As filed with the Securities and Exchange Commission on March 4, 2005
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.
Two Portland Square
Portland, Maine 04101
207-879-1900
T. Gibbs Kane, Jr., President
8 Sound Shore Drive
Greenwich, CT 06836
203-629-1980
Date of fiscal year end: December 31, 2004
Date of reporting period: December 31, 2004
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
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[LOGO]
TWO PORTLAND SQUARE, PORTLAND, ME 04101 1-800-754-8758
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December 31, 2004
Dear Shareholder:
The Sound Shore Fund ended December 31, 2004 with a net asset value of
$36.71 following a required year-end distribution of $0.075 in dividends and
$1.847 in long-term capital gains. The total return gain of 9.72% for the
quarter and 15.37% for the year compared favorably with the broad market
averages such as the Standard & Poor's 500 Index ("S&P 500") which increased
9.23% and 10.88%, respectively. The Dow Jones Industrial Average ("DJIA")
advanced 7.53% in the quarter and 5.27% for the year. From the first quarter of
2000, near the peak in the major equity indices, the Fund has appreciated
46.37%, versus a decline in the S&P 500 of -12.97%.
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
COMPOUND ANNUAL TOTAL RETURN RATES FOR THE PERIODS ENDING DECEMBER 31, 2004
WERE 15.37%, 8.91%, 14.22%, AND 12.78%, RESPECTIVELY. FOR THE MOST RECENT
MONTH-END PERFORMANCE, PLEASE CALL (800) 551-1980 OR VISIT THE FUND'S WEBSITE
AT WWW.SOUNDSHOREFUND.COM.
To the surprise of many, the markets posted a strong ending to what had
been, as recently as late October, a "down" year in the major averages.
Hostilities abroad, trade and fiscal deficits, higher energy prices, rising
short-term rates, and election uncertainty seemed to share much of the blame.
However, corporations continued to perform in line or ahead of expectations,
and as the election uncertainty lifted, the markets appeared to respond.
Amazingly, the final result for the S&P 500 implied a "normal" year as the
10.9% total return was very close to the 10.4% annualized average since the
inception of this index in 1926. Perhaps equally as remarkable, rarely is the
S&P 500 very close to this long-term average. In fact, less than 20% of the
time has the S&P 500 been within 5 percentage points of the 10.4% long-term
return.
The market's macro-defying performance in 2004 seems to provide
confirmation of the merits of our company specific bottom-up investment
process. Sound Shore's investment in Federal Home Loan Corp. ("Freddie Mac")
provides a solid case study of this process put to work. Freddie Mac stumbled
significantly in early 2003 as accounting issues related to its derivatives and
income recognition first surfaced. During 2003, the company brought on a new
CEO, Richard Syron, (with whom we were familiar from his days as CEO of Thermo
Electron Corp., another Sound Shore holding) who took several significant steps
toward resolving the company's outstanding issues and improving profitability.
These steps included hiring new operating and financial management teams,
significantly upgrading the company's IT systems, and working with regulators
to resolve the company's open issues as quickly as possible.
After fits and starts in 2003, the stock of Freddie Mac emerged from its
doldrums to become one of Sound Shore's top performing holdings in 2004. We
believe Freddie Mac's current valuation
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of approximately 11 times forward four quarter earnings continues to be
attractive given the company's long-term earnings power.
Health Care was the weakest sector of the stock market in 2004, hurt by
well chronicled issues with some large pharmaceutical names. However, our
investment experience in this underperforming sector was, on balance, very
positive. Aetna, Inc., profiled in last year's year-end report, continued to
fare well and was joined by Cigna Corp., another large medical insurer. Both
advanced as improving medical cost/price trends and favorable customer
retention rates propelled rising earnings guidance as the year unfolded. In
contrast, Watson Pharmaceuticals, Inc., primarily a generic drug manufacturer,
declined for the year even though it was one of the best fourth quarter
performers after receiving a favorable debt agency rating.
Energy was the best sector for the year and we participated in its
ascendancy. However, energy stocks dampened our return for the fourth quarter
as prices for oil and natural gas retreated. Halliburton Co., El Paso Corp.,
Devon Energy Corp. ("Devon"), and ConocoPhillips all followed this script,
underperforming for the quarter but adding significantly for the year. While we
have taken profits in some energy names, believing they have discounted the
current realities, we believe company specific drivers above and beyond the
commodity price influence remain in place at Devon, and at a recent addition,
Royal Dutch Petroleum Co. ADR.
The beginning of a calendar year seems to spawn a host of fresh predictions
about matters we, and many others, have come to find as unforeseeable.
Nevertheless, the economic gurus predicted much about 2004 correctly, and
current consensus expectations for 2005 seem like "deja-vu all over again."
