No. 811-21758
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 24
SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 24
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
POST-EFFECTIVE AMENDMENT NO. 24
INVESTMENT COMPANY ACT OF 1940
POST-EFFECTIVE AMENDMENT NO. 24
CLIPPER FUNDS TRUST
2949 East Elvira Road, Suite 101
Tucson, Arizona 85756
(520) 806-7600
Tucson, Arizona 85756
(520) 806-7600
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Agents For Service:
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Lisa Cohen
Davis Selected Advisers, L.P.
2949 East Elvira Road, Suite 101
Tucson, AZ 85756
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Richard Cutshall
Greenberg Traurig LLP
1144 15th Street
Suite 3300
Denver, CO 80202
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It is proposed that this filing will become effective:
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Immediately upon filing pursuant to paragraph (b) of Rule 485
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On May 1, 2026, pursuant to paragraph (b) of Rule 485
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60 days after filing pursuant to paragraph (a) of Rule 485
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On [ ] pursuant to paragraph (a) of Rule 485
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75 days after filing pursuant to paragraph (a)(2) of Rule 485
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On [ ] pursuant to paragraph (a)(2) of Rule 485
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This post-effective amendment designates a new effective date for a previously filed
post-effective amendment
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1
Title of Securities being Registered Common Stock of:
Clipper Fund
EXPLANATORY NOTE
This Post-Effective Amendment contains:
Clipper Fund Prospectus
Clipper Fund Statement of Additional Information
Part C
Signature Pages
Exhibits
Clipper Fund Statement of Additional Information
Part C
Signature Pages
Exhibits
2
Clipper Fund
May 1, 2026
Prospectus
A Portfolio of Clipper Funds Trust
Ticker: CFIMX
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
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This prospectus contains important information. Please read it carefully before investing and keep it for future reference.
No financial adviser, dealer, salesperson, or any other person has been authorized to give any information or to make any representations, other than those contained in this prospectus, in connection with the offer contained in this prospectus and, if given or made, such other information or representations must not be relied on as having been authorized by the Fund, the Fund’s investment adviser or the Fund’s distributor.
This prospectus does not constitute an offer by the Fund or by the Fund’s distributor to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful for the Fund to make such an offer.
Prospectus | Clipper Fund | 2
Clipper Fund Summary
The Fund seeks long-term capital growth and capital preservation.
This table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which
are not reflected in the tables and examples below.
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Shareholder Fees
(fees paid directly from your investment)
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Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
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Maximum Deferred Sales Charge (Load)
(as a percentage of the lesser of the net asset value of the shares redeemed or the
total cost of such shares)
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Redemption Fee
(as a percentage of total redemption proceeds)
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Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Management Fees
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Distribution and/or Service (12b-1) Fees
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Other Expenses
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Total Annual Fund Operating Expenses
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1 Year
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3 Years
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5 Years
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10 Years
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Clipper Fund
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$ |
$ |
$ |
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 17 % of the average value of its portfolio.
Davis Selected Advisers, L.P. (“Davis Advisors” or the “Adviser”), the Fund’s investment adviser, uses the Davis Investment Discipline to invest the Fund’s portfolio principally in common stocks (including indirect holdings of common stock through Depositary Receipts (as defined below)) issued by large companies with market capitalizations
of at least $10 billion. The Fund is non-diversified and, therefore, is allowed to focus its investments in fewer
companies than a fund that is required to diversify its portfolio. The Fund’s portfolio generally contains between 15 and 35 companies, although the precise number of its investments will vary over time. Historically, the Fund has invested a significant
portion of its assets in financial services companies and in foreign companies, and may also invest in mid- and small-capitalization
companies.
Davis Investment Discipline. Davis Advisors manages equity funds using the Davis Investment Discipline. Davis
Advisors conducts extensive research to try to identify businesses that possess characteristics
that Davis Advisors believes foster the creation of long-term value, such as proven management, a durable franchise and business
model, and sustainable competitive advantages. Davis Advisors aims to invest in such businesses when they are trading
at discounts to their intrinsic worth. Davis Advisors emphasizes individual stock selection and believes that the ability to evaluate
management is critical. Davis Advisors routinely visits managers at their places of business in order to gain insight into
the relative value of different businesses. Such research, however rigorous, involves predictions and forecasts that are inherently
uncertain. After determining which companies Davis Advisors believes the Fund should own, Davis Advisors then turns its
analysis to determining the intrinsic value of those companies’ equity securities. Davis Advisors seeks companies whose equity securities can be purchased at a discount from Davis Advisors’ estimate of the company’s intrinsic value based upon fundamental analysis of cash flows, assets and liabilities, and other criteria that Davis Advisors deems to be material on a company-by-company basis. Davis Advisors’ goal is to invest in companies for the long term (ideally, five years or longer, although
this goal may not be met). Davis Advisors considers selling a company’s equity securities if the securities’ market price exceeds Davis Advisors’ estimates of intrinsic value, if the ratio of the risks and rewards of continuing to own the company’s equity securities is no longer attractive, to raise cash to purchase a more attractive investment opportunity, to satisfy net
redemptions, or for other purposes.
Prospectus | Clipper Fund | 3
Principal Risks of Investing in the Fund
The principal risks of investing in the Fund are:
Stock Market Risk. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices, including the possibility of sharp declines.
Common Stock Risk. Common stock represents an ownership position in a company. An adverse event may have a negative impact on a company and could result in a decline in the price of its common stock. Common stock is generally subordinate to an issuer’s other securities, including preferred, convertible, and debt securities.
Financial Services Risk. Risks of investing in the financial services sector include: (1) systemic risk: factors outside the control of a particular financial institution may adversely affect the ability of the financial institution to operate normally or may impair its financial condition; (2) regulatory actions: financial services companies may suffer setbacks if regulators change the rules under which they operate; (3) changes in interest rates: unstable and/or rising interest rates may have a disproportionate effect on companies in the financial services sector; (4) non-diversified loan portfolios: financial services companies may have concentrated portfolios that make them vulnerable to economic conditions that affect an industry; (5) credit: financial services companies may have exposure to investments or agreements that may lead to losses; and (6) competition: the financial services sector has become increasingly competitive.
Focused Portfolio Risk. Funds that invest in a limited number of companies may have more risk because changes in the value of a single security may have a more significant effect, either negative or positive, on the value of the Fund’s total portfolio.
Foreign Country Risk. Securities of foreign companies (including Depositary Receipts) may be subject to greater risk, as foreign economies may not be as strong or diversified, foreign political systems may not be as stable and foreign financial reporting standards may not be as rigorous as they are in the United States. There may also be less information publicly available regarding the non-U.S. issuers and their securities. These securities may be less liquid (and, in some cases, may be illiquid) and could be harder to value than more liquid securities.
Headline Risk. The Fund may invest in a company when the company becomes the center of controversy after receiving adverse media attention concerning its operations, long-term prospects, management, or for other reasons. While Davis Advisors researches companies subject to such contingencies, it cannot be correct every time, and the company’s stock may never recover or may become worthless.
Large-Capitalization Companies Risk. Companies with $10 billion or more in market capitalization are considered by the Adviser to be large-capitalization companies. Large-capitalization companies generally experience slower rates of growth in earnings per share than do mid- and small-capitalization companies.
Manager Risk. Poor security selection or focus on securities in a particular sector, category, or group of companies may cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective. Even if the Adviser implements the intended investment strategies, the implementation of the strategies may be unsuccessful in achieving the Fund’s investment objective.
Depositary Receipts Risk. Depositary Receipts, consisting of American Depositary Receipts, European Depositary Receipts, and Global Depositary Receipts, are certificates evidencing ownership of shares of a foreign issuer. Depositary Receipts are subject to many of the risks associated with investing directly in foreign securities. Depositary Receipts may trade at a discount, or a premium, to the underlying security and may be less liquid than the underlying securities listed on an exchange.
Fees and Expenses Risk. The Fund may not earn enough through income and capital appreciation to offset the operating expenses of the Fund. All mutual funds incur operating fees and expenses. Fees and expenses reduce the return that a shareholder may earn by investing in a fund, even when a fund has favorable performance. A low-return environment, or a bear market, increases the risk that a shareholder may lose money.
Foreign Currency Risk. The change in value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of securities denominated in that foreign currency. For example, when the Fund holds a security that is denominated in a foreign currency, a decline of that foreign currency against the U.S. dollar would generally cause the value of the Fund’s shares to decline.
Mid- and Small-Capitalization Companies Risk. Companies with less than $10 billion in market capitalization are considered by the Adviser to be mid- or small-capitalization companies. Mid- and small-capitalization companies typically have more limited product lines, markets, and financial resources than larger companies and their securities may trade less frequently and in more limited volume than those of larger, more mature companies.
An investment in the Fund is not a deposit of the bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Prospectus | Clipper Fund | 4
| | Returns | Period Ending |
| Quarter | | |
| Quarter | - | |
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| Average Annual Total Returns (For the periods ended December 31, 2025) | Past 1 Year | Past 5 Years | Past 10 Years |
| Return before taxes | | | |
| Return after taxes on distributions | | | |
| Return after taxes on distributions and sale of Fund shares | | | |
| S&P 500 Index reflects no deduction for fees, expenses or taxes | | | |
Management
Investment Adviser. Davis Selected Advisers, L.P. serves as the Fund’s investment adviser.
Sub-Adviser. Davis Selected Advisers–NY, Inc., a wholly owned subsidiary of the Adviser, serves as the Fund’s sub-adviser.
Portfolio Managers. As of the date of this prospectus, the Portfolio Managers listed below are jointly
and primarily responsible for the day-to-day management of the Fund’s portfolio.
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Portfolio Managers
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Experience with this Fund
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Primary Title with Investment Adviser or Sub-Adviser
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Christopher Davis
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Since January 2006
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Chairman, Davis Selected Advisers, L.P.
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Danton Goei
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Since January 2014
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Vice President, Davis Selected Advisers–NY, Inc.
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Purchase and Sale of Fund Shares
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Minimum Initial Investment
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$2,500
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Minimum Additional Investment
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$25
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You may sell (redeem) shares each day the New York Stock Exchange is open. Your transaction
may be placed through your dealer or financial adviser, by writing to Clipper Fund, P.O. Box 219167, Kansas City,
MO 64121-9167, telephoning 1-800-432-2504 or accessing the Fund’s website, www.clipperfund.com. Certain financial intermediaries may impose different restrictions than those shown above.
Tax Information
If the Fund earns income or realizes capital gains, it intends to make distributions
that may be taxed as ordinary income, qualified dividend income or capital gains by federal, state and local authorities.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a broker-dealer or other financial intermediary (such
as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services.
These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson
to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
Prospectus | Clipper Fund | 5
Additional Information About Investment Objective, Principal Strategies, and Principal Risks
This prospectus contains important information about investing in the Fund. Please
read this prospectus carefully before you make any investment decisions. Additional information regarding the Fund is available
at clipperfund.com/resources/regulatory-documents.
Investment Objective
Clipper Fund’s investment objective is long-term capital growth and capital preservation. The Fund’s investment objective is a fundamental policy, which means that it may not be changed by the Fund’s Board of Trustees without shareholder approval.
Principal Investment Strategies
The principal investment strategies and risks for the Fund are described in more detail
above and below. The prospectus and statement of additional information (“SAI”) contain a number of investment strategies and risks that may be important to consider even though they are not principal investment strategies or principal risks
for the Fund. The prospectus also contains disclosure that describes Davis Advisors’ process for determining when the Fund may pursue a non-principal investment strategy.
Davis Advisors uses the Davis Investment Discipline to invest Clipper Fund’s portfolio principally in common stocks (including indirect holdings of common stock through Depositary Receipts) issued by
large companies with market capitalizations of at least $10 billion. The Fund is non-diversified and, therefore,
is allowed to focus its investments in fewer companies than a fund that is required to diversify its portfolio. The Fund’s portfolio generally contains between 15 and 35 companies, although the precise number of its investments will vary over time. Historically,
the Fund has invested a significant portion of its assets in financial services companies and in foreign companies, and
may also invest in mid- and small-capitalization companies.
Principal Risks of Investing in the Fund
If you buy shares of the Fund, you may lose some or all of the money that you invest.
The 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. The likelihood of loss may be greater if you invest for a shorter period
of time. This section describes the principal risks (but not the only risks) that could cause the value of your investment
in the Fund to decline and which could prevent it from achieving its stated investment objective.
The principal risks of investing in the Fund, listed alphabetically, include:
Common Stock Risk. Common stock represents ownership positions in companies. The prices of common stock
fluctuate based on changes in the financial condition of their issuers and on market and economic
conditions. Events that have a negative impact on a business probably will be reflected in a decline in the price
of its common stock. Furthermore, when the total value of the stock market declines, most common stocks, even those issued by
strong companies, likely will decline in value. Common stock is generally subordinate to an issuer’s other securities, including preferred, convertible, and debt securities.
Depositary Receipts Risk. Securities of a foreign company may involve investing in Depositary Receipts, which
include American Depositary Receipts, European Depositary Receipts, and Global Depositary
Receipts, which are certificates evidencing ownership of shares of a foreign issuer. These certificates, which may
be sponsored or unsponsored, are issued by depositary banks and, generally, trade on an established market in the United States
or elsewhere. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuer’s home country. The depositary bank may not have physical custody of the underlying securities at all times and may charge fees for
various services, including forwarding dividends, interest, and corporate actions. Depositary Receipts are alternatives to
directly purchasing the underlying foreign securities in their national markets and currencies. However, Depositary Receipts
continue to be subject to many of the risks associated with investing directly in foreign securities. These risks include foreign
exchange risk as well as the political and economic risks of the underlying issuer’s country. Depositary Receipts may trade at a discount or a premium to the underlying security and may be less liquid than the underlying securities listed on an exchange.
Fees and Expenses Risk. The Fund may not earn enough through income and capital appreciation to offset its
operating expenses. All mutual funds incur operating fees and expenses. Fees and expenses reduce
the return that a shareholder may earn by investing in a fund even when that fund has favorable performance. A low-return
environment, or a bear market, increases the risk that a shareholder may lose money.
Financial Services Risk. A company is “principally engaged” in financial services if it owns financial services related assets constituting at least 50% of the total value of its assets, or if at least 50% of
its revenues are derived from its provision of financial services. The financial services sector consists of several different industries
that behave differently in different economic and market environments, including banking, insurance, and securities brokerage
houses. Companies in the financial services sector include commercial banks, industrial banks, savings institutions,
finance companies, diversified financial services companies, investment banking firms, securities brokerage houses,
investment advisory companies, leasing
Prospectus | Clipper Fund | 6
companies, insurance companies, and companies providing similar services. Due to the
wide variety of companies in the financial services sector, they may react in different ways to changes in economic
and market conditions.
Risks of investing in the financial services sector include: (1) systemic risk: factors
outside the control of a particular financial institution — like the failure of another, significant financial institution or material disruptions to the credit markets — may adversely affect the ability of the financial institution to operate normally or may
impair its financial condition; (2) regulatory actions: financial services companies may suffer setbacks if regulators change the
rules under which they operate; (3) changes in interest rates: unstable and/or rising interest rates may have a disproportionate
effect on companies in the financial services sector; (4) non-diversified loan portfolios: financial services companies, whose securities
a fund purchases, may themselves have concentrated portfolios, such as a high level of loans to real estate developers,
which makes them vulnerable to economic conditions that affect that industry; (5) credit: financial services companies may
have exposure to investments or agreements, which, under certain circumstances, may lead to losses, e.g., sub-prime loans; and
(6) competition: the financial services sector has become increasingly competitive.
Banking. Commercial banks (including “money center” regional and community banks), savings and loan associations, and holding companies of the foregoing are especially subject to adverse effects of volatile
interest rates, concentrations of loans in particular industries or classifications (such as real estate, energy, or sub-prime
mortgages), and significant competition. The profitability of these businesses is to a significant degree dependent on the
availability and cost of capital funds. Economic conditions in the real estate market may have a particularly strong effect
on certain banks and savings associations. Commercial banks and savings associations are subject to extensive federal and, in
many instances, state regulation. Neither such extensive regulation nor the federal insurance of deposits ensures the solvency
or profitability of companies in this industry and there is no assurance against losses in securities issued by such companies.
Insurance. Insurance companies are particularly subject to government regulation and rate setting,
potential anti-trust and tax law changes, and industry-wide pricing and competition cycles. Property and casualty
insurance companies also may be affected by weather, terrorism, long-term climate changes, and other catastrophes.
Life and health insurance companies may be affected by mortality and morbidity rates, including the effects of epidemics.
Individual insurance companies may be exposed to reserve inadequacies, problems in investment portfolios (e.g., real estate or “junk” bond holdings), and failures of reinsurance carriers.
Other Financial Services Companies. Many of the investment considerations discussed in connection with banks and insurance companies also apply to other financial services companies. These companies
are subject to extensive regulation, rapid business changes and volatile performance dependent on the availability and
cost of capital, and prevailing interest rates and significant competition. General economic conditions significantly affect these
companies. Credit and other losses resulting from the financial difficulty of borrowers or other third parties have a
potentially adverse effect on companies in this industry. Investment banking, securities brokerage, and investment advisory companies
are particularly subject to government regulation and the risks inherent in securities trading and underwriting activities.
Other Regulatory Limitations. Regulations of the Securities and Exchange Commission (“SEC”) impose limits on: (1) investments in the securities of companies that derive more than 15% of their gross
revenues from the securities or investment management business (although there are exceptions, the Fund is prohibited from investing
more than 5% of its total assets in a single company that derives more than 15% of its gross revenues from the securities
or investment management business); and (2) investments in insurance companies. The Fund, generally, is prohibited from
owning more than 10% of the outstanding voting securities of an insurance company.
Focused Portfolio Risk. The Fund is non-diversified and, therefore, is allowed to focus its investments in
fewer companies than a fund that is required to diversify its portfolio. Davis Advisors believes that concentrating the Fund’s portfolio in a select, limited number of companies allows its best ideas to have a meaningful impact on the Fund’s performance. The Fund’s portfolio generally contains between 15 and 35 companies rather than hundreds of companies;
however, it may contain fewer than 15 companies or more than 35 companies if considered prudent and desirable by
Davis Advisors. Investors should be aware that a non-diversified portfolio may experience greater price volatility than
would a diversified portfolio.
Foreign Country Risk. Foreign companies may issue both equity and fixed income securities. A company may
be classified as either “domestic” or “foreign” depending upon which factors the Adviser considers most important for a given company. Factors that the Adviser considers in classifying a company as domestic or foreign
include: (1) whether the company is organized under the laws of the United States or a foreign country; (2) whether the company’s securities principally trade in securities markets outside of the United States; (3) the source of the majority of the company’s revenues or profits; and (4) the location of the majority of the company’s assets. The Adviser generally follows the country classification indicated by a third-party service provider but may use a different country classification if the Adviser’s analysis of the four factors provided above, or other factors that the Adviser deems relevant, indicate that a different
country classification is more appropriate. Foreign country risk can be more focused on factors concerning specific countries or geographic areas when the Fund’s holdings are more focused in these countries or geographic areas.
The Fund may invest a significant portion of its assets in securities issued by companies
operating, incorporated, or principally traded in foreign countries. Investing in foreign countries involves risks that may cause the Fund’s performance to be more volatile than it would be if the Fund invested solely in the United States. Foreign
economies may not be as strong or as diversified, foreign political systems may not be as stable and foreign financial
reporting standards may not be as rigorous as
Prospectus | Clipper Fund | 7
they are in the United States. In addition, foreign capital markets may not be as
well developed, so securities may be less liquid, transaction costs may be higher, and investments may be subject to more government
regulation. When the Fund invests in foreign securities, its operating expenses are likely to be higher than those of
an investment company investing exclusively in U.S. securities, since the custodial and certain other expenses associated with
foreign investments are expected to be higher.
Foreign Currency Risk. Securities issued by foreign companies in foreign markets are frequently denominated
in foreign currencies. The change in value of a foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of securities denominated in that foreign currency. For example, when the Fund holds
a security that is denominated in a foreign currency, a decline of that foreign currency against the U.S. dollar would generally cause the value of the Fund’s shares to decline. The Fund may, but generally does not, hedge its currency risk.
Headline Risk. Davis Advisors seeks to acquire companies with durable business models that can be
purchased at attractive valuations relative to what Davis Advisors believes to be the companies’ intrinsic values. Davis Advisors may make such investments when a company becomes the center of controversy after receiving adverse
media attention. The company may be involved in litigation, the company’s financial reports or corporate governance may be challenged, the company’s public filings may disclose a weakness in internal controls, greater government regulation
may be contemplated, or other adverse events may threaten the company’s future. While Davis Advisors researches companies subject to such contingencies, it cannot be correct every time and the company’s stock may never recover or may become worthless.
Large-Capitalization Companies Risk. Companies with $10 billion or more in market capitalization are considered by the
Adviser to be large-capitalization companies. Large-capitalization companies generally
experience slower rates of growth in earnings per share than do mid- and small-capitalization companies.
Manager Risk. Poor security selection or focus on securities in a particular sector, category,
or group of companies may cause the Fund to underperform relevant benchmarks or other funds with a similar investment
objective. Even if the Adviser implements the intended investment strategies, the implementation of the strategies
may be unsuccessful in achieving the Fund’s investment objective.
Mid- and Small-Capitalization Companies Risk. Companies with less than $10 billion in market capitalization are considered by the Adviser to be mid- or small-capitalization companies. Investing in mid- and
small-capitalization companies may be more risky than investing in large-capitalization companies. Smaller companies typically
have more limited product lines, markets, and financial resources than larger companies and their securities may trade
less frequently and in more limited volume than those of larger, more mature companies. Securities of these companies
may be subject to volatility in their prices. They may have a limited trading market, which may adversely affect the Fund’s ability to dispose of them and can reduce the price the Fund might be able to obtain for them. Other investors that own a security
issued by a mid- or small-capitalization company for whom there is limited liquidity might trade the security when the Fund
is attempting to dispose of its holdings in that security. In that case, the Fund might receive a lower price for its holdings
than otherwise might be obtained. Mid- and small-capitalization companies also may be unseasoned. These include companies that
have been in operation for less than three years, including the operations of any predecessors.
Stock Market Risk. Stock markets tend to move in cycles, with periods of rising prices and periods of
falling prices, including the possibility of sharp declines. As an example, U.S. and international markets have
experienced volatility in recent months and years due to a number of economic, political, and global macro factors including
the impact of the coronavirus (COVID-19) as a global pandemic, uncertainties regarding interest rates, rising inflation, trade
tensions, and the threat of tariffs and/or retaliatory tariffs imposed by the U.S. and other countries. While COVID-19 is no
longer a global pandemic as of 2023, the recovery from COVID-19 may last for a prolonged period of time. In addition, as a
result of continuing political tensions and armed conflicts, including the war between Ukraine and Russia, the U.S. and the European
Union imposed sanctions on certain Russian individuals and companies, including certain financial institutions,
and have limited certain exports and imports to and from Russia. The war may continue to contribute to market volatility.
Further, the conflicts in the Middle East may lead to overall economic uncertainty and negative impacts on the global economy
and major financial markets. These developments as well as other events could result in further market volatility and
negatively affect financial asset prices, the liquidity of certain securities, and the normal operations of securities exchanges
and other markets. Continuing market volatility as a result of recent market conditions, U.S. political developments, or
other events may have an adverse effect on the performance of the Fund.
An investment in the Fund is not a deposit of the bank and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Prospectus | Clipper Fund | 8
Additional Information About Expenses, Fees, and Performance
All Fund results in this prospectus reflect the reinvestment of dividends and capital
gain distributions, if any. Unless otherwise noted, Fund results reflect any fee waivers and/or expense reimbursements in effect
during the periods presented.
Information Concerning After-Tax Returns
As of the date of this prospectus, the tax rates are 37% for ordinary income, 20%
for qualified income, and 20% for long-term capital gains. An additional 3.8% tax imposed by the Affordable Care Act is included
on all investment income as part of the highest marginal rate used in all after-tax performance calculations.
Non-Principal Investment Strategies and Risks
Clipper Fund may implement investment strategies that are not principal investment strategies if, in the Adviser’s professional judgment, the strategies are appropriate. A strategy includes any policy, practice,
or technique used by the Fund to achieve its investment objective. Whether a particular strategy, including a strategy to invest
in a particular type of security, is a principal investment strategy depends on the strategy’s anticipated importance in achieving the Fund’s investment objective and how the strategy affects the Fund’s potential risks and returns. In determining what is a principal investment strategy, the Adviser considers, among other things, the amount of the Fund’s assets expected to be committed to the strategy, the amount of the Fund’s assets expected to be placed at risk by the strategy, and the likelihood of the Fund losing some or all of those assets from implementing the strategy. Non-principal investment strategies are generally
those investments that constitute less than 5% to 10% of the Fund’s assets, depending upon their potential impact on the investment performance of the Fund.
While the Adviser expects to pursue the Fund’s investment objective by implementing the principal investment strategies described in this prospectus, the Adviser may employ non-principal investment strategies or securities if, in Davis Advisors’ professional judgment, the securities, trading, or investment strategies are appropriate.
Factors that Davis Advisors considers in pursuing these other strategies include whether the strategy: (1) is likely to be consistent with shareholders’ reasonable expectations; (2) is likely to assist the Adviser in pursuing the Fund’s investment objective; (3) is consistent with the Fund’s investment objective; (4) will not cause the Fund to violate any of its fundamental
or non-fundamental investment restrictions; and (5) will not materially change the Fund’s risk profile from the risk profile that results from following the principal investment strategies as described in this prospectus and further explained in the
SAI, as amended from time to time.
Liquidity Risk Management. While it is not anticipated to be an issue, the Fund’s Portfolio is managed with the restrictions and requirements of the Liquidity Rule’s limitations in mind, by the implementation of a Liquidity Risk Management Program (the “LRMP”). The Adviser monitors the adequacy and effectiveness of the implementation of the LRMP on an ongoing basis. This monitoring includes a review of the Fund’s liquidity risk based on a variety of factors including the Fund’s: (1) investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably
foreseeable stressed conditions, (3) shareholder redemptions, and (4) borrowing arrangements and other funding sources.
The Liquidity Rule places a 15% limit on the Fund’s illiquid investments and requires a fund that does not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of that fund’s net assets in highly liquid investments (highly liquid investment minimum or HLIM). The LRMP includes provisions and safeguards that are reasonably
designed to comply with the 15% limit on illiquid investments and the Fund is currently classified as a fund that
primarily holds highly liquid investments. The LRMP includes the classification, no less than monthly, of the Clipper Fund’s investments into one of four liquidity classifications as provided for in the Liquidity Rule.
At a recent meeting of the Fund’s Board of Trustees, the Adviser provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the LRMP from April 1,
2024, through March 31, 2025. The report concluded that the LRMP is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk. There can be no guarantee that the LRMP will achieve its objectives in the future.
ReFlow Liquidity Program. Clipper Fund may participate in the ReFlow Fund, LLC (“ReFlow”) liquidity program, which is designed to provide an alternative liquidity source for mutual funds experiencing
net redemptions of their shares. Pursuant to the program, ReFlow provides participating mutual funds with a source of cash to meet
net shareholder redemptions by standing ready each business day to purchase Fund shares up to the value of the net
shares redeemed by other shareholders that are expected to settle that business day. Following purchases of Fund shares, ReFlow
then generally redeems those shares when the Fund experiences net sales, at the end of a maximum holding period determined
by ReFlow (currently 8 days), or at other times at ReFlow’s or the Adviser’s discretion. While ReFlow holds Fund shares, it will have the same rights and privileges with respect to those shares as any other shareholder. In the event the
Fund uses the ReFlow service, the Fund will pay a fee to ReFlow each time ReFlow purchases Fund shares, calculated by applying
to the purchase amount a fee rate determined through an automated daily auction among participating mutual funds. The
current minimum fee rate is 0.14%, although the Fund may submit a bid at a higher rate if it determines that doing so
is in the best interest of Fund shareholders. ReFlow’s purchases of Fund shares through the liquidity program are made on an investment-blind basis without regard to the Fund’s objective, policies, or anticipated performance. In accordance with federal securities laws, ReFlow is prohibited from acquiring more than 3% of the outstanding voting securities of the Fund. ReFlow will
periodically redeem its entire share position in the Fund and may request that such redemption be met in-kind in accordance with the Fund’s policy on purchases and redemptions in-kind. The Board of Trustees has approved the Fund’s participation in the ReFlow program.
Prospectus | Clipper Fund | 9
The Adviser believes that participation in the ReFlow liquidity program may assist in stabilizing the Fund’s net assets, to the benefit of the Fund and its shareholders, although there is no guarantee that the program will do so. To the extent the Fund’s net assets do not decline, the Adviser typically will also benefit.
Repurchase Agreements. The Fund may enter into repurchase agreements. Repurchase agreements are transactions
in which the Fund purchases government securities and simultaneously commits to resell them
to the same counterparty at a future time and at a price reflecting a market rate of interest. Income from repurchase agreements
may not be exempt from state and local taxation. Repurchase agreements often offer a higher yield than investments directly
in government securities. The resale price reflects the purchase price plus an agreed-on incremental amount, which is unrelated
to the coupon rate or maturity of the purchased security. The repurchase obligation of the seller is, in effect, secured
by the underlying securities. In the event of a bankruptcy or other default of a seller of a repurchase agreement, the Fund could
experience both delays in liquidating the underlying securities and losses, including (1) possible decline in the value of the
collateral during the period, while the Fund seeks to enforce its rights thereto; (2) possible loss of all or a part of the income
during this period; and (3) expenses of enforcing its rights.
The Fund will enter into repurchase agreements only when the seller agrees that the
value of the underlying securities, including accrued interest (if any), will at all times be equal to or exceed the value
of the repurchase agreement. The Fund may enter into tri-party repurchase agreements in which a third-party custodian bank ensures
the timely and accurate exchange of cash and collateral. The majority of these transactions run from day-to-day and delivery
pursuant to the resale typically occurs within one to seven days of the purchase. The Fund normally will not enter into repurchase
agreements maturing in more than seven days.
Restricted and Illiquid Securities. The Fund may invest in restricted securities that are subject to contractual restrictions
on resale. The Fund is prohibited from purchasing or holding illiquid securities (which
may include restricted securities) if more than 15% of the Fund’s net assets would then be illiquid. If illiquid securities were to exceed 15% of the value of the Fund’s net assets, the Adviser would attempt to reduce the Fund’s investment in illiquid securities in an orderly fashion. Companies whose securities are not publicly traded may not be subject to the disclosure or other
investor protection requirements that would be applicable if their securities were publicly traded.
The restricted securities that the Fund may purchase include securities that have
not been registered under the Securities Act of 1933, as amended (the “1933 Act”), but are eligible for purchase and sale pursuant to Rule 144A (“Rule 144A Securities”). This Rule permits certain qualified institutional buyers, such as the Fund, to trade
in privately placed securities even though such securities are not registered under the 1933 Act. The Adviser, under criteria established by the Fund’s Board of Trustees, will consider whether Rule 144A Securities being purchased or held by the Fund are illiquid and thus subject to the Fund’s policy limiting investments in illiquid securities. In making this determination,
the Adviser will consider the frequency of trades and quotations, the number of dealers and potential purchasers, dealer undertakings
to make a market, and the nature of the security and the marketplace trades (for example, the time needed to dispose of
the security, the method of soliciting offers, and the mechanics of transfer). The liquidity of Rule 144A Securities also will be
monitored by the Adviser and if, as a result of changed conditions, it is determined that a Rule 144A Security is no longer liquid, the Fund’s holding of illiquid securities will be reviewed to determine what, if any, action is required in light of the policy
limiting investments in such securities. Investing in Rule 144A Securities could have the effect of increasing the amount of
investments in illiquid securities if qualified institutional buyers are unwilling to purchase such securities.
