|
|
|
|
|
ASSETS
|
|
|
|
|
Investments, at value (Cost $1,356,854,977)
|
|
$
|
1,786,374,675
|
|
Receivables:
|
|
|
|
|
Investments sold
|
|
|
13,705,274
|
|
Capital shares sold
|
|
|
980,249
|
|
Dividends
|
|
|
1,842,766
|
|
Prepaid expenses
|
|
|
42,779
|
|
|
|
|
|
|
Total Assets
|
|
|
1,802,945,743
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Payables:
|
|
|
|
|
Investments purchased
|
|
|
35,526,706
|
|
Capital shares redeemed
|
|
|
893,552
|
|
Accrued liabilities:
|
|
|
|
|
Advisory fees
|
|
|
1,079,530
|
|
Administrator fees
|
|
|
48,622
|
|
Transfer agent fees and expenses
|
|
|
195,448
|
|
Custodian fees
|
|
|
13,415
|
|
Compliance and Treasurer Services fees
|
|
|
10,534
|
|
Professional fees
|
|
|
24,673
|
|
Other
|
|
|
89,387
|
|
|
|
|
|
|
Total Liabilities
|
|
|
37,881,867
|
|
|
|
|
|
|
Net Assets
|
|
$
|
1,765,063,876
|
|
|
|
|
|
|
|
|
COMPONENTS OF NET ASSETS
|
|
|
|
|
Par Value (200,000,000, $0.001 par value shares authorized)
|
|
$
|
42,763
|
|
Paid-in capital
|
|
|
1,425,912,230
|
|
Accumulated undistributed net investment income
|
|
|
955,938
|
|
Accumulated net realized loss on investments
|
|
|
(91,366,753
|
)
|
Net unrealized appreciation on investments
|
|
|
429,519,698
|
|
|
|
|
|
|
Net Assets
|
|
$
|
1,765,063,876
|
|
|
|
|
|
|
|
|
NET ASSET VALUE
|
|
|
|
|
Net Assets
|
|
$
|
1,765,063,876
|
|
Shares Outstanding
|
|
|
42,762,930
|
|
|
|
|
|
|
Net Asset Value (offering price & redemption price per share)
|
|
$
|
41.28
|
|
|
|
|
|
|
See Notes to Financial Statements.
8
SOUND SHORE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)
|
|
|
|
|
INVESTMENT INCOME
|
|
|
|
|
Income:
|
|
|
|
|
Dividends
|
|
$
|
15,802,267
|
|
|
|
|
|
|
Total Income
|
|
|
15,802,267
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
Advisory fees (Note 3)
|
|
|
6,083,927
|
|
Administrator fees
|
|
|
262,235
|
|
Transfer agent fees and expenses
|
|
|
867,932
|
|
Custodian fees
|
|
|
76,217
|
|
Compliance and Treasurer Services fees (Note 3)
|
|
|
72,531
|
|
Directors fees and expenses (Note 3)
|
|
|
33,022
|
|
Professional fees
|
|
|
95,431
|
|
Insurance fees
|
|
|
41,740
|
|
Registration fees
|
|
|
27,091
|
|
Printing fees
|
|
|
45,289
|
|
Miscellaneous
|
|
|
22,474
|
|
|
|
|
|
|
Total Expenses
|
|
|
7,627,889
|
|
|
|
|
|
|
Net Investment Income
|
|
|
8,174,378
|
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
|
|
|
|
|
Net realized gain on investments sold
|
|
|
73,279,126
|
|
Net change in unrealized appreciation/(depreciation) on investments
|
|
|
191,077,287
|
|
|
|
|
|
|
Net realized and unrealized gain on investments
|
|
|
264,356,413
|
|
|
|
|
|
|
Net increase in net assets from operations
|
|
$
|
272,530,791
|
|
|
|
|
|
|
See Notes to Financial Statements.