Pundits are again blessing modest economic growth, slowly rising cost
pressures, continued deficits, decelerating earnings growth, modestly rising
interest rates, and moderate inflation. This climate is hardly likely to whet
the appetite of index traders. However, surprises, both macro and micro, never
seem to go out of style and we expect 2005 will offer up ample opportunities.
One interesting offset to slowing earnings growth is the cash accumulation
and/or balance sheet strengthening that has been underway at most corporations.
Productivity enhancements and stringent attention to fixed and variable costs
have enabled many corporations to generate significantly higher operating
margins and more cash flow than at comparable times in an economic cycle. At
the same time, many corporations have been cautious on capital outlays
reflecting good spending habits built during the recent recession (and memories
of 9/11). Absent shocks to the consensus expectations, we expect a very active
year in returning cash to shareholders through dividend increases, share
buybacks and acquisitions. Our value oriented, stock specific approach should
reward us if we successfully identify those entities that meet or exceed
expectations and avoid more than our normal share of disappointments.
Recently, Morningstar began to assign a qualitative or fiduciary grade in
addition to the quantitative star ratings to funds under their purview. We are
very pleased that this independent
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source gave the Sound Shore Fund a top rating of A in "shareholder
friendliness". Various measures addressed were: Fees, Board Quality,
Incentives, Regulatory Issues, and Corporate Culture. On a more melancholy
note, we report with deep sorrow the passing earlier this year of one of our
founding Board Directors, Chuck Hedlund. A former executive of Exxon and
founding Chairman of Conservation International, Chuck served the Fund with
enthusiasm and sage counsel for nearly 20 years. He embodied the elements that
an A rating would connote and will be missed.
As usual, we thank you for your investment alongside us in the Fund and
encourage you to visit our website www.soundshorefund.com for performance and
portfolio updates throughout the year.
Sincerely,
SOUND SHORE FUND
HARRY BURN, III
JOHN P. DEGULIS
T. GIBBS KANE, JR.
CO-PORTFOLIO MANAGERS
THE FUND'S AVERAGE ANNUAL TOTAL RETURN ASSUMES REINVESTMENT OF ALL DIVIDEND
AND CAPITAL GAIN DISTRIBUTIONS. THE S&P 500 IS AN UNMANAGED INDEX REPRESENTING
THE AVERAGE PERFORMANCE OF 500 WIDELY HELD, PUBLICLY TRADED, LARGE
CAPITALIZATION STOCKS. THE DJIA CONSISTS OF 30 STOCKS THAT ARE CONSIDERED TO BE
MAJOR FACTORS IN THEIR INDUSTRIES AND THAT ARE WIDELY HELD BY INDIVIDUALS AND
INSTITUTIONAL INVESTORS. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX OR
AVERAGE. ESTIMATED EARNINGS GROWTH IS THE YEAR OVER YEAR GROWTH IN EARNINGS PER
SHARE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
PERCENT OF NET ASSETS AS OF 12/31/04: AETNA, INC.: 3.29%; CIGNA CORP.:
3.40%; CONOCOPHILLIPS: 1.34%; DEVON ENERGY CORP.: 1.75%; EL PASO CORP.: 3.22%;
FEDERAL HOME LOAN MORTGAGE CORP.: 4.63%; HALLIBURTON CO.: 2.44%; THERMO
ELECTRON CORP.: 2.53%; ROYAL DUTCH PETROLEUM CO. ADR: 2.40%; AND WATSON
PHARMACEUTICALS, INC.: 3.35%.
THE VIEWS IN THIS LETTER WERE THOSE OF THE FUND MANAGERS AS OF 12/31/04 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 FORUM FUND SERVICES,
LLC. (2/05) EFFECTIVE MARCH 1, 2005, FORUM FUND SERVICES, LLC WILL CHANGE ITS
NAME TO 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.