The Fund may also invest in securities of U.S. and non-U.S. issuers that are issued
through private offerings pursuant to Regulation S of the 1933 Act, as amended. Regulation S securities are subject to legal
or contractual restrictions on resale. These securities may be considered illiquid, as described above. Although Regulation
S securities may be resold in privately negotiated transactions, the price realized from these sales could be less than the
price paid by the Fund. Companies whose securities are not publicly traded may not be subject to the disclosure and other
investor protection requirements that would be applicable if their securities were publicly traded.
See the Fund’s SAI for additional information regarding restricted and illiquid securities.
Short-Term Investments. The Fund may use short-term investments, such as treasury bills and repurchase agreements,
to maintain flexibility while evaluating long-term opportunities.
Temporary Defensive Investments. The Fund may, but is not required to, use short-term investments for temporary defensive
purposes. In the event that Davis Advisors’ Portfolio Managers anticipate a decline in the values of the companies in which the Fund invests (due to economic, political, or other factors), the Fund may reduce
its risk by investing in short-term securities until market conditions improve. While the Fund is invested in short-term
investments, it will not be pursuing its stated investment objective. Unlike equity securities, these investments will not
appreciate in value when the market advances and will not contribute to long-term growth of capital.
For more details concerning current investments and market outlook, please see the Fund’s most recent shareholder report.
Prospectus | Clipper Fund | 10
Management and Organization
Davis Selected Advisers, L.P. (“Davis Advisors”) serves as the investment adviser for the Clipper Fund. Davis Advisors’ offices are located at 2949 East Elvira Road, Suite 101, Tucson, Arizona 85756. Davis
Advisors provides investment advice for Clipper Fund, manages its business affairs and provides day-to-day administrative
services. Davis Advisors also serves as investment adviser for other mutual funds, exchange-traded funds and institutional
and individual clients. For the fiscal year-ended December 31, 2025, Davis Advisors’ net management fee paid by the Fund for its services (based on average net assets) was 0.55%. A discussion regarding the basis for the approval of the Fund’s investment advisory and service agreement by the Fund’s Board of Trustees is contained in the Fund’s most recent semi-annual Form N-CSR financial statements.
Davis Selected Advisers–NY, Inc. serves as the sub-adviser for the Clipper Fund. Davis Selected Advisers–NY, Inc.’s offices are located at 620 Fifth Avenue, 3rd Floor, New York, New York 10020. Davis Selected Advisers–NY, Inc. provides investment management and research services for the Clipper Fund and other institutional clients,
and is a wholly owned subsidiary of Davis Advisors. Davis Selected Advisers–NY, Inc.’s fee is paid by Davis Advisors, not Clipper Fund.
Execution of Portfolio Transactions. Davis Advisors places orders with broker-dealers for the portfolio transactions of
Clipper Fund. Davis Advisors seeks to place portfolio transactions with brokers or
dealers who will execute transactions as efficiently as possible and at the most favorable net price. In placing executions
and paying brokerage commissions or dealer markups, Davis Advisors considers price, commission, timing, competent block trading
coverage, capital strength and stability, research resources, and other factors. Subject to best price and execution,
Davis Advisors may place orders for Clipper Fund’s portfolio transactions with broker-dealers who have sold shares of the Fund. However, when Davis Advisors places orders for the Fund’s portfolio transactions, it does not give any consideration to whether a broker-dealer has sold shares of the Fund. In placing orders for Clipper Fund’s portfolio transactions, the Adviser does not commit to any specific amount of business with any particular broker-dealer.
Over the last three fiscal years, the Fund paid the following brokerage commissions:
|
Fiscal Year-Ended December 31,
|
2025
|
2024
|
2023
|
|
Brokerage commissions paid
|
$133,732
|
$188,439
|
$82,564
|
|
Brokerage as a percentage of average net assets
|
0.01%
|
0.02%
|
0.01%
|
Portfolio Managers
◼
Christopher Davis has served as a Portfolio Manager of Clipper Fund since January 2006 and also manages
other equity funds advised by Davis Advisors. Mr. Davis has served as an analyst and Portfolio
Manager for Davis Advisors since September 1989.
◼
Danton Goei has served as a Portfolio Manager of Clipper Fund since January 2014 and also manages
other equity funds advised by Davis Advisors. Mr. Goei started with Davis Advisors as a research analyst
in November 1998.
The Portfolio Managers listed above are jointly and primarily responsible for the day-to-day management of the Fund’s portfolio. A limited portion of the Fund’s assets may be managed by Davis Advisors’ research analysts, subject to review by the Fund’s Portfolio Managers.
The SAI provides additional information about the Portfolio Managers’ compensation, other accounts managed by the Portfolio Managers and the Portfolio Managers’ investments in the Fund.
Certain Portfolio Managers may serve on the board(s) of public companies where they,
from time to time, may have access to material, non-public information (“MNPI”). Davis Advisors has instituted policies and procedures to ensure that these Portfolio Managers will not be able to utilize MNPI for their own benefit or for any
of the accounts they manage.
Shareholder Information
Procedures and Shareholder Rights Are Described by Current Prospectus and Other Disclosure
Documents
Investors should look to the most recent prospectus and SAI, as amended or supplemented
from time to time, for information concerning the Fund, including information on how to purchase and redeem Fund shares
and how to contact the Fund. The most recent prospectus and SAI (including any supplements or amendments thereto) will
be on file with the Securities and Exchange Commission as part of the Fund’s registration statement. Please also see the back cover of this prospectus for information on other ways to obtain information about the Fund.
How Your Shares Are Valued
Once you open your Clipper Fund account, you may purchase or sell shares at the net asset value (“NAV”) next determined after Clipper Fund’s transfer agent or other “qualified financial intermediary” (a financial institution that has entered into a contract with Davis Advisors or its affiliates to offer, sell and redeem shares of
the Fund) receives your request to purchase or sell shares in “good order.” A request is in good order when all documents which are required to constitute a legal purchase or sale of shares have been received by Clipper Fund’s transfer agent or other qualified financial intermediary (as defined above).
Prospectus | Clipper Fund | 11
The documents required to achieve good order vary depending upon a number of factors
(are shares held in a joint account or a corporate account, has the account had a recent address change, etc.). Contact your
financial adviser or Clipper Fund if you have questions about what documents will be required.
If your purchase or sale order is received in good order prior to the close of trading
on the New York Stock Exchange (“NYSE”), your transaction will be executed that day at that day’s NAV. If your purchase or sale order is received in good order after the close of the NYSE, your transaction will be processed the next business day at that next day’s NAV. Clipper Fund calculates the NAV of the shares issued by the Fund as of the close of trading on
the NYSE, normally 4:00 p.m., Eastern time, on each day when the NYSE is open. NYSE holidays currently include New Year’s Day, Martin Luther King, Jr. Day, Washington’s Birthday, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
The NAV of the shares is determined by taking the value of the class of shares’ total assets, subtracting the class of shares’ liabilities and then dividing the result (net assets) by the number of outstanding
shares. Since the Fund invests in securities that may trade in foreign markets on days other than when Clipper Fund calculates its NAV, the value of the Fund’s portfolio may change on days that shareholders will not be able to purchase or redeem shares in
the Fund.
If you have access to the Internet, you can also check the NAV on the Fund’s website, www.clipperfund.com.
Valuation of Portfolio Securities
The Board of Trustees of the Clipper Fund has delegated the determination of fair
value of securities to Davis Selected Advisers, L.P. The Adviser has implemented policies and procedures that govern the
pricing of securities for the Clipper Fund, as discussed below.
The Adviser values securities for which market quotations are readily available at
current value. Short-term investments purchased within 60 days to maturity and of sufficient credit quality are valued at
amortized cost, which approximates fair value. Securities listed on the NYSE, NASDAQ, and other national exchanges are valued
at the last reported sales price on the day of valuation. Listed securities for which no sale was reported on that date are
valued at the last quoted bid price. Securities traded on foreign exchanges are valued based upon the last sales price on the principal
exchange on which the security is traded prior to the time when the Fund’s assets are valued.
Securities, including illiquid or restricted securities, for which market quotations
are not readily available are valued at their fair value. Securities whose values have been materially affected by a significant event occurring before the Fund’s assets are valued but after the close of their respective exchanges will be fair valued. Fair
value is determined in good faith using consistently applied procedures. Fair valuation is based on subjective factors and,
as a result, the fair value price of a security may differ from the security’s market price and may not be the price at which the security may be sold. Fair valuation could result in a different NAV than an NAV determined by using market quotations. The Board
of Trustees reviews and discusses with management a summary of fair valued securities in quarterly board meetings.
In general, foreign securities are more likely to require a fair value determination
than domestic securities because circumstances may arise between the close of the market on which the securities trade
and the time when the Fund values its portfolio securities, which may affect the value of such securities. Securities denominated
in foreign currencies and traded in foreign markets will have their values converted into U.S. dollar equivalents at the
prevailing exchange rates as computed by State Street Bank and Trust Company. Fluctuation in the values of foreign currencies
in relation to the U.S. dollar may affect the net asset value of the Fund’s shares even if there has not been any change in the foreign currency prices of the Fund’s investments.
Securities of smaller companies are also generally more likely to require a fair value
determination because they may be thinly traded and less liquid than traditional securities of larger companies.
The Fund may occasionally be entitled to receive award proceeds from litigation relating
to an investment security. The Fund generally does not recognize a gain on contingencies until such payment is certain,
which in most cases is when it receives payment.
To the extent that the Fund’s portfolio investments trade in markets on days when the Fund is not open for business, the Fund’s NAV may vary on those days. In addition, trading in certain portfolio investments
may not occur on days the Fund is open for business because markets or exchanges other than the NYSE may be closed. If the exchange or market on which the Fund’s underlying investments are primarily traded closes early, the NAV may be calculated
prior to its normal market calculation time. For example, the primary trading markets for the Fund may close early on the
day before certain holidays and the day after Thanksgiving.
Fixed income securities may be valued at prices supplied by the Clipper 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. Government bonds, corporate
bonds, asset-backed bonds, convertible securities, and high-yield or junk bonds are normally valued on the basis of prices
provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance
on quoted prices and may reflect appropriate factors such as institutional trading in similar groups of securities,
developments related to special securities, dividend rate, maturity, and other market data. Prices for fixed income securities
received from pricing services sometimes
Prospectus | Clipper Fund | 12
represent best estimates. In addition, if the prices provided by the pricing service
and independent quoted prices are unreliable, the Adviser will arrive at its own fair valuation using its fair value procedures.
Portfolio Holdings
A description of Clipper Fund’s policies and procedures with respect to the disclosure of the Fund’s portfolio holdings is available in the SAI.
The Fund’s complete schedules of investments are filed with the SEC on Form N-CSR (as of the end of the second and fourth quarters) and on Form N-PORT Part F (as of the end of the first and third quarters). The Fund’s Forms N-CSR (Annual and Semi-Annual Reports) and N-PORT Part F are available, without charge, upon request,
by calling 1-800-432-2504, on the Clipper Fund’s website at clipperfund.com/resources/regulatory-documents, and on the SEC’s website at www.sec.gov. Lists of the Fund’s month-end and quarter-end holdings are also available at www.clipperfund.com. They become available on or about the 10th day following each respective time period and remain available on the website until
the list is updated for the subsequent period.
How Clipper Fund Pays Earnings
There are two ways you can receive payments from Clipper Fund:
◼
Dividends. Dividends are distributions to shareholders of net investment income and short-term
capital gains on investments.
◼
Capital Gains. Capital gains are profits received by the Fund from the sale of securities held for
the long term, which are then distributed to shareholders.
If you would like information about when Clipper Fund pays dividends and distributes
capital gains, please call 1-800-432-2504. Unless you choose otherwise, the Clipper Fund will automatically reinvest your dividends
and capital gains in additional Fund shares.
You can request to have your dividends and capital gains paid to you by check or deposited
directly into your bank account. Dividends and capital gains of $50 or less will not be sent by check but will be reinvested
in additional Fund shares.
You will receive a statement each year detailing the amount of all dividends and capital
gains paid to you during the previous year. To ensure that these distributions are reported properly to the U.S. Treasury,
you must certify on your Clipper Fund Application Form, or on IRS Form W-9, that your Taxpayer Identification Number is
correct and you are not subject to backup withholding. If you are subject to backup withholding, or if you did not certify your
Taxpayer Identification Number, the IRS requires Clipper Fund to withhold a percentage of any dividends paid and redemption
proceeds received.
Dividends and Distributions
◼
Clipper Fund ordinarily distributes its dividends and capital gains, if any, in June
and December.
◼
When a dividend or capital gain is distributed, the net asset value per share is reduced
by the amount of the payment.
◼
You may elect to reinvest dividend and/or capital gain distributions to purchase additional
shares of Clipper Fund or you may elect to receive them in cash. Many shareholders do not elect to take capital
gain distributions in cash because these distributions reduce principal value.
◼
If a dividend or capital gain distribution is for an amount less than $50, the Fund
will not issue a check. Instead, the dividend or capital gain distribution will be automatically reinvested in additional
shares of the Fund.
◼
If a dividend or capital gain distribution check remains uncashed for four months
or is undeliverable by the United States Postal Service, the Fund may reinvest the dividend or capital gain distribution in
additional shares of the Fund, promptly after making this determination, and future dividends and capital gains distributions
will be automatically reinvested in additional shares of the Fund.
Federal Income Taxes
The following discussion is very general. Because each shareholder’s circumstances are different and special tax rules may apply, you should consult your tax adviser about your investment in the Fund.
Prospectus | Clipper Fund | 13
You will generally have to pay federal income taxes, as well as any other state and
local taxes, on any distributions which may be received from the Fund. If you sell Fund shares it is generally considered a taxable
event. The following table summarizes the tax status to you of certain transactions related to the Fund:
|
Transaction
|
Federal Tax Status
|
|
Redemption of shares
|
Usually capital gain or loss; long-term, only if shares owned more than
one year
|
|
Distributions of net capital gain
(excess of net long-term capital gain over net short-term
capital loss)
|
Long-term capital gain
|
|
Ordinary dividends
(including distributions of net short-term capital gain)
|
Ordinary income; certain dividends potentially taxable at long-term
capital gain rates
|
Distributions of net capital gain are taxable to you as long-term capital gains regardless
of how long you have owned your shares. Certain dividends may be treated as “qualified dividend income,” which for noncorporate shareholders is taxed at reduced rates. “Qualified dividend income” generally is income derived from dividends paid by U.S. corporations or certain foreign corporations that are either incorporated in a U.S. possession or eligible
for tax benefits under certain U.S. income tax treaties. In addition, dividends received from foreign corporations may be treated
as qualified dividend income if the stock with respect to which the dividends are paid is readily tradable on an established
U.S. securities market. A portion of the dividends received from the Fund (but none of the Fund’s capital gain distributions) may qualify for the dividends-received deduction for corporate shareholders.
You may want to avoid buying shares when the Fund is about to declare a dividend or
distribution, because it will be taxable to you even though it may effectively be a return of a portion of your investment. Similarly,
shareholders that are investing through a taxable account should consider the embedded gains or losses of the Fund.
For example, a new shareholder could be subject to taxes on a distribution it receives from the Fund that was earned when
it was not a shareholder. It is important to note that investors are only taxed on their own economic income over the life of the
investment. The embedded gains or losses for the Fund are disclosed in the most recent Annual and Semi-Annual Financial Statements
and Other Information.
The Fund’s dividends and other distributions are generally treated as received by shareholders when they are paid. However, if any dividend or distribution is declared by the Fund in October, November or December
of any calendar year and payable to shareholders of record on a specified date in such a month but is actually paid during
the following January, such dividend or distribution will be treated as received by each shareholder on December 31 of the
year in which it was declared.
After the end of the year, the Fund will provide you with information about the distributions
and dividends you received and any redemption of shares during the previous year. If you are neither a citizen nor
a resident of the United States, certain dividends that you receive from the Fund may be subject to federal withholding tax. To the extent that the Fund’s distributions consist of ordinary dividends or other payments that are subject to withholding, the
Fund will withhold federal income tax at the rate of 30% (or such lower rate as may be determined in accordance with any applicable
treaty). Dividends that are reported by the Fund as “interest-related dividends” or “short-term capital gain dividends” are generally exempt from such withholding for taxable years of the Fund beginning before January 1, 2014.
If you do not provide the Fund with your correct taxpayer identification number and
any required certifications, you will be subject to backup withholding on your redemption proceeds, dividends, and other distributions.
The backup withholding rate is currently 28%. Backup withholding will not, however, be applied to payments that
have been subject to the 30% withholding tax on shareholders who are neither citizens nor residents of the United
States.
Fees and Expenses of the Fund
The Fund must pay operating fees and expenses.
Management Fee
The management fee covers the normal expenses of managing the Fund, including compensation,
research costs, corporate overhead and related expenses.
12b-1 Fees
Clipper Fund does not charge any Rule 12b-1 distribution fees.
Other Expenses
Other expenses include miscellaneous fees from affiliated and outside service providers.
These fees may include legal, audit, custodial fees, the costs of printing and mailing of reports and statements, automatic
reinvestment of distributions and other conveniences, and payments to third parties that provide recordkeeping services or
administrative services for investors in the Fund.
Prospectus | Clipper Fund | 14
Total Fund Operating Expenses
The total cost of operating a mutual fund is reflected in its expense ratio. A shareholder
does not pay operating costs directly. Instead, operating costs are deducted before the Fund’s NAV is calculated and are expressed as a percentage of the Fund’s average daily net assets. The effect of these expenses is reflected in the performance
results for the Fund. Investors should examine total operating expenses closely in the prospectus, especially when comparing
one fund with another fund in the same investment category.
Fees Paid to Dealers and Other Financial Intermediaries
Broker-dealers and other financial intermediaries (“Qualifying Dealers”) may charge Davis Distributors, LLC (the “Distributor”) or the Adviser substantial fees for selling Clipper Fund’s shares and providing continuing support to shareholders. The fees charged by Qualifying Dealers may include, but are not limited
to: (1) recordkeeping fees from the Fund for providing recordkeeping services to investors who hold Clipper Fund shares
through dealer-controlled omnibus accounts; and (2) other fees, described below, paid by Davis Advisors or the Distributor
from their own resources.
Qualifying Dealers may, as a condition to distributing shares of Clipper Fund, request
that the Distributor, or the Adviser, pay or reimburse the Qualifying dealer for: (1) marketing support payments, including
business planning assistance, client servicing and data analytics, educating personnel about Clipper Fund and shareholder
financial planning needs, placement on the Qualifying dealer’s list of offered funds, and access to sales meetings, sales representatives and management representatives of the Qualifying dealer; and (2) financial assistance charged to
allow the Distributor to participate in and/or present at conferences or seminars, sales or training programs for invited registered
representatives and other employees, client and investor events, and other dealer-sponsored events. These additional fees are sometimes referred to as “revenue sharing” payments. A number of factors are considered in determining fees paid to Qualifying Dealers, including the dealer’s sales and assets and the quality of the dealer’s relationship with the Distributor. Fees are generally based on the value of shares of the Fund held by the Qualifying dealer or financial institution for its customers or based
on sales of Fund shares by the dealer or financial institution, or a combination thereof. In some cases, the charges or fees
may be a negotiated lump sum payment. Davis Advisors may use its profits from the advisory fee it receives from the Fund
to pay some or all of these fees. Some Qualifying Dealers may also choose to pay additional compensation to their registered
representatives who sell the Fund. Such payments may be associated with the status of the Fund on a Qualifying dealer’s preferred list of funds or otherwise associated with the Qualifying dealer’s marketing and other support activities. The foregoing arrangements may create an incentive for the Qualifying Dealers, brokers, or other financial institutions, as well as their
registered representatives, to sell Clipper Fund rather than other funds.
In 2025, the Distributor, or the Adviser, was charged additional fees by the Qualifying
Dealers listed below. The Distributor or the Adviser paid these fees from its own resources. These Qualifying Dealers may provide
Clipper Fund enhanced sales and marketing support and financial advisers employed by the Qualifying Dealers may recommend
Clipper Fund rather than other funds. Qualifying Dealers may be added or deleted at any time.
BMO Harris (fka Marshall & Ilsley Trust Company); Charles Schwab & Co., Inc.; Edward
D Jones; Fidelity Brokerage Services, LLC; LPL Financial; Matrix Settlement; Merrill Lynch; Mid-Atlantic Capital;
Morgan Stanley Smith Barney; Pershing, LLC; Raymond James & Associates, Inc.; RBC Capital Markets Corp.; Vanguard
Marketing Corporation; and Wells Fargo Advisors, LLC.
In addition, the Distributor may, from time-to-time, pay additional cash compensation
or other promotional incentives to authorized dealers or agents who sell shares of Clipper Fund. In some instances, such
cash compensation or other incentives may be offered only to certain dealers or agents who employ registered representatives
who have sold or may sell significant amounts of shares of Clipper Fund during specified periods of time.
Although Clipper Fund may use brokers who sell shares of the Fund to execute portfolio
transactions, the Fund does not consider the sale of Fund shares as a factor when selecting brokers to execute portfolio
transactions.
Investors should consult their financial intermediaries regarding the details of payments
they may receive in connection with the sale of Fund shares.
Due Diligence Meetings. The Distributor routinely sponsors due diligence meetings for registered representatives,
during which they receive updates on Clipper Fund and are afforded the opportunity to speak with the Fund’s Portfolio Managers. Invitation to these meetings is not conditioned on selling a specific number of shares.
Those who have shown an interest in Clipper Fund, however, are more likely to be considered. To the extent permitted by their firm’s policies and procedures, registered representatives’ expenses in attending these meetings may be covered by the Distributor.
Seminars and Educational Meetings. The Distributor may defray certain expenses of Qualifying Dealers incurred in connection with seminars and other educational efforts subject to the Distributor’s policies and procedures governing payments for such seminars. The Distributor may share expenses with Qualifying Dealers
for costs incurred in conducting training and educational meetings about various aspects of the Clipper Fund for the
employees of Qualifying Dealers. In addition, the Distributor may share expenses with Qualifying Dealers for costs incurred
in hosting client seminars at which the Fund is discussed.
Prospectus | Clipper Fund | 15
Recordkeeping Fees. Certain Qualifying Dealers have chosen to maintain “omnibus accounts” with Clipper Fund. In an omnibus account, the Fund maintains a single account in the name of the Qualifying
dealer and the dealer maintains all of its clients’ individual shareholder accounts. Likewise, for many retirement plans, a third-party administrator may open an omnibus account with Clipper Fund and the administrator will then maintain all of
the participant accounts. Davis Advisors, on behalf of the Fund, enters into agreements whereby the Fund is charged by the Qualifying
dealer or administrator for such recordkeeping services.
Recordkeeping services typically include: (1) establishing and maintaining shareholder
accounts and records; (2) recording shareholder account balances and changes thereto; (3) arranging for the wiring of
funds; (4) providing statements to shareholders; (5) furnishing proxy materials, periodic Clipper Fund reports, prospectuses,
and other communications to shareholders as required; (6) transmitting shareholder transaction information; and
(7) providing information in order to assist the Clipper Fund in its compliance with state securities laws. Clipper Fund, typically,
would be paying these shareholder servicing fees directly if a Qualifying dealer did not hold all customer accounts
in a single omnibus account with Clipper Fund.
Other Compensation. The Distributor may, from its own resources and not from the Fund’s, pay additional fees to the extent not prohibited by state or federal laws, the Securities and Exchange Commission (SEC),
or any self-regulatory agency such as the Financial Industry Regulatory Authority (FINRA).
How to Open an Account
To open an account with Clipper Fund you must initially invest at least $2,500 in
a regular or IRA account.
At the Distributor’s discretion, the minimum may be waived for an account established under a “wrap account” or other fee-based program that is sponsored and maintained by a registered broker-dealer approved by
the Distributor. The Distributor reserves the right, at its discretion and without notice, to modify, waive, or increase
the minimum initial investment requirements for any investor, or category of investors, or financial intermediaries
that submit trades on behalf of underlying investors.
To Open an Account
|
Mail
|
Complete and sign the Application Form and mail it to the Clipper Fund. Include a
check made payable to
Clipper Fund. All purchases by check should be in U.S. dollars. Clipper Fund will not accept third-party
checks, starter checks, traveler’s checks, or money orders.
|
|
Regular mail
Clipper Fund
P.O. Box 219167
Kansas City,
MO64121-9167
|
Express shipping
Clipper Fund
801 Pennsylvania Ave
Suite 219167
Kansas City, MO 64105-1307
|
|
Dealer
|
You may have your dealer order and pay for the shares. In this case, you must pay
your dealer directly. Your
dealer will then order the shares from the Distributor. Please note that your dealer
may charge a service fee
or commission for these transactions.
|
Anti-Money Laundering Compliance
Clipper Fund and the Distributor are required to comply with various anti-money laundering
laws and regulations and have appointed an anti-money laundering compliance officer. Consequently, Clipper Fund
or the Distributor may request additional information from you to verify your identity and the source of your funds. If you
do not provide the requested information, Clipper Fund may not be able to open your account. If at any time the Clipper Fund
believes an investor may be involved in suspicious activity or if certain account information matches information on government
lists of suspicious persons, Clipper Fund and the Distributor may choose not to establish a new account or may be required to “freeze” a shareholder’s account. They may also be required to provide a government agency or another financial institution
with information about transactions that have occurred in a shareholder’s account or to transfer monies received to establish a new account, transfer an existing account or transfer the proceeds of an existing account to a governmental agency.
In some circumstances, the law may not permit the Clipper Fund or the Distributor to inform the shareholder that it has taken
the actions described above.
Retirement Plan Accounts
You can invest in Clipper Fund using any of these types of retirement plan accounts:
◼
IRAs
◼
Roth IRAs
◼
Simplified Employee Pension (SEP) IRAs
UMB Bank acts as custodian for these retirement plans and charges each participant
a $10 custodial fee each year per Social Security Number. This fee will be waived for accounts sharing the same Social Security
Number if the accounts total at least $50,000 at Clipper Fund. This custodial fee is automatically deducted from each account
in December, unless you elect to pay
Prospectus | Clipper Fund | 16
the fee directly. Checks for the custodial fee should be made payable to UMB Bank.
If an account is closed before this fee is paid, it will be deducted from the proceeds at the time of the redemption. To open
a retirement plan account, you must fill out a Retirement Account Application Form. You can request this form by calling Investor Services or by visiting Clipper Fund’s website, www.clipperfund.com.
How to Buy and Sell Shares
Once you have established an account with Clipper Fund, you can add to or withdraw
from your investment. This prospectus describes the types of transactions you can perform as a Clipper Fund shareholder
including how to initiate these transactions and the charges that you may incur (if any) when buying or selling shares. A transaction
will not be executed until all required documents have been received in a form meeting all legal requirements. Legal requirements
vary depending upon the type of transaction and the type of account. Call Investor Services for instructions. These
procedures and charges may change over time and the prospectus in effect at the time a transaction is initiated will describe
the procedures and charges that will apply to the transaction.
Right to Reject or Restrict any Purchase Order
Purchases should be made for long-term investment purposes only. Clipper Fund and
the Distributor reserve the right to reject any purchase order for any reason prior to the end of the first business day after
the date that a purchase order was processed. Clipper Fund, or the Distributor, may “reject” a current purchase order or “restrict” an investor from placing future purchase orders. Clipper Fund and the Distributor will not reject or restrict a redemption
order without adequate reason, including, but not limited to, allowing a purchase check to clear, a court order, etc. Clipper Fund
is not designed to serve as a vehicle for frequent trading in response to short-term fluctuations in the securities markets.
Accordingly, purchases that are part of activity that Clipper Fund or the Distributor has determined may involve actual or potential
harm to the Fund may be rejected.
Ways to Buy and Sell Shares
|
Telephone
|
Call 1-800-432-2504. You can speak directly with an Investor Services Professional, Monday through Friday,
from 9 a.m. to 6 p.m. Eastern time or use the Fund’s automated telephone system at any time, day or night.
|
|
Online
|
You may initiate most account transactions through online account access on the Clipper
Fund website,
www.clipperfund.com. Please note that certain account types may be restricted from
online access.
|
|
Mail
|
Send the request to the Clipper Fund at either address listed below.
|
|
Regular mail
Clipper Fund
P.O. Box 219167
Kansas City, MO
64121-9167
|
Express shipping
Clipper Fund
801 Pennsylvania Ave
Suite 219167
Kansas City, MO 64105-1307
|
|
Dealer
|
Contact a dealer who will execute the transaction through the Distributor. Please
note that your dealer may
charge service fees or commissions for these transactions.
|
|
Wire
|
You may wire federal funds directly to the Fund’s service provider, State Street Bank and Trust Company.
|
Clipper Fund does not issue certificates for its shares. Instead, shares purchased
are automatically credited to an account maintained for you on the books of Clipper Fund by State Street Bank and Trust Company.
Transactions in the account, such as additional investments, will be reflected on regular confirmation statements from
Clipper Fund. Dividend and capital gain distributions, purchases through automatic investment plans and certain retirement
plans, and withdrawals will be confirmed at least quarterly.
When Your Transactions Are Processed
Purchases and sales will be processed at 4 p.m. Eastern time after the Fund’s transfer agent or other qualified financial intermediary receives your request to purchase or sell shares in good order, including
all documents that are required to constitute a legal purchase or sale of shares.
Buying More Shares
You may buy more shares at any time, by mail, through a dealer, by telephone, through
online account access, or by wire. The minimum additional purchase amount is $25.
Mail. When you purchase shares by mail:
◼
Make the check payable to Clipper Fund.
◼
If you have the investment slip from your most recent statement, include it with the
check. If you do not have an investment slip, include a letter with your check that includes your account number.
Dealer. When you buy shares through a dealer, you may be charged service fees or commissions
for these transactions.
Prospectus | Clipper Fund | 17
Telephone. If you have a bank account listed on your account you may purchase shares via ACH
(Automated Clearing House) and the funds will be pulled directly from your bank account to purchase shares. Call
1-800-432-2504 to use the Fund’s automated phone system 24 hours a day or speak to an Investor Services Professional,
Monday through Friday, from 9 a.m. to 6 p.m. Eastern time.
Online Account Access. If you have a bank account listed on your account you may purchase shares via ACH
(Automated Clearing House) and the funds will be pulled directly from your bank account to purchase shares. See “Internet Transactions” in this prospectus for details on how to access your account through the internet.