9
SOUND SHORE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
For the
Six Months Ended
June 30,
2013
(Unaudited)
|
|
|
For the
Year Ended
December 31,
2012
|
|
Operations:
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
8,174,378
|
|
|
$
|
13,899,858
|
|
Net realized gain on investments sold
|
|
|
73,279,126
|
|
|
|
68,625,035
|
|
Net change in unrealized appreciation/(depreciation) on investments
|
|
|
191,077,287
|
|
|
|
197,889,722
|
|
|
|
|
|
|
|
|
|
|
Increase in net assets from operations
|
|
|
272,530,791
|
|
|
|
280,414,615
|
|
|
|
|
|
|
|
|
|
|
Dividends to shareholders from net investment income
|
|
|
(7,258,117
|
)
|
|
|
(13,720,813
|
)
|
|
|
|
|
|
|
|
|
|
Total distributions to shareholders
|
|
|
(7,258,117
|
)
|
|
|
(13,720,813
|
)
|
|
|
|
|
|
|
|
|
|
Capital share transactions (Note 6)
|
|
|
8,366,126
|
|
|
|
(364,091,527
|
)
|
|
|
|
|
|
|
|
|
|
Total increase (decrease)
|
|
|
273,638,800
|
|
|
|
(97,397,725
|
)
|
Net assets:
|
|
|
|
|
|
|
|
|
Beginning of the period
|
|
|
1,491,425,076
|
|
|
|
1,588,822,801
|
|
|
|
|
|
|
|
|
|
|
End of the period (Including accumulated undistributed net investment income of $955,938 and $39,677,
respectively)
|
|
$
|
1,765,063,876
|
|
|
$
|
1,491,425,076
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
10
SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2013 (Unaudited)
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 diversified, open-end management investment company under the Investment Company Act of 1940 (the Act). 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 (GAAP), which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities, if any, 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 (NASDAQ), are valued at the last quoted sale price as provided by independent pricing services as of the close of trading on the system or exchange on 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 prices. 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. Fixed-income securities may be valued at prices supplied by the Funds 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 open-end regulated investment companies are valued at net asset value (NAV). Short-term instruments
with remaining maturities of 60 days or less may be valued at amortized cost.
The Fund values securities at fair value pursuant to procedures adopted by the Board of Directors if market quotations are not readily available (including a short and temporary lapse in
the provision of a price by the regular pricing source) or, if in the judgment of the Adviser, the prices or values available do not represent the fair value of the instrument. Factors which may cause the Adviser to make such a judgment include, but
are not limited to, the following: (i) only a bid price or an asked price is available, (ii) the spread between the bid price and the asked price is substantial, (iii) the frequency of sales, (iv) the thinness of the market,
(v) the size of reported trades, and (vi) actions of the securities markets, such as the suspension or limitation of trading. Fair valuation is based on subjective factors and, as a result, the fair value price of an asset may differ from
the assets market price and may not be the price at which the asset may be sold. Fair valuation could result in a NAV different from one determined by using market quotations.
11
SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 30, 2013 (Unaudited)
Valuation inputs used to determine the value
of the Funds investments are summarized in the three broad levels listed below:
Level 1 - quoted prices in active markets for identical assets
Level 2 - other significant observable inputs (including quoted prices of similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 - significant unobservable inputs (including the Funds own assumptions in determining the fair value of
investments)
The inputs or
methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Pursuant to the valuation procedures noted previously, equity securities (including exchange traded securities and other
open-end regulated investment companies) are generally categorized as Level 1 securities in the fair value hierarchy. Fixed-income securities and short-term instruments are generally categorized as Level 2 securities in the fair value hierarchy.
Investments for which there are no quotations, or for which quotations do not appear reliable, are valued at fair value as determined in good faith by the Pricing Committee under the direction of the Board. These valuations are typically categorized
as Level 2 or Level 3 in the fair value hierarchy.