[CHART]
SOUND SHORE FUND VS. S&P 500 INDEX
AVERAGE ANNUAL TOTAL RETURN
One Year Five Year Ten Year
Sound Shore Fund 15.37% 8.91% 14.22%
S&P 500 Index 10.88% (2.30)% 12.07%
Value on 12/31/04
Sound Shore Fund: $37,787
S&P 500 Index: $31,242
Date Sound Shore Fund S&P 500 Index
12/31/1994 $10,000 $10,000
1/31/1995 10,181 10,259
2/28/1995 10,569 10,659
3/31/1995 10,789 10,973
4/30/1995 10,873 11,295
5/31/1995 11,423 11,746
6/30/1995 11,740 12,019
7/31/1995 11,974 12,417
8/31/1995 12,118 12,448
9/30/1995 12,352 12,973
10/31/1995 12,163 12,927
11/30/1995 12,736 13,494
12/31/1995 12,987 13,754
1/31/1996 13,188 14,221
2/29/1996 13,445 14,353
3/31/1996 13,788 14,492
4/30/1996 14,332 14,705
5/31/1996 15,004 15,084
6/30/1996 14,797 15,141
7/31/1996 14,223 14,473
8/31/1996 14,747 14,778
9/30/1996 15,500 15,609
10/31/1996 15,908 16,040
11/30/1996 17,243 17,251
12/31/1996 17,308 16,909
1/31/1997 18,161 17,965
2/28/1997 18,353 18,106
3/31/1997 17,675 17,364
4/30/1997 18,401 18,399
5/31/1997 19,612 19,519
6/30/1997 20,537 20,393
7/31/1997 22,391 22,015
8/31/1997 22,303 20,783
9/30/1997 23,854 21,920
10/31/1997 22,847 21,189
11/30/1997 23,047 22,169
12/31/1997 23,609 22,549
1/31/1998 23,518 22,798
2/28/1998 25,278 24,442
3/31/1998 26,146 25,693
4/30/1998 26,311 25,951
5/31/1998 25,229 25,505
6/30/1998 24,780 26,541
7/31/1998 23,637 26,259
8/31/1998 20,490 22,466
9/30/1998 21,194 23,905
10/31/1998 23,488 25,848
11/30/1998 24,126 27,414
12/31/1998 24,649 28,993
1/31/1999 24,183 30,205
2/28/1999 23,159 29,267
3/31/1999 23,609 30,437
4/30/1999 25,440 31,616
5/31/1999 25,481 30,870
6/30/1999 26,222 32,582
7/31/1999 25,337 31,566
8/31/1999 23,760 31,410
9/30/1999 22,984 30,550
10/31/1999 23,952 32,482
11/30/1999 24,044 33,142
12/31/1999 24,661 35,093
1/31/2000 23,674 33,330
2/29/2000 23,038 32,700
3/31/2000 25,816 35,897
4/30/2000 25,247 34,817
5/31/2000 25,172 34,102
6/30/2000 24,343 34,943
7/31/2000 24,863 34,397
8/31/2000 26,892 36,533
9/30/2000 27,463 34,605
10/31/2000 28,645 34,458
11/30/2000 27,496 31,743
12/31/2000 29,638 31,899
1/31/2001 28,398 33,030
2/28/2001 28,873 30,020
3/31/2001 29,031 28,119
4/30/2001 29,374 30,303
5/31/2001 30,298 30,506
6/30/2001 29,829 29,764
7/31/2001 30,023 29,471
8/31/2001 29,697 27,628
9/30/2001 27,687 25,397
10/31/2001 27,256 25,882
11/30/2001 28,701 27,866
12/31/2001 29,399 28,111
1/31/2002 28,620 27,701
2/28/2002 28,639 27,166
3/31/2002 30,129 28,188
4/30/2002 29,735 26,480
5/31/2002 30,024 26,286
6/30/2002 27,046 24,414
7/31/2002 24,565 22,511
8/31/2002 25,257 22,659
9/30/2002 22,622 20,198
10/31/2002 23,766 21,975
11/30/2002 25,373 23,267
12/31/2002 24,861 21,900
1/31/2003 24,071 21,328
2/28/2003 23,070 21,007
3/31/2003 23,137 21,211
4/30/2003 24,813 22,957
5/31/2003 27,443 24,165
6/30/2003 28,165 24,474
7/31/2003 28,474 24,906
8/31/2003 29,447 25,391
9/30/2003 28,956 25,122
10/31/2003 30,132 26,542
11/30/2003 30,835 26,776
12/31/2003 32,752 28,179
1/31/2004 33,671 28,696
2/29/2004 34,199 29,095
3/31/2004 33,915 28,656
4/30/2004 33,182 28,206
5/31/2004 33,534 28,593
6/30/2004 34,411 29,149
7/31/2004 33,413 28,183
8/31/2004 33,306 28,296
9/30/2004 34,440 28,602
10/31/2004 34,391 29,039
11/30/2004 36,318 30,214
12/31/2004 37,787 31,242
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SOUND SHORE FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 2004
================================================================================
SHARE MARKET
AMOUNT VALUE
----------- ---------------
COMMON STOCK (96.2%)
------------------------------------------------------------------
BANKS (6.1%)
Comerica, Inc. 790,500 $ 48,236,310
U.S. Bancorp 1,762,500 55,201,500
---------------
103,437,810
---------------
CONSUMER DISCRETIONARY (18.7%)
Dana Corp. 959,500 16,628,135
DIRECTV Group, Inc. + 1,939,500 32,467,230
Honda Motor Co., Ltd. ADR 1,293,600 33,711,216
Interpublic Group of Cos., Inc. + 4,141,000 55,489,400
Liberty Media Corp., Class A + 6,489,000 71,249,220
McDonald's Corp. 1,543,000 49,468,580
Time Warner, Inc. + 3,052,000 59,330,880
---------------
318,344,661
---------------
ENERGY (11.2%)
ConocoPhillips 262,500 22,792,875
Devon Energy Corp. 763,000 29,695,960
El Paso Corp. 5,253,500 54,636,400
Halliburton Co. 1,057,500 41,496,300
Royal Dutch Petroleum Co. ADR 710,000 40,739,800
---------------
189,361,335
---------------
HEALTH CARE (15.5%)
Aetna, Inc. 447,500 55,825,625
Baxter International, Inc. 1,533,500 52,967,090
Cigna Corp. 707,000 57,669,990
Laboratory Corp. of America Holdings + 1,068,500 53,232,670
Thermo Electron Corp. + 1,424,500 43,005,655
---------------
262,701,030
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SEE NOTES TO FINANCIAL STATEMENTS.