Wire. You may wire federal funds directly to the Fund’s service provider, State Street Bank and Trust Company. To ensure that the purchase is credited properly, follow these wire instructions:
State Street Bank and Trust Company
Boston, MA 02210
Attn: Mutual Fund Services
Clipper Fund
Shareholder Name
Shareholder Account Number
Federal Routing Number: 011000028
DDA Number: 9905-370-4
Boston, MA 02210
Attn: Mutual Fund Services
Clipper Fund
Shareholder Name
Shareholder Account Number
Federal Routing Number: 011000028
DDA Number: 9905-370-4
Inactive Accounts
If shareholder-initiated contact does not occur on your account within the timeframe
specified by the law in your state of record or if Fund mailings are returned as undeliverable during that timeframe, the
assets of your account (shares and/or any uncashed checks) may be transferred to your last known recorded state of residence
as unclaimed property in accordance with specific state law. NOTE: If you fail to initiate such contact, your property will
be escheated to your last known state of residency after which you will need to claim the property from that state.
If a check remains uncashed for four months or is undeliverable by the United States
Postal Service, the Fund may reinvest the proceeds in additional shares of the Fund. In addition, your account options may be
updated to reinvest all subsequent distributions in shares of the Fund and systematic withdrawal options may be terminated.
Making Automatic Investments
An easy way to increase your investment in Clipper Fund is to sign up for the Automatic
Investment Plan. Under this plan, you arrange for a predetermined amount of money to be withdrawn from your bank account
and invested in Fund shares. The minimum amount you can invest under the plan each month is $25. The account minimum
of $2,500 must be met prior to establishing an automatic investment plan.
Purchases can be processed electronically on any day of the month if the institution
that services your bank account is a member of the Automated Clearing House (ACH) system. Each debit should be reflected
on your next bank statement.
To sign up for the Automatic Investment Plan, complete the appropriate section of
the Application Form or complete an Account Service Form. You can modify your Automatic Investment Plan at any time by
calling Investor Services.
Selling Shares
You may sell back all or part of your shares in the Fund (also known as redeeming
your shares) on any day that the Fund is open at net asset value. You can sell the shares by mail, through a dealer, by telephone,
or through online account access. The Fund typically expects to pay redemption proceeds one business day following receipt
and acceptance of a proper redemption request. However, in some cases, payment from the Fund may take longer than one business
day and may take up to seven days as is generally permitted by the Investment Company Act of 1940, as amended. The Fund
may, under limited circumstances, be permitted to pay redemption proceeds beyond seven days following receipt and acceptance
of a proper redemption request. You may redeem shares on any day that the Fund is open. If you recently purchased
shares and subsequently request a redemption of those shares, redemption proceeds may be withheld until a sufficient
period of time has passed to reasonably ensure that all checks or drafts (including certified or cashier’s checks) have cleared, normally not exceeding fifteen calendar days from the purchase date.
Under normal conditions, the Fund typically expects to meet shareholder redemption
requests by using available cash (or cash equivalents) or by selling portfolio securities. The Fund may use additional methods
to meet shareholder redemption requests, if they become necessary. These methods may be used during both normal and stressed
market conditions. These methods may include, but are not limited to, the use of overdraft protection afforded by the Fund’s custodian bank or borrowing from a line of credit.
In addition to paying redemption proceeds in cash, the Fund reserves the right to
pay part or all of your redemption proceeds with Fund securities or other Fund assets instead of cash (in-kind redemption). On
the same redemption date, some shareholders may be paid in whole or in part in securities (which may differ among
those shareholders), while other shareholders may be paid entirely in cash. The disposal of the securities received
in-kind may be subject to brokerage costs and, until sold, such securities remain at market risk and liquidity risk, including
the risk that such securities are or become
Prospectus | Clipper Fund | 18
difficult to sell. If the Fund pays your redemption with illiquid or less liquid securities,
you will bear the risk of not being able to sell such securities. A redemption in-kind is treated as a taxable transaction
and a sale of the redeemed shares, generally resulting in a capital gain or loss to you, subject to certain loss limitation rules.
Mail. All registered shareholders must sign the request.
◼
A Medallion Signature Guarantee is required if the redemption request is:
−
For a check greater than $100,000;
−
Made payable to someone other than the registered shareholder(s);
−
Sent to an address other than to the address of record or to an address of record
that has been changed in the last 30 days; or
−
To a bank account not on record.
Dealer. When you sell shares through a dealer, you may be charged service fees or commissions
for these transactions.
Telephone. Call 1-800-432-2504 to use the Clipper Fund’s automated phone system 24 hours a day or speak to an Investor Services Professional, Monday through Friday, from 9 a.m. to 6 p.m. Eastern time.
◼
Redemptions by check:
−
Are limited to $100,000;
−
Must be mailed to the address of record that has been on the account for at least
30 days; and
−
Must be made payable to the registered shareholder.
◼
Redemptions via wire or ACH can only be sent to an eligible bank currently on the
account.
Online Account Access. See “Internet Transactions” in this prospectus for details on how to access your account through the internet.
◼
Redemptions by check:
−
Are limited to $100,000;
−
Must be mailed to the address of record that has been on the account for at least
30 days; and
−
Must be made payable to the registered shareholder.
◼
There is a 15-day holding period following a bank maintenance event during which online
redemptions are restricted. Shareholders are still able to submit redemption requests via phone or written instruction.
◼
Redemptions via wire or ACH can only be sent to an eligible bank currently on the
account.
Unless you decide not to have telephone, fax, or internet services on your account(s),
you agree to hold the Clipper Fund, any of its affiliates or mutual funds managed by such affiliates, and each of their respective
directors/trustees, officers, employees, and agents harmless from any losses, expenses, costs, or liabilities (including attorney’s fees) that may be incurred in connection with the exercise of these privileges when Clipper Fund, acting in good
faith, has complied with instructions that are believed to be genuine. The Fund uses certain procedures to confirm that your
instructions are genuine. If these procedures are not used, the Fund may be liable for any loss from unauthorized instructions.
What You Need to Know Before You Sell Your Shares
You will always receive cash for sales that total less than $250,000 or one percent of the Fund’s net asset value during any ninety-day period. Any sales above the cash limit may be paid in securities.
◼
In certain circumstances, such as the death of a shareholder or acting as power of
attorney, additional documentation may be required. Please contact Investor Services at 1-800-432-2504 to determine if your situation requires such documentation.
◼
In the past, Clipper Fund issued certificates for its shares. If a certificate was
issued for the shares you wish to sell, the certificate must be sent by certified mail to Clipper Fund, accompanied by a letter
of instruction signed by the owner(s).
◼
A sale may produce a gain or loss. Gains may be subject to tax.
◼
The SEC may suspend redemption of shares under certain emergency circumstances if
the New York Stock Exchange is closed for reasons other than customary closings and holidays.
Medallion Signature Guarantee
To protect you and Clipper Fund against fraud, certain redemption requests must be
made in writing with your signature guaranteed. A Medallion Signature Guarantee is a written endorsement from an eligible
guarantor institution that the signature(s) on the written request is (are) valid. Certain commercial banks, trust
companies, savings associations, credit unions, and members of a United States stock exchange participate in the Medallion
Signature Guarantee Program. No other form of signature verification will be accepted.
Prospectus | Clipper Fund | 19
Stock Power
This is a letter of instruction signed by the owner of Fund shares that gives State
Street Bank and Trust Company permission to transfer ownership of the shares to another person or group. Any transfer of ownership
requires that all shareholders have their signatures Medallion-guaranteed.
Involuntary Redemption
If your fund/account balance declines to less than $2,500 as a result of a redemption
or transfer, the Fund will redeem your remaining shares in the Fund at net asset value. You will be notified before your
account is involuntarily redeemed. Telephone redemptions will receive immediate notice that the redemption will result in the entire
account being redeemed upon execution of the transaction. All other redemptions will receive a letter notifying account
holders that their accounts will be involuntarily redeemed unless the account balance is increased to at least $2,500 within 30 days.
Systematic Withdrawal Plan
You can sell a predetermined dollar or percentage amount each month or quarter (for
retirement accounts or IRAs, withdrawals may be established on an annual basis). Because withdrawals are sales,
they may produce a gain or loss. If you purchase additional Fund shares at around the same time that you make a withdrawal,
you may have to pay taxes. When you participate in this plan, shares are sold so that you will receive payment by one
of three methods:
◼
You may receive a check at the address of record provided that this address has not
changed for a period of at least 30 days.
◼
You may also choose to receive funds by ACH by completing an Account Service Form.
If you wish to execute a Systematic Withdrawal Plan by ACH after your account has been established, please
complete an Account Service Form and have your signature Medallion-guaranteed.
◼
You may have funds sent by check to a third-party at an address other than the address
of record. In order to do so, you must complete the appropriate section of the Application Form. If you wish to designate
a third-party payee after your account has been established, you must submit a letter of instruction with a Medallion
Signature Guarantee.
You may stop systematic withdrawals at any time without charge or penalty by calling
Investor Services.
Wiring Sale Proceeds to Your Bank Account
You may be eligible to have your redemption proceeds electronically transferred to
a commercial bank account by federal funds wire. There is a $5 charge by State Street Bank and Trust Company for wire service
and receiving banks may also charge for this service. Proceeds of redemption by federal funds wire are usually credited
to your bank account on the next business day after the sale. Alternatively, redemption through ACH will usually arrive at your
bank two banking days after the sale. To have redemption proceeds sent by federal funds wire to your bank, you must first fill out the “Banking Instructions” section on the Account Application Form and attach a voided check or deposit slip. If the
account has already been established, an Account Service Form must be submitted with a Medallion Signature Guarantee and a
voided check.
Frequent Purchases and Redemptions of Fund Shares
Clipper Fund discourages short-term or excessive trading, does not accommodate short-term
or excessive trading, and, if detected, intends to restrict or reject such trading or take other action if in the
judgment of Davis Advisors such trading may be detrimental to the interest of the Fund. Such strategies may dilute the value of Fund
shares held by long-term shareholders, interfere with the efficient management of the Fund’s portfolio, and increase brokerage and administrative costs.
Clipper Fund’s Board of Trustees has adopted a 30-day restriction policy with respect to the frequent purchase and redemption of Fund shares. Under the 30-day restriction any shareholder redeeming shares from
the Fund will be precluded from investing in the Fund for 30 calendar days after the redemption transaction. Transactions that
are part of a systematic plan are excluded from this restriction. Certain financial intermediaries, such as 401(k) plan administrators,
may apply purchase and exchange limitations which are different than the limitations discussed above. These limitations
may be more or less restrictive than the limitations imposed by Clipper Fund, but are designed to detect and prevent excessive
trading. Shareholders should consult their financial intermediaries to determine what purchase limitations may be applicable
to their transactions in Clipper Fund through those financial intermediaries. To the extent reasonably feasible, the Fund’s market timing procedures apply to all shareholder accounts and neither Clipper Fund nor Davis Advisors have entered into
agreements to exempt any shareholder from application of either Clipper Fund’s or a financial intermediary’s market-timing procedures, as applicable.
Clipper Fund receives purchase and redemption orders from many financial intermediaries
that maintain omnibus accounts with the Fund. Omnibus account arrangements permit financial intermediaries to aggregate their clients’ transactions and ownership positions. If the Fund, or the Distributor, discovers evidence of material
excessive trading in an omnibus account they may seek the assistance of the financial intermediary to prevent further excessive
trading in the omnibus account. Shareholders seeking to engage in excessive trading practices may employ a variety
of strategies to avoid detection and there can be no assurance that the Fund will successfully prevent all instances of market
timing.
If Clipper Fund, at its discretion, identifies any activity that may constitute frequent
trading, it reserves the right to restrict further trading activity regardless of whether the activity exceeds the Fund’s written guidelines. In applying this policy, Clipper Fund reserves the right to consider the trading of multiple accounts under common
ownership, control, or influence to be trading out of a single account.
Prospectus | Clipper Fund | 20
This policy regarding frequent trading does not apply to the following: (1) purchases
and redemptions of Fund shares by ReFlow in connection with the Fund’s participation in the ReFlow Liquidity Program (see “Non-Principal Investment Strategies and Risks – ReFlow Liquidity Program”); and (2) purchase and sale activity by certain approved third parties who agree to accept redemptions in-kind in lieu of cash in liquidation of Fund shares,
subject to the determination by the Adviser that such purchase and sale activity is in the best interest of Fund shareholders.
Telephone Transactions
A benefit of investing through Clipper Fund is that you can use the Fund’s automated telephone system to buy or sell shares. IRA shares cannot be sold through the automated telephone system. If you do not wish
to have this option activated for your account, complete the appropriate section of the Application Form or contact Investor
Services.
When you call Clipper Fund, you can perform a transaction in one of two ways:
◼
Speak directly with an Investor Services Professional during business hours (9 a.m.
to 6 p.m. Eastern time).
◼
You can use the automated telephone system, 24 hours a day, seven days a week.
When you buy or sell shares by telephone instruction, you agree that Clipper Fund
is not liable for following telephone instructions believed to be genuine (that is, believed to be directed by the account
holder, registered representative, or authorized trader whose name is on file). The Fund uses certain procedures to confirm
that your instructions are genuine, including a request for personal identification and a tape recording of the conversation.
If these procedures are not used, the Fund may be liable for any loss from unauthorized instructions.
Be aware that during unusual market conditions, Clipper Fund may not be able to accept
all requests by telephone.
Internet Transactions
You can use the Fund’s website, www.clipperfund.com, to review your account balance and recent transactions. Your account may qualify for the privilege to purchase or sell shares online. IRA shares cannot
be sold through the automated telephone system or online. You may also elect to receive the summary prospectus, account statements
and annual and semi-annual reports electronically, in lieu of paper form, by enrolling in eConsent on the Fund’s website. Please review the Fund’s website for more complete information.
To access your accounts, you must establish a unique and confidential User ID and
Password. To create your User ID and Password, you will need your account number and the last four digits of your Social
Security Number and either a cell phone or email for satisfying the two-factor authentication. Your User ID and Password will
be required each time you access your Clipper account online.
When you buy or sell shares over the Internet, you agree that Clipper Fund is not
liable for following instructions believed to be genuine (that is, believed to be, directed by the account holder or registered
representative on file). The Fund uses certain procedures to confirm that your instructions are genuine. If these procedures are
not used, the Fund may be liable for any loss from unauthorized instructions.
Householding
The Fund may, on occasion, mail notices, reports, prospectuses, or proxy material
to shareholders. To avoid sending duplicate copies of materials to households, the Fund will mail only one copy of these items
to shareholders having the same last name and address on the Fund’s records. The consolidation of these mailings, called householding, benefits the Fund through reduced mailing expense. If you have a direct account with the Fund and you do not
want the mailing of these documents to be combined with those to other members of your household, please contact Clipper Fund
by phone at 1-800-432-2504. Your instructions will become effective within 30 days of your notice to the Fund.
Privacy Notice
While you generally will be dealing with a broker-dealer or other financial adviser,
we may collect information about you from your account application and other forms that you may deliver to us. We use this
information to process your requests and transactions; for example, to provide you with additional information about our
Funds, to open an account for you, or to process a transaction. In order to service your account and execute your transactions,
we may provide your personal information to firms that assist us in servicing your account, such as our transfer
agent. We may also provide your name and address to one of our agents for the purpose of mailing to you your account statement
and other information about our products and services. We may also gather information through the use of “cookies” when you visit our website. These files help us to recognize repeat visitors and allow easy access to and use of the website.
We require these outside firms and agents to protect the confidentiality of your information and to use the information only
for the purpose for which the disclosure is made. We do not provide customer names and addresses to outside firms, organizations,
or individuals except in furtherance of our business relationship with you or as otherwise allowed by law.
We restrict access to non-public personal information about you to those employees
who need to know that information to provide products or services to you. We maintain physical, electronic, and procedural
safeguards that comply with federal standards to guard your personal information.
Prospectus | Clipper Fund | 21
Financial Highlights
The financial highlights table is intended to help you understand the Fund’s financial performance for the past 5 years ended December 31, 2025. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This information has been derived
from information audited by KPMG LLP, whose report, along with the Fund’s financial statements, are included in the Annual Financial Statements and Other Information, which is available upon request.
Prospectus | Clipper Fund | 22
Financial Highlights
CLIPPER FUND
The following financial information represents selected data for each share of capital
stock outstanding throughout each period:
|
|
Year ended December 31,
|
||||
|
|
2025a
|
2024a
|
2023a
|
2022a
|
2021a
|
|
Net Asset Value, Beginning of Period
|
$13.62
|
$12.93
|
$10.49
|
$13.64
|
$13.17
|
|
Income (Loss) from Investment Operations:
|
|||||
|
Net Investment Incomeb
|
0.14
|
0.13
|
0.12
|
0.11
|
0.05
|
|
Net Realized and Unrealized Gains (Losses)
|
3.45
|
2.39
|
3.11
|
(2.66)
|
2.30
|
|
Total from Investment Operations
|
3.59
|
2.52
|
3.23
|
(2.55)
|
2.35
|
|
Dividends and Distributions:
|
|||||
|
Dividends from Net Investment Income
|
(0.14)
|
(0.14)
|
(0.13)
|
(0.13)
|
(0.05)
|
|
Distributions from Realized Gains
|
(1.18)
|
(1.69)
|
(0.66)
|
(0.47)
|
(1.83)
|
|
Total Dividends and Distributions
|
(1.32)
|
(1.83)
|
(0.79)
|
(0.60)
|
(1.88)
|
|
Net Asset Value, End of Period
|
$15.89
|
$13.62
|
$12.93
|
$10.49
|
$13.64
|
|
Total Returnc
|
27.43%
|
19.49%
|
31.48%
|
(18.75)%
|
17.78%
|
|
Ratios/Supplemental Data:
|
|||||
|
Net Assets, End of Period (in millions)
|
$1,357
|
$1,149
|
$1,067
|
$880
|
$1,189
|
|
Ratio of Expenses to Average Net Assets:
|
|||||
|
Gross
|
0.68%
|
0.70%
|
0.71%
|
0.71%
|
0.71%
|
|
Netc
|
0.68%
|
0.70%
|
0.71%
|
0.71%
|
0.71%
|
|
Ratio of Net Investment Income to Average Net Assets
|
0.96%
|
0.94%
|
1.05%
|
0.95%
|
0.33%
|
|
Portfolio Turnover Ratee
|
17%
|
20%
|
8%
|
9%
|
25%
|
a
Per share amounts have been adjusted to reflect the impact of the 10 for 1 share split
that occurred on May 9, 2025.
b
Per share calculations were based on average shares outstanding for the period.
c
Assumes hypothetical initial investment on the business day before the first day of
the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value
calculated on the last business day of the fiscal period.
d
The Net Ratio of Expenses to Average Net Assets reflects the impact, if any, of certain
reimbursements and/or waivers from the Adviser.
e
The lesser of purchases or sales of portfolio securities for a period, divided by
the monthly average of the fair value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition
of one year or less or securities delivered from in-kind redemptions are excluded from the calculation.
Prospectus | Clipper Fund | 23
Investment Company Act File No. 811-21758
2949 East Elvira Road, Suite 101
Tucson, AZ 85756
1-800-432-2504
www.clipperfund.com
Tucson, AZ 85756
1-800-432-2504
www.clipperfund.com
Obtaining Additional Information
Additional information about the Fund’s investments is available in the Fund’s annual and semi-annual reports to shareholders and in Form N-CSR. In the Fund’s annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during its last fiscal year. The SAI provides more detailed information about the Fund and its management and operations. In Form N-CSR, you will find the Fund’s annual and semi-annual financial statements.
The Fund’s SAI and annual report have been filed with the Securities and Exchange Commission, are incorporated into this prospectus by reference, and are legally a part of this prospectus.
The Fund’s SAI, annual and semi-annual reports to shareholders, and other information such as Fund financial statements are available, without charge, upon request:
By Telephone: Call the Fund toll-free at 1-800-432-2504, Monday through Friday, from 9 a.m. to 6 p.m. Eastern time. You may also call this number for account inquiries.
By Mail: Write to Clipper Fund, P.O. Box 219167, Kansas City, MO 64121-9167
On the Internet: clipperfund.com/resources/regulatory-documents
By email: crinvestor.services@dsaco.com
From the SEC: Reports and other information about the Fund are also available on the EDGAR database on the SEC website (www.sec.gov). Additional copies of the registration statement can be obtained, for a duplicating fee, by sending an electronic request to publicinfo@sec.gov.
Clipper Fund
May 1, 2026
STATEMENT OF ADDITIONAL INFORMATION
A Portfolio of Clipper Funds Trust
Ticker: CFIMX
This statement of additional information is not a prospectus and should be read in
conjunction with the Fund’s prospectus dated May 1, 2026. This statement of additional information incorporates the prospectus by reference. A copy of the Fund’s prospectus may be obtained, without charge, by calling Investor Services at 1-800-432-2504 or by visiting our website, www.clipperfund.com/resources/regulatory-documents.
The Fund’s most recent annual report and semi-annual report to shareholders, and other information such as Fund financial statements, are separate documents that are available,
without charge, upon request.
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Statement of Additional Information | Clipper Fund | 2
Section I:
Investment Objective, Strategies, Risks, and Restrictions
Investment Objective, Strategies, Risks, and Restrictions
This statement of additional information (the “SAI”) supplements, and should be read in conjunction with, the prospectus for Clipper Fund (the “Fund”).
The Adviser and Sub-Adviser. The Fund is managed by Davis Selected Advisers, L.P. (the “Adviser”) and Davis Selected Advisers–NY, Inc. (the “Sub-Adviser”).
Investment Objective
The investment objective of the Fund is long-term capital growth and capital preservation.
There is no assurance that the Fund will achieve its investment objective. An investment in the Fund may not be appropriate
for all investors, and short-term investing is discouraged. The Fund’s investment objective is a fundamental policy, which means that it may not be changed by the Fund’s Board of Trustees without shareholder approval.
Non-Principal Investment Strategies and Risks
The Adviser may implement investment strategies which are not principal investment
strategies if, in its professional judgment, the strategies are appropriate. A strategy includes any policy, practice,
or technique used by the Fund to achieve its investment objective. Whether a particular strategy, including a strategy to invest
in a particular type of security, is a principal investment strategy depends on the strategy’s anticipated importance in achieving the Fund’s investment objective, and how the strategy affects the Fund’s potential risks and returns. In determining what is a principal investment strategy, the Adviser considers, among other things, the amount of the Fund’s assets expected to be committed to the strategy, the amount of the Fund’s assets expected to be placed at risk by the strategy, and the likelihood of the Fund losing some or all of those assets from implementing the strategy. Non-principal investment strategies are generally
those investments which constitute less than 5% to 10% of a Fund’s assets depending upon their potential impact upon the investment performance of the Fund.
While the Adviser expects to pursue the Fund’s investment objective by implementing the principal investment strategies described in the Fund’s prospectus, the Fund may employ non-principal investment strategies or securities if, in Davis Advisors’ professional judgment, the securities, trading, or investment strategies are appropriate. Factors that Davis Advisors considers in pursuing these other strategies include whether the strategy: (1) is likely to be consistent with shareholders’ reasonable expectations; (2) is likely to assist the Adviser in pursuing the Fund’s investment objective; (3) is consistent with the Fund’s investment objective; (4) will not cause the Fund to violate any of its fundamental or non-fundamental investment restrictions; and (5) will not materially change the Fund’s risk profile from the risk profile that results from following the principal investment strategies as described in the Fund’s prospectus and further explained in this SAI, as amended from time to time.
The composition of the Fund’s portfolio and the strategies that the Adviser may use to try to achieve the Fund’s investment objective may vary depending on market conditions and available investment opportunities.
The Fund is not required to use any of the investment strategies described below in pursuing its investment objective.
The Fund may use some of the investment strategies rarely or not at all. Whether the Fund uses a given investment
strategy at a given time depends on the professional judgment of the Adviser.
The principal investment strategies and risks for the Fund are described in the Fund’s prospectus. A number of investment strategies and risks, which are not principal investment strategies or principal risks
for the Fund (and, therefore, are not included in the Fund’s prospectus), are described below.
Equity Strategies and Risks
Emphasizing Investments in Selected Market Sectors. A Fund may invest up to 25% of its net assets in the securities of issuers conducting their principal business activities in the same market sector.
Significant investments in selected market sectors render a portfolio particularly vulnerable to the risks of its target sectors.
Such exposure may cause that Fund to be more impacted by risks relating to and developments affecting that market sector.
For purposes of measuring concentration in a market sector, the Fund generally classifies companies at the “industry group” or “industry” level. However, further analysis may lead the Adviser to classify companies at the sub-industry level. See the section
of this SAI on Investment Restrictions for further details.
China Risk – Generally. Investments in Chinese securities may subject the Fund to risks that are specific
to China. China may be subject to significant amounts of instability including, but not limited to, economic, political, and social instability. China’s economy may differ from the U.S. economy in certain respects including, but not limited
to, general development, level of government involvement, wealth distribution, and structure. The government of China
has historically demonstrated its control over almost every sector of the Chinese economy through state ownership and/or administrative
regulation. As an example, the Chinese government has taken certain actions that have influenced prices of goods,
encouraged companies to invest in certain industries, has induced mergers, and may take such actions or similar actions now
or in the future. In addition, the Chinese government has taken actions which could materially impact the business operations
of certain industries which could impact underlying holdings. U.S. and Chinese regulators have, and may in the future, impact
the ability of Chinese companies to gain access to U.S. capital markets.
Statement of Additional Information | Clipper Fund | 3
For purposes of raising capital offshore on exchanges outside of China, including
on U.S. exchanges, many Chinese-based operating companies are structured as VIEs. In this structure, the Chinese-based operating
company is the VIE and establishes a shell company in a foreign jurisdiction, such as the Cayman Islands. The shell company
lists on a foreign exchange and enters into contractual arrangements with the VIE. This structure allows Chinese companies
in which the government restricts foreign ownership to raise capital from foreign investors. While the shell company
has no equity ownership of the VIE, these contractual arrangements permit the shell company to consolidate the VIE’s financial statements with its own for accounting purposes and provide for economic exposure to the performance of the underlying Chinese
operating company. Therefore, an investor in the listed shell company, such as the Fund, will have exposure to the
Chinese-based operating company only through contractual arrangements and has no ownership in the Chinese-based operating
company. Furthermore, because the shell company only has specific rights provided for in these service agreements with
the VIE, its abilities to control the activities at the Chinese-based operating company are limited and the operating company
may engage in activities that negatively impact investment value.
While the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could prohibit the existence of such structures or negatively impact the VIE’s contractual arrangements with the listed shell company by making them invalid. If these contracts
were found to be unenforceable under Chinese law, investors in the listed shell company, such as the Fund, may suffer significant
losses with little or no recourse available. If the Chinese government determines that the agreements establishing the
VIE structures do not comply with Chinese law and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and operating licenses, or forfeiture
of ownership interest. In addition, the listed shell company’s control over a VIE may also be jeopardized if a natural person who holds the equity interest in the VIE breaches the terms of the agreement, is subject to legal proceedings, or if any physical
instruments for authenticating documentation, such as chops and seals, are used without the Chinese-based issuer’s authorization to enter into contractual arrangements in China. Chops and seals, which are carved stamps used to sign documents,
represent a legally binding commitment by the company. Moreover, any future regulatory action may prohibit the
ability of the shell company to receive the economic benefits of the Chinese-based operating company, which may cause the value of the Fund’s investment in the listed shell company to suffer a significant loss. For example, in 2021, the Chinese
government prohibited use of the VIE structure for investment in after-school tutoring companies. There is no guarantee
that the government will not place similar restrictions on other industries.
Chinese law prohibits investments by foreign investors in certain companies in certain
industries. Certain industries that impact minors may be at a higher risk of regulatory action. The Chinese government
placed new regulations on the companies related to after-school tutoring and private educational services, one of which is
mandating that it must now be registered as a non-profit organization.
Consumer Discretionary Sector Risk. Companies engaged in the design, production, or distribution of products or services
for the consumer discretionary sector (e.g., retailing and consumer services) are
subject to the risk that their products or services may become obsolete quickly. The success of these companies can depend heavily
on disposable household income and consumer spending. During periods of an expanding economy, the consumer discretionary
sector may outperform the consumer staples sector, but may underperform when economic conditions worsen. Moreover,
the consumer discretionary sector can be significantly affected by several factors including, without limitation,
the performance of domestic and international economies, exchange rates, changing consumer preferences, demographics,
marketing campaigns, cyclical revenue generation, consumer confidence, commodity price volatility, labor relations,
interest rates, import and export controls, intense competition, technological developments, and government regulation.
Broadline Retail Risk. Retailers, especially those that operate via the internet or direct marketing (e.g.,
online consumer services, online retail, travel) are subject to fluctuating consumer demand. Unlike
traditional brick and mortar retailers, online marketplaces and retailers must assume shipping costs or pass such costs to consumers.
Consumer access to price information for the same or similar products may cause companies that operate in the online marketplace,
retail, and travel segments to reduce profit margins in order to compete. Due to the nature of their business models,
companies that operate in the online marketplace, retail, and travel segments may also be subject to heightened cybersecurity
risk including the risk of theft or damage to vital hardware, software, and information systems. The loss or public dissemination
of sensitive customer information or other proprietary data may negatively affect the financial performance
of such companies to a greater extent than traditional brick and mortar retailers. As a result of such companies being web-based
and the fact that they process, store, and transmit large amounts of data, including personal information, for their customers,
failure to prevent or mitigate data loss or other security breaches, including breaches of vendors’ technology and systems, could expose companies that operate via the internet or direct marketing retail to a risk of loss or misuse of such information,
adversely affect their operating results, result in litigation or potential liability, and otherwise harm their businesses.
Industrials Sector Risk. The Industrials Sector includes manufacturers and distributors of capital goods such
as aerospace and defense, building projects, electrical components and equipment, construction machinery,
and companies that offer construction and engineering services. This sector also includes providers of commercial
and professional services including office services and supplies, security and alarm services, human resources/employment
services, and research and consulting services. Included in the industrials sector are also companies that provide transportation
services including air freight and logistics, airlines, railroads, and transportation infrastructure companies. A company
in this sector is subject to the risk that the securities of such issuer will underperform the market as a whole due to legislative
or regulatory changes, adverse market
Statement of Additional Information | Clipper Fund | 4
conditions, and/or increased competition affecting the industrials sector. The prices
of the securities of companies operating in the industrials sector may fluctuate due to the level and volatility of commodity
prices, the exchange value of the dollar, import controls, worldwide competition, liability for environmental damage, depletion of
resources, and mandated expenditures for safety and pollution control devices.
Information Technology Sector Risk. The Information Technology Sector includes companies that offer software and information technology services and manufacturers and distributors of technology hardware
and semiconductors. A company in this sector is subject to the risk that the securities of such issuer will underperform
the market as a whole due to legislative or regulatory changes, adverse market conditions, and/or increased competition affecting
the information technology sector. The prices of the securities of companies operating in the information technology
sector are closely tied to market competition, increased sensitivity to short product cycles and aggressive pricing,
and problems with bringing products to market.
Passive Foreign Investment Companies. Some securities of companies domiciled outside the U.S. in which the Fund may invest may be considered passive foreign investment companies (“PFICs”) under U.S. tax laws. PFICs are foreign corporations which generate primarily passive income. For federal tax purposes, a corporation is
deemed a PFIC if 75% or more of the foreign corporation’s gross income for its tax year is passive income or, in general, if 50% or more of its assets are assets that produce or are held to produce passive income. Passive income is further defined as
any income to be considered foreign personal holding company income within the subpart F provisions defined by Section
954 of the Internal Revenue Code.