The following table summarizes the Funds investments categorized in the fair value hierarchy as of June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security Type
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
Investments
in Securities
|
|
Common Stocks
|
|
$
|
1,721,770,108
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,721,770,108
|
|
Short-Term Investments
|
|
|
64,604,567
|
|
|
|
|
|
|
|
|
|
|
|
64,604,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
|
|
$
|
1,786,374,675
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,786,374,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
June 30, 2013, all equity securities and open-end mutual funds were included in Level 1 in the table above. Please refer to the Schedule of Investments to view equity securities categorized by industry type.
The Funds policy is to disclose
transfers between Levels based on valuations at the end of the reporting period. There were no transfers between Levels as of June 30, 2013, based on the valuation input Levels on December 31, 2012.
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 practicable after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence. Income and
capital gains on some 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.
12
SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 30, 2013 (Unaudited)
c. Dividends to
Shareholders
Dividends and distributions payable to shareholders are recorded by the Fund on the
ex-dividend date. Dividends from net investment income, if any, are declared and paid semiannually. 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 GAAP. 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 to distribute substantially 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 federal taxation. Therefore, no federal income or excise tax
provision is required.
For all
open tax years and all major taxing jurisdictions, management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for
examination by taxing authorities (i.e., generally, the last three tax year ends and the interim tax period since then). Further, management of the Fund is also not aware of any uncertain tax positions that would require the Fund to record a tax
liability and, therefore, there is no impact to the Funds financial statements.
3. Investment Advisory and Other Services
Investment Adviser
The Funds investment adviser is Sound Shore Management, Inc. (the Adviser). Pursuant to an investment advisory agreement, the Adviser receives an advisory fee, accrued
daily and paid monthly at an annual rate of 0.75% of the Funds average daily net assets.
Other Services
Citi Fund Services Ohio, Inc.
(Citi) provides certain administration, portfolio accounting and transfer agency services to the Fund.
The Fund also has agreements with various financial intermediaries and mutual fund supermarkets under which customers of these intermediaries may purchase and hold Fund shares.
These intermediaries effectively provide sub-transfer agent services that the Fund transfer agent would have otherwise had to provide. In recognition of this, the transfer agent, the Fund and the Funds Adviser have entered into an agreement
whereby the transfer agent agrees to pay financial intermediaries a portion of the amount denoted on the Statement of Operations as Transfer agent fees and expenses that it receives from the Fund and the Adviser agrees to pay the excess,
if any, charged by a financial intermediary.
13
SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
JUNE 30, 2013 (Unaudited)
Foreside Fund Services, LLC is the Funds distributor
(the Distributor). The Distributor is neither affiliated with the Adviser, Citi nor its affiliated companies. The Fund does not have a distribution plan (under Rule 12b-1 of the Act); accordingly, the Distributor receives no compensation
from the Fund for its distribution services.
Pursuant to a Compliance Services Agreement with the Fund, Foreside Compliance Services, LLC (FCS), an affiliate of the
Distributor, provides a Chief Compliance Officer and Anti-Money Laundering Officer to the Fund as well as some additional compliance support functions. Under a Treasurer Services Agreement with the Fund, Foreside Management Services, LLC
(FMS), an affiliate of the Distributor, provides a Treasurer to the Fund. Neither the Distributor, FCS, FMS, nor their employees that serve as officers of the Fund, have any role in determining the investment policies of or securities to
be purchased or sold by the Fund.
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), quarterly fees of $1,250, plus $5,000 per quarterly in-person meeting, $2,000 per quarterly
meeting attended telephonically and $1,000 per special meeting attended in person or telephonically.
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 period ended June 30, 2013 aggregated $432,797,340 and $423,700,962, respectively.