5
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SOUND SHORE FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 2004
================================================================================
SHARE MARKET
AMOUNT VALUE
----------- ---------------
INDUSTRIALS (12.9%)
CSX Corp. 717,000 $ 28,737,360
L-3 Communications Holdings, Inc. 323,500 23,693,140
SPX Corp. 1,217,500 48,773,050
Tyco International Ltd. 1,691,000 60,436,340
Waste Management, Inc. 1,935,500 57,948,870
---------------
219,588,760
---------------
INSURANCE (11.5%)
AMBAC Financial Group, Inc. 597,500 49,072,675
Berkshire Hathaway, Inc., Class A + 803 70,583,700
Chubb Corp. 698,500 53,714,650
UnumProvident Corp. 1,253,000 22,478,820
---------------
195,849,845
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MATERIALS (3.2%)
Georgia-Pacific Corp. 1,442,500 54,064,900
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MORTGAGE (4.6%)
Federal Home Loan Mortgage Corp. 1,067,500 78,674,750
---------------
PHARMACEUTICALS (3.4%)
Watson Pharmaceuticals, Inc. + 1,735,500 56,941,755
---------------
TECHNOLOGY (6.3%)
Agilent Technologies, Inc. + 1,740,000 41,934,000
Computer Associates International, Inc. 518 16,089
Hewlett Packard Co. 1,424,500 29,871,765
Texas Instruments, Inc. 1,417,500 34,898,850
---------------
106,720,704
---------------
TELECOMMUNICATIONS (2.8%)
CenturyTel, Inc. 1,347,000 47,778,090
---------------
TOTAL COMMON STOCK (COST $1,273,773,472) $ 1,633,463,640
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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, 2004
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SHARE MARKET
AMOUNT VALUE
----------- ---------------
MONEY MARKET FUND (4.9%)
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Citi/SM/ Institutional Liquid Reserves, Class A (cost $83,232,265) 83,232,265 $ 83,232,265
---------------
TOTAL INVESTMENTS (101.1%) (COST $1,357,005,737)* $ 1,716,695,905
OTHER ASSETS LESS LIABILITIES (-1.1%) (18,463,957)
---------------
NET ASSETS (100.0%) (46,265,173 SHARES OUTSTANDING) $ 1,698,231,948
===============
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE) $ 36.71
===============
+ Non-income producing security.
ADR -- American Depository Receipt.
* Cost for Federal income tax purposes is $1,357,915,143 and net unrealized
appreciation consists of:
Gross Unrealized Appreciation $359,840,094
Gross Unrealized Depreciation (1,059,332)
------------
Net Unrealized Appreciation $358,780,762
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SEE NOTES TO FINANCIAL STATEMENTS.
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SOUND SHORE FUND, INC.
STATEMENT OF NET ASSETS (CONCLUDED)
DECEMBER 31, 2004
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AT DECEMBER 31, 2004 NET ASSETS CONSISTED OF:
-----------------------------------------------------------------
Par Value (100,000,000 shares authorized) $ 46,265
Paid in Capital 1,339,403,873
Accumulated Undistributed Net Investment Income 1,048
Unrealized Appreciation on Investments 359,690,168
Accumulated Net Realized Loss from Investments (909,406)
--------------
NET ASSETS $1,698,231,948
==============
PORTFOLIO HOLDINGS
% OF NET ASSETS
Banks 6.1%
Consumer Discretionary 18.7%
Energy 11.2%
Health Care 15.5%
Industrials 12.9%
Insurance 11.5%
Materials 3.2%
Mortgage 4.6%
Pharmaceuticals 3.4%
Technology 6.3%
Telecommunications 2.8%
Money Market Fund 4.9%
Other Assets less Liabilities (1.1)%
------
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, 2004
================================================================================
INVESTMENT INCOME
Income:
Dividends (net of foreign withholding taxes $89,032) $ 16,802,459
Interest 338
------------
Total Income 16,802,797
------------
Expenses:
Adviser fee (Note 3) 9,571,360
Administrator fee (Note 3) 1,264,911
Transfer Agency fee 1,276,163
Custodian fee 143,011
Accountant fee 59,547
Professional fees 112,801
Directors' fees and expenses (Note 3) 33,650
Miscellaneous 164,267
------------
Total Expenses 12,625,710
Fees waived (Note 3) (75,658)
------------
Net Expenses 12,550,052
------------
Net Investment Income 4,252,745
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments sold 82,959,662
Net change in unrealized appreciation (depreciation) on investments 117,631,508
------------
Net realized and unrealized gain on investments 200,591,170
------------
Net increase in net assets from operations $204,843,915
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SEE NOTES TO FINANCIAL STATEMENTS.