Investing in PFICs involves the risks associated with investing in foreign securities,
as described above. There is also the risk that the Fund may not realize that a foreign corporation it invests in is a PFIC for
federal tax purposes. Federal tax laws impose severe tax penalties for failure to properly report investment income from PFICs.
The Fund makes efforts to ensure compliance with federal tax reporting of these investments, however, there can be no guarantee that the Fund’s efforts will always be successful.
Emerging Market Risk. Securities of issuers in emerging and developing markets may offer special investment
opportunities, but present risks not found in more mature markets. Those securities may be more difficult
to sell at an acceptable price and their prices may be more volatile than securities of issuers in more developed markets.
Settlements of trades may be subject to greater delays so that the Fund might not receive the proceeds of a sale of a security
on a timely basis. In unusual situations it may not be possible to repatriate sales proceeds in a timely fashion. These investments
may be very speculative.
Emerging markets might have less developed trading markets and exchanges. These countries
may have less- developed legal and accounting systems and investments may be subject to greater risks of government
restrictions on withdrawing the sale proceeds of securities from the country. Companies operating in emerging markets may
not be subject to U.S. prohibitions against doing business with countries which are state sponsors of terrorism. Economies
of developing countries may be more dependent on relatively few industries that may be highly vulnerable to local and
global changes. Governments may be more unstable and present greater risks of nationalization, expropriation, or restrictions
on foreign ownership of stocks of local companies.
Unsponsored Depositary Receipts. The Fund may invest in both sponsored and unsponsored arrangements. In a sponsored
arrangement, the foreign issuer assumes the obligation to pay some or all of the depositary’s transaction fees, whereas, in an unsponsored arrangement, the foreign issuer assumes no obligations and the depositary’s transaction fees are paid by the holders. Foreign issuers in respect of whose securities unsponsored depositary receipts
have been issued are not necessarily obligated to disclose material information in the markets in which the unsponsored
depositary receipts are traded and, therefore, such information may not be reflected in the prices of such securities
in those markets. Shareholder benefits, voting rights, and other attached rights may not be extended to the holders of unsponsored
depositary receipts.
Investments in Other Investment Companies. The Fund can invest in securities issued by other investment companies, which can include open-end funds, closed-end funds, or exchange-traded funds (“ETFs” which are typically open-ended funds or unit investment trusts listed on a stock exchange). In some instances, an ETF or closed-end
fund may trade at market prices that are higher or lower than the NAV. The Fund may do so as a way of gaining exposure
to securities represented by the investment company’s portfolio at times when the Fund may not be able to buy those securities directly. As a shareholder of an investment company, the Fund would be subject to its ratable share of that investment company’s expenses, including its advisory and administration expenses. At the same time, the Fund would bear its own
management fees and expenses. To the extent that the management fees paid to an investment company are for the same or
similar services as the management fees paid by the Fund, there would be a layering of fees that would increase expenses and
decrease returns. The Fund does not intend to invest in other investment companies unless the Portfolio Manager(s) believe
that the potential benefits of the investment justify the expenses. The Fund’s investments in the securities of other investment companies are subject to the limits that apply to those kinds of investments under the Investment Company Act of 1940, as revised (“1940 Act”).
Initial Public Offerings. An initial public offering (“IPO”) is the initial public offering of securities of a particular company. IPOs in which the Fund invests can have a dramatic impact on the Fund’s performance and assumptions about future performance based on that impact may not be warranted. Investing in IPOs involves
risks. Many, but not all, of the companies issuing IPOs are small, unseasoned companies. Many are companies that have only been
in operation for short periods of time. Small company securities, including IPOs, are subject to greater volatility in their
prices than are securities issued by more
Statement of Additional Information | Clipper Fund | 5
established companies. If the Fund does not intend to make a long-term investment
in an IPO (it is sometimes possible to immediately sell an IPO at a profit) the Adviser may not perform the same detailed
research on the company that it does for core holdings.
Rights and Warrants. Rights and warrants are forms of equity securities. Warrants, basically, are options
to purchase equity securities at specific prices valid for a specific period of time. Their prices do
not necessarily move parallel to the prices of the underlying securities. Rights are similar to warrants, but normally have shorter maturities
and are distributed directly by issuers to their shareholders. Rights and warrants have no voting rights, receive
no dividends, and have no rights with respect to the assets of the issuer.
Other Forms of Equity Securities. In addition to common stock, the Fund may invest in other forms of equity securities
including preferred stocks and securities with equity conversion or purchase rights.
The prices of equity securities fluctuate based on changes in the financial condition of their issuers and on market and economic
conditions. Events that have a negative impact on a business probably will be reflected in a decline in the price
of its equity securities. Furthermore, when the total value of the stock market declines, most equity securities, even those issued
by strong companies, likely will decline in value.
Inflation Risk. Also called purchasing power risk, is the chance that the cash flows from an investment won’t be worth as much in the future because of changes in purchasing power due to inflation.
Real Estate Companies, Including REITs. Real estate securities are issued by companies that have at least 50% of the value
of their assets, gross income or net profits attributable to ownership, financing,
construction, management, or sale of real estate or to products or services that are related to real estate or the real estate
industry. The Fund does not invest directly in real estate. Real estate companies include: real estate investment trusts (“REITs”) or other securitized real estate investments, brokers, developers, lenders, and companies with substantial real estate holdings
such as paper, lumber, hotel, and entertainment companies. REITs pool investors’ funds for investment primarily in income-producing real estate or real estate-related loans or interests. A REIT is not taxed on income distributed to shareholders if
it complies with various requirements relating to its organization, ownership, assets, and income, and with the requirement
that it distribute to its shareholders at least 90% of its taxable income (other than net capital gains) each taxable year.
REITs generally can be classified as equity REITs, mortgage REITs, or hybrid REITs. Equity REITs invest the majority of their
assets directly in real property and derive their income primarily from rents. Equity REITs also can realize capital gains by
selling property that has appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive
their income primarily from interest payments. Hybrid REITs combine the characteristics of both equity REITs and mortgage
REITs. To the extent that the management fees paid to a REIT are for the same or similar services as the management
fees paid by the Fund, there will be a layering of fees which would increase expenses and decrease returns. Securities issued
by REITs may trade less frequently and be less liquid than common stock issued by other companies.
Real estate securities, including REITs, are subject to risks associated with the
direct ownership of real estate including: (1) declines in property values, because of changes in the economy or the surrounding
area or because a particular region has become less appealing to tenants; (2) increases in property taxes, operating expenses,
interest rates, or competition; (3) overbuilding; (4) changes in zoning laws; (5) losses from casualty or condemnation;
(6) declines in the value of real estate risks related to general and local economic conditions; (7) uninsured casualties or
condemnation losses; (8) fluctuations in rental income; (9) changes in neighborhood values; (10) the appeal of properties to
tenants; (11) increases in interest rates, and (12) access to the credit markets. The Fund also could be subject to such risks by
reason of direct ownership as a result of a default on a debt security it may own.
Equity REITs may be affected by changes in the value of the underlying property owned
by the trusts while mortgage REITs may be affected by the quality of credit extended. Equity and mortgage REITs are dependent
on management skill, may not be diversified, and are subject to project financing risks. REITs also are subject to:
heavy cash flow dependency, defaults by borrowers, self-liquidation, the possibility of failing to qualify for the favorable
federal income tax treatment generally available to REITs under the Internal Revenue Code, and failing to maintain exemption
from registration under the 1940 Act. Changes in interest rates also may affect the value of the debt securities in the Fund’s portfolio. By investing in REITs indirectly through the Fund, a shareholder will bear not only their proportionate
share of the expense of the Fund but also, indirectly, similar expenses of the REITs, including compensation of management. Some
real estate securities may be rated less than investment grade by rating services. Such securities may be subject to the
risks of high-yield, high-risk securities discussed below.
Preferred Stock Risk. Preferred stock is a form of equity security and is generally ranked behind an issuer’s debt securities in claims for dividends and assets of an issuer in a liquidation or bankruptcy. For this
reason, the price of a preferred stock may react more strongly than the debt securities of an issuer. Preferred stock is subject
to issuer and market risk that is applicable to equity securities in general. An adverse event may have a negative impact on a
company and could result in a decline in the price of its preferred stock. Preferred stock of smaller companies may be more vulnerable
to adverse developments than preferred stock of larger companies.
Convertible Securities. Convertible securities are a form of equity security. Generally, convertible securities
are bonds, debentures, notes, preferred stocks, warrants, and other securities that convert or
are exchangeable into shares of the underlying common stock at a stated exchange ratio. Usually, the conversion or exchange
is solely at the option of the holder.
Statement of Additional Information | Clipper Fund | 6
However, some convertible securities may be convertible or exchangeable at the option
of the issuer or are automatically converted or exchanged at a certain time, on the occurrence of certain events, or
have a combination of these characteristics. Usually a convertible security provides a long-term call on the issuer’s common stock and therefore tends to appreciate in value as the underlying common stock appreciates in value. A convertible security
also may be subject to redemption by the issuer after a certain date and under certain circumstances (including a specified
price) established on issue. If a convertible security held by the Fund is called for redemption, the Fund could be required to
tender it for redemption, convert it into the underlying common stock, or sell it.
Convertible bonds, debentures, and notes are varieties of debt securities and as such
are subject to many of the same risks including interest rate sensitivity, changes in debt rating, and credit risk. In addition,
convertible securities are often viewed by the issuer as future common stock subordinated to other debt and carry a lower rating than the issuer’s non-convertible debt obligations. Thus, convertible securities are subject to many of the same risks as
high-yield, high-risk securities. A more complete discussion of these risks is provided below in the sections titled “Bonds and Other Debt Securities” and “High-Yield, High-Risk Debt Securities.”
Due to its conversion feature, the price of a convertible security normally will vary
in some proportion to changes in the price of the underlying common stock. A convertible security will also normally provide
a higher yield than the underlying common stock (but generally lower than comparable non-convertible securities). Due to their
higher yield, convertible securities generally sell above their “conversion value,” which is the current value of the stock to be received on conversion. The difference between this conversion value and the price of convertible securities will
vary over time depending on the value of the underlying common stocks and interest rates. When the underlying common stocks
decline in value, convertible securities will tend not to decline to the same extent because the yield acts as a price support.
When the underlying common stocks rise in value, the value of convertible securities also may be expected to increase, but
generally will not increase to the same extent as the underlying common stocks.
Fixed income securities generally are considered to be interest rate sensitive. The
value of convertible securities will change in response to changes in interest rates. During periods of falling interest rates, the
value of convertible bonds generally rises. Conversely, during periods of rising interest rates, the value of such securities
generally declines. Changes by recognized rating services in their ratings of debt securities and changes in the ability of
an issuer to make payments of interest and principal also will affect the value of these investments.
Fixed Income Strategies and Risks
Bonds and Other Debt Securities. Bonds and other debt securities may be purchased by the Fund if the Adviser believes
that such investments are consistent with the Fund’s investment strategies, may contribute to the achievement of the Fund’s investment objective, and will not violate any of the Fund’s investment restrictions. The U.S. Government, corporations, and other issuers sell bonds and other debt securities to borrow money. Issuers pay investors
interest and generally must repay the amount borrowed at maturity. Some debt securities, such as zero-coupon bonds, do not
pay current interest, but are purchased at discounts from their face values. The prices of debt securities fluctuate, depending
on such factors as interest rates, credit quality, and maturity.
Bonds and other debt securities, generally, are subject to credit risk and interest
rate risk. While debt securities issued by the U.S. Treasury generally are considered free of credit risk, debt issued by agencies
and corporations all entail some level of credit risk. Investment grade debt securities have less credit risk than do high-yield,
high-risk debt securities. Credit risk is described more fully in the section titled “High-Yield, High-Risk Debt Securities.”
Bonds and other debt securities, generally, are interest rate sensitive. During periods
of falling interest rates, the values of debt securities held by the Fund generally rise. Conversely, during periods of rising interest
rates, the values of such securities generally decline. Changes by recognized rating services in their ratings of debt
securities and changes in the ability of an issuer to make payments of interest and principal also will affect the value of these
investments.
U.S. Government Securities. U.S. Government securities represent loans by investors to the U.S. Treasury Department
or a wide variety of government agencies and instrumentalities. Securities issued by most
U.S. Government entities are neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S.
Government. These entities include, among others, the Federal Home Loan Banks (FHLBs), the Federal National Mortgage Association
(FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC). Securities issued by the U.S. Treasury and a small
number of U.S. Government agencies, such as the Government National Mortgage Association (GNMA), are backed
by the full faith and credit of the U.S. Government. The values of U.S. Government and agency securities and U.S. Treasury
securities are subject to fluctuation.
U.S. Government securities include mortgage-related securities issued by an agency
or instrumentality of the U.S. Government. GNMA certificates are mortgage-backed securities representing part
ownership of a pool of mortgage loans. These loans issued by lenders such as mortgage bankers, commercial banks, and
savings and loan associations are either insured by the Federal Housing Administration or guaranteed by the Veterans Administration. A “pool” or group of such mortgages is assembled and, after being approved by GNMA, is offered to investors
through securities dealers. Once approved by GNMA, the timely payment of interest and principal on each mortgage is guaranteed
by GNMA and backed by the full faith and credit of the U.S. Government. GNMA certificates differ from bonds in that
principal is paid back monthly by the
Statement of Additional Information | Clipper Fund | 7
borrower over the term of the loan rather than returned in a lump sum at maturity.
GNMA certificates are characterized as “pass-through” securities because both interest and principal payments (including prepayments) are passed through to the holder of such certificates.
As of September 7, 2008, the Federal Housing Finance Agency (“FHFA”) was appointed as the conservator of FHLMC and FNMA for an indefinite period. In accordance with the Federal Housing Finance Regulatory
Reform Act of 2008 and the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as conservator,
the FHFA will control and oversee these entities until the FHFA deems them financially sound and solvent. During the conservatorship, each entity’s obligations are expected to be paid in the normal course of business. Although no express guarantee
exists for the debt or mortgage-backed securities issued by these entities, the U.S. Department of the Treasury, through
a securities lending credit facility and a senior preferred stock purchase agreement, has attempted to enhance the ability
of the entities to meet their obligations.
Pools of mortgages also are issued or guaranteed by other agencies of the U.S. Government.
The average life of pass-through pools varies with the maturities of the underlying mortgage instruments. In addition, a pool’s term may be shortened or lengthened by unscheduled or early payment, or by slower than expected prepayment
of principal and interest on the underlying mortgages. The occurrence of mortgage prepayments is affected by the level
of interest rates, general economic conditions, the location and age of the mortgage and other social and demographic
conditions. As prepayment rates of individual pools vary widely, it is not possible to accurately predict the average
life of a particular pool. A collateralized mortgage obligation (“CMO”) is a debt security issued by a corporation, trust, custodian, or by a U.S. Government agency or instrumentality that is collateralized by a portfolio or pool of mortgages, mortgage-backed
securities, U.S. Government securities, or corporate debt obligations. The issuer’s obligation to make interest and principal payments is secured by the underlying pool or portfolio of securities. CMOs are most often issued in two or more
classes (each of which is a separate security) with varying maturities and stated rates of interest. Interest and principal
payments from the underlying collateral (generally a pool of mortgages) are not necessarily passed directly through to the
holders of the CMOs. These payments typically are used to pay interest on all CMO classes and to retire successive class
maturities in a sequence. Thus, the issuance of CMO classes with varying maturities and interest rates may result in greater predictability
of maturity with one class and less predictability of maturity with another class than a direct investment in a mortgage-backed
pass-through security (such as a GNMA certificate). Classes with shorter maturities, typically, have lower volatility
and yield while those with longer maturities, typically, have higher volatility and yield. Thus, investments in CMOs
provide greater or lesser control over the investment characteristics than mortgage pass-through securities and offer more defensive
or aggressive investment alternatives.
Investments in mortgage-related U.S. Government securities, such as GNMA certificates
and CMOs, also involve other risks. The yield on a pass-through security typically is quoted based on the maturity of
the underlying instruments and the associated average life assumption. Actual prepayment experience may cause the yield to differ
from the assumed average life yield. Accelerated prepayments adversely impact yields for pass-through securities purchased
at a premium. The opposite is true for pass-through securities purchased at a discount. During periods of declining interest
rates, prepayment of mortgages underlying pass-through certificates can be expected to accelerate. When the mortgage
obligations are prepaid, the Fund reinvests the prepaid amounts in securities, the yields of which reflect interest
rates prevailing at that time. Therefore, the Fund’s ability to maintain a portfolio of high-yielding, mortgage-backed securities will be adversely affected to the extent that prepayments of mortgages must be reinvested in securities that have lower yields than
the prepaid mortgages. Moreover, prepayments of mortgages that underlie securities purchased at a premium could result
in capital losses. Investment in such securities also could subject the Fund to “maturity extension risk,” which is the possibility that rising interest rates may cause prepayments to occur at a slower than expected rate. This particular risk may effectively
change a security that was considered a short- or intermediate-term security at the time of purchase into a long-term security.
Long-term securities generally fluctuate more widely in response to changes in interest rates than short or intermediate-term
securities.
If the Fund purchases mortgage-backed securities that are “subordinated” to other interests in the same mortgage pool, the Fund, as a holder of those securities, may only receive payments after the pool’s obligations to other investors have been satisfied. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may limit substantially the pool’s ability to make payments of principal or interest to the Fund as holder of such subordinated
securities, reducing the values of those securities or in some cases rendering them worthless; the risk of such defaults
is generally higher in the case of mortgage pools that include so-called “subprime” mortgages. An unexpectedly high or low rate of prepayment on a pool’s underlying mortgages may have similar effects on subordinated securities. A mortgage pool may
issue securities subject to various levels of subordination; the risk of non-payment affects securities at each level, although
the risk is greatest in the case of more highly subordinate securities.
The guarantees of the U.S. Government, its agencies, and its instrumentalities are
guarantees of the timely payment of principal and interest on the obligations purchased. The value of the shares issued
by the Fund is not guaranteed and will fluctuate with the value of the Fund’s portfolio. Generally, when the level of interest rates rise, the value of the Fund’s investment in U.S. Government securities is likely to decline and, when the level
of interest rates decline, the value of the Fund’s investment in U.S. Government securities is likely to rise.
The Fund may engage in portfolio trading primarily to take advantage of yield disparities.
Such trading strategies may result in minor temporary increases or decreases in the Fund’s current income and in its holding of debt securities that sell at
Statement of Additional Information | Clipper Fund | 8
substantial premiums or discounts from face value. If expectations of changes in interest
rates or the price of the securities prove to be incorrect, the Fund’s potential income and capital gain will be reduced or its potential loss will be increased.
Interest Rate Sensitivity Risk. If a security pays a fixed interest rate and market rates increase, the value of
the fixed-rate security should decline. Interest rates may also have a powerful influence on the
earnings of financial institutions.
Credit Risk. Like any borrower, the issuer of a fixed income security may be unable to make timely
payments of interest and principal. If the issuer is unable to make payments in a timely fashion the value
of the security will decline and may become worthless. Financial institutions are often highly leveraged and may not be able to
make timely payments of interest and principal. Even U.S. Government Securities are subject to credit risk.
High-Yield, High-Risk Debt Securities. The real estate securities, convertible securities, bonds, and other debt securities
in which the Fund may invest may include high-yield, high-risk debt securities rated BB or lower by S&P Global (“S&P”) or Ba or lower by Moody’s Investors Service (“Moody’s”) or unrated securities. Securities rated BB or lower by S&P and Ba or lower by Moody’s are referred to in the financial community as “junk bonds” and may include D-rated securities of issuers in default. See Appendix A for a more detailed description of the rating system. Ratings
assigned by credit agencies do not evaluate market risks. The Adviser considers the ratings assigned by S&P or Moody’s as one of several factors in its independent credit analysis of issuers. A description of each bond quality category is set forth in Appendix A, titled “Quality Ratings of Debt Securities.” The ratings of Moody’s and S&P represent their opinions as to the quality of the securities that they undertake to rate. It should be emphasized, however, that ratings are relative,
subjective, and are not absolute standards of quality. There is no assurance that any rating will not change. The Fund may retain
a security whose rating has changed or has become unrated.
While likely to have some quality and protective characteristics, high-yield, high-risk
debt securities, whether or not convertible into common stock, usually involve increased risk as to payment of principal
and interest. Issuers of such securities may be highly leveraged and may not have available to them traditional methods of
financing. Therefore, the risks associated with acquiring the securities of such issuers generally are greater than is the case
with higher-rated securities. For example, during an economic downturn or a sustained period of rising interest rates, issuers
of high-yield securities may be more likely to experience financial stress, especially if such issuers are highly leveraged. During
such periods, such issuers may not have sufficient revenues to meet their principal and interest payment obligations. The issuer’s ability to service its debt obligations also may be adversely affected by specific issuer developments, or the issuer’s inability to meet specific projected business forecasts or the unavailability of additional financing. The risk of loss due to default
by the issuer is significantly greater for the holders of high-yield securities because such securities may be unsecured and
may be subordinated to other creditors of the issuer.
High-yield, high-risk debt securities are subject to greater price volatility than
higher-rated securities, tend to decline in price more steeply than higher-rated securities in periods of economic difficulty or accelerating
interest rates, and are subject to greater risk of non-payment in adverse economic times. There may be a thin trading
market for such securities, which may have an adverse impact on market price and the ability of the Fund to dispose of particular
issues and may cause the Fund to incur special securities’ registration responsibilities, liabilities and costs, and liquidity and valuation difficulties. Unexpected net redemptions may force the Fund to sell high-yield, high-risk debt securities without
regard to investment merit, thereby possibly reducing return rates. Such securities may be subject to redemptions or call
provisions, which, if exercised when investment rates are declining, could result in the replacement of such securities
with lower-yielding securities, resulting in a decreased return. To the extent that the Fund invests in bonds that are original issue
discount, zero-coupon, pay-in-kind or deferred interest bonds, the Fund may have taxable interest income greater than the
cash actually received on these issues. In order to avoid taxation at the Fund level, the Fund may have to sell portfolio securities
to meet distribution requirements.
The values of high-yield, high-risk debt securities tend to reflect individual corporate
developments to a greater extent than higher-rated securities, which react primarily to fluctuations in the general level
of interest rates. Lower-rated securities also tend to be more sensitive to economic and industry conditions than higher-rated securities.
Adverse publicity and investor perceptions, whether or not based on fundamental analysis regarding individual lower-rated
bonds, may result in reduced prices for such securities. If the negative factors such as these adversely impact
the value of high-yield, high-risk securities and the Fund holds such securities, the Fund’s net asset value will be adversely affected.
The Fund may have difficulty disposing of certain high-yield, high-risk bonds because
there may be a thin trading market for such bonds. Because not all dealers maintain markets in all high-yield, high-risk
bonds, the Fund anticipates that such bonds could be sold only to a limited number of dealers or institutional investors. The
lack of a liquid secondary market may have an adverse impact on market price and the ability to dispose of particular issues and
also may make it more difficult to obtain accurate market quotations or valuations for purposes of valuing the Fund’s assets. Market quotations generally are available on many high-yield issues only from a limited number of dealers and may not necessarily
represent firm bid prices of such dealers or prices for actual sales. In addition, adverse publicity and investor perceptions
may decrease the values and liquidity of high-yield, high-risk bonds regardless of a fundamental analysis of the investment
merits of such bonds. To the extent that the Fund purchases illiquid or restricted bonds, it may incur special securities’ registration responsibilities, liabilities and costs, and liquidity and valuation difficulties relating to such bonds.
Bonds may be subject to redemption or call provisions. If an issuer exercises these
provisions when investment rates are declining, the Fund will be likely to replace such bonds with lower-yielding bonds,
resulting in decreased returns. Zero-
Statement of Additional Information | Clipper Fund | 9
coupon, pay-in-kind, and deferred interest bonds involve additional special considerations.
Zero-coupon bonds are debt obligations that do not entitle the holder to any periodic payments of interest prior
to maturity or a specified cash payment date when the securities begin paying current interest (the “cash payment date”) and therefore are issued and traded at discounts from their face amounts or par value. The market prices of zero-coupon securities
generally are more volatile than the market prices of securities that pay interest periodically and are likely to respond to changes
in interest rates to a greater degree than securities paying interest currently with similar maturities and credit quality. Pay-in-kind
bonds pay interest in the form of other securities rather than cash. Deferred interest bonds defer the payment of interest
to a later date. Zero-coupon, pay-in-kind or deferred interest bonds carry additional risk in that, unlike bonds that pay interest
in cash throughout the period to maturity, the Fund will realize no cash until the cash payment date unless a portion of such
securities are sold. There is no assurance of the value or the liquidity of securities received from pay-in-kind bonds. If the issuer
defaults, the Fund may obtain no return at all on its investment. To the extent that the Fund invests in bonds that are original
issue discount, zero-coupon, pay-in-kind, or deferred interest bonds, the Fund may have taxable interest income greater than the
cash actually received on these issues. In order to distribute such income to avoid taxation, the Fund may have to sell portfolio
securities to meet its distribution requirements under circumstances that could be adverse.
Federal tax legislation limits the tax advantages of issuing certain high-yield, high-risk
bonds. This could have a materially adverse effect on the market for high-yield, high-risk bonds.
Cash Management. For defensive purposes or to accommodate inflows of cash awaiting more permanent investment,
the Fund may temporarily and without limitation hold high-grade, short-term money market
instruments, cash, and cash equivalents, including repurchase agreements. The Fund may also invest in registered
investment companies which are regulated as money market funds or companies exempted from registration under Sections
3(c)(1) or 3(c)(7) of the 1940 Act that themselves primarily invest in temporary defensive investments, including U.S.
Government securities and commercial paper. To the extent that the management fees paid to other investment companies are
for the same or similar services as the management fees paid by the Fund, there will be a layering of fees that would increase
expenses and decrease returns. Investments in other investment companies are limited by the 1940 Act and the rules
thereunder.
In certain instances, the Fund may engage in repurchase agreement transactions through
the Fixed Income Clearing Corporation (“FICC”). FICC sells U.S. Government or agency securities to the Fund under agreements to repurchase these securities at a stated repurchase price including interest for the term of the agreement.
The term of the agreement will typically be overnight or over the weekend. The Fund, through FICC, receives delivery of the
underlying U.S. Government or agency securities as collateral, whose value is required to be at least equal to the repurchase
price. If FICC were to become bankrupt, the Fund may be delayed or may incur costs or possible losses of principal and income
in disposing of the collateral.
Master Limited Partnerships Risk. The Fund may invest in securities of master limited partnerships (“MLPs”). Investments in MLPs involve risks that differ from investments in common stock, including risks
related to the following: (1) a common unit holder’s limited control and limited rights to vote on matters affecting the MLP; (2) potential conflicts of interest between the MLP and the MLP’s general partner; (3) cash flow; (4) dilution; and (5) the general partner’s right to require unit holders to sell their common units at an undesirable time or price. MLP common unit holders
may not elect the general partner or its directors and have limited ability to remove an MLP’s general partner. MLPs may issue additional common units without unit holder approval which could dilute the ownership interests of investors holding MLP
common units. MLP common units, like other equity securities, can be affected by macro-economic and other factors affecting
the stock market in general, expectations of interest rates, investor sentiment towards an issuer or certain market sector, changes in a particular issuer’s financial condition, or unfavorable or unanticipated poor performance of a particular
issuer. Prices of common units of individual MLPs, like prices of other equity securities, also can be affected by fundamentals
unique to the partnership or company, including earnings power and coverage ratios. A holder of MLP common units
typically would not be shielded to the same extent that a shareholder of a corporation would be. In certain circumstances,
creditors of an MLP would have the right to seek return of capital distributed to a limited partner, which would continue
after an investor sold its investment in the MLP. The value of an MLP security may decline for reasons that directly relate to
the issuer such as management performance, financial leverage, and reduced demand for the issuer’s products or services.
Currently, MLPs do not pay U.S. federal income tax at the partnership level. A change
in current tax law, or a change in the underlying business mix of a given MLP, could result in an MLP being treated as a
corporation for U.S. federal income tax purposes, which could result in a requirement to pay federal income tax on its taxable
income and have the effect of reducing the amount of cash available for distribution by the MLP, resulting in a reduction of the value of the common unit holder’s investment. Changes in the laws, regulations, or related interpretations relating to the Fund’s investments in MLPs could increase the Fund’s expenses, reduce its cash distributions, negatively impact the value of an investment in an MLP, or otherwise impact its ability to implement its investment strategy. Due to the heavy state and federal regulations that an MLP’s assets may be subject to, an MLP’s profitability could be adversely impacted by changes in the regulatory environment.
Generally, the securities markets may move down, sometimes rapidly and unpredictably,
based on overall economic conditions and other factors. The value of a security may decline due to general market conditions
that are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes
in the outlook for corporate earnings, changes in interest or currency rates, or adverse investor sentiment generally. A security’s value also may decline because of factors that affect a particular industry or industries, such as labor shortages or
increased production costs and competitive conditions within an industry.
Statement of Additional Information | Clipper Fund | 10
Derivatives. The Fund is prohibited from investing in derivatives, excluding certain currency
and interest rate hedging transactions. This restriction is not fundamental and may be changed by the Fund without
a shareholder vote. If the Fund does determine to invest in derivatives in the future, it will comply with Rule 18f-4 under
the 1940 Act.
Additional Non-Principal Investment Strategies and Risks
Settlement Risk. Settlement systems in some markets (especially those of developing countries) are
generally less well organized than those of more developed markets. There may be risks that settlement
may be delayed and that cash or securities belonging to the Fund may be at risk because of failures or defects in the systems.
In particular, market practice may require that payment be made before receipt of the security being purchased or that delivery
of a security be made before payment is received. In such a situation, a default by a broker or bank that is processing the
transaction may cause the Fund to suffer a loss.
Distressed Companies. The Fund may invest in or continue to hold debt or securities issued by distressed
companies which are or are about to be involved in reorganizations, financial restructurings, or bankruptcy.
A bankruptcy, merger, or other restructuring or a tender or exchange offer, proposed or pending at the time the Fund
invests in the debt or securities may not be completed on the terms or within the time frame contemplated which may result in
losses to the Fund. Debt obligations of distressed companies typically are unrated, lower-rated, in default, or close to default
and are generally more likely to become worthless than the securities of more financially stable companies.
Borrowing. A Fund may purchase additional securities so long as borrowings do not exceed 5%
of its total assets. A Fund may obtain such short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities. A Fund may borrow from banks provided that, immediately after any such borrowing, there is an
asset coverage of at least 300% for all borrowings. In the event that such asset coverage at any time falls below 300%, the
Fund shall, within three business days thereafter, reduce the amount of its borrowings to an extent that the asset coverage
of such borrowings shall be at least 300%. A Fund is not required to dispose of portfolio holdings immediately if it would suffer
losses as a result. Borrowing money to meet redemptions or other purposes would have the effect of temporarily leveraging the Fund’s assets and potentially exposing the Fund to leveraged losses.