5. Federal Income Tax and Investment Transactions
Distributions during the fiscal years ended as noted were
characterized for tax purposes as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
December 31, 2011
|
|
Ordinary Income
|
|
$
|
13,720,813
|
|
|
$
|
12,901,175
|
|
Long-Term Capital Gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Taxable Distributions
|
|
|
13,720,813
|
|
|
|
12,901,175
|
|
Return of Capital
|
|
|
|
|
|
|
5,861,925
|
|
|
|
|
|
|
|
|
|
|
Total Distributions Paid
|
|
$
|
13,720,813
|
|
|
$
|
18,763,100
|
|
|
|
|
|
|
|
|
|
|
Components of capital on a
federal income tax basis at 12/31/2012, were as follows:
|
|
|
|
|
Par Value + Paid-in Capital
|
|
$
|
1,417,588,867
|
|
Undistributed Ordinary Income
|
|
|
39,677
|
|
Capital Loss Carryforwards
|
|
|
(161,257,714
|
)
|
Net Unrealized Appreciation
|
|
|
235,054,246
|
|
|
|
|
|
|
|
|
$
|
1,491,425,076
|
|
14
SOUND SHORE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Concluded)
JUNE 30, 2013 (Unaudited)
At December 31, 2012, the Fund, for federal income tax
purposes, had capital loss carryforwards which expire (pre-effective capital loss carryforwards) as set forth in the table below. These amounts may be applied against future net realized gains until the earlier of their utilization or expiration.
Capital loss carryforwards subject to
expiration:
|
|
|
Expires tax year
ending
|
|
Capital loss
carryforwards
|
2017
|
|
$161,257,714
|
Under the Regulated
Investment Company Modernization Act of 2010, capital losses incurred by the Funds after December 31, 2010 will not be subject to expiration (post-effective capital loss carryforwards). In addition, post-effective capital loss carryforwards
must be utilized prior to the utilization of pre-effective capital loss carryforwards. At December 31, 2012, the Fund had no post-effective capital loss carryforwards.
6. Capital Stock
As of June 30, 2013, 200,000,000
shares of $.001 par value stock were authorized and capital paid in amounted to $1,425,954,993. Transactions in capital stock were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Six Months
Ended
June 30, 2013
|
|
|
For the
Year
Ended
December 31, 2012
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Sale of shares
|
|
|
5,330,107
|
|
|
$
|
214,192,682
|
|
|
|
4,925,360
|
|
|
$
|
162,580,220
|
|
Reinvestment of dividends
|
|
|
171,471
|
|
|
|
6,980,587
|
|
|
|
404,789
|
|
|
|
13,223,339
|
|
Redemption of shares
|
|
|
(5,457,545
|
)
|
|
|
(212,807,143
|
)
|
|
|
(16,413,576
|
)
|
|
|
(539,895,086
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) from capital transactions
|
|
|
44,033
|
|
|
$
|
8,366,126
|
|
|
|
(11,083,427
|
)
|
|
$
|
(364,091,527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the 42,762,930 shares
outstanding as of June 30, 2013, the Employees Profit Sharing Plan of the Adviser owned 620,507 shares.
7. Other Information
On June 30, 2013, two entities, Charles Schwab & Co. Inc. and National Financial Services LLC, held of record in omnibus
accounts approximately 62% of the outstanding shares of the Fund on behalf of numerous investors.
8. Subsequent Events
Subsequent events occurring after the date of this report have been evaluated for potential impact to this report through the date the
report was issued.
15
SOUND SHORE FUND, INC.