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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,
2004 2003
-------------- --------------
Operations:
Net investment income $ 4,252,745 $ 1,462,030
Net realized gain on investments sold 82,959,662 19,612,501
Net change in unrealized appreciation (depreciation) on
investments 117,631,508 216,250,966
-------------- --------------
Increase in net assets from operations 204,843,915 237,325,497
Distributions to shareholders from:
Net investment income (4,251,686) (1,485,534)
Net realized gains (81,293,529) (13,164,975)
Capital share transactions (Note 6) 564,521,230 32,063,487
-------------- --------------
Total increase 683,819,930 254,738,475
Net assets:
Beginning of the year 1,014,412,018 759,673,543
-------------- --------------
End of the year (Including line (A)) $1,698,231,948 $1,014,412,018
============== ==============
(A) Accumulated undistributed net investment income $ 1,048 $ --
-------------- --------------
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SEE NOTES TO FINANCIAL STATEMENTS.
10
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SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
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, which require
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and 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 for which market quotations are readily available
are valued using the last reported sales price provided by independent
pricing services as of the close of trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern time), 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 quotations
are available are generally valued at the mean between the closing bid and
asked prices. Money market instruments that mature in 60 days or less may be
valued at amortized cost, which approximates market value, unless the Fund's
investment adviser believes another valuation is more appropriate.
Investments in other open-ended regulated investment companies are valued at
net asset value.
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.
B) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Dividend income is recorded on the ex-dividend date. Interest income is
recorded on an accrual basis. 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 accounting principles generally accepted in the United States of
America. These differences are due primarily to differing
- --------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
treatments of income and gain 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
under Supchapter M of the Internal Revenue Code 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.
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 $1,047,054 are payable at December 31,
2004.
OTHER SERVICES
Forum Administrative Services, LLC (the "Administrator") and its affiliates
provide certain administration, portfolio accounting and transfer agency
services to the Fund.
The Administrator has agreed contractually to waive a portion of its fee and
reimburse certain expenses so that total annual operating expenses do not
exceed 0.98% of the Fund's average daily net assets through April 30, 2005. The
Administrator contractually waived fees of $75,658 for the period January 1,
2004 through December 31, 2004.
Forum Fund Services, LLC is the Fund's distributor (the "Distributor"). The
Distributor is not affiliated with the Adviser, the Administrator, or their
affiliates. The Distributor receives no compensation from the Fund for its
distribution services. Effective March 1, 2005, the Distributor will change its
name to Foreside Fund Services, LLC.
The Fund pays each Director who is unaffiliated with the Adviser, the
Administrator or any of their affiliates, $1,000 per meeting attended, plus
$750 per quarter.
Certain Officers and Directors of the Fund are Officers, Directors, or
employees of the aforementioned companies. No Officer, except for the Chief
Compliance Officer, is compensated for serving in these capacities. The Chief
Compliance Officer receives compensation from the Fund for providing compliance
services.
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, 2004,
aggregated $1,077,461,146 and $603,923,728 respectively.
- --------------------------------------------------------------------------------
12
- --------------------------------------------------------------------------------
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, 2004 DECEMBER 31, 2003
----------------- -----------------
Ordinary Income $ 4,251,686 $9,345,461
Long-Term Capital Gain 81,293,529 5,305,048
As of December 31, 2004, the components of distributable earnings on a tax
basis were as follows:
Undistributed Ordinary Income $ 1,048
Unrealized Gain 358,780,762
The difference between components of distributable earnings on a tax basis and
the amounts reflected in the Statements of Net Assets are primarily due to wash
sale timing differences.
RECLASSIFICATION OF CAPITAL ACCOUNTS
On the Statement of Net Assets, as a result of distribution reclassifications,
certain amounts for the year ended December 31, 2004, have been reclassified.
The following reclassification has no impact on the net assets of the Fund.