Lending Portfolio Securities. The Fund may lend its portfolio securities to certain types of eligible borrowers
approved by the Board of Trustees. The Fund has engaged State Street Bank and Trust Company (“State Street”) as the Fund’s lending agent pursuant to a written agreement. The Fund will retain a portion of the securities’ lending income and will remit the remaining portion to State Street as compensation for its services as securities lending agent.
As securities lending agent, State Street will screen and select borrowers, monitor the availability of securities, negotiate rebates,
daily mark to market the loans, monitor and maintain cash collateral levels, process securities movements, and reinvest cash
collateral as directed by the Adviser or as specific in the lending agent agreement.
The Fund may engage in securities lending to earn additional income or to raise cash
for liquidity purposes. The Fund must receive collateral for a loan. Under current applicable regulatory requirements (which
are subject to change), on each business day, the loan collateral must be at least equal to the value of the loaned securities.
The collateral must consist of cash, bank letters of credit, securities of the U.S. Government or its agencies or instrumentalities,
or other cash equivalents in which the Fund is permitted to invest.
Lending activities are strictly limited as described in the section titled “Investment Restrictions.” Lending money or securities involves the risk that the Fund may suffer a loss if a borrower does not repay a loan
when due. To manage this risk, the Fund deals only with counterparties it believes to be creditworthy and requires that the
counterparty deposit collateral with the Fund.
When it loans securities, the Fund still owns the securities, receives amounts equal
to the dividends or interest on loaned securities, and is subject to gains or losses on those securities. The Fund also receives
one or more of: (1) negotiated loan fees; (2) interest on securities used as collateral; and/or (3) interest on any short-term
debt instruments purchased with such loan collateral. Either type of interest may be shared with the borrower. The Fund may also pay reasonable finder’s, custodian, and administrative fees in connection with these loans. The terms of the Fund’s loans must meet applicable tests under the Internal Revenue Code and must permit the Fund to reacquire loaned securities on five days’ notice or in time to vote on any important matter.
For purposes of applying the limitation set forth below in the Investment Restrictions sub-section titled “Making Loans,” there are no limitations with respect to unsecured loans made by a Fund to an unaffiliated
party. However, if a Fund loans its portfolio securities, the obligation on the part of the Fund to return collateral
upon termination of the loan could be deemed to involve the issuance of a senior security within the meaning of Section 18(f) of the
1940 Act. In order to avoid violation of Section 18(f), a Fund may not make a loan of portfolio securities if, as a result,
more than one-third of its total asset value (at value computed at the time of making a loan) would be on loan.
Income from securities lending as of the most recent fiscal year end:
|
|
Clipper Fund
|
|
Gross income from securities lending activities (including income from cash collateral
reinvestment)
|
$71,269
|
|
Fees and/or compensation for securities lending activities and related services
|
|
|
Fees paid to State Street from a revenue split for their services as securities lending
agent
|
$1,302
|
Statement of Additional Information | Clipper Fund | 11
|
|
Clipper Fund
|
|
Fees paid for any cash collateral management services (including fees deducted from
a pooled cash collateral
reinvestment vehicle) that are not included in the revenue split paid to State Street
|
$543
|
|
Administrative fees not included in revenue split
|
$-
|
|
Indemnification fees not included in revenue split
|
$-
|
|
Rebates (paid to borrowers)
|
$65,517
|
|
Other fees not included in revenue split (specify)
|
$-
|
|
Aggregate fees/compensation for securities lending activities
|
$67,362
|
|
Net income from securities lending activities
|
$3,907
|
Short Sales. When the Fund believes that a security is overvalued, it may sell the security short
and borrow the same security from a broker or other institution to complete the sale. If the price of the security
decreases in value, the Fund may make a profit and, conversely, if the security increases in value, the Fund will incur a
loss because it will have to replace the borrowed security by purchasing it at a higher price. There can be no assurance that the Fund
will be able to close out the short position at any particular time or at an acceptable price. Although the Fund’s gain is limited to the amount at which it sold a security short, its potential loss is not limited. A lender may request that the borrowed securities
be returned on short notice. If that occurs at a time when other short sellers of the subject security are receiving similar requests, a “short squeeze” can occur. This means that the Fund might be compelled, at the most disadvantageous time, to
replace borrowed securities previously sold short with purchases on the open market at prices significantly greater than
those at which the securities were sold short. Short selling also may produce higher than normal portfolio turnover and result in
increased transaction costs to the Fund. If the Fund sells a security short, it will either own an off-setting “long position” (an economically equivalent security which is owned) or establish a “Segregated Account” as described in this SAI.
The Fund may also make short sales “against-the-box,” in which it sells short securities it owns. The Fund will incur transaction costs, including interest expenses, in connection with opening, maintaining,
and closing short sales against-the-box, which results in a “constructive sale,” requiring the Fund to recognize any taxable gain from the transaction.
The Fund has adopted a non-fundamental investment limitation that prevents it from
selling any security short if it would cause more than 5% of its total assets, taken at market value, to be sold short. This
limitation does not apply to selling short against the box.
When-Issued and Delayed-Delivery Transactions. The Fund can invest in securities on a “when-issued” basis and can purchase or sell securities on a “delayed-delivery” basis. When-issued and delayed-delivery are terms that refer to securities whose terms and indenture are available and for which a market exists but that are
not available for immediate delivery.
When such transactions are negotiated, the price (which generally is expressed in
yield terms) is fixed at the time the commitment is made. Delivery and payment for the securities take place at a later
date (generally within 45 days of the date the offer is accepted). The securities are subject to change in value from market
fluctuations during the period until settlement. The value at delivery may be less than the purchase price. For example, changes in
interest rates before settlement will affect the value of such securities and may cause a loss to the Fund. During the period between
purchase and settlement, no payment is made by the Fund to the issuer and no interest accrues to the Fund from the investment.
The Fund may engage in when-issued transactions to secure what the Adviser considers
to be an advantageous price and yield at the time of entering into the obligation. When the Fund enters into a when-issued
or delayed-delivery transaction, it relies on the other party to complete the transaction. Its failure to do so may cause the
Fund to lose the opportunity to obtain the security at a price and yield the Adviser considers to be advantageous. When the Fund
engages in when-issued and delayed-delivery transactions, it does so for the purpose of acquiring or selling securities consistent
with its investment objective and strategies, and not for the purpose of investment leverage. Although the Fund will
enter into delayed-delivery or when-issued purchase transactions to acquire securities, it can dispose of a commitment before
settlement. If the Fund chooses to dispose of the right to acquire a when-issued security before its acquisition or to dispose
of its right to delivery or receive against a forward commitment, it may incur a gain or loss.
At the time the Fund makes the commitment to purchase or sell a security on a when-issued
or delayed-delivery basis, it records the transaction on its books and reflects the value of the security purchased in determining the Fund’s net asset value. In a sale transaction, it records the proceeds to be received. The Fund will identify
on its books liquid securities of any type at least equal in value to the value of the Fund’s purchase commitments until the Fund pays for the investment.
When-issued and delayed-delivery transactions can be used by the Fund as defensive
techniques to hedge against anticipated changes in interest rates and prices. For instance, in periods of rising interest
rates and falling prices, the Fund might sell securities in its portfolio on a forward commitment basis to attempt to limit its
exposure to anticipated falling prices. In periods of falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or delayed-delivery basis to obtain the benefit of currently
higher cash yields.
Cybersecurity Risk. With the increased use of technologies such as the Internet to conduct business,
the Fund has become potentially more susceptible to operational and information security risks through
breaches in cybersecurity. In general, a breach in cybersecurity can result from either a deliberate attack or an unintentional
event. Cybersecurity breaches may involve, among other things, infection by computer viruses or other malicious software
code, or unauthorized access to the
Statement of Additional Information | Clipper Fund | 12
Fund’s digital information systems, networks, or devices through “hacking” or other means, in each case for the purpose of misappropriating assets or sensitive information (e.g., personal shareholder information),
corrupting data or causing operational disruption or failures in the physical infrastructure or operating systems
that support the Fund. Cybersecurity risks also include the risk of losses of service resulting from external attacks that do not require unauthorized access to the Fund’s systems, networks, or devices. For example, denial-of-service attacks on the Adviser’s or an affiliate’s website could effectively render the Fund’s network services unavailable to its shareholders and other intended end-users. Any such cybersecurity breaches or losses of service may cause the Fund to lose proprietary
information, suffer data corruption, or lose operational capacity, which, in turn, could cause the Fund to incur regulatory penalties,
reputational damage, additional compliance costs associated with corrective measures, and/or financial loss. While
the Fund and its investment adviser have established plans and procedures designed to prevent or reduce the impact of a cybersecurity
attack, there is no guarantee that these plans and procedures will be successful. There are inherent limitations in these
plans and procedures given the ever changing nature of technology and cybersecurity attack tactics and there is a possibility
that certain risks have not been adequately identified or prepared for.
In addition, cybersecurity failures by or breaches of the Fund’s third-party service providers (including, but not limited to, the Fund’s investment adviser, transfer agent, custodian, and other financial intermediaries) may disrupt the business operations of the service providers and of the Fund, potentially resulting in financial losses, the inability of the Fund’s shareholders to transact business with the Fund and of the Fund to process transactions, the inability
of the Fund to calculate its net asset value, violations of applicable privacy and other laws, rules and regulations, regulatory
fines and penalties, reputational damage, reimbursement or other compensatory costs, and/or additional compliance costs
associated with implementation of any corrective measures. The Fund and its shareholders could be negatively impacted
as a result of any such cybersecurity breaches and there can be no assurance that the Fund will not suffer losses relating
to cybersecurity attacks or other informational security breaches affecting the Fund’s third-party service providers in the future, particularly as the Fund cannot control cybersecurity plans or systems implemented by such service providers.
Securities the Fund invests in are subject to cybersecurity risks in similar ways
to the Fund. A cybersecurity risk or cybersecurity event may cause the Fund’s investments in such issuers to lose value. In extreme cases, a risk or event could cause the issuer to cease business.
Segregated Accounts. A number of the Fund’s potential non-principal investment strategies may require it to establish segregated accounts. When the Fund enters into an investment strategy that would result in a “senior security,” as that term is defined in the 1940 Act, the Fund will either: (1) own an off-setting position in
securities; or (2) set aside liquid securities in a segregated account with its custodian bank (or designated in the Fund’s books and records) in the amount prescribed. The Fund will maintain the value of such segregated accounts equal to the prescribed amount
by adding or removing additional liquid securities to account for fluctuations in the value of securities held in such
accounts. Securities held in a segregated account cannot be sold while the senior security is outstanding unless they are replaced
with qualifying securities and the value of the account is maintained.
A segregated account is not required when the Fund holds securities, options, or futures
positions whose value is expected to offset its obligations that would otherwise require a segregated account. The Fund
may also use other SEC approved methods to reduce or eliminate the leveraged aspects of senior securities.
Portfolio Transactions
The Adviser is responsible for the placement of portfolio transactions, subject to the supervision of the Fund’s Board of Trustees. Following is a summary of the Adviser’s trading policies which are described in Part 2 of its Form ADV. The Adviser is primarily a discretionary investment adviser. Accordingly, the Adviser generally
determines the securities and quantities to be bought and sold for each client’s account.
Best Execution. The Adviser follows procedures intended to provide reasonable assurance of best execution.
However, there can be no assurance that best execution will in fact be achieved in any given transaction.
The Adviser seeks to place portfolio transactions with brokers or dealers who will execute transactions as efficiently
as possible and at the most favorable net price. In determining what constitutes best execution, the Adviser not only considers quantitative
factors (e.g., the possible transaction cost), but also whether the transaction represents the best qualitative
execution. In placing executions and paying brokerage commissions or dealer markups, the Adviser considers, among other factors,
price, commission, timing, aggregated trades, capable floor brokers or traders, competent block trading coverage, ability
to position, capital strength and stability, reliable and accurate communication and settlement processing, use of automation,
knowledge of other buyers or sellers, arbitrage skills, administrative ability, underwriting and provision of information
on the particular security or market in which the transaction is to occur, research, the range and quality of the services made
available to clients, and the payment of bona fide client expenses. To the extent that clients direct brokerage, the Adviser cannot
be responsible for achieving best execution. The Adviser may place orders for portfolio transactions with broker-dealers who have
sold shares of funds which the Adviser serves as adviser or sub-adviser. However, when the Adviser places orders for portfolio
transactions, it does not give any consideration to whether a broker-dealer has sold shares of the funds which the Adviser
serves as adviser or sub-adviser. The applicability of specific criteria will vary depending on the nature of the transaction,
the market in which it is executed and the extent to which it is possible to select from among multiple broker-dealers.
Statement of Additional Information | Clipper Fund | 13
Cross Trades. When the Adviser deems it to be advantageous, the Fund may purchase or sell securities
directly from or to another client account which is managed by the Adviser. This may happen due to a variety
of circumstances, including situations when the Fund must purchase securities due to holding excess cash and,
at the same time, a different client of the Adviser must sell securities in order to increase its cash position. Cross trades
are only executed when deemed beneficial to the Fund and the other client and the Adviser has adopted written procedures to ensure
fairness to both parties.
Investment Allocations. The Adviser considers many factors when allocating securities among its clients, including
the Fund, including, but not limited to, the client’s investment style, applicable restrictions, availability of securities, available cash, anticipated liquidity, and existing holdings. The Adviser employs several Portfolio
Managers each of whom performs independent research and develops different levels of conviction concerning potential
investments. Clients managed by the Portfolio Manager performing the research may receive priority allocations of limited
investment opportunities that are in short supply, including IPOs.
Clients are not assured of participating equally or at all in any particular investment opportunity. The nature of a client’s investment style may exclude it from participating in many investment opportunities
even if the client is not strictly precluded from participation based on written investment restrictions. For example: (1) large-cap
value clients are unlikely to participate in IPOs of small-capitalization companies; (2) the Adviser may allocate short-term
trading opportunities to clients pursuing active trading strategies rather than clients pursuing long-term, buy-and-hold strategies;
(3) minimum block sizes may be optimal for liquidity which may limit the participation of smaller accounts; (4) it
is sometimes impractical for some custodians to deal with securities which are difficult to settle; and (5) private accounts and
managed money/wrap accounts generally do not participate in direct purchases of foreign securities, but may participate in
depositary receipts consisting of American Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”), and Global Depositary Receipts (“GDRs”).
The Adviser attempts to allocate limited investment opportunities, including IPOs,
among clients in a manner that is fair and equitable when viewed over a considerable period of time and involving many allocations.
Generally, the Adviser allocates investments to clients utilizing a pro rata methodology. When the Adviser is limited
in the amount of a particular security it can purchase due to a limited supply, limited liquidity, or other reason, the Adviser
may allocate the limited investment opportunity to a subset of eligible clients.
The Adviser serves as investment adviser for a number of clients and may deal with
conflicts of interest when allocating investment opportunities among its various clients. For example: (1) the Adviser receives
different advisory fees from different clients; (2) the performance records of some clients are more public than the performance
records of other clients; and (3) the Adviser and its affiliates, owners, officers, and employees have invested substantial
amounts of their own capital in some client accounts (notably the Davis Funds, Selected Fund, Clipper Fund, and Davis ETFs),
but do not invest their own capital in every client’s account. The majority of the Adviser’s clients pursue specific investment strategies, many of which are similar. The Adviser expects that, over long periods of time, most clients pursuing similar
investment strategies should experience similar, but not identical, investment performance. Many factors affect investment
performance including but not limited to: (1) the timing of cash deposits and withdrawals to and from an account; (2) the
fact that the Adviser may not purchase or sell a given security on behalf of all clients pursuing similar strategies; (3) price
and timing differences when buying or selling securities; and (4) the clients’ own different investment restrictions. The Adviser’s trading policies are designed to minimize possible conflicts of interest in trading for its clients.
Limitations on Aggregate Investments in a Single Company. The Adviser’s policy is not to invest for the purpose of exercising control or management of other companies. In extraordinary circumstances,
the Adviser may seek to influence management. In such an event, appropriate government and regulatory filings would
be made.
Federal and state laws, as well as company documents (sometimes referred to as “poison pills”) may limit the percentage of a company’s outstanding shares which may be purchased or owned by the Adviser’s clients. This is especially true in heavily regulated industries such as insurance, banking, and real estate investment trusts.
Unless it can obtain an exception, the Adviser will not make additional purchases of these companies for its clients if,
as a result of such purchase, shares in excess of the applicable investment limitation (for example, 9.9% of outstanding voting shares)
would be held by its clients in the aggregate.
Order Priority. The Adviser’s trading desk prioritizes incoming orders of similar purchases and sales of securities between institutional and managed money/wrap account orders. The Adviser’s trading desk typically executes orders for institutional clients, including investment companies, institutional private accounts, sub-advised
accounts, and others. Managed money/wrap account program sponsors typically execute orders for managed money/wrap accounts.
The Adviser’s trading desk attempts to coordinate the timing of orders with a trade rotation to prevent the Adviser from “bidding against itself” on orders. Generally, a block trade representing a portion of the total trade (approximately 1∕2 of an order given by the Portfolio Manager) is placed first for institutional and private
accounts. Once this trade is completed, the Adviser places orders for wrap accounts, one sponsor at a time. Sponsors of certain
model portfolios will execute trades for their clients. These model portfolio sponsors are included as a part of the wrap account
trade rotation. If the Adviser has not received a response from a model portfolio sponsor within a reasonable period of time,
the Adviser will resume through the trade rotation. If this occurs, it is possible that the model portfolio sponsor and
the Adviser will be executing similar trades for discretionary clients. The trading concludes with another block transaction for institutional
and private accounts. The trading
Statement of Additional Information | Clipper Fund | 14
desk follows procedures intended to provide reasonable assurance that no clients are
disadvantaged by this trade rotation and the compliance department monitors execution quality. However, there can be no assurance
that best execution will in fact be achieved in any given transaction.
Pattern Accounts. The Adviser serves as investment adviser for a number of clients which are patterned
after model portfolios or designated mutual funds managed by the Adviser. For example, a client pursuing the Adviser’s large-cap value strategy may be patterned after Davis New York Venture Fund. A client patterned after Davis New
York Venture Fund will usually have all of its trading (other than trading reflecting cash flows due to client deposits or
withdrawals) aggregated with that of Davis New York Venture Fund. In unusual circumstances, the Adviser may not purchase or sell
a given security on behalf of all clients (even clients managed in a similar style), and it may not execute a purchase of securities
or a sale of securities for all participating clients at the same time.
Orders for accounts which are not patterned after model portfolios or designated mutual
funds are generally executed in the order received by the trading desk with the following exceptions: (1) the execution
of orders for clients that have directed that particular brokers be used may be delayed until the orders which do not direct a particular
broker have been filled; (2) the execution of orders may be delayed when the client (or responsible Portfolio Manager)
requests such delay due to market conditions in the security to be purchased or sold; and (3) the execution of orders
which are to be bunched or aggregated.
Aggregated Trades. Generally, the Adviser’s equity Portfolio Managers communicate investment decisions to a centralized equity trading desk while fixed income Portfolio Managers normally place their transactions
themselves. The Adviser frequently follows the practice of aggregating orders of various institutional clients
for execution if the Adviser believes that this will result in the best net price and most favorable execution. In some instances,
aggregating trades could adversely affect a given client. However, the Adviser believes that aggregating trades generally benefits
clients because larger orders tend to have lower execution costs and the Adviser’s clients do not compete with each other trading in the market. Directed brokerage trades in a particular security are typically executed separately from, and possibly after, the Adviser’s other client trades.
In general, all of the Adviser’s clients (excluding clients who are directing brokerage and managed account/wrap programs) seeking to purchase or sell a given security at approximately the same time will,
generally, be aggregated into a single order or series of orders. When an aggregated order is filled, all participating clients receive
the price at which the order was executed. If, at a later time, the participating clients wish to purchase or sell additional
shares of the same security or if additional clients seek to purchase or sell the same security, then the Adviser will issue a new order
and the clients participating in the new order will receive the price at which the new order was executed.
In the event that an aggregated order is not entirely filled, the Adviser will allocate
the purchases or sales among participating clients in the manner it considers to be most equitable and consistent with its fiduciary
obligations to all such clients. Generally, partially-filled orders are allocated pro rata based on the initial order
submitted by each participating client.
In accordance with the various managed account/wrap programs in which the Adviser
participates, the Adviser typically directs all trading to the applicable program sponsor unless, in the Adviser’s reasonable discretion, doing so would adversely affect the client. Clients typically pay no commissions on trades executed through
program sponsors. In the event that an order to the sponsor of a managed account/wrap program is not entirely filled, the Adviser
will allocate the purchases or sales among the clients of that sponsor in the manner it considers to be most equitable and consistent
with its fiduciary obligations to all such clients. Generally, partially-filled orders are allocated among the particular sponsor’s participating clients on a random basis that is anticipated to be equitable over time. The Adviser may, if circumstances
permit, execute transactions for ETF clients through transfers-in-kind. There may be times that the Adviser is not able
to aggregate transactions because of applicable law or other considerations (such as tax or liquidity considerations) when
doing so might otherwise be advantageous.
Trading Error Correction. In the course of managing client accounts, it is possible that trading errors will
occur from time to time. The Adviser has adopted Trading Error Correction Policies & Procedures which,
when the Adviser is at fault, seek to place a client’s account in the same position it would have been had there been no error. The Adviser retains flexibility in attempting to place a client’s account in the same position it would have been had there been no error. The Adviser attempts to treat all material errors uniformly, regardless of whether they would result in a
profit or loss to the client. For example, the Adviser may purchase securities from a client account at cost if they were acquired
due to a trading error. If more than one trading error or a series of trading errors is discovered in a client account, then
gains and losses on the erroneous trades may be netted.
Research Paid for with Commissions. The Adviser does not use client commissions (“Soft Dollars”) to pay for: (1) computer hardware or software or other electronic communications facilities; (2) publications,
both paper based or electronic, that are available to the general public; and (3) research reports that are created by parties
other than the broker-dealers providing trade execution, clearing, and/or settlement services to the Adviser’s clients. If the Adviser determines to purchase such services, it pays for them using its own resources.
The Adviser may receive research that is bundled with the trade execution, clearing,
and/or settlement services provided by a particular broker-dealer. The Adviser may take into account the products and services
as well as the execution capacity of a brokerage firm in selecting brokers. Thus, transactions may be directed to a brokerage
firm that provides: (1) important information concerning a company; (2) introductions to key company officers; (3) industry
and company conferences; and (4) other value added research services. The Adviser may have an incentive to select or
recommend a broker-dealer based on its
Statement of Additional Information | Clipper Fund | 15
interest in continuing to receive these value added research or services that the
Adviser believes are useful in its investment decision-making process but only when, in the Adviser’s judgment, the broker-dealer is capable of providing best execution for that transaction. If the Adviser were to direct brokerage to a firm providing these
value added services, the Adviser may receive a benefit as it may not have to pay for the services it has received.
Research or other services obtained in this manner may be used in servicing the Adviser’s other accounts, including in connection with other Adviser client accounts other than those that pay commissions
to the broker. Such products and services may disproportionately benefit other Adviser client accounts relative to the Fund
based on the amount of brokerage commissions paid by the Fund and such other Adviser client accounts. For example,
research or other services that are paid for through one client’s commissions may not be used in managing that client’s account.
The Adviser follows the concepts of Section 28(e) of the Securities Exchange Act of
1934. Subject to the criteria of Section 28(e), the Adviser may pay a broker a brokerage commission in excess of that
which another broker might have charged for effecting the same transactions, in recognition of the value of the brokerage
and research services provided by or through the broker. The Adviser’s Head Trader exercises their professional judgment to determine which brokerage firm is best suited to execute any given portfolio transaction. This includes transactions executed
through brokerage firms which provide the services listed above. The Adviser does not attempt to allocate soft dollar benefits
to client accounts proportionately to the commissions which the accounts pay to brokerage firms which provide research services.
The Adviser believes it is important to its investment decision-making to have access to independent research.
Exceptions. There are occasions when the Adviser varies the trading procedures and considerations
described above. The Adviser exercises its best judgment in determining whether clients should execute
portfolio transactions simultaneously with, prior to, or subsequent to the model portfolio or designated mutual fund that they
are patterned after. The factors that the Adviser considers in exercising its judgment include, but are not limited to, the
need for confidentiality of the purchase or sale, market liquidity of the securities in issue, the particular events or circumstances
that prompt the purchase or sale of the securities, and operational efficiencies. Even when transactions are executed on the
same day, clients may not receive the same price as the model portfolios or designated mutual funds they are patterned after.
If the transactions are not aggregated, such prices may be better or worse.
Portfolio Turnover. Because the Fund’s portfolio is managed using the Davis Investment Discipline, portfolio turnover is expected to be low. The Fund anticipates that, during normal market conditions, its
annual portfolio turnover rate will be less than 100%. However, depending upon market conditions, portfolio turnover rate will
vary. At times it could be high which could require the payment of larger amounts in brokerage commissions and possibly
more taxable distributions.
When the Adviser deems it to be appropriate, the Fund may engage in active and frequent
trading to achieve its investment objective. Active trading may include participation in IPOs. Active trading may result
in the realization and distribution to shareholders of larger amounts of capital gains compared with a fund with less active
trading strategies which could increase shareholder tax liability. Active trading may also generate larger amounts of short-term
capital gains which are generally taxable as ordinary income when distributed to taxable shareholders. Frequent trading
also increases transaction costs which could detract from the Fund’s performance.
ReFlow Liquidity Program. Clipper Fund may participate in the ReFlow liquidity program, which is designed to
provide an alternative liquidity source for mutual funds experiencing redemptions of their shares.
In order to pay cash to shareholders who redeem their shares on a given day, a mutual fund typically must hold cash in
its portfolio, liquidate portfolio securities, or borrow money, all of which impose certain costs on the Fund. ReFlow Fund, LLC (“ReFlow”) provides participating mutual funds with another source of cash by standing ready to purchase shares from the Fund up to the amount of the Fund’s net redemptions on a given day. ReFlow then generally redeems those shares when the Fund
experiences net sales. In return for this service, the Fund will pay a fee to ReFlow at a rate determined by a daily auction
with other participating mutual funds. The costs to the Fund for participating in ReFlow are expected to be influenced by
and comparable to the cost of other sources of liquidity, such as the Fund’s short- term lending arrangements or the costs of selling portfolio securities to meet redemptions. In accordance with federal securities laws, ReFlow is prohibited from
acquiring more than 3% of the outstanding voting securities of the Fund.
There is no assurance that ReFlow will have sufficient funds available to meet the Fund’s liquidity needs on a particular day. Investments in the Fund by ReFlow in connection with the ReFlow liquidity program
are not subject to the market timing limitations described in the Fund’s prospectus.
The Adviser believes that participation in the ReFlow liquidity program may assist in stabilizing the Fund’s net assets, to the benefit of the Fund and its shareholders, although there is no guarantee that the program will do so. To the extent the Fund’s net assets do not decline, the Adviser typically will also benefit.
Statement of Additional Information | Clipper Fund | 16
Portfolio Commissions
The Fund paid the following brokerage commissions:
|
Fiscal Year-Ended December 31,
|
2025
|
2024
|
2023
|
|
Brokerage commissions paid:
|
$133,732
|
$188,439
|
$82,564
|
|
Amount paid to brokers providing research:
|
None
|
None
|
None
|
|
Amount paid to brokers providing services:
|
None
|
None
|
None
|
Investments in Certain Broker-Dealers. As of December 31, 2025, the Fund owned the following securities (excluding repurchase agreements) issued by any of its regular brokers and dealers. The Fund’s regular brokers and dealers are the ten brokers or dealers receiving the greatest amount of commissions from the Fund’s portfolio transactions during the most recent fiscal year, the ten brokers or dealers engaging in the largest amount of principal
transactions during the most recent fiscal year, and the ten brokers or dealers that sold the largest amount of Fund shares during
the most recent fiscal year. As of the most recent fiscal year-ended December 31, 2025, the Fund owned securities (excluding
repurchase agreements) issued by the following broker dealer(s):
|
Broker-Dealer
|
Value
|
|
Wells Fargo & Co.
|
$35,556,732
|
Investment Restrictions
The Fund follows investment strategies developed in accordance with its investment
objective, policies and restrictions described in its prospectus and this SAI.
The Fund has adopted the fundamental investment policies set forth below, which may
not be changed without shareholder approval. Where necessary, an explanation following a fundamental policy describes the Fund’s practices with respect to that policy, as permitted by governing rules, regulations, and interpretations. If the
governing rules, regulations, and/or interpretations change, the Fund’s investment practices may change without a shareholder vote.
The fundamental investment restrictions set forth below may not be changed without
the approval of the lesser of: (1) 67% or more of the voting securities present at a duly held meeting of Fund shareholders
at which a quorum (more than 50% of outstanding shares) is present; or (2) more than 50% of the outstanding voting securities
of the Fund.
Except for the fundamental investment policies regarding illiquid securities and borrowing,
all percentage restrictions apply as of the time of an investment without regard to any later fluctuations in the value
of portfolio securities or other assets. All references to the assets of the Fund are in terms of current value.
◼
Diversification. The Fund is not required to diversify its investments.
Further Explanation of Diversification Policy. The Fund is classified as non-diversified under the 1940 Act. The Fund intends to remain classified as a regulated investment company under the Internal
Revenue Code. This requires the Fund to conform to the following: at the end of each quarter of the taxable year, at least 50% of the value of the Fund’s total assets must be represented by: cash and cash items, U.S. Government securities, securities
of other regulated investment companies, and “other securities.” For this purpose, “other securities” does not include investments in the securities of any one issuer representing more than 5% of the value of the Fund’s total assets or more than 10% of the issuer’s outstanding voting securities.
◼
Concentration. The Fund may not concentrate its investments in the securities of issuers primarily
engaged in any particular industry.
Further Explanation of Concentration Policy. A Fund may not invest 25% or more of its total assets, taken at market value, in the securities of issuers primarily engaged in any particular industry (other than
securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities). The Fund generally uses the
Global Industry Classification Standard (“GICS”) as developed by Morgan Stanley Capital International and S&P Global to determine industry classification. GICS presents industry classification as a series of levels (i.e., sector, industry
group, industry, and sub-industry). For purposes of measuring concentration, a Fund generally classifies companies at the “industry group” or “industry” level. However, further analysis may lead the Adviser to classify companies at the sub-industry
level. The Adviser will only measure concentration at the sub-industry level when it believes that the various
sub-industries in question can reasonably be expected to be impacted differently to a material extent by future economic events. For example, in the “Insurance” industry, the Adviser believes that the sub-industries (insurance brokers, life &
health insurance, multi-line insurance, property & casualty insurance, and reinsurance) can reasonably be expected to be impacted
differently to a material extent by future economic events such as natural disasters, global politics, inflation, unemployment,
technology, etc. In addition, the Adviser may reclassify a company into an entirely different sector if it believes
that the GICS classification on a specific company does not accurately describe the company.
◼
Issuing Senior Securities. The Fund may not issue senior securities, except as permitted under applicable law,
including the 1940 Act and published SEC staff positions.
Further Explanation of Issuing Senior Securities. The Fund may not issue senior securities, except as provided by the 1940 Act and any rules, regulations, orders, or letters issued thereunder. This limitation
does not apply to selling short against
Statement of Additional Information | Clipper Fund | 17
the box. See the non-fundamental restriction further limiting short selling below. The 1940 Act defines a “Senior Security” as any bond, debenture, note or similar obligation or instrument constituting a security
and evidencing indebtedness, and any stock of a class having priority over any other class as to distribution of assets
or payments of dividends.