FINANCIAL HIGHLIGHTS
JUNE 30, 2013 (Unaudited)
These financial highlights reflect selected data for a share outstanding throughout each period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months
Ended
June 30,
2013
(Unaudited)
|
|
|
Year Ended December 31,
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Net Asset Value,
Beginning of Period
|
|
$
|
34.91
|
|
|
$
|
29.53
|
|
|
$
|
31.82
|
|
|
$
|
28.58
|
|
|
$
|
22.76
|
|
|
$
|
35.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income(a)
|
|
|
0.20
|
|
|
|
0.29
|
|
|
|
0.22
|
|
|
|
0.19
|
|
|
|
0.22
|
|
|
|
0.25
|
|
Net realized and unrealized gain (loss)on investments
|
|
|
6.34
|
|
|
|
5.39
|
|
|
|
(2.18
|
)
|
|
|
3.25
|
|
|
|
5.82
|
|
|
|
(12.91
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total from Investment Operations
|
|
|
6.54
|
|
|
|
5.68
|
|
|
|
(1.96
|
)
|
|
|
3.44
|
|
|
|
6.04
|
|
|
|
(12.66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from Net investment income
|
|
|
(0.17
|
)
|
|
|
(0.30
|
)
|
|
|
(0.23
|
)
|
|
|
(0.20
|
)
|
|
|
(0.22
|
)
|
|
|
(0.26
|
)
|
Return of capital
|
|
|
|
|
|
|
|
|
|
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Distributions
|
|
|
(0.17
|
)
|
|
|
(0.30
|
)
|
|
|
(0.33
|
)
|
|
|
(0.20
|
)
|
|
|
(0.22
|
)
|
|
|
(0.26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value,
End of Period
|
|
$
|
41.28
|
|
|
$
|
34.91
|
|
|
$
|
29.53
|
|
|
$
|
31.82
|
|
|
$
|
28.58
|
|
|
$
|
22.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Return(b)
|
|
|
18.74
|
%
|
|
|
19.32
|
%
|
|
|
(6.18
|
)%
|
|
|
12.13
|
%
|
|
|
26.64
|
%
|
|
|
(35.60
|
)%
|
Ratios/Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets at End of Period
(in thousands)
|
|
$
|
1,765,064
|
|
|
$
|
1,491,425
|
|
|
$
|
1,588,823
|
|
|
$
|
1,927,863
|
|
|
$
|
2,116,522
|
|
|
$
|
1,624,674
|
|
Ratios to Average Net Assets:(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
0.94
|
%
|
|
|
0.94
|
%
|
|
|
0.94
|
%
|
|
|
0.94
|
%
|
|
|
0.94
|
%
|
|
|
0.92
|
%
|
Net Investment Income
|
|
|
1.01
|
%
|
|
|
0.89
|
%
|
|
|
0.69
|
%
|
|
|
0.66
|
%
|
|
|
0.89
|
%
|
|
|
0.80
|
%
|
Portfolio Turnover Rate(b)
|
|
|
27
|
%
|
|
|
56
|
%
|
|
|
61
|
%
|
|
|
64
|
%
|
|
|
97
|
%
|
|
|
111
|
%
|
(a)
|
Calculated using the average shares outstanding for the period.
|
(b)
|
Not annualized for periods less than one year.
|
(c)
|
Annualized for periods less than one year.
|
16
SOUND SHORE FUND, INC.
JUNE 30, 2013 (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 January 1, 2013
through June 30, 2013.
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 Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
Account Value
January 1,
2013
|
|
|
Ending
Account Value
June 30, 2013
|
|
|
Expenses Paid
During Period*
|
|
Actual Return
|
|
$
|
1,000.00
|
|
|
$
|
1,187.40
|
|
|
$
|
5.10
|
|
Hypothetical Return
|
|
$
|
1,000.00
|
|
|
$
|
1,020.13
|
|
|
$
|
4.71
|
|
*
|
Expenses are equal to the Funds annualized expense ratio of 0.94%, multiplied by the average account value over the period, multiplied by
181/365 to reflect the most recent one-half year period.
|
17
SOUND SHORE FUND, INC.
JUNE 30, 2013 (Unaudited)
Investment Advisory Agreement Approval
A majority of the Independent Directors met separately in
advance of the Board meeting, held on January 28, 2013, with their independent counsel and extensively discussed and considered the Investment Advisory Agreement. In this meeting, they reviewed the Board materials that had been provided in
advance of the meeting in light of the relevant factors set forth in judicial precedent. The Independent Directors reviewed, among other things, the fee and expense comparisons described in more detail below. They also recognized that some factors,
such as economies of scale and fall out benefits, were not applicable given the size of the Fund and the nature of the Advisers operations. The Independent Directors expressed their continuing confidence in management and their ability to ask
questions of management to get the information that is necessary in considering approval of the Investment Advisory Agreement.