Paid-in-Capital $110
Accumulated Net Investment Income (11)
Undistributed Net Realized Loss (99)
6. CAPITAL STOCK
As of December 31, 2004, 100,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $1,339,450,138. Transactions in
capital stock were as follows:
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
Sale of shares 18,634,585 $ 652,994,174 11,941,447 $ 331,929,160
Reinvestment of dividends 2,281,067 83,710,748 429,480 14,318,176
Redemption of shares (4,923,307) (172,183,692) (11,534,598) (314,183,849)
---------- ------------- ----------- -------------
Net increase from capital transactions 15,992,345 $ 564,521,230 836,329 $ 32,063,487
========== ============= =========== =============
Of the 46,265,173 shares outstanding as of December 31, 2004, the Employees'
Profit Sharing Plan of the Adviser owned 362,801 shares.
- --------------------------------------------------------------------------------
13
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
FINANCIAL HIGHLIGHTS
================================================================================
These financial highlights reflect selected data for a share outstanding
throughout each period.
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- -------- ---------- ----------
Net Asset Value,
Beginning of Period $ 33.51 $ 25.81 $ 30.58 $ 33.70 $ 29.47
---------- ---------- -------- ---------- ----------
Investment Operations
Net investment income 0.10 0.05 0.05 0.10 0.14
Net realized and unrealized gain (loss) on
investments 5.05 8.14 (4.77) (0.36) 5.79
---------- ---------- -------- ---------- ----------
Total from Investment Operations 5.15 8.19 (4.72) (0.26) 5.93
---------- ---------- -------- ---------- ----------
Distributions from:
Net investment income (0.10) (0.05) (0.05) (0.10) (0.14)
In excess of net investment income -- -- -- -- --(a)
Net realized gains (1.85) (0.44) -- (2.76) (1.47)
In excess of net realized gains -- -- -- -- (0.09)(b)
---------- ---------- -------- ---------- ----------
Total Distributions (1.95) (0.49) (0.05) (2.86) (1.70)
---------- ---------- -------- ---------- ----------
Net Asset Value,
End of Period $ 36.71 $ 33.51 $ 25.81 $ 30.58 $ 33.70
========== ========== ======== ========== ==========
Total Return 15.37% 31.74% (15.43)% (0.81)% 20.18%
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $1,698,150 $1,014,412 $759,674 $1,033,658 $1,101,888
Ratios to Average Net Assets:
Expenses (net of reimbursement) 0.98% 0.98% 0.98% 0.98% 0.98%
Expenses (gross)(c) 0.99% 1.00% 0.99% 0.99% 0.99%
Net Investment Income 0.33% 0.18% 0.17% 0.32% 0.44%
Portfolio Turnover Rate 50% 62% 72% 104% 98%
(a)Distributions in excess of net investment income are less than $0.01 per
share.
(b)Distributions in excess of realized gains are the result of timing issues.
(c)Reflects expense ratio in the absence of expense waiver and reimbursement.
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
14
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
================================================================================
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS 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, 2004, 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. An audit includes 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, 2004, 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, 2004, 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 23, 2005
- --------------------------------------------------------------------------------
15
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
DECEMBER 31, 2004 (UNAUDITED)
================================================================================
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 12-month period ended June 30, 2004 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
Effective June 30, 2004, 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, without charge, 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.
SHAREHOLDER EXPENSES EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) 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, 2004 through December 31,
2004.
ACTUAL EXPENSES - The "Actual Return" row in 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 "Expenses Paid During Period" column
to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES - The "Hypothetical Return" row in
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
- --------------------------------------------------------------------------------
16
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
DECEMBER 31, 2004 (UNAUDITED) (CONTINUED)
================================================================================
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 "Hypothetical Return"
row in 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 ANNUAL
JULY 1, 2004 DECEMBER 31, 2004 DURING PERIOD/(1)/ EXPENSE RATIO
------------- ----------------- ----------------- -------------
Actual Return $1,000.00 $1,098.11 $5.17 0.98%
Hypothetical Return $1,000.00 $1,020.21 $4.98 0.98%
(1)EQUALS THE FUND'S ANNUALIZED EXPENSE RATIO, MULTIPLIED BY THE AVERAGE
ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS IN MOST
RECENT FISCAL HALF-YEAR, DIVIDED BY 366 TO REFLECT THE HALF-YEAR PERIOD.
FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR
INCOME DIVIDENDS - The Fund paid income dividends of $4,251,686 for the tax
year ended December 31, 2004. The Fund designates 100.00% of its income
dividend distributed as qualifying for the corporate dividends-received
deduction (DRD) and 100.00% for the qualified dividend rate (QDI) as defined in
Section 1(h)(11) of the Internal Revenue Code.
CAPITAL GAIN DIVIDENDS - The Fund paid long-term capital gain dividends of
$81,293,529 for the tax year ended December 31, 2004.
