stelzer Road
Columbus, OH 43219
Age: 70
INTERESTED DIRECTORS
Harry Burn, III,
M.B.A.
8 Sound Shore Drive
Greenwich,
Connecticut 06830
Age: 64
- --------------------------------------------------------------------------------
20
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
DECEMBER 31, 2007
================================================================================
DIRECTORS AND OFFICERS OF THE FUND (CONCLUDED)
OTHER
NAME, ADDRESS POSITION(S) LENGTH OF TIME PRINCIPAL OCCUPATION(S) DIRECTORSHIPS
AND AGE WITH THE FUND SERVED DURING THE PAST FIVE YEARS HELD BY DIRECTOR
- ------------- ------------------------ --------------- ----------------------------------------------- ----------------
T. Gibbs Kane, Jr. President and Director, April 1985 President and Director, Sound Shore
8 Sound Shore Drive Valuation Committee to present Management, Inc. since 1977; Chartered
Greenwich, (member) Financial Analyst.
Connecticut 06830
Age: 60
OFFICERS
Shanna S. Sullivan Secretary; Valuation October 1985 to Vice President, Treasurer, Secretary and
8 Sound Shore Drive Committee (Chair) present Director, Sound Shore Management, Inc.
Greenwich, since 1979.
Connecticut 06830
Age: 62
Simon D. Collier Treasurer April 2005 to President of Foreside Financial Group LLC
Two Portland Square present ("FFG"), (financial services firm), the parent
Portland, Maine 04101 of the Distributor, and holds various officer
Age: 46 positions of FFG subsidiaries, 2005 to
present; President, Foreside Services, Inc.
(staffing services firm), an affiliate of the
Distributor, 2006 to present; Chief
Operating Officer and Managing Director,
Global Fund Services, Citigroup 2003-2005;
Managing Director, Global Securities
Services for Investors, Citibank, N.A. 1999-
2003. Mr. Collier serves as an officer to other
unaffiliated mutual funds or closed-end
funds for which the Distributor or its
affiliates, act as distributor or provider of
other services.
Leslie K. Klenk Chief Compliance Officer November Director, Foreside Compliance Services, LLC
Two Portland Square 2006-present (mutual fund compliance services provider)
Portland, Maine 04101 since November 2006; Chief Compliance
Age: 43 Officer, Ironwood Series Trust (mutual
fund) since November 2006; Chief
Compliance Officer, Wintergreen Fund, Inc.
(mutual fund) since December 2006; Senior
Vice President and Counsel, Citigroup Fund
Services, LLC (mutual fund services
provider) (1998 - 2006).
(1)TERM OF SERVICE IS UNTIL HIS/HER SUCCESSOR IS ELECTED OR QUALIFIED OR UNTIL
HIS/HER EARLIER RESIGNATION OR REMOVAL.
(2)HARRY BURN, III AND T. GIBBS KANE, JR. ARE "INTERESTED PERSONS" OF THE FUND
AS DEFINED IN SECTION 2(A)(19) OF THE 1940 ACT BY VIRTUE OF THEIR POSITION
AS SHAREHOLDERS, SENIOR OFFICERS, AND DIRECTORS OF THE ADVISER. EACH IS A
PORTFOLIO MANAGER OF THE FUND.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S DIRECTORS. THE SAI IS AVAILABLE FOR FREE, BY CONTACTING THE
FUND AT (800) 551-1980.
- --------------------------------------------------------------------------------
21
[LOGO]
INVESTMENT ADVISER
Sound Shore Management, Inc.
Greenwich, Connecticut
ADMINISTRATOR
Citi Fund Services, LLC
Portland, Maine
DISTRIBUTOR
Foreside Fund Services, LLC
Portland, Maine
TRANSFER AND
DISTRIBUTION PAYING AGENT
Citi Fund Services, LLC
Columbus, Ohio
CUSTODIAN
Citibank, N.A.
New York, New York
COUNSEL
Dechert LLP
New York, New York
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Boston, Massachusetts
107-AR-1207
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus, which includes
information regarding the Fund's objectives and policies, experience of its
management, marketability of shares, and other information.
SOUND SHORE FUND, INC.
3435 Stelzer Road
Columbus, OH 43219
http://www.soundshorefund.com
ANNUAL REPORT
DECEMBER 31, 2007
LOGO
[GRAPHIC]
ITEM 2. CODE OF ETHICS
As of the end of the period covered by this report, Sound Shore Fund, Inc. has
adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to
its President and Treasurer. A copy of the code of ethics is filed as an exhibit
to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Directors (the "Board") determined that no member of the Audit
Committee is an "audit committee financial expert" as that term is defined under
applicable regulatory guidelines. The Board believed that the Audit Committee,
as a group, possesses many of the attributes of an "audit committee financial
expert."