◼
Borrowing. The Fund may not borrow money, except to the extent permitted by applicable law including
the 1940 Act and published SEC staff positions.
Further Explanation of Borrowing Policy. A Fund may borrow from banks provided that, immediately thereafter, it has 300% asset coverage for all borrowings. A Fund may purchase additional securities
so long as borrowings do not exceed 5% of its total assets. A Fund may obtain such short-term credit as may be necessary
for the clearance of purchases and sales of portfolio securities. In the event that market fluctuations cause borrowing
to exceed the limits stated above, the Adviser would act to remedy the situation as promptly as possible, normally within
three business days. The Adviser is not required to dispose of portfolio holdings immediately if a Fund would suffer losses
as a result.
◼
Underwriting. The Fund may not underwrite securities of other issuers except to the extent permitted
by applicable law, including the 1940 Act and published SEC staff positions.
Further Explanation of Underwriting Policy. The Fund may not underwrite securities of other issuers, except insofar as the Fund may be deemed to be an underwriter in connection with the disposition of its
portfolio securities.
◼
Investments in Commodities and Real Estate. The Fund may not purchase or sell commodities or real estate, except to the extent permitted by applicable law, including the 1940 Act and published SEC staff
positions.
Further Explanation of Policy Restricting Investments in Commodities and Real Estate.
The Fund may purchase or sell financial futures contracts, options on financial futures contracts, currency contracts,
and options on currency contracts as described in its prospectus and SAI. The Fund may not purchase or sell real estate,
except that the Fund may invest in securities that are directly or indirectly secured by real estate or issued by issuers
that invest in real estate.
◼
Making Loans. The Fund may not make loans to other persons, except as allowed by applicable law
including the 1940 Act and published SEC staff positions.
Further Explanation of Lending Policy. The acquisition of investment securities or other investment instruments, entering
into repurchase agreements, leaving cash on deposit with the Fund’s custodian, and similar actions are not deemed to be the making of a loan.
To generate income and offset expenses, the Fund may lend portfolio securities to
broker-dealers and other financial institutions that the Adviser believes to be creditworthy in an amount up to 33 1∕3% of its total assets, taken at market value. While securities are on loan, the borrower will pay the Fund any income accruing on
the security. The Fund may invest any collateral it receives in additional portfolio securities, typically U.S. Treasury
notes, certificates of deposit, other high-grade, short-term obligations, or interest-bearing cash equivalents. The Fund is still subject
to gains or losses due to changes in the value of securities that it has lent.
When the Fund lends its securities, it will require the borrower to give the Fund
collateral in cash or U.S. Government securities. The Fund will require collateral in an amount equal to at least 100% of
the current value of the securities lent, including accrued interest. The Fund has the right to call a loan and obtain the securities
lent any time on notice of not more than five business days. The Fund may pay reasonable fees in connection with
such loans.
Non-Fundamental Investment Policies
The Fund has adopted and will follow the non-fundamental investment policies set forth
below which may be changed by the Fund’s Board of Trustees without the approval of the Fund’s shareholders.
◼
Illiquid Securities. A Fund will not purchase or hold illiquid securities if more than 15% of its net
assets would be invested in such securities. If illiquid securities exceeded 15% of that Fund’s net assets, the Adviser would attempt to reduce the Fund’s investment in illiquid securities in an orderly fashion.
◼
High-Yield, High-Risk Securities. The Fund will not purchase debt securities rated BB or Ba or lower (sometimes referred
to as “Junk Bonds”) if the securities are in default at the time of purchase or if such purchase would then cause more than 20% of the Fund’s net assets to be invested in such lower-rated securities.
◼
Short Selling. The Fund will not sell any security short if it would cause more than 5% of its total
assets, taken at market value, to be sold short. This limitation does not apply to selling short against the
box.
◼
Investing for Control. The Fund does not invest for the purpose of exercising control or management of other
companies.
◼
Mortgage, Pledge, Lend or Hypothecate Assets. The Fund will not mortgage, pledge, lend, or hypothecate more than 33 1∕3% of its total assets, taken at market value, in securities lending or other activities.
◼
Foreign Issuers. The Fund may not invest in the securities of foreign issuers and obligors if, as
a result, more than 15% of the Fund’s total assets would be invested in such securities.
Statement of Additional Information | Clipper Fund | 18
Section II:
The Fund and Key Persons
The Fund and Key Persons
This SAI should be read in conjunction with the Fund’s prospectus. This SAI supplements the information available in the prospectus.
Organization of the Fund
Clipper Fund. The Clipper Fund is registered under the 1940 Act as a non-diversified, open-end
management investment company. Clipper Fund is an authorized series of Clipper Funds Trust.
On November 26, 2014, Clipper Fund shareholders voted to reorganize the Fund into
Clipper Fund, a portfolio of Clipper Funds Trust. The new fund acquired all of the assets of the predecessor fund as part
of the reorganization. Since the new Clipper Fund’s objective(s) and policies are similar in all material aspects to those of the predecessor fund, and since each Fund has the same investment adviser, each Fund has adopted the performance and financial
history of the predecessor fund. Consequently, certain information included in the Fund’s prospectus and in this SAI that is as of a date prior to the date of the Fund’s prospectus and this SAI, represents information of the predecessor fund.
Clipper Funds Trust (the “Trust”). The Trust was organized as a Delaware statutory trust on February 22, 2005 and was
amended and restated on March 27, 2014. The beneficial interest of each series of
the Trust is divided into an unlimited number of shares, with no par value. The Fund’s shares have equal dividend, distribution, liquidation and voting rights. Holders of the Fund’s shares have no conversion or pre-emptive rights. All shares of the Fund, when duly issued, will be fully paid and non-assessable. The rights of the holders of shares of capital stock may
not be modified except by vote of the holders of a majority of the outstanding shares. The Board of Trustees is authorized to create new series (“funds”) or classes of shares of beneficial interest in a fund in addition to those already existing without the
approval of shareholders of the Trust. The assets received by the Trust upon sale of shares of the Fund and all income, earnings,
profits and proceeds thereof, subject only to the rights of creditors, are specifically allocated to the Fund. They constitute
the underlying assets of the Fund, are required to be segregated on the Trust’s books of account, and are to be charged with the expenses of the Fund. Any general expenses of the Trust not readily identifiable as belonging to a particular fund will be allocated on the basis of each fund’s relative net assets during the fiscal year. Each issued and outstanding share of a fund is entitled
to participate equally in dividends and distributions declared by the fund and upon liquidation or dissolution of the fund
in the net assets remaining after satisfaction of outstanding liabilities. The Declaration of Trust (the “Declaration”) specifically authorizes the Board to terminate the Trust or any fund by notice to the shareholders without shareholder approval.
In accordance with the 1940 Act (1) the Trust will hold a shareholder meeting for
the election of trustees when less than a majority of the trustees have been elected by shareholders, and (2) if, as a result
of a vacancy in the Board, less than two-thirds of the trustees have been elected by the shareholders, that vacancy will be filled
by a vote of the shareholders.
The Trust is not required to hold an annual meeting of shareholders. However, as provided
in the Declaration and the By-laws of the Trust, shareholder meetings may be called by a majority of the Trustees, by
the President or, upon written request of shareholders holding, in the aggregate, not less than 10% of the shares of the Trust
(if shareholders of all series are required under the Declaration to vote in the aggregate) or of any series of the Trust (if
shareholders of such series are entitled under the Declaration to vote by individual series), for the purpose as may be prescribed
by law, the Declaration or the By-laws, or for the purpose of taking action upon any other matter deemed by the Trustees to be
necessary or desirable, including changing fundamental policies, electing or removing Trustees, and approving or amending an
investment advisory agreement.
One-third of the outstanding shares entitled to vote will be a quorum for the transaction
of any business at a shareholder meeting, except as may otherwise be required by the 1940 Act or other applicable law.
Except when a larger vote is required by any provision of the Declaration or the By-Laws or by applicable law, when a quorum
is present at any meeting, a majority of the interests voted will decide any questions and a plurality of the interests
voted will elect a Trustee. Where any provision of law or of the Declaration requires that the shareholders of any series will vote
as a series (or that shareholders of a class will vote as a class), then a majority of the interests of that series (or class) voted
on that matter (or a plurality with respect to the election of a Trustee) will decide that matter with respect to that series (or class).
The Trust communicates important information to shareholders through annual, semi-annual
and quarterly reports, newsletters, special mailings and other events throughout the year. For further information,
please refer to the registration statement and exhibits for the Trust on file with the SEC in Washington, D.C. and
available upon payment of a copying fee. The statements in the prospectus and this SAI concerning the contents of contracts
or other documents, copies of which are filed as exhibits to the registration statement, are qualified by reference to such
contracts or documents.
Reorganization. In December 2014 Clipper Fund, Inc. reorganized into Clipper Fund,
an authorized series of Clipper Funds Trust.
Statement of Additional Information | Clipper Fund | 19
Trustees and Officers
Each of the Independent Directors/Trustees and officers holds identical offices with
each of the Davis Funds, Selected Fund, and Clipper Fund (five registrants, a total of 15 separate series): Davis New York
Venture Fund, Inc., Davis Series, Inc., Davis Variable Account Fund, Inc., Selected American Shares, Inc., and Clipper Funds Trust.
The five registrants have the same Directors/Trustees. Certain Directors/Trustees and officers also may hold similar
positions with Davis Fundamental ETF Trust, which is also managed by the Adviser.
The Fund’s Board of Trustees (the “Board”) supervises the business and management of the Fund. The Board establishes the Fund’s policies and meets regularly to review the activities of the officers, who are responsible for day-to-day operations of the Fund, the Adviser, and certain other service providers. The Board approves all significant
agreements between the Fund and those companies that furnish services to the Fund. Trustees are elected and serve
until their successors are elected and qualified. Information about the Trustees, including their business addresses, dates
of birth, principal occupations during the past five years, and other current Directorships of publicly traded companies or funds
are set forth in the table below.
The Board has appointed an Independent Trustee as Chairman. The Chairman presides
at meetings of the Trustees and may call meetings of the Board and any Board committee whenever deemed necessary. The
Chairman may act as a liaison with the Fund’s management, officers, attorneys, and other Trustees generally between meetings. The Chairman may perform such other functions as may be requested by the Board from time to time. The Board has
designated a number of standing committees as further described below, each of which has a Chairman. The Board also
may designate working groups or ad hoc committees as it deems appropriate.
The Board believes that this leadership structure is appropriate because it allows
the Board to exercise informed and independent judgment over matters under its purview and it allocates areas of responsibility
among committees or working groups of Trustees and the full Board in a manner that enhances effective oversight.
The Board also believes that having a majority of Independent Trustees is appropriate and in the best interest of the Fund’s shareholders. Nevertheless, the Board also believes that having interested persons serve on the Board brings corporate and
financial viewpoints that are, in the Board’s view, crucial elements in its decision-making process. The leadership structure of the Board may be changed at any time and in the discretion of the Board, including in response to changes in circumstances
or the characteristics of the Fund.
Trustees
For the purposes of their service as Trustees to the Clipper Fund, the business address
for each of the Trustees is: 2949 East Elvira Road, Suite 101, Tucson, AZ 85756. Subject to exceptions and exemptions which
may be granted by the Independent Trustees, Trustees must retire from the Board of Trustees and cease being a Trustee
at the close of business on the last day of the calendar year in which the Trustee attains age seventy-eight (78).
|
Name, Date of Birth,
Position(s) Held with
Fund, Length of Service
|
Principal Occupation(s) During Past 5
Years
|
Number of
Portfolios
Overseen
|
Other Directorships Held by Trustee
During the Past 5 Years
|
|
Independent Trustees:
|
|
|
|
|
Francisco Borges
(11/17/51)
Trustee since 2014
|
Retired; Chairman and Head of
Secondaries, Ares Management Corp.
(global alternative investment manager)
until 2024; Chairman and Managing
Partner, Landmark Partners, LLC (private
equity firm) until 2021.
|
15
|
Director, Davis Funds (consisting of
thirteen portfolios); Director, Selected
American Shares, Inc. (consisting of
one portfolio); Chairman and Trustee,
John S. and James L. Knight
Foundation; Chairman/Director,
Assured Guaranty Ltd. (financial
guaranty insurance business); Trustee,
Millbrook School; Director, Hartford
HealthCare (healthcare network).
|
|
John Gates, Jr.
(08/02/53)
Trustee since 2025
|
Executive Chairman, TradeLane
Properties LLC (industrial real estate
company); Chairman and Chief Executive
Officer of PortaeCo LLC (private
investment company).
|
15
|
Director, Davis Funds (consisting of
thirteen portfolios); Director, Selected
American Shares, Inc. (consisting of
one portfolio); Director, Miami Corp.
(diversified investment company).
|
|
Samuel Iapalucci
(07/19/52)
Trustee since 2025
Chairman since 2025
|
Retired; Executive Vice President and Chief
Financial Officer, CH2M HILL Companies,
Ltd. (engineering) until 2008.
|
15
|
Director, Davis Funds (consisting of
thirteen portfolios); Director, Selected
American Shares, Inc. (consisting of
one portfolio).
|
|
Katherine MacWilliams
(01/19/56)
Trustee since 2014
|
Retired; Chief Financial Officer, Caridian
BCT, Inc. (medical device company) until
2012.
|
15
|
Director, Davis Funds (consisting of
thirteen portfolios); Director, Selected
American Shares, Inc. (consisting of
one portfolio).
|
Statement of Additional Information | Clipper Fund | 20
|
Name, Date of Birth,
Position(s) Held with
Fund, Length of Service
|
Principal Occupation(s) During Past 5
Years
|
Number of
Portfolios
Overseen
|
Other Directorships Held by Trustee
During the Past 5 Years
|
|
Lara Vaughan
(04/20/69)
Trustee since 2025
|
Chief Executive Officer and Chief Financial
Officer of Parchman, Vaughan, & Company,
L.L.C. (investment bank).
|
15
|
Director, Davis Funds (consisting of
thirteen portfolios); Director, Selected
American Shares, Inc. (consisting of
one portfolio).
|
|
Interested Trustees:
|
|
|
|
|
Andrew Davis
(06/25/63)
Trustee since 2014
|
President or Vice President of each Davis
Fund, Selected Fund, and Clipper Fund;
President, Davis Selected Advisers, L.P.,
and also serves as an executive officer of
certain companies affiliated with the
Adviser.
|
15
|
Director, Davis Funds (consisting of
thirteen portfolios); Director, Selected
American Shares, Inc. (consisting of
one portfolio).
|
|
Christopher Davis
(07/13/65)
Trustee since 2014
|
President or Vice President of each Davis
Fund, Selected Fund, Clipper Fund, and
Davis ETF; Chairman, Davis Selected
Advisers, L.P., and also serves as an
executive officer of certain companies
affiliated with the Adviser, including sole
member of the Adviser’s general partner,
Davis Investments, LLC.
|
15
|
Director, Davis Funds (consisting of
thirteen portfolios); Director, Selected
American Shares, Inc. (consisting of
one portfolio); Lead Independent
Director, Graham Holdings Company
(educational and media company);
Director, The Coca-Cola Company
(beverage company); Director,
Berkshire Hathaway Inc. (financial
services).
|
Andrew Davis and Christopher Davis own partnership units (directly, indirectly, or
both) of the Adviser and are considered to be “interested persons” of the Fund as defined in the 1940 Act. Andrew Davis and Christopher Davis are brothers.
Independent Trustees’ Compensation
Independent Trustees receive an annual retainer for their service. During the fiscal
year-ended December 31, 2025, the compensation paid to the Trustees who are not considered to be interested persons
of the Fund is listed in the table below. The Trustees receive no pecuniary retirement benefits accrued as Fund expenses. Interested
Trustees are not compensated by the Fund.
|
Independent
Trustees
|
Fund Compensation
|
Total Complex
Compensation(1)
|
|
Francisco Borges
|
$9,600
|
$125,000
|
|
John Gates, Jr.
|
$9,600
|
$125,000
|
|
Samuel Iapalucci
|
$9,600
|
$125,000
|
|
Katherine MacWilliams
|
$9,880
|
$128,600
|
|
Lara Vaughan
|
$9,600
|
$125,000
|
|
Trustee Emeritus
|
|
|
|
Thomas Gayner(2)
|
$6,000
|
$78,125
|
(1)
“Total Complex Compensation” is the aggregate compensation paid for service as a director by all mutual funds with the same investment adviser. There are six registered investment companies in the complex.
(2)
Mr. Gayner retired in March 2025, currently serves as Trustee Emeritus, and can serve
as Trustee Emeritus until age 78.
Officers
All Clipper Fund officers (including some Interested Trustees) hold positions as executive
officers with the Adviser and its affiliates, including Davis Selected Advisers, L.P. (Adviser), Davis Selected Advisers–NY, Inc. (sub-adviser), Davis Distributors, LLC (the principal underwriter), Davis Investments, LLC (the sole general
partner of the Adviser), and other affiliated companies. The Clipper Fund does not pay salaries to any of its officers. Each of the Clipper Fund’s officers is elected annually. Clipper Fund’s officers serve until reelection or until their successor is elected and qualified.
Lisa Cohen (born 04/25/89, Officer of Clipper Funds Trust since 2021). Vice President and Secretary of Davis New York Venture Fund, Inc., Davis Variable Account Fund, Inc., and Davis Series, Inc. (collectively, the “Davis Funds,” consisting of thirteen portfolios), Selected American Shares, Inc. (consisting of one portfolio),
Clipper Funds Trust (consisting of one portfolio), and Davis Fundamental ETF Trust (consisting of four portfolios); Vice
President, Chief Legal Officer, and Secretary of Davis Selected Advisers, L.P.; and also serves as an executive officer
of certain companies affiliated with the Adviser. Prior to assuming these positions, Ms. Cohen worked for Honeywell International, Inc. (January 2020 – June 2021) and as an attorney at Davis Selected Advisers, L.P. (December 2015 – January 2020).
Andrew Davis (born 06/25/63, Officer of Clipper Funds Trust since 2015). See description in the section on Interested Trustees.
Statement of Additional Information | Clipper Fund | 21
Christopher Davis (born 07/13/65, Officer of Clipper Funds Trust since 2005). See description in the section on Interested Trustees.
Kenneth Eich (born 08/14/53, Officer of Clipper Funds Trust since 2005). Executive Vice President and Principal Executive Officer of Davis New York Venture Fund, Inc., Davis Variable Account Fund, Inc., and
Davis Series, Inc. (collectively, the “Davis Funds,” consisting of thirteen portfolios), Selected American Shares, Inc. (consisting of one portfolio), and Clipper Funds Trust (consisting of one portfolio); Trustee/Chairman, Executive Vice President,
and Principal Executive Officer of Davis Fundamental ETF Trust (consisting of four portfolios); Chief Operating Officer
of Davis Selected Advisers, L.P.; and also serves as an executive officer of certain companies affiliated with the Adviser.
Douglas Haines (born 03/04/71, Officer of Clipper Funds Trust since 2005). Vice President, Treasurer, Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer of Davis New
York Venture Fund, Inc., Davis Variable Account Fund, Inc., and Davis Series, Inc. (collectively, the “Davis Funds,” consisting of thirteen portfolios), Selected American Shares, Inc. (consisting of one portfolio), Clipper Funds Trust (consisting
of one portfolio), and Davis Fundamental ETF Trust (consisting of four portfolios); Vice President and Director of Fund Accounting
of Davis Selected Advisers, L.P.
Michaela McLoughry (born 03/21/81, Officer of Clipper Funds Trust since 2023). Vice President and Chief Compliance Officer of Davis New York Venture Fund, Inc., Davis Variable Account Fund, Inc., and
Davis Series, Inc. (collectively, the “Davis Funds,” consisting of thirteen portfolios), Selected American Shares, Inc. (consisting of one portfolio), Clipper Funds Trust (consisting of one portfolio), and Davis Fundamental ETF Trust (consisting of
four portfolios); Vice President and Chief Compliance Officer of Davis Selected Advisers, L.P.; and also serves as an executive
officer of certain companies affiliated with the Adviser. Prior to assuming these positions, Ms. McLoughry spent approximately
18 years in the Fund Accounting department at Davis Selected Advisers, L.P.
Standing Committees of the Board of Trustees
Although the Board of Trustees has general criteria that guide its choice of candidates
to serve on the Board of Trustees, there are no specific required qualifications for Board membership, including with respect
to the diversity of candidates for Board membership. Candidates for Board membership nominated by shareholders are not treated
differently than candidates nominated from other sources. The Board of Trustees believes that the different perspectives,
viewpoints, professional experience, education, and individual qualities of each Trustee represent a diversity
of experiences and a variety of complementary skills. Each Trustee has experience as a Director of the Davis Funds
and Selected Fund and Trustee of Clipper Fund. It is the Trustees’ belief that this allows the Board of Trustees, as a whole, to oversee the business of the Clipper Fund in a manner consistent with the best interests of the shareholders of the Clipper Fund.
When considering potential nominees to fill vacancies on the Board of Trustees and as part of its annual self-evaluation,
the Board of Trustees reviews the mix of skills and other relevant experiences of the Trustees. Qualified candidates will be people
of proven character and talent who have achieved notable success in their professional careers. The specific talents that
the Nominating Committee of the Board of Trustees seeks in a candidate depend to a great extent upon the Board of Trustees’ needs at the time a vacancy occurs.
The table above provides professional experience of each Trustee on an individual
basis. This disclosure includes the length of time serving the Clipper Fund, other directorships held, and their principal occupation
during the past five years. With their experience, each of the Trustees has become familiar with the regulatory and investment
matters of the Clipper Fund and have contributed to the Trustees’ deliberations. In light of the Clipper Fund’s business and structure, the Board of Trustees believes the experience of each Trustee is beneficial for overseeing the business of the Clipper
Fund. Moreover, the Board of Trustees believes that the different experiences and backgrounds of the Trustees are complementary and enhance the Board of Trustees’ ability to oversee the Clipper Fund’s affairs.
Audit Committee. The Board of Trustees has established an Audit Committee, which is comprised entirely
of Independent Trustees (Katherine MacWilliams, Chair; Francisco Borges; and Lara Vaughan). The Audit
Committee has a charter. The Audit Committee reviews financial statements and other audit-related matters for the
Clipper Fund. The Audit Committee also holds discussions with management and with the Independent Accountants concerning the scope of the audit and the auditor’s independence. The Audit Committee meets as often as deemed appropriate by the Audit
Committee. The Audit Committee met four times during the fiscal year-ended December 31, 2025.
The Board of Trustees has determined that Katherine MacWilliams is the Clipper Fund’s Independent Audit Committee Financial Expert pursuant to Section 407 of the Sarbanes-Oxley Act and as defined
by Item 3 of Form N-CSR of the 1940 Act. In their deliberations, the Board of Trustees considered Ms. MacWilliams’: (1) professional experience; (2) independence as defined in Item 3 of Form N-CSR; and (3) integrity and absence of disciplinary history.
Nominating Committee. The Board of Trustees has established a Nominating Committee, which is comprised
entirely of Independent Trustees (Samuel Iapalucci, Chair; and Francisco Borges), which meets
as often as deemed appropriate by the Nominating Committee. The Clipper Fund does not elect Trustees annually. Each Trustee
serves until retirement, resignation, death, or removal. Subject to exceptions and exemptions which may be granted by the
Independent Trustees, Trustees must retire from the Board of Trustees and cease being a Trustee at the close of business
on the last day of the calendar year in which the Trustee attains age seventy-eight (78). After formal retirement, Trustees may
serve in emeritus status, attend board functions, and receive up to one-half the current compensation of Trustees. The Nominating
Committee met one time during the fiscal year-ended December 31, 2025. The Nominating Committee reviews and nominates
persons to serve as members of the Board of Trustees, and reviews and makes recommendations concerning the compensation
of the Independent Trustees.
Statement of Additional Information | Clipper Fund | 22
The chairperson of the Nominating Committee also currently serves as the Chairman
of the Board and: (1) presides over Board meetings; (2) presides over executive sessions of the Independent Trustees of
the Clipper Fund, in addition to presiding over meetings of the committee; (3) participates with the officers and counsel in
the preparation of agendas and materials for Board meetings; (4) facilitates communication between the Independent Trustees and
management, and among the Independent Trustees; and (5) has such other responsibilities as the Board or Independent
Trustees shall determine.
The Nominating Committee has a charter. When the Board of Trustees is seeking a candidate
to become a Trustee, it considers qualified candidates received from a variety of sources, including having authority
to retain third-parties that may receive compensation related to identifying and evaluating candidates. Shareholders may propose
nominees by writing to the Nominating Committee, in care of the Secretary of the Clipper Fund, at 2949 East Elvira,
Suite 101, Tucson, Arizona 85756.
Brokerage Committee. The Board of Trustees has established a Brokerage Committee, which is comprised entirely
of Independent Trustees (John Gates, Jr., Chair), which meets as often as deemed appropriate
by the Brokerage Committee. The Brokerage Committee met one time during the fiscal year-ended December 31, 2025. The
Brokerage Committee reviews and makes recommendations concerning the Clipper Fund’s portfolio brokerage and trading practices.
Risk Oversight
Registered investment companies, including Clipper Fund, are subject to a variety
of risks, including investment risk, valuation risk, reputational risk, risk of operational failure or lack of business continuity,
and legal, compliance, and regulatory risk. Risk management seeks to identify and address risks, i.e., events or circumstances
that could have material adverse effects on the business, operations, shareholder services, investment performance or reputation
of the Fund.
Day-to-day management of Clipper Fund, including risk management, is the responsibility of the Clipper Fund’s contractual service providers, including the Fund’s Adviser, Sub-Adviser, as applicable, the Distributor, Custodian and Transfer Agent. Each of these entities is responsible for specific portions of the Fund’s operations including the processes and associated risks relating to the Fund’s investments, integrity of cash movements, financial reporting, operations, and compliance. The Board of Trustees oversees the service providers’ discharge of their responsibilities including the processes they use to manage relevant risks. As part of its overall activities, the Board of Trustees reviews the management of the Fund’s risk management structure by various departments of the Adviser including: Portfolio Management, Fund Operations,
Legal, and Internal Audit, as well as by Clipper Fund’s Chief Compliance Officer (“CCO”). The responsibility to manage the Fund’s risk management structure on a day-to-day basis is within the Adviser’s overall investment management responsibilities. The Adviser has its own, independent interest in risk management.
The Board of Trustees discharges risk oversight as part of its overall activities
with the assistance of its Audit Committee and CCO. In addressing issues regarding the Fund’s risk management between meetings, appropriate representatives of the Adviser communicate with the Chair of the Board of Trustees or Clipper Fund’s CCO, who is accountable and reports directly to the Board of Trustees. Various personnel, including Clipper Fund’s CCO, the Adviser’s management, and other service providers (such as the Fund’s independent accountants) make periodic reports to the Board of Trustees or to the Audit Committee with respect to various aspects of risk management.
The Board of Trustees recognizes that not all risks that may affect the Fund can be
identified, that it may not be practical or cost-effective to eliminate or mitigate certain risks, that it may be necessary to
bear certain risks (such as investment-related risks) to achieve the Fund’s investment objective, and that the processes, procedures, and controls employed to address certain risks may be limited in their effectiveness. Moreover, reports received by the Trustees
as to risk management matters are typically summaries of the relevant information. As a result of the foregoing and other factors, the Board of Trustees’ risk management oversight is subject to substantial limitations.
The Audit Committee assists the Board of Trustees in reviewing with the independent
auditors, at various times throughout the year, matters relating to the annual audits and financial accounting and reporting
matters.
Clipper Fund’s CCO assists the Board of Trustees in overseeing the significant investment policies of the Fund. The CCO monitors these policies. The Board of Trustees receives and considers the CCO’s annual written report which, among other things, summarizes material compliance issues that arose during the previous year
and any remedial action taken to address these issues, as well as any material changes to the compliance programs. The Board
of Trustees also receives and considers reports from Clipper Fund’s CCO throughout the year. As part of its oversight responsibilities, the Board of Trustees has approved various compliance policies and procedures. Each Committee presents reports
to the Board of Trustees which may prompt further discussion of issues concerning the oversight of the Fund’s risk management. The Board of Trustees also may discuss particular risks that are not addressed in the Committee process.
Trustees’ Fund Holdings
As of December 31, 2025, the Trustees had invested the following amounts in all Funds
managed by the Adviser. Investments are listed in the following ranges: None, $1–10,000, $10,001–50,000, $50,001–100,000 and Over $100,000:
|
Independent Trustees
|
Clipper Fund
|
Total Invested In All Funds(1)
|
|
Francisco Borges
|
Over $100,000
|
Over $100,000
|
|
John Gates, Jr.
|
None
|
Over $100,000
|
|
Samuel Iapalucci
|
None
|
Over $100,000
|
Statement of Additional Information | Clipper Fund | 23
|
Independent Trustees
|
Clipper Fund
|
Total Invested In All Funds(1)
|
|
Katherine MacWilliams
|
Over $100,000
|
Over $100,000
|
|
Lara Vaughan
|
$1–$10,000
|
Over $100,000
|
|
Interested Trustees(2)
|
|
|
|
Andrew Davis
|
Over $100,000
|
Over $100,000
|
|
Christopher Davis
|
Over $100,000
|
Over $100,000
|
(1)
“Total Invested in All Funds” is the aggregate dollar range of investments in all Funds overseen by the individual Trustee and managed by Davis Selected Advisers, L.P. This includes the Davis Funds, Selected Fund, and Clipper
Fund.
(2)
Interested Trustees are employed by and own shares in the Adviser and are considered to be “interested persons” of the Clipper Fund as defined in the 1940 Act.
Stock Ownership Guidelines. The Trustees consider ownership of Funds in the Fund Complex by Trustees to be of
utmost importance and believe that such ownership enhances the commitment of the Trustees to the Fund’s future and aligns the interests of the Trustees with those of the Fund’s shareholders. Therefore, the Trustees adopted minimum Trustees’ stock ownership guidelines. These guidelines require that each Trustee shall beneficially
own and maintain ownership of shares of the Funds with an aggregate value, measured as of December 31 of each year, of at
least three times their respective annual retainer (not including any meeting fees or non-recurring compensation) for such year.
Interested Trustees do not receive Trustees’ fees, but maintain stock ownership positions in the Funds of at least three times the base annual retainer for an Independent Trustee. Newly elected Independent Trustees have three years from the
date the Trustee is first elected on the Board of any of the Funds to reach this ownership level. As of December 31, 2025, all of the Fund’s Trustees on such date met these suggested stock ownership guidelines.
Independent Trustees’ Affiliations and Transactions
None of the Independent Trustees (or their immediate family members) own any securities issued by the Clipper Fund’s investment adviser, sub-adviser, principal underwriter, or any company (other than
a registered investment company) directly or indirectly controlling, controlled by, or under common control with the above listed
companies (hereafter referred to as the “Adviser and its affiliates”). Andrew Davis and Christopher Davis own partnership units (directly, indirectly, or both) in the Adviser and are considered to be Interested Trustees.