DIRECTORS AND OFFICERS OF THE FUND
The following is relevant information regarding each Director and Officer of
the Fund:
NAME, ADDRESS POSITION(S) LENGTH OF TIME PRINCIPAL OCCUPATION(S)
AND DATE OF BIRTH WITH THE FUND SERVED/(1)/ DURING THE PAST FIVE YEARS
- ----------------- --------------- -------------- ---------------------------------
INDEPENDENT DIRECTORS
Dr. D. Kenneth Baker Director, Audit March 1987 Consultant, Princeton University,
3088 Fairway Woods Committee to present 1990 - 1998
Carolina Trace (member), Consultant, University of
Sanford, North Carolina 27330 Nominating Pennsylvania, 1992 - 1998
Born: October 1923 Committee
(Chairman)
- --------------------------------------------------------------------------------
17
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
DECEMBER 31, 2004 (UNAUDITED) (CONTINUED)
================================================================================
DIRECTORS AND OFFICERS OF THE FUND (CONTINUED)
NAME, ADDRESS POSITION(S) LENGTH OF TIME PRINCIPAL OCCUPATION(S)
AND DATE OF BIRTH WITH THE FUND SERVED/(1)/ DURING THE PAST FIVE YEARS
- ----------------- --------------- -------------- ---------------------------------------
John L. Lesher Director, Audit April 1985 Consultant, Jack Lesher & Associates
402 West Lyon Farm Drive Committee to present
Greenwich, Connecticut 06831 (Chairman),
Born: February 1934 Nominating
Committee
(member)
John J. McCloy II Director, Audit April 1985 Director, Noise Cancellation
313 Stanwich Road and Nominating to present Technologies, Inc.
Greenwich, Connecticut 06830 Committees Director, Passenger Express
Born: November 1937 (member) Director, EPT Technologies
Director, Geo History
Trustee, American University in Cairo
INTERESTED DIRECTORS
Harry Burn, III, M.B.A./(2)/ Chairman and April 1985 Chairman and Director, Sound Shore
8 Sound Shore Drive Director, to present Management, Inc. since 1978.
Greenwich, Connecticut 06836 Valuation (Chairman He is a Chartered Financial Analyst.
Born: January 1944 Committee September 1992
(member) to present)
T. Gibbs Kane, Jr./(3)/ President and April 1985 President and Director, Sound Shore
8 Sound Shore Drive Director, to present Management, Inc. since 1977. He is a
Greenwich, Connecticut 06836 Valuation Chartered Financial Analyst
Born: May 1947 Committee
(member)
OFFICERS
John Y. Keffer/(4)/ Vice President June 1993 President, Citigroup Global
Two Portland Square to present Transaction Services, Fund Services,
Portland, Maine 04101 ("Citigroup") (a fund services company)
Born: July 1942 since 2003
President, Forum Financial Group, LLC
("Forum") (a fund services company
acquired by Citigroup in 2003)
- --------------------------------------------------------------------------------
18
- --------------------------------------------------------------------------------
SOUND SHORE FUND, INC.
DECEMBER 31, 2004 (UNAUDITED) (CONCLUDED)
================================================================================
DIRECTORS AND OFFICERS OF THE FUND (CONCLUDED)
NAME, ADDRESS POSITION(S) LENGTH OF TIME PRINCIPAL OCCUPATION(S)
AND DATE OF BIRTH WITH THE FUND SERVED/(1)/ DURING THE PAST FIVE YEARS
- ----------------- ------------- -------------- -----------------------------------------
Stacey E. Hong Treasurer June 2002 Director, Fund Accounting, Citigroup
Two Portland Square to present since 2003
Portland, ME 04101 Director, Forum Accounting Services,
Born: May 1966 LLC (fund accountant acquired by
Citigroup in 2003) 1992 - 2003
Shanna S. Sullivan Secretary, October 1985 Vice President, Treasurer, Secretary and
8 Sound Shore Drive Valuation to present Director, Sound Shore
Greenwich, Connecticut 06836 Committee Management, Inc. since 1979
Born: August 1945 (Chairman)
Cheryl O. Tumlin Chief October 2004 Counsel, Investment Company Services,
Two Portland Square Compliance to present Forum Fund Services, LLC (a mutual fund
Portland, ME 04101 Officer distributor and compliance services
Born: June 1966 provider) Counsel, Citigroup since 2003
Counsel, Forum 2001 - 2003
and 1996 - 1999
Counsel, I-many, Inc. (a software
development company) 1999 - 2001
Ellen S. Smoller Assistant October 1985 Equity Trader, Sound Shore
8 Sound Shore Drive Secretary to present Management, Inc. since 1984
Greenwich, Connecticut 06836
Born: April 1959
Sara M. Morris Assistant January 2004 Director and Relationship Manager,
Two Portland Square Secretary to present Citigroup since 2004
Portland, ME 04101 Chief Financial Officer,
Born: September 1963 The VIA Group, LLC, 1999 - 2003
Chief Financial Officer, Forum,
1994 - 1999
Frederick Skillin Assistant June 2004 Senior Vice President, Financial Control,
Two Portland Square Treasurer to present Citigroup since 2003
Portland, ME 04101 Senior Manager, Corporate Finance,
Born: May 1958 Forum, 1994 - 2004
(1)TERM OF SERVICE IS INDEFINITE.
(2)MR. BURN OWNS A CONTROLLING INTEREST IN THE ADVISER FOR WHICH HE SERVES AS
CHAIRMAN AND DIRECTOR. HE IS ONE OF THE PORTFOLIO MANAGERS OF THE FUND.
(3)MR. KANE OWNS A CONTROLLING INTEREST IN THE ADVISER FOR WHICH HE SERVES AS
PRESIDENT AND DIRECTOR. HE IS ONE OF THE PORTFOLIO MANAGERS OF THE FUND.
(4)EFFECTIVE JANUARY 27, 2005, JOHN Y. KEFFER RESIGNED AS VICE PRESIDENT.
EACH DIRECTOR OVERSEES THE FUND, WHICH IS THE ONLY PORTFOLIO WITHIN THE
COMPLEX. ALL DIRECTORSHIPS OR TRUSTEESHIPS HELD BY THE DIRECTORS ARE LISTED IN
THE PRINCIPAL OCCUPATIONS COLUMN. 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.
- --------------------------------------------------------------------------------
19
[LOGO]
INVESTMENT ADVISER
Sound Shore Management, Inc.
Greenwich, Connecticut
ADMINISTRATOR
Forum Administrative Services, LLC
Portland, Maine
DISTRIBUTOR
Forum Fund Services, LLC
(Effective March 1, 2005 Foreside Fund Services, LLC)
Portland, Maine
TRANSFER AND
DISTRIBUTION PAYING AGENT
Forum Shareholder Services, LLC
Portland, Maine
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
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.
Two Portland Square
Portland, ME 04101
http://www.soundshorefund.com
ANNUAL REPORT
DECEMBER 31, 2004
[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 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 $24,000 in 2003 and $25,500 in 2004.
(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 $1,500
in 2003 and $1,500 in 2004. These services consisted of out-of-pocket expenses.
(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 $3,200 in 2003 and $3,500 in 2004.
These services consisted of review or preparation of U.S. federal, state, local
and excise tax returns.
(d) The aggregate 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, were $1,500 in 2003 and
$1,500 in 2004. These services consisted of a review of fee analyses prepared in
connection with the Registrant's annual advisory contract renewal.
(e) (1) The Audit Committee of the Board of Directors of the Registrant reviews
and approves in advance any audit engagement, and all proposals by management of
the Registrant or the investment adviser to the Registrant that the Registrant,
the investment adviser, or their affiliated persons employ the independent
auditor to render "permissible non-audit services" (as defined in the Fund's
Audit Committee Charter ("Charter") consistent with Rule 2-01(c)(4) of
Regulation S-X) to the Registrant and to consider whether such services are
consistent with the independent auditor's independence. The Charter also
provides that pre-approval by the Audit Committee of any permissible non-audit
services is not required so long as: (i) the aggregate amount of all such
permissible non-audit services provided to the Registrant constitutes not more
than 5% of the total amount of revenues paid by the Registrant 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 Registrant 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). 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
Registrant. Any pre-approval determination of a delegate will be presented to
the full Audit Committee at its next meeting. The Audit Committee will
communicate any pre-approval made by it or a delegate to the Registrant's
investment adviser, who will ensure that the appropriate disclosure is made in
the Registrant's periodic reports required by Section 13(a) of the Securities
Exchange Act of 1934, as amended, and other documents as required under the
federal securities laws.
(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 investment adviser, other than
the services reported in paragraphs (b) and (c) of this Item 4, were $1,500 in
2003 and $1,500 in 2004.
(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 the
investment adviser that require pre-approval were pre-approved.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not Applicable.
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 required by Rule
30a-3(b) 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 last fiscal half year 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 Section 302 of the Sarbanes-Oxley Act of 2002
(Exhibit filed herewith).
(a)(3) Not applicable.
(b) Certifications pursuant to 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.
---------------------------
T. Gibbs Kane, Jr., President
Date 2/24/05
---------------------------
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.
-----------------------------------
T. Gibbs Kane, Jr., President
Date 2/24/05
-----------------------------------
By /s/ Stacey E. Hong
-----------------------------------
Stacey E. Hong, Treasurer
Date 2/24/05
-----------------------------------