At the Board meeting, the Independent Directors and the full Board reviewed, considered and discussed the written materials provided to
them. These materials included the terms of the Investment Advisory Agreement; the long, mid and short term performance of the Fund as measured against relevant benchmarks, revenue received by the Adviser from the Fund, as well as costs incurred by
the Adviser in connection with the advisory services it renders to the Fund; and profitability data and other Adviser financial information provided at the meeting. The materials also included comparative analyses of advisory and certain other fees
and total expenses borne by the Fund to all 73 mutual funds included in an independently selected universe of no-load U.S. diversified equity funds with no 12b-1 or non-12b-1 fees with assets of $1 billion to $3 billion and additional summary
information comparing its total expenses and fees to the funds in this 73-fund universe, as well as to funds in a group of 11 small fund families (under 10 funds) within the 73-fund universe. The Independent Directors noted that all 73 funds were
part of a family of funds while the Fund is a stand-alone fund, and that total expense ratios and advisory fees were generally higher for the funds in the small fund family group which was a more apt comparison for the Fund. Among other things, they
considered that, while the Funds total expense ratio of aproximately 0.94% and its contractual advisory fee of 0.75% were higher than the average and median for the 73-fund universe, the Funds total expense ratio was slightly higher than
the average and matched the median for the small fund family group, and its advisory fee was lower than the average and median for the small fund family group. The Independent Directors also noted that the Adviser managed the Fund very efficiently
with low overhead.
The written materials
provided to the Board also contained Fund average annual total return data for numerous time periods, including the one, three, five, 10, 15, 20 and 25-year periods ended December 31, 2012, and comparable data for the Standard &
Poors 500 Index, the Dow Jones Industrial Average, the NASDAQ Composite and certain Russell Indexes and Morningstar mutual fund averages. At the Board meeting, the Independent Directors and the full Board reviewed, considered and discussed
this performance information.
The Directors,
including the Independent Directors, also took into account (1) the consistent quality of services provided by the Adviser, including the Funds strong long-term performance record, as well as its more recent performance; (2) the
reputation of the Adviser; and (3) the professional credentials of its personnel and the efficiency and economy of its operations. The Directors, including the Independent Directors, recognized that while the fees charged by the Adviser to
private accounts are lower than those charged to the Fund, the nature of the private accounts and the services provided to them are different from the Fund. While the Directors, including the Independent Directors, did not identify any single factor
as controlling, after considering all the factors, they resolved unanimously to approve continuance of the Investment Advisory Agreement as in the best interests of the Fund and its shareholders.
18
SOUND SHORE FUND, INC.
JUNE 30, 2013 (Unaudited) (Concluded)
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
Funds portfolio is available, without charge and upon request, by calling (800) 551-1980 or by visiting the Funds web site at http://www.soundshorefund.com. This information is also available on the SECs web site at
http://www.sec.gov under the name of the Sound Shore Fund.
The Funds 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
Funds web site at http://www.soundshorefund.com. This information is available on the SECs web site at http://www.sec.gov under the name of the Sound Shore Fund.
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. This information is available on the SECs web site at http://www.sec.gov under the name of the Sound Shore Fund. It may be reviewed and copied at
the SECs Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
19
Investment Adviser
Sound Shore Management, Inc.
Greenwich, Connecticut
Administrator
Citi Fund Services Ohio, Inc.
Columbus, Ohio
Distributor
Foreside Fund Services, LLC
Portland, Maine
www.foreside.com
Transfer and
Distribution Paying Agent
Citi Fund Services Ohio, Inc.
Columbus, Ohio
Custodian
Citibank, N.A.
New York, New York
Fund Counsel
Dechert LLP
New York, New York
Independent Registered
Public Accounting Firm
Deloitte & Touche LLP
New York, New York
107-SAR-0613
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 Funds objectives and policies, experience
of its management, and other information.
SOUND SHORE FUND, INC.
3435 Stelzer Road
Columbus, OH 43219
http://www.soundshorefund.com
(800) 551-1980
Semi-Annual Report
(Unaudited)
JUNE 30, 2013