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) The aggregate fees billed for each of the last two fiscal years (the
"Reporting Periods") for professional services rendered by the Registrant's
principal accountant for the audit of the Registrant's annual financial
statements, or services that are normally provided by the principal accountant
in connection with the statutory and regulatory filings or engagements for the
Reporting Periods, were $31,400 in 2006 and $32,750 in 2007.
(b) Audit-Related Fees - The aggregate fees billed in the Reporting Periods for
assurance and related services rendered by the principal accountant that were
reasonably related to the performance of the audit of the Registrant's financial
statements and are not reported under paragraph (a) of this Item 4 were $0 in
2006 and $0 in 2007.
(c) The aggregate fees billed in the Reporting Periods for professional services
rendered by the principal accountant to the Registrant for tax compliance, tax
advice and tax planning ("Tax Services") were $3,500 in 2006 and $4,100 in 2007.
These services consisted of review or preparation of U.S. federal, state, local
and excise tax returns.
(d) There were no other fees billed in the Reporting Periods for products and
services provided by the principal accountant to the Registrant, other than the
services reported in paragraphs (a) through (c) of this Item.
(e) Pre-Approval Requirements for Audit and Non-Audit Services. The Audit
Committee reviews and approves in advance all audit and "permissible non-audit
services" (as defined under Rule 2-01(c)(4) of Regulation S-X) for the Fund. In
addition, the Audit Committee reviews and approves in advance all "permissible
non-audit services" to be provided to Sound Shore Management, Inc., the Fund's
investment adviser ("Sound Shore Management"), the Fund's investment adviser, by
the Fund's independent auditor if the engagement relates to the operations and
financial reporting of the Fund. The Audit Committee considers whether fees paid
by Sound Shore Management for audit and permissible non-audit services are
consistent with the independent auditor's independence. Pre-approval of any
permissible non-audit services provided to the Fund is not required so long as:
(i) the aggregate amount of all such permissible non-audit services provided to
the Fund constitutes not more than 5% of the total amount of revenues paid by
the Fund to its auditor during the fiscal year in which the permissible
non-audit services are provided; (ii) the permissible non-audit services were
not recognized by the Fund at the time of the engagement to be non-audit
services; and (iii) such services are promptly brought to the attention of the
Audit Committee and approved prior to the completion of the audit by the Audit
Committee or its authorized delegate(s). Pre-approval of permissible non-audit
services rendered to Sound Shore Management is not required if such services
constitute not more than 5% of the total amount of revenues paid by the Fund and
Sound Shore Management collectively to the Fund's independent auditor during the
fiscal year in which such services are provided. The Audit Committee may
delegate to one or more of its members authority to pre-approve permissible
non-audit services to be provided to the Fund. Any pre-approval determination of
a delegate will be presented to the full Audit Committee at its next meeting.
(e) (2) No services included in (b) - (d) above were approved pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable as less than 50%.
(g) The aggregate fees billed in the Reporting Periods for Non-Audit Services by
the principal accountant to the Registrant and Sound Shore Management were
$32,500 in 2006 and $35,600 in 2007.
(h) The Registrant's Audit Committee considers the provision of any non-audit
services rendered to the investment adviser, to the extent applicable, in
evaluating the independence of the Registrant's principal accountant. Any
services provided by the principal accountant to the Registrant or to Sound
Shore Management require pre-approval were pre-approved.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Included as part of report to stockholders under Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES
(a) The registrant's President and Treasurer have concluded that the
registrant's disclosure controls and procedures (as defined in rule 30a-3(c)
under the Investment Company Act of 1940 (the "Act")) are effective, based on
their evaluation of these disclosure controls and procedures as of a date within
90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in rule 30a-3(d) under the Act) that occurred during the
registrant's second fiscal quarter of the period covered by this report that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) A copy of the Code of Ethics (Exhibit filed herewith).
(a)(2) Certifications pursuant to Rule 30a-2(a) of the Investment Company Act of
1940 as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 (Exhibit
filed herewith).
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) of the Investment Company Act of
1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 (Exhibit
filed herewith).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant SOUND SHORE FUND, INC.
By /s/ T. Gibbs Kane, Jr.
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T. Gibbs Kane, Jr., President
Date 2/25/08
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ T. Gibbs Kane, Jr.
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T. Gibbs Kane, Jr., President
Date 2/25/08
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By /s/ Simon D. Collier
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Simon D. Collier, Treasurer
Date 2/25/08
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