None of the Independent Trustees (or their immediate family members) have had any
direct or indirect interest, the value of which exceeds $120,000, during the last two calendar years in the Adviser or in the
Adviser and its affiliates.
None of the Independent Trustees (or their immediate family members) have had any
material interest in any transaction, or series of transactions, during the last two calendar years, in which the amount involved
exceeds $120,000 and to which any of the following persons was a party: the Clipper Fund, an officer of the Clipper Fund,
or any fund managed by the Adviser, or in the Adviser and its affiliates.
None of the Independent Trustees (or their immediate family members) have had any
direct or indirect relationships during the last two calendar years, in which the amount involved exceeds $120,000 and to which
any of the following persons was a party: the Clipper Fund, an officer of the Clipper Fund, or any fund managed by the
Adviser, or in the Adviser and its affiliates.
None of the officers of the Adviser and its affiliates have served during the last
two calendar years on the Board of Trustees of a company where any Trustee of the Fund (or any of the Trustees’ immediate family members) served as an officer.
Certain Shareholders of the Fund
As of April 1, 2026, the Fund’s Trustees and Officers, as a group, owned the following percentages of shares issued by the Fund. This percentage does not include investments controlled indirectly, including
holdings by Davis Selected Advisers, L.P.
|
|
|
|
Clipper Fund
|
3%
|
The following table sets forth, as of April 1, 2026, the name and holdings of each
person known by Clipper Funds Trust, to be a record owner of more than 5% of the outstanding shares of the Fund. Other than as
indicated below, the Fund is not aware of any shareholder who beneficially owns more than 25% of the Fund’s total outstanding shares. Shareholders owning a significant percentage of the Fund’s shares do not affect the voting rights of other shareholders.
|
Name and Address of Shareholders
Owning More Than 5% of Fund
|
Percent of Shares
Outstanding
|
|
National Financial Services Corp
FBO Customers
New York, NY
|
21.27%
|
|
Davis Selected Advisers, L.P.
Tucson, AZ
|
17.38%
|
|
Charles Schwab & Co. Inc.
San Francisco, CA
|
14.80%
|
Statement of Additional Information | Clipper Fund | 24
Investment Advisory Services
Davis Selected Advisers, L.P. and Davis Selected Advisers–NY, Inc. Davis Selected Advisers, L.P. (the “Adviser”), whose principal office is at 2949 East Elvira Road, Suite 101, Tucson, Arizona 85756, serves
as investment adviser for Davis New York Venture Fund, Inc., Davis Series, Inc., and Davis Variable Account Fund, Inc. (the “Davis Funds”); Davis Fundamental ETF Trust (the “Davis ETFs”); Selected American Shares, Inc. (the “Selected Fund”); and Clipper Funds Trust (the “Clipper Fund”). The Adviser also provides advisory or sub-advisory services to other parties including other registered investment companies, private accounts, offshore funds, and managed money/wrap accounts. Davis
Investments, LLC, an entity controlled by Christopher Davis, is the Adviser’s sole general partner. Christopher Davis is Chairman of the Adviser and, as the sole member of the general partner, controls the Adviser. Davis Distributors, LLC (the “Distributor”), a subsidiary of the Adviser, serves as the distributor or principal underwriter of many of the funds that
the Adviser administers including Davis Funds, Selected Fund, Clipper Fund, and offshore funds. Davis Selected Advisers–NY, Inc. (the “Sub-Adviser”), a wholly owned subsidiary of the Adviser, performs investment management, research, and other
services for the Clipper Fund on behalf of the Adviser under sub-advisory agreements with the Adviser. All fees paid
to the Sub-Adviser are paid by the Adviser.
Advisory Agreement with Davis Selected Advisers, L.P. and Sub-Advisory Agreement with Davis Selected Advisers–NY, Inc. Pursuant to an Advisory Agreement, the Fund pays the Adviser a fee according to the
following schedule:
|
Annual Rate
|
Value of Average Daily Net Assets of the Fund During the Month
|
|
0.55% of
|
First $3 billion
|
|
0.54% of
|
Next $1 billion
|
|
0.53% of
|
Next $1 billion
|
|
0.52% of
|
Next $1 billion
|
|
0.51% of
|
Next $1 billion
|
|
0.50% of
|
Next $3 billion
|
|
0.485% of
|
Over $10 billion
|
Fee expressed as a percentage of average net assets
These fees may be higher than those of some other mutual funds but are not necessarily
higher than those paid by funds with similar objectives.
The Fund paid the following aggregate advisory fees to the Adviser during the last
three fiscal years:
|
Fiscal Year-Ended December 31,
|
2025
|
2024
|
2023
|
|
Clipper Fund
|
$6,625,930
|
$6,327,528
|
$5,306,904
|
In accordance with the provisions of the 1940 Act, the Advisory and Sub-Advisory Agreement
will terminate automatically on assignment and are subject to cancellation on 60 days’ written notice by the Fund’s Board of Trustees, the vote of the holders of a majority of the Fund’s outstanding shares or the Adviser. The continuance of the Advisory and Sub-Advisory Agreement must be approved at least annually by the Fund’s Board of Trustees or by the vote of holders of a majority of the outstanding shares of the Fund. In addition, any new agreement, or the continuation of the existing
agreement, must be approved by a majority of Trustees who are not parties to the agreements or interested persons of
any such party. The Advisory and Sub- Advisory Agreement also makes provisions for portfolio transactions and brokerage
policies of the Fund, which are discussed above under “Portfolio Transactions.”
Pursuant to the Advisory and Sub-Advisory Agreement, the Adviser, subject to the general supervision of the Fund’s Board of Trustees, provides management and investment advice and furnishes statistical, executive
and clerical personnel, bookkeeping, office space and equipment necessary to carry out its investment advisory functions
and such corporate managerial duties as requested by the Board of Trustees of the Fund. The Fund bears all expenses other
than those specifically assumed by the Adviser under the Advisory and Sub-Advisory Agreement, including preparation of its
tax returns, financial reports to regulatory authorities, dividend determinations, transactions and accounting matters
related to its custodian bank, transfer agency, custodial and investor services, and qualification of its shares under federal
and state securities laws. The Fund may reimburse the Adviser for providing certain services, including accounting and administrative
services, and investor services. Such reimbursements are detailed below:
|
Fiscal Year-Ended December 31,
|
2025
|
2024
|
2023
|
|
Accounting & Administrative Services:
|
None
|
None
|
None
|
|
Investor Services:
|
$71,463
|
$73,405
|
$61,649
|
Approval of the Advisory and Sub-Advisory Agreement. The Board of Trustees is scheduled to meet four times a year. The Trustees believe that matters bearing on the Advisory and Sub-Advisory Agreement are
considered at most, if not all, of their meetings. The Independent Trustees are advised by independent legal counsel selected
by the Independent Trustees. A discussion of the Trustees’ considerations in the annual approval of Advisory and Sub-Advisory Agreement is included in the Fund’s next annual or semi- annual report following the annual approval.
Unique Nature of Each Fund. The Adviser may serve as the investment adviser or sub-adviser to other funds that
have investment objectives and principal investment strategies similar to those of the
Fund. While the Fund may have many similarities to these other funds, the investment performance of each fund will be
different due to a number of differences between the funds including differences in sales charges, expense ratios, and cashflows.
Statement of Additional Information | Clipper Fund | 25
Code of Ethics. The Adviser, Sub-Adviser, Distributor, and the Clipper Fund have adopted a Code of
Ethics, meeting the requirements of Rule 17j-1 under the 1940 Act that regulate the personal securities transactions of the Adviser’s investment personnel, other employees, and affiliates with access to information regarding securities
transactions of the Clipper Fund. Such employees may invest in securities including securities that may be purchased
or held by the Clipper Fund. A copy of the Code of Ethics is on public file with and available from the SEC.
Continuing Regulation. The Adviser, like most other asset managers, is subject to ongoing inquiries from
the SEC and/or the Financial Industry Regulatory Authority (“FINRA”) regarding industry practices.
Proxy Voting Policies and Record. The Board of Trustees has directed the Adviser to vote the Fund’s portfolio securities in conformance with the Adviser’s Proxy Voting Policies and Procedures. These policies and procedures are summarized in Appendix B. Information regarding how the Fund voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30 is available, without charge, on the Fund’s website, https://clipperfund.com/proxy-voting, by calling Clipper Fund’s Investor Services at 1-800-432-2504, or on the SEC’s website (www.sec.gov).
Portfolio Managers
Clipper Fund. The Portfolio Managers of Clipper Fund are Christopher Davis and Danton Goei. They
are the persons primarily responsible for investing the Fund’s assets on a daily basis.
Accounts Managed as of December 31, 2025
|
Portfolio
Managers
|
Number of
other RICs(1)
|
Assets(2) in
RICs
in millions
|
Number of
OPIV(3)
|
Assets in OPIV
in millions
|
Number of
OA(4)
|
Assets in OA
in millions
|
|
Christopher Davis
|
10
|
$12,791.4
|
2
|
$539.3
|
35
|
$10,858.7
|
|
Danton Goei
|
10
|
$12,307.6
|
4
|
$804.8
|
33
|
$10,424.7
|
(1)
“RIC” means Registered Investment Company.
(2)
“Assets” means total assets managed by the Portfolio Manager. Some or all of these assets may be co-managed with another Portfolio Manager who will also be credited with managing the same assets. The sum of assets managed by Davis Advisors’ Portfolio Managers may exceed the total assets managed by Davis Advisors.
(3)
“OPIV” means Other Pooled Investment Vehicles.
(4)
“OA” means Other Accounts. These accounts are primarily private accounts and sponsors of managed money/wrap accounts.
Ownership of Fund Shares as of December 31, 2025
|
Portfolio Managers
|
|
|
Christopher Davis
|
Over $1 million
|
|
Danton Goei
|
Over $1 million
|
Ownership disclosure is made using the following ranges: None; $1–$10,000; $10,001–$50,000; $50,001–$100,000; $100,001–$500,000; $500,001–$1 million; Over $1 million.
Structure of Compensation
Christopher Davis’ compensation for services provided to the Adviser consists of a base salary. The Adviser’s Portfolio Managers are provided benefits packages including life insurance, health insurance, and participation in the Adviser’s 401(k) plan comparable to that received by other company employees.
Danton Goei’s compensation for services provided to the Adviser consists of: (1) a base salary;
(2) an annual discretionary bonus; (3) awards of equity (“Units”) in Davis Selected Advisers, L.P., including Units and/or phantom Units; (4) an incentive plan whereby the Adviser purchases shares in certain mutual funds managed by the Adviser,
which vest based on the passage of time provided that the Portfolio Manager is still employed by the Adviser; and
(5) an incentive plan whereby the Adviser purchases shares in selected mutual funds managed by the Adviser. In the case of fund
shares purchased as described above in (5), at the end of specified periods, generally five-years following the date of purchase,
some, all, or none of the Fund shares will be registered in the employee’s name based on Fund performance, after expenses on a pre-tax basis, versus the Fund’s benchmark index, as described in the Fund’s prospectus or, in limited cases, based on performance ranking among established peer groups. The Adviser does not purchase incentive shares in every fund these Portfolio
Managers manage or assist on. In limited cases, such incentive compensation is tied on a memorandum basis to the performance
of the portion of the Fund (“sleeve”) managed by the analyst versus the Fund’s benchmark. The Adviser’s Portfolio Managers are provided benefits packages including life insurance, health insurance, and participation in the Adviser’s 401(k) plan comparable to that received by other company employees.
Potential Conflicts of Interest
Potential conflicts of interest may arise in connection with the management of multiple
accounts, including potential conflicts of interest related to the knowledge and timing of Clipper Fund’s trades, investment opportunities, broker selection, and Fund investments. Portfolio Managers and other investment professionals may be privy to
the size, timing, and possible market impact of the Fund’s trades. It is theoretically possible that Portfolio Managers could use this information to the advantage of other accounts they manage and to the possible detriment of the Fund. It is possible
that an investment opportunity may be suitable for both the Fund and other accounts managed by Portfolio Managers but may
not be available in sufficient quantities for both the Fund and other accounts to participate fully. Similarly, there may be
limited opportunity to sell an investment held
Statement of Additional Information | Clipper Fund | 26
by the Fund and another account. Management of multiple portfolios and/or other accounts
may result in a Portfolio Manager devoting unequal time and attention to the management of each portfolio and/or other
accounts. The Adviser seeks to manage such competing interests for the time and attention of Portfolio Managers. For example, many of Davis Advisors’ Portfolio Managers focus on a small set of model accounts with similar accounts being managed
by investing in the same securities and using the same investment weightings that are used in connection with the management
of the model accounts.
If a Portfolio Manager identifies a limited investment opportunity which may be suitable
for more than one portfolio or other account, a portfolio may not be able to take full advantage of that opportunity due
to an allocation of filled purchase or sale orders across all eligible portfolios and other accounts. Large clients may generate
more revenue for the Adviser than do smaller accounts. Accounts which pay higher management fees usually generate more
revenue than accounts of the same size paying lower management fees. A Portfolio Manager may be faced with a conflict of
interest when allocating limited investment opportunities given the benefit to the Adviser of favoring accounts that
pay a higher fee or generate more income for the Adviser. To deal with these situations, the Adviser has adopted procedures
for allocating limited investment opportunities across multiple accounts.
With respect to securities transactions for the portfolios, the Adviser determines
which broker to use to execute each order, consistent with its duty to seek best execution of the transaction. However, with
respect to certain other accounts (such as mutual funds, other pooled investment vehicles that are not registered mutual funds,
and other accounts managed for organizations and individuals), the Adviser may be limited by the client with respect
to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, the Adviser
may place separate, non-simultaneous, transactions for a portfolio and another account which may temporarily affect the
market price of the security or the execution of the transaction, or both, to the detriment of the portfolio or the other account.
Substantial investment of the Adviser or Davis Family assets in certain mutual funds
may lead to conflicts of interest. A portion of a Portfolio Manager’s compensation may include awards of equity in Davis Advisors. A Portfolio Manager may face a conflict of interest given that the Adviser is more heavily invested in some funds
than in other funds. A portion of the Portfolio Manager’s compensation may also include an incentive plan whereby the Adviser purchases shares in certain funds managed by Davis Advisors. A Portfolio Manager may face a conflict of interest given
that their long-term compensation may be more heavily determined by the performance of one fund or portion of a fund than
by another fund which he also manages. To mitigate these potential conflicts of interest, the Adviser has adopted policies
and procedures intended to ensure that all clients are treated fairly over time. Davis Advisors does not receive an incentive
based fee on any account.
Davis Advisors expects that, over long periods of time, most clients pursuing similar
investment strategies should experience similar, but not identical, investment performance. Many factors affect investment
performance including, but not limited to: (1) the timing of cash deposits and withdrawals to and from an account; (2) the
possibility that Davis Advisors may not purchase or sell a given security on behalf of all clients pursuing similar strategies;
(3) price and timing differences when buying or selling securities; and (4) clients pursuing similar investment strategies
but imposing different investment restrictions. Davis Advisors has adopted written trading policies designed to minimize
possible conflicts of interest in trading for its clients.
Conflicts of interest may also arise regarding proxy voting. Davis Advisors has adopted
written proxy voting policies designed to minimize possible conflicts of interest when voting proxies on behalf of its clients.
Certain Portfolio Managers may serve on the board(s) of public companies where they,
from time to time, may have access to material, non-public information (“MNPI”). Davis Advisors has instituted policies and procedures to ensure that these Portfolio Managers will not be able to utilize MNPI for their own benefit or for any
of the accounts they manage.
Disclosure of Portfolio Holdings
Portfolio Holdings Information Is Protected. Information about the Fund’s portfolio holdings is proprietary information which the Adviser is committed to protecting. Clipper Fund has adopted procedures
reasonably designed to ensure that portfolio holdings information is not released on a selective basis except to qualified
persons rendering services to the Fund which require that those persons receive information concerning the Fund’s portfolio holdings. Neither the Fund nor the Adviser receives compensation with respect to the disclosure of portfolio holdings.
Public Disclosure of Portfolio Holdings. Information about the Fund’s portfolio holdings that has previously been made public may be freely disclosed. Information about portfolio holdings may become “public” by: (1) publication on the Clipper Fund’s website; (2) quarterly filings with the SEC on Form N-CSR or Form N-PORT Part F; or (3) other publication determined by the Adviser’s Chief Legal Officer or their designee, in writing, stating their rationale, to be public. The publicly disclosed portfolio may exclude certain securities when allowed by applicable regulations
and deemed to be in the best interest of the Fund.
Clipper Fund’s Executive Vice President, or their designee, currently the Clipper Fund’s Chief Compliance Officer, may authorize publication of portfolio holdings on a more frequent basis.
The Adviser manages other accounts such as separate accounts, private accounts, unregistered
products, and portfolios sponsored by companies other than the Adviser. These other accounts may be managed
in a similar fashion to the Fund and thus may have similar portfolio holdings. Such accounts may be subject to different
portfolio holdings disclosure policies that
Statement of Additional Information | Clipper Fund | 27
permit public disclosure of portfolio holdings information in different forms and at different times than the Fund’s portfolio holdings disclosure policies. Additionally, clients of such accounts have access to
their portfolio holdings and may not be subject to the Fund’s portfolio holdings disclosure policies.
Statistical Information. The Fund’s portfolio holdings procedures do not prevent the release of aggregate, composite or descriptive information that, in the opinion of Clipper Fund’s Chief Compliance Officer or their designee, does not present material risks of dilution, arbitrage, market timing, insider trading, or other inappropriate
trading that may be detrimental to the Fund. Information excluded from the definition of portfolio holdings information
generally includes, without limitation: (1) descriptions of allocations among asset classes, regions, countries
or industries/sectors; (2) aggregated data such as average or median ratios, market capitalization, credit quality, or duration;
(3) performance attributions by industry, sector, or country; or (4) aggregated risk statistics.
Release of Non-Public Portfolio Holdings Information. Clipper Fund or the Adviser may disclose non-public information about the Fund’s portfolio holdings to third-parties in a number of situations, including: (1) disclosure of specific securities (not a material portion of the entire portfolio) to broker-dealers in connection with
the purchase or sale by the Fund of such securities; (2) requests for price quotations on specific securities (not a material
portion of the entire portfolio) from broker-dealers for the purpose of enabling the Fund’s service providers to calculate the Fund’s net asset value; (3) requests for bids on one or more securities; (4) disclosures in connection with litigation involving Fund
portfolio securities; (5) disclosure to regulatory authorities; (6) statements to the press by Portfolio Managers from time to time about the Fund’s portfolio and securities held by the Fund which may or may not have been previously disclosed; and
(7) attendance by employees of the Adviser at due diligence meetings with existing or potential investors in which specific
Fund holdings are discussed and other information which the employee reasonably believes cannot be used in a manner which
would be harmful to the Fund. In addition, the Adviser may provide a wide variety of information about the Fund (other
than portfolio holdings) to existing and potential investors and intermediaries working on behalf of such investors. Such information
may not be available from publicly available information and may consist of statistical and analytical information concerning the Fund’s portfolio as a whole and how it has performed, without naming specific portfolio securities held by the Fund. Clipper Fund’s portfolio holdings procedures prohibit release of non-public information concerning the Fund’s portfolio holdings to individual investors, institutional investors, intermediaries which distribute the Fund’s shares, and other parties which are not employed by the Adviser or its affiliates. Information about the Fund’s portfolio holdings may be reviewed by third-parties for legitimate business purposes, but only if: (1) the Adviser’s Chief Operating Officer, or their designee, currently Clipper Fund’s Chief Compliance Officer, considers the application for review of the Fund’s portfolio holdings and, in their business judgment, the requesting third-party: (a) has a legitimate business purpose for reviewing the portfolio
holdings and (b) does not pose a material risk to the Fund; and (2) the third-party enters into an acceptable confidentiality
agreement (including a duty not to trade). Clipper Fund’s Board of Trustees is notified of the application for review of the Fund’s portfolio holdings by any such third-parties at the next scheduled quarterly meeting of the Board of Trustees, at
which time the Board of Trustees reviews the application by each such party and considers whether the release of the Fund’s portfolio holding information to the third-parties is in the best interests of the Fund and its shareholders.
Third-Parties Receiving Portfolio Holdings Information. As of January 31, 2026, each of the following third-party service providers have been approved to receive non-public information concerning Clipper Fund’s portfolio holdings: (1) KPMG LLP (serves as the Fund’s independent registered public accounting firm); (2) Linedata (trading software); (3) Global Trading Analytics (provides analytical reports); (4) Clearwater Analytics (provides
investment performance attribution reports); (5) State Street Bank and Trust Company (serves as the Fund’s custodian bank and securities lending agent); (6) Greenberg Traurig, LLP (counsel for Clipper Fund); (7) K&L Gates LLP (counsel for
the Adviser); (8) Donnelley Financial Solutions (Software Development); (9) Diligent Corporation (Software Development);
(10) Broadridge Financial Solutions (provides analytical reports to the Trustees); (11) Deloitte & Touche, R&A CPAs, and
Johnson Lambert LLP (serve as the Adviser’s auditors); (12) MSCI/ISS Inc.; (13) Gresham Technologies (US) Inc. (share reconciliation); (14) Compliance Science, Inc.; (15) Pointpath Studios; (16) the Investment Company Institute; and
(17) John Pitt (provides editing services).
Administration. Clipper Fund’s Chief Compliance Officer oversees the release of portfolio holdings information including authorizing the release of portfolio holdings information.
Distribution of Fund Shares
The Distributor. Davis Distributors, LLC (the “Distributor”), 2949 East Elvira Road, Suite 101, Tucson, Arizona 85756, is a wholly owned subsidiary of the Adviser and, pursuant to a Distributing Agreement, acts as principal underwriter of the Fund’s shares on a continuing basis. By the terms of the Distributing Agreement, the Distributor
(or an affiliate) pays for all expenses in connection with the preparation, printing, and distribution of advertising and sales literature for use in offering the Fund’s shares to the public, including reports to shareholders to the extent they are used
as sales literature. The Distributor (or an affiliate) also pays for the preparation and printing of prospectuses other than those
forwarded to existing shareholders. The continuance and assignment provisions of the Distributing Agreement are the same as
those of the Advisory Agreement.
The Distributor has agreements with securities dealers and other financial institutions
for distributing shares of the Fund and/or providing services to shareholders. The Distributor may pay such firms service fees
for accounts for which representatives of the dealers are responsible and provide services.
The Distributor or Adviser uses its own resources to make these payments.
Statement of Additional Information | Clipper Fund | 28
Recordkeeping Fees. Certain dealers (and other financial intermediaries) have chosen to maintain omnibus
accounts with the Fund. In an omnibus account, a fund maintains a single account in the name of the
dealer and the dealer maintains all of the individual shareholder accounts. Likewise, for many retirement plans, a third-party
administrator may open an omnibus account with the Fund and the administrator will then maintain all of the participant
accounts. The Adviser, on behalf of the Fund, enters into agreements whereby the Fund and sometimes the Adviser in addition,
compensate the dealer or administrator for recordkeeping services. This compensation is not treated as a distribution expense.
Fund Supermarkets. The Fund participates in various “Fund Supermarkets” in which a supermarket sponsor (usually a registered broker-dealer) offers many mutual funds to the supermarket sponsor’s clients. The Fund pays the supermarket sponsor a negotiated fee for distributing fund shares and for continuing services
provided to its shareholders.
A portion of the supermarket sponsor’s fee (that portion related to shareholder services such as new account setup, shareholder accounting, shareholder inquiries, transaction processing, and shareholder confirmations
and reporting) is paid as a shareholder servicing fee of the Fund. The Fund typically would be paying these shareholder
servicing fees directly, were it not that the supermarket sponsor holds all customer accounts in a single omnibus account
with the Fund. If the supermarket sponsor’s fees exceed the sum available from shareholder servicing fees, then the Adviser pays the remainder out of its profits.
Financial Statements
The audited financial statements and the report of the Fund’s independent registered public accounting firm, included in the Fund’s Annual Financial Statements and Other Information, are incorporated by reference into this SAI.
Other Important Service Providers
Custodian. State Street Bank and Trust Company (“State Street” or the “Custodian”), One Congress Street, Suite 1, Boston, MA 02114-2016, serves as custodian of the Fund’s assets. The Custodian maintains all of the instruments representing the Fund’s investments and all cash. The Custodian delivers securities against payment on sale and pays for securities against delivery on purchase. The Custodian also remits the Fund’s assets in payment of its expenses, pursuant to instructions of officers or resolutions of the Board of Trustees. The Custodian also provides certain
fund accounting services to the Fund.
Transfer Agent. SS&C Global Investor & Distribution Solutions, Inc. (“SS&C GIDS”), P.O. Box 219197, Kansas City, MO 64121-9197, serves as the Fund’s transfer agent.
Independent Registered Public Accounting Firm. KPMG LLP (“KPMG”), 191 W Nationwide Blvd, Suite 500, Columbus, OH 43215, serves as the Fund’s independent registered public accounting firm. KPMG audits the Fund’s financial statements and financial highlights, performs other related audit services, and meets with the
Audit Committee of the Board of Trustees. KPMG also acts as the independent registered public accounting firm to certain other
funds advised by the Adviser. In addition, KPMG prepares the Fund’s federal and state income tax returns and related forms. Audit and non-audit services provided by KPMG to the Fund must be pre-approved by the Audit Committee.
Counsel. Greenberg Traurig, LLP, 1144 15th Street, Suite 3300, Denver, CO 80202, serves as
counsel to the Clipper Fund and also serves as counsel for the Independent Trustees.
Statement of Additional Information | Clipper Fund | 29
Section III:
Purchases and Redemptions
Purchases and Redemptions
This SAI should be read in conjunction with the Fund’s prospectus. This SAI supplements the information available in the Fund’s prospectus.
How to Purchase Shares
Clipper Fund and the Distributor reserve the right to reject any purchase order for any reason. The Fund’s prospectus provides full directions on how to purchase shares.
Broker-Dealers May Remit Payment. Your broker-dealer may order and remit payment for the shares on your behalf. The
broker-dealer can also order the shares from the Distributor by telephone or wire.
Please note that the following rules and provisions apply with respect to purchases of Fund shares through a broker-dealer:
◼
The Distributor has entered into agreements with broker-dealers to receive on its
behalf purchase and redemptions orders;
◼
Such broker-dealers are authorized to designate other intermediaries to receive purchase
and redemption orders on behalf of the Distributor;
◼
The Fund will be deemed to have received a purchase or redemption order when an authorized
broker or, if applicable, its broker’s authorized designee receives the order; and
◼
A Client order will be priced at the Fund’s net asset value next computed after they are received by an authorized broker-dealer or the broker-dealer’s authorized designee.
Special Services
The Fund’s prospectus describes a number of special services offered by the Clipper Fund. This SAI supplements that discussion.
Prototype Retirement Plans. The Distributor and certain qualified dealers have available prototype retirement
plans (e.g., profit sharing, money purchase, Simplified Employee Pension (“SEP”) plans, and model 403(b) and 457 plans for charitable, educational and governmental entities) sponsored by the Clipper Fund for corporations
and self-employed individuals. The Distributor and certain qualified dealers also have prototype Individual Retirement Account (“IRA”) plans (deductible IRAs and non-deductible IRAs, including “Roth IRAs”), Education Savings Accounts, and SIMPLE IRA plans for both individuals and employers. These plans utilize the shares of the Clipper Fund as their investment
vehicles. UMB Bank acts as custodian or trustee for certain retirement plans and charges each participant an annual custodial
fee of $10 per Social Security Number regardless of the number of plans established. For a detailed explanation of the custodial
fees charged to an IRA, please refer to the prospectus.
In-Kind Purchases. Shares of the Clipper Fund are continuously offered at their public offering price
next determined after an order is accepted. The methods available for purchasing shares of the Clipper Fund are described in the Fund’s prospectus. In addition, shares of the Clipper Fund may be purchased using securities if the Adviser
determines that doing so is in the best interest of the Fund and its shareholders. The Adviser must review the securities that are offered in exchange for the “in-kind” purchase to determine that the securities delivered to the Fund: (1) meet the investment
objective, strategy, and policies of the Fund; (2) do not cause the violation of any investment restrictions at the time of
acceptance; (3) are readily marketable; (4) may be accurately and objectively valued on a daily basis; and (5) represent securities
that are desirable for the Fund to own given the Fund’s investment strategy and the Adviser’s view of market conditions. The Adviser reserves the right to reject all or any part of the securities offered in exchange for shares of the Fund. On any such
in-kind purchase, the following conditions will apply:
◼
The securities offered by the investor in exchange for shares of a Fund must not be
in any way restricted as to resale or otherwise be illiquid;
◼
The securities must have a value that is readily ascertainable (and not established
only by evaluation procedures) as evidenced by a listing on the NYSE, AMEX, NASDAQ, or other appropriate method; and
◼
The transaction involves a net purchase of $1 million or more in Fund shares.
Clipper Fund believes that this ability to purchase shares of the Fund using securities
provides a means by which holders of certain securities may obtain diversification and continuous professional management
of their investments without the expense of selling those securities in the public market. Benefits to the Fund include
the ability to purchase desirable securities without brokerage commissions.
An investor who wishes to make an in-kind purchase must provide the Adviser with a
full and exact written description of each security that they propose to deliver to the Fund. The Fund will advise the investor
as to those securities that it is prepared to accept and will provide the forms required to be completed and signed by the investor.
The investor should then send the securities, in proper form for transfer and with the necessary forms, to the Adviser
and certify that there are no legal or contractual restrictions on the free transfer and sale of the securities. The securities
will be valued as of the close of business on the day of receipt by the Fund in the same manner as portfolio securities of the
Fund are valued. The number of shares of
Statement of Additional Information | Clipper Fund | 30
the Fund, having a net asset value as of the close of business on the day of receipt
equal to the value of the securities delivered by the investor, will be issued to the investor, less applicable stock transfer taxes,
if any.
The exchange of securities by the investor pursuant to this in-kind offer will constitute
a taxable transaction and may result in a gain or loss for federal income tax purposes. Each investor should consult their
tax adviser to determine the tax consequences under Federal and state law of making such an in-kind purchase. This
service may be discontinued at any time without prior notice.
Market Timing. Clipper Fund has not entered into any arrangements which permit organizations or individuals to “market time” the Clipper Fund. Although the Clipper Fund will not knowingly permit investors to excessively trade the Clipper Fund, shareholders seeking to engage in market timing may employ a variety of strategies
to avoid detection and there can be no guarantee that all market timing will be prevented despite the Clipper Fund’s best efforts. The Clipper Fund receive purchase and sales orders through financial intermediaries and cannot always know or reasonably
detect excessive trading which may be facilitated by these intermediaries or by the use of omnibus accounts by intermediaries.
The Clipper Fund reserve the right to terminate or amend the exchange privilege at any time by filing amended registration
statements.
Redemption of Shares
The prospectus describes redemption procedures. This SAI supplements that discussion.
Certificates. In the past, Clipper Fund issued share certificates and some are still outstanding.
If shares to be redeemed are represented by a certificate, the certificate must be sent by certified mail to Clipper
Fund with a letter of instruction signed by all account owner(s).
Redemption Proceeds. Redemption proceeds normally are paid to you within seven days after Clipper Fund
receives your proper redemption request. Payment for redemptions can be suspended under certain
emergency conditions determined by the SEC or if the New York Stock Exchange (“NYSE”) is closed for reasons other than customary or holiday closings. You may redeem shares on any business day (i.e., any day the NYSE is open for regular session
trading). Redemption proceeds may be withheld until a sufficient period of time has passed for State Street to be reasonably
sure that all checks or drafts (including certified or cashiers’ checks) for shares purchased have cleared, normally not exceeding fifteen calendar days. You can avoid any redemption delay by paying for your shares with a bank or federal funds wire.
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act so that the Fund
is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day
period for any shareholder of the Fund. The Fund could pay the redemption price of its shares in excess of $250,000 or 1% of its
net asset value, either totally or partially, by a distribution in-kind of portfolio securities (instead of cash). The securities
so distributed would be valued at the same amount as that assigned to them in calculating the NAV for the shares being sold.
If a shareholder receives a distribution in-kind, the shareholder could incur brokerage or other charges in converting the securities
to cash and will bear any market risks associated with such securities until they are converted into cash. A redemption in-kind
is treated as a taxable transaction and a sale of the redeemed shares, generally resulting in a capital gain or loss to you,
subject to certain loss limitation rules.
The Fund does not intend to hold any significant percentage of its portfolio in illiquid
securities, although the Fund, like virtually all mutual funds, may from time to time hold a small percentage of securities
that are illiquid. When the Fund makes an in-kind redemption, the Fund follows the Fund’s protocol of making such distribution by way of (a) a pro rata distribution of securities or (b) a non-pro rata distribution of securities that is in the best
interest of all Fund shareholders. If the securities provided to investors in an in-kind redemption are a non-pro rata portion of that Fund’s portfolio, it will only include securities that have been disclosed in the Fund’s most recent public portfolio holdings disclosure. The portfolio securities distributed in an in-kind redemption would be those traded on a public securities market or be otherwise
considered liquid pursuant to the Fund’s liquidity policies and procedures. Except as otherwise may be approved by the Board of Trustees, the securities that would not be included in an in-kind distribution include: (1) unregistered securities
which, if distributed, would be required to be registered under the Securities Act of 1933, as amended; (2) securities issued
by entities in countries which (a) restrict or prohibit the holding of securities by non-nationals other than through qualified investment
vehicles, such as a fund, or (b) permit transfers of ownership of securities to be effected only by transactions conducted
on a local stock exchange; and (3) certain Fund assets that, although they may be liquid and marketable, must be traded
through the marketplace or with the counterparty to the transaction in order to effect a change in beneficial ownership.
There may be a risk that redemption in-kind activity could negatively impact the market
value of the securities distributed in-kind and, in turn, the NAV of the Fund(s) that holds securities that are being distributed
in-kind. The Adviser believes that the benefits to a Fund of redemptions in-kind will generally outweigh the risk of any
potential negative NAV impact.
Federal Funds Wire. You may be eligible to have your redemption proceeds electronically transferred to
a commercial bank account by federal funds wire. There is a $5 charge by State Street for wire service,
and receiving banks also may charge for this service. Redemption by federal funds wire is usually credited to your bank account
on the next business day after the sale. Alternatively, redemption through Automated Clearing House usually will arrive at
your bank two banking days after the sale. To have redemption proceeds sent by federal funds wire to your bank, you must first fill out the “Banking Instruction” section on the Account Application Form and attach a voided check or deposit slip. If the
account has already been established, an Account Service Form must be submitted with a medallion guarantee and a copy of a
voided check or deposit slip.
Statement of Additional Information | Clipper Fund | 31
Section IV:
General Information
General Information
This SAI should be read in conjunction with the Fund’s prospectus. This SAI supplements the information available in the Fund’s prospectus.
Determining the Price of Shares
Net Asset Value. The price per share for purchases or redemptions of Fund shares made directly through
Clipper Fund, generally, is the value next computed after Clipper Fund receives the purchase order
or redemption request in good order. In order for your purchase order or redemption request to be effective on the day you
place your order with your broker-dealer or other financial institution, such broker-dealer or financial institution must: (1)
receive your order before 4 p.m. Eastern time; and (2) promptly transmit the order to Clipper Fund. The broker-dealer or financial
institution is responsible for promptly transmitting purchase orders or redemption requests to Clipper Fund so that you may receive the same day’s net asset value. Note that in the case of redemptions and repurchases of Fund shares owned by corporations,
trusts, or estates or of shares represented by outstanding certificates (in the past, Clipper Fund issued share certificates),
Clipper Fund may require additional documents to effect the redemption and the applicable price will be determined
as of the next computation following the receipt of the required documentation or outstanding certificates. See “Redemption of Shares.”
The Fund does not price its shares or accept orders for purchases or redemptions on
days when the NYSE is closed.
Certain brokers and certain designated intermediaries may accept purchase and redemption
orders on their behalf. The Distributor will be deemed to have received such an order when the broker or the designee
has accepted the order. Customer orders are priced at the net asset value next computed after such acceptance. Such
order may be transmitted to the Fund or its agents several hours after the time of the acceptance and pricing.
Valuation of Portfolio Securities. The valuation of the Fund’s portfolio securities is described in the Fund’s prospectus and annual and semi-annual financial statements and other information.
Dividends and Distributions
The Fund’s prospectus describes the Fund’s dividend and distribution policies. This SAI supplements that discussion.
There are two sources of income, net income and realized capital gains, paid to you
by the Fund. You will receive confirmation statements for dividends declared and Fund shares purchased through reinvestment of
dividends. You will also receive confirmations after each purchase or redemption. For tax purposes, information concerning
fund distributions will be mailed annually to shareholders. Shareholders have the option of receiving all fund dividends
and distributions in cash, of having all dividends and distributions reinvested, or of having income dividends paid in cash
and capital gain distributions reinvested. Reinvestment of all dividends and distributions is automatic for accounts utilizing
the Automatic Withdrawal Plan. The reinvestment of dividends and distributions is made at net asset value on the payment
date.
Dividends and Distributions May Change. Usually dividends and capital gains distributions
are paid as discussed above. However, the Board of Trustees reserves the right to suspend payments or to make additional
payments.
Federal Income Taxes
The following is a summary of certain material U.S. federal (and, where noted, state
and local) income tax considerations affecting the Fund and its shareholders. This discussion is very general and, except
where noted, does not address investors subject to special rules, such as investors who hold shares in the Fund through an
IRA, 401(k) or other tax-advantaged account. Current and prospective shareholders are therefore urged to consult their
own tax advisers with respect to the specific federal, state, local and foreign tax consequences of investing in the Fund. The summary
is based on the laws in effect on the date of this SAI and existing judicial and administrative interpretations thereof,
all of which are subject to change, possibly with retroactive effect.
The Fund and Its Investments. The Fund has elected to be treated, and intends to qualify each year, as a “regulated investment company” or “RIC” under Subchapter M of the Internal Revenue Code. To so qualify, the Fund must, among other things: (a) derive at least 90% of its gross income in each taxable year from dividends, interest,
payments with respect to certain securities loans, and gains from the sale or other disposition of stock or securities
or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or currencies, and net income derived from interests in “qualified publicly traded partnerships” (i.e., partnerships that are traded on an established securities market or tradable on a
secondary market, other than partnerships that derive 90% of their income from interest, dividends, capital gains, and other traditionally
permitted mutual fund income); and (b) diversify its holdings so that, at the end of each quarter of the Fund’s taxable year, (1) at least 50% of the value of the Fund’s assets is represented by cash, securities of other regulated investment companies, U.S. government securities and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the Fund’s assets and not greater than 10% of the outstanding voting securities of such issuer and (2)
not more than 25% of the value of its assets is invested in the securities (other than U.S. government securities or securities
of other regulated investment companies) of any one issuer, in the securities (other than the securities of other
regulated investment companies) of any two
Statement of Additional Information | Clipper Fund | 32
or more issuers that the Fund controls and that are determined to be engaged in the
same or similar trades or businesses or related trades or businesses, or in the securities of one or more “qualified publicly traded partnerships.”
The Fund’s investments in partnerships, if any, including in qualified publicly traded partnerships, may result in the Fund being subject to state, local or foreign income, franchise or withholding tax liabilities.
As a regulated investment company, the Fund will not be subject to U.S. federal income
tax on the portion of its taxable investment income and capital gains that it distributes to its shareholders, provided
that it satisfies a minimum distribution requirement. To satisfy the minimum distribution requirement, the Fund must distribute
to its shareholders at least the sum of (1) 90% of its “investment company taxable income” (i.e., generally, the taxable income of a RIC other than its net capital gain, plus or minus certain other adjustments) as computed without taking into account
the dividends-paid deduction, and (2) 90% of its net tax-exempt income for the taxable year. The Fund will be subject to
income tax at regular corporate tax rates on any taxable income or gains that it does not distribute to its shareholders.
Under certain circumstances, the Fund may elect to treat certain losses as though
they were incurred on the first day of the taxable year following the taxable year in which they were actually incurred.
If, for any taxable year, the Fund were to fail to qualify as a regulated investment
company under the Internal Revenue Code or were to fail to meet the distribution requirement, it would be taxed in the same
manner as an ordinary corporation and distributions to its shareholders would not be deductible by the Fund in computing
its taxable income. In addition, in the event of a failure to qualify, the Fund’s distributions, to the extent derived from the Fund’s current and accumulated earnings and profits, including any distributions of net long-term capital gains, would be taxable
to shareholders as ordinary dividend income for federal income tax purposes. However, such dividends would be eligible,
subject to any generally applicable limitations, (1) to be treated as qualified dividend income in the case of shareholders
taxed as individuals and (2) for the dividends-received deduction in the case of corporate shareholders. Moreover, if the
Fund were to fail to qualify as a regulated investment company in any year, it would be required to pay out its earnings and profits
accumulated in that year in order to qualify again as a regulated investment company. Under certain circumstances, the
Fund may cure a failure to qualify as a regulated investment company, but in order to do so the Fund may incur significant
Fund-level taxes and may be forced to dispose of certain assets.
If the Fund failed to qualify as a regulated investment company for a period greater
than two taxable years, the Fund would generally be required to recognize any net built-in gains with respect to certain
of its assets upon a disposition of such assets within ten years of qualifying as a regulated investment company in a subsequent year.
The Internal Revenue Code imposes a 4% nondeductible excise tax on the Fund to the extent it does not distribute by the
end of any calendar year at least the sum of (1) 98% of its ordinary income for that year and (2) 98.2% of its capital gain net
income (both long-term and short-term) for the one-year period ending, as a general rule, on October 31 of that year. For this
purpose, however, any ordinary income or capital gain net income retained by the Fund that is subject to corporate income tax
will be considered to have been distributed by year-end. In addition, the minimum amounts that must be distributed in any year
to avoid the excise tax will be increased or decreased to reflect any under-distribution or overdistribution, as the case may be,
from the previous year. The Fund anticipates that it will pay such dividends and will make such distributions as are
necessary in order to avoid the application of this excise tax.
The Fund may be required to treat amounts as taxable income or gain, subject to the
distribution requirements referred to above, even though no corresponding amounts of cash are received concurrently, as
a result of (1) mark-to-market rules, constructive sale rules or rules applicable to PFICs (as defined below) or partnerships
or trusts in which the Fund invests or to certain options, futures or forward contracts, or “appreciated financial positions” or (2) the inability to obtain cash distributions or other amounts due to currency controls or restrictions on repatriation
imposed by a foreign country with respect to the Fund’s investments (including through depositary receipts) in issuers in such country or (3) tax rules applicable to debt obligations acquired with “original issue discount,” including zero-coupon or deferred payment bonds and pay-in-kind debt obligations, or to market discount if an election is made with respect to such
market discount. In order to distribute this income and avoid a tax on the Fund, the Fund might be required to liquidate portfolio
securities that it might otherwise have continued to hold, potentially resulting in additional taxable gain or loss. The Fund
might also meet the distribution requirements by borrowing the necessary cash, thereby incurring interest expenses.
Foreign Investments. Dividends or other income (including, in some cases, capital gains) received by the
Fund from investments in foreign securities may be subject to withholding and other taxes imposed
by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes
in some cases. The Fund does not expect to be eligible to elect to pass through foreign taxes to its shareholders, who therefore
will not be entitled to credits or deductions on their own tax returns for foreign taxes paid by the Fund. Foreign taxes
paid by the Fund will reduce the return from the Fund’s investments.
Under Section 988 of the Internal Revenue Code, gains or losses attributable to fluctuations
in exchange rates between the time the Fund accrues income or receivables or expenses or other liabilities denominated
in a foreign currency and the time the Fund actually collects such income or pays such liabilities are generally treated
as ordinary income or ordinary loss. Similarly, gains or losses on foreign currency, foreign currency forward contracts,
certain foreign currency options or futures contracts and the disposition of debt securities denominated in foreign currency,
to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, are also treated as
ordinary income or loss.
Statement of Additional Information | Clipper Fund | 33
Passive Foreign Investment Companies. If the Fund purchases shares in certain foreign investment entities, called “passive foreign investment companies” (“PFICs”), and does not make certain elections, it may be subject to U.S. federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such income is distributed as a taxable dividend by the Fund to its shareholders. Additional charges in the nature
of interest may be imposed on the Fund in respect of deferred taxes arising from such distributions or gains.
If the Fund were to invest in a PFIC and elect to treat the PFIC as a “qualified electing fund” under the Internal Revenue Code, in lieu of the foregoing requirements, the Fund would generally be required to include
in income each year a portion of the ordinary earnings and net capital gains of the qualified electing Fund, even if not
distributed to the Fund, and such amounts would be subject to the 90% and excise tax distribution requirements described above.
In order to distribute this income and avoid a tax at the Fund level, the Fund might be required to liquidate portfolio securities
that it might otherwise have continued to hold, potentially resulting in additional taxable gain or loss. In order to make the “qualified electing fund” election, the Fund would be required to obtain certain annual information from the PFICs in which it
invests, which may be difficult or impossible to obtain.
If the Fund were to invest in a PFIC and make a mark-to-market election, the Fund
would be treated as if it had sold and repurchased all of the PFIC stock at the end of each year. In such case, the Fund
would report any such gains as ordinary income and would deduct any such losses as ordinary losses to the extent of previously
recognized gains. Such an election must be made separately for each PFIC owned by the Fund and, once made, would be effective
for all subsequent taxable years of the Fund, unless revoked with the consent of the Internal Revenue Service (the “IRS”). By making the election, the Fund could potentially ameliorate the adverse tax consequences with respect to its ownership
of shares in a PFIC, but in any particular year might be required to recognize income in excess of the distributions
it receives from PFICs and its proceeds from dispositions of PFIC stock. The Fund might have to distribute such excess income
and gain to satisfy the 90% distribution requirement and to avoid imposition of the 4% excise tax. In order to
distribute this income and avoid a tax at the Fund level, the Fund might be required to liquidate portfolio securities that it might
otherwise have continued to hold, potentially resulting in additional taxable gain or loss.
Taxation of U.S. Shareholders. Dividends and other distributions by the Fund are generally treated under the Internal
Revenue Code as received by the shareholders at the time the dividend or distribution
is made. However, if any dividend or distribution is declared by the Fund in October, November or December of any calendar
year and payable to shareholders of record on a specified date in such a month but is actually paid during the following
January, such dividend or distribution will be deemed to have been received by each shareholder on December 31 of the year in
which the dividend was declared.
The Fund intends to distribute annually to its shareholders substantially all of its
investment company taxable income (computed without taking into account the dividends-paid deduction), and any net realized
long-term capital gains in excess of net realized short-term capital losses (including any capital loss carryovers).
If the Fund retains for investment an amount equal to all or a portion of its net long-term capital gains in excess of its net
short-term capital losses (including any capital loss carryovers), it will be subject to a corporate tax on the amount retained. In
that event, the Fund will designate such retained amounts as undistributed capital gains in a notice to its shareholders who
(a) will be required to include in income for U.S. federal income tax purposes, as long-term capital gains, their proportionate
shares of the undistributed amount, (b) will be entitled to credit their proportionate shares of the tax paid by the Fund on the
undistributed amount against their U.S. federal income tax liabilities, if any, and to claim refunds to the extent their credits
exceed their liabilities, if any, and (c) will be entitled to increase their tax basis, for U.S. federal income tax purposes, in
their shares by an amount equal to the excess of the amount of undistributed capital gains included in their respective income over
their respective income tax credits. Organizations or persons not subject to U.S. federal income tax on such capital gains
will be entitled to a refund of their pro rata share of such taxes paid by the Fund upon timely filing appropriate returns or
claims for refund with the IRS.
Dividends of net investment income and distributions of net realized short-term capital
gains are taxable to a shareholder as ordinary income, whether paid in cash or in shares. Distributions of net realized
long-term capital gains, if any, that the Fund reports as capital gain dividends are taxable as long-term capital gains, whether
paid in cash or in shares and regardless of how long a shareholder has held shares of the Fund.
Dividends and distributions from the Fund will generally be taken into account in determining a shareholder’s “net investment income” for purposes of the Medicare contribution tax applicable to certain individuals, estates and trusts.
Special rules, however, apply to certain dividends paid to individuals. Certain dividends
may be subject to tax at the rates generally applicable to long-term capital gains for individuals, provided that the
individual receiving the dividend satisfies certain holding period and other requirements. Dividends subject to these special
rules are not actually treated as capital gains, however, and thus are not included in the computation of an individual’s net capital gain and generally cannot be used to offset capital losses. The long-term capital gains rates will apply to: (1) 100% of the dividends
paid by the Fund to an individual in a particular taxable year if 95% or more of the Fund’s gross income (ignoring gains attributable to the sale of stocks and securities except to the extent net short-term capital gain from such sales exceeds
net long-term capital loss from such sales) in that taxable year is attributable to “qualified dividend income” received by the Fund; or (2) the portion of the dividends paid by the Fund to an individual in a particular taxable year that is attributable to
qualified dividend income received by the Fund in that taxable year if such qualified dividend income accounts for less than 95% of the Fund’s gross income (ignoring gains attributable to the sale of stocks and securities except to the extent net short-term
capital gain from such sales exceeds net long-term capital loss from such sales) for that taxable year. For this purpose, “qualified dividend income” generally means
Statement of Additional Information | Clipper Fund | 34
income from dividends received by the Fund from U.S. corporations and qualified foreign
corporations, provided that the Fund satisfies certain holding period requirements in respect of the stock of such
corporations and has not hedged its position in the stock in certain ways. However, qualified dividend income does not include
any dividends received from tax-exempt corporations. Also, dividends received by the Fund from a REIT or from another RIC
generally are qualified dividend income only to the extent the dividend distributions are made out of qualified dividend income
received by such REIT or RIC. In the case of securities lending transactions, payments in lieu of dividends are not qualified
dividend income. If a shareholder elects to treat Fund dividends as investment income for purposes of the limitation on the
deductibility of investment interest, such dividends would not be qualified dividend income.
The Fund will send you information after the end of each year setting forth the amount
of Fund dividends, if any, that are eligible for the reduced rates.
If an individual receives a dividend qualifying for the long-term capital gains rates
and such dividend constitutes an “extraordinary dividend,” and the individual subsequently recognizes a loss on the sale or exchange of stock in respect of which the extraordinary dividend was paid, then the loss will be long-term capital
loss to the extent of such extraordinary dividend. An extraordinary dividend on common stock for this purpose is generally
a dividend (1) in an amount greater than or equal to 10% of the taxpayer’s tax basis (or trading value) in a share of stock, aggregating dividends with ex-dividend dates within an 85-day period or (2) in an amount greater than 20% of the taxpayer’s tax basis (or trading value) in a share of stock, aggregating dividends with ex-dividend dates within a 365-day period.
Dividends paid by the Fund that are attributable to dividends received by the Fund
from domestic corporations may qualify for the dividends-received deduction for corporations.
Distributions in excess of the Fund’s current and accumulated earnings and profits will, as to each shareholder, be treated as a tax-free return of capital to the extent of the shareholder’s basis in their shares of the Fund, and as a capital gain thereafter (if the shareholder holds their shares of the Fund as capital assets). Each shareholder
who receives distributions in the form of additional shares will be treated for U.S. federal income tax purposes as if receiving
a distribution in an amount equal to the amount of money that the shareholder would have received if he or she had instead
elected to receive cash dividends. A shareholder’s tax basis in the shares so received will be equal to the amount of the distribution.
Investors considering buying shares just prior to a dividend or capital gain distribution
should be aware that, although the price of shares purchased at that time may reflect the amount of the forthcoming distribution,
such dividend or distribution may nevertheless be taxable to them.
If the Fund is the holder of record of any stock on the record date for any dividends
payable with respect to such stock, such dividends will be included in the Fund’s gross income not as of the date received but as of the later of (a) the date such stock became ex-dividend with respect to such dividends (i.e., the date on which a buyer
of the stock would not be entitled to receive the declared, but unpaid, dividends) or (b) the date the Fund acquired such stock.
Accordingly, in order to satisfy its income distribution requirements, the Fund may be required to pay dividends based on anticipated
earnings, and shareholders may receive dividends in an earlier year than would otherwise be the case.
Sales of Shares. Upon the sale or exchange of their shares, a shareholder will realize a taxable gain
or loss equal to the difference between the amount realized and their basis in the shares. A redemption
of shares by the Fund will be treated as a sale for this purpose. Such gain or loss will be treated as capital gain or loss if the shares are capital assets in the shareholder’s hands, and will be long-term capital gain or loss if the shares are held for more
than one year and short-term capital gain or loss if the shares are held for one year or less. Any loss realized on a sale or exchange
will be disallowed to the extent the shares disposed of are replaced, including replacement through the reinvesting of
dividends and capital gains distributions in the Fund, within a 61-day period beginning 30 days before and ending 30 days after
the disposition of the shares. In such a case, the basis of the shares acquired will be increased to reflect the disallowed
loss. Any loss realized by a shareholder on the sale of Fund shares held by the shareholder for six months or fewer will be treated
for U.S. federal income tax purposes as a long-term capital loss to the extent of any distributions or deemed distributions
of long-term capital gains received by the shareholder (including amounts credited to the shareholder as undistributed capital
gains) with respect to such shares.
If a shareholder recognizes a loss with respect to the Fund’s shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the
IRS a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting
requirement, but under current guidance, shareholders of a regulated investment company are not excepted. The fact
that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations
in light of their individual circumstances.
Backup Withholding. The Fund may be required in certain circumstances to apply backup withholding on
dividends, distributions and redemption proceeds payable to non-corporate shareholders who fail
to provide the Fund with their correct taxpayer identification number or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. The backup withholding rate is currently 28%. Backup withholding
is not an additional tax and any amount withheld may be credited against a shareholder’s U.S. federal income tax liabilities. Backup withholding will not be applied to payments that have already been subject to the 30% withholding tax described below under “Non-U.S. Shareholders.”
Statement of Additional Information | Clipper Fund | 35
Notices. Shareholders will receive, if appropriate, various written notices after the close of the Fund’s taxable year regarding the U.S. federal income tax status of certain dividends, distributions and redemption
proceeds that were paid (or that are treated as having been paid) by the Fund to its shareholders during the preceding
taxable year.
Other Taxes. Dividends, distributions and redemption proceeds may also be subject to additional
state, local and foreign taxes depending on each shareholder’s particular situation.
Taxation of Non-U.S. Shareholders. Ordinary dividends and certain other payments made by the Fund to non-U.S. shareholders are generally subject to withholding tax at a 30% rate (or such lower
rate as may be determined in accordance with any applicable treaty). In order to obtain a reduced rate of withholding, a non-U.S.
shareholder will be required to provide an IRS Form W-8BEN certifying its entitlement to benefits under a treaty. The withholding
tax does not apply to dividends paid to a non-U.S. shareholder who provides a Form W-8ECI, certifying that the dividends
are effectively connected with the non-U.S. shareholder’s conduct of a trade or business within the United States. Instead, the effectively connected dividends will be subject to regular U.S. income tax as if the non-U.S. shareholder were a U.S.
shareholder. A non-U.S. corporation receiving effectively connected dividends may also be subject to additional “branch profits tax” imposed at a rate of 30% (or a lower treaty rate). A non-U.S. shareholder who fails to provide an IRS Form W-8BEN
or other applicable form may be subject to backup withholding at the appropriate rate.
The 30% withholding tax generally will not apply to distributions of the excess of
net long-term capital gains over net short-term capital losses or to redemption proceeds.
For Fund taxable years beginning before January 1, 2014, the 30% withholding tax also
will not apply to dividends that the Fund reports as (a) interest-related dividends, to the extent such dividends are derived from the Fund’s “qualified net interest income,” or (b) short-term capital gain dividends, to the extent such dividends are derived from the Fund’s “qualified short-term gain.” “Qualified net interest income” is the Fund’s net income derived from U.S.-source interest and original issue discount, subject to certain exceptions and limitations. “Qualified short-term gain” generally means the excess of the net short-term capital gain of the Fund for the taxable year over its net long-term capital
loss, if any. In the case of shares held through an intermediary, the intermediary may withhold even if the Fund reports the
payment as qualified net interest income or qualified short-term capital gain. Non-U.S. shareholders should contact their intermediaries
with respect to the application of these rules to their accounts.
Special rules apply to foreign persons who receive distributions from the Fund that are attributable to gain from “United States real property interests” (“USRPIs”). The Internal Revenue Code defines USRPIs to include direct holdings of U.S. real property and any interest (other than an interest solely as a creditor) in domestic corporations that are “United States real property holding corporations” (“USRPHCs”) during a specified time period. The Internal Revenue Code defines a USRPHC as any corporation if the fair value of its USRPIs equals or exceeds 50% of the total
fair value of its USRPIs, its interests in real property located outside of the U.S., and any other of its assets used or held
for use in a trade or business. For this purpose, an interest in a foreign corporation may be a USRPI. In general, the distribution
of gains from USRPIs to foreign shareholders is subject to U.S. federal income tax withholding at a rate of 35% and obligates such
foreign shareholder to file a U.S. tax return. The Fund does not expect to be a USRPHC. If the Fund were to be classified
as a USRPHC (or if it would be so classified, were it not for certain exceptions), then certain distributions by the
Fund to foreign shareholders would be subject to U.S. federal withholding tax, and foreign shareholders might be required to file
U.S. federal income tax returns to report distributions received from the Fund.
Distributions and redemption payments paid after December 31, 2013, to a non-U.S.
shareholder that fails to make certain required certifications or that is a “foreign financial institution” as defined in Section 1471 of the Internal Revenue Code and that does not meet the requirements imposed on foreign financial institutions by Section
1471, will generally be subject to withholding tax at a 30% rate. Under current IRS guidance, withholding on such payments
will begin at different times depending on the type of payment, the type of payee, and whether the shareholder’s account is opened before or after January 1, 2014. Withholding with respect to ordinary dividends is currently scheduled
to begin on January 1, 2014, for accounts opened on or after that date and on certain later dates for accounts opened
before January 1, 2014. Withholding on redemption payments and certain capital gain dividends is currently scheduled to begin
on January 1, 2017. The extent, if any, to which such withholding tax may be reduced or eliminated by an applicable tax treaty
is unclear. A non-U.S. shareholder may be exempt from the withholding described in this paragraph under an intergovernmental
agreement between the U.S. and a foreign government, provided that the shareholder and the applicable foreign government
comply with the terms of such agreement.
The foregoing is only a summary of certain material U.S. federal income tax consequences
(and, where noted, state and local tax consequences) affecting the Fund and its shareholders. Shareholders are advised
to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Fund.
Cost Basis Reporting
Mutual funds are required to report to the Internal Revenue Service the “cost basis” of shares acquired by a shareholder on or after January 1, 2012 (“covered shares”) and subsequently redeemed. These requirements do not apply to investments through a tax-deferred arrangement such as a 401(k) plan or an individual retirement plan.
The cost basis of a share is generally its purchase price adjusted for dividends, return of capital, and other corporate actions.
Cost basis is used to determine whether a sale of the shares results in a gain or loss. If you redeem covered shares during
any year, then the Fund will report the cost
Statement of Additional Information | Clipper Fund | 36
basis of such covered shares to you and the IRS on Form 1099-B. The Fund will permit
Fund shareholders to elect from among several IRS-accepted cost basis methods to calculate the cost basis in your covered
shares. If you do not affirmatively elect a cost basis method, then the Fund’s default cost basis calculation method, which is currently the Average Cost method, will be applied to your account(s). The cost basis method elected or applied may not be changed
after the settlement date of a sale of Fund shares. If you hold Fund shares through a broker (or another nominee), please
contact that broker (nominee) with respect to the reporting of cost basis and available elections for your account. You are encouraged
to consult your tax advisor regarding the application of the cost basis reporting rules and, in particular, which
cost basis calculation method you should elect.
Procedures and Shareholder Rights Are Described by Current Prospectus and Other Disclosure
Documents
Among other disclosures, the Fund’s most current prospectus, SAI, annual and semi-annual reports, and other documents describe: (1) the procedures which the Fund follows when interacting with shareholders; and (2) shareholders’ rights. The Fund’s procedures and shareholders’ rights may change from time to time to reflect changing laws, rules, and operations. The Fund’s prospectus and other disclosure documents will be amended from time to time to reflect these changes.
Performance Data
From time to time, the Fund may advertise information regarding its performance. These
performance figures are based on historical results and are not intended to indicate future performance.
Performance Rankings
Lipper Rankings. From time to time, the Fund may publish the ranking of the performance of its shares
by Lipper Analytical Services, Inc. Lipper is a widely recognized independent mutual fund monitoring service.
Lipper monitors the performance of regulated investment companies, including the Fund, and ranks its performance for
various periods in categories based on investment style. The Lipper performance rankings are based on total returns that
include the reinvestment of capital gain distributions and income dividends but do not take sales charges or taxes into consideration. Lipper also publishes “peer-group” indices of the performance of all mutual funds in a category that it monitors and
averages of the performance of the funds in particular categories.
Morningstar Ratings and Rankings. From time to time, the Fund may publish the ranking and/or star rating of the performance of its shares by Morningstar, Inc., an independent mutual fund monitoring
service. Morningstar rates and ranks mutual funds in broad investment categories: domestic stock funds, international stock
funds, taxable bond funds, and municipal bond funds.
Performance Rankings and Comparisons by Other Entities and Publications. From time to time, the Fund may include in its advertisements and sales literature performance information about the Fund cited in
newspapers and other periodicals such as The New York Times, The Wall Street Journal, Barron’s, or similar publications. That information may include performance quotations from other sources, including Lipper and Morningstar. The performance of the Fund’s shares may be compared in publications to the performance of various market indices or other investments and
averages, performance rankings, or other benchmarks prepared by recognized mutual fund statistical services.
Investors also may wish to compare the returns on the Fund’s shares to the return on fixed-income investments available from banks and thrift institutions. Those include certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed- or variable-time deposits and various other instruments such
as Treasury bills. However, none of the Fund’s returns or share prices are guaranteed or insured by the FDIC or any other agency and will fluctuate daily, while bank depositary obligations may be insured by the FDIC and may provide fixed rates of return.
Repayment of principal and payment of interest on Treasury securities is backed by the full faith and credit of the U.S.
Government.
From time to time, the Fund may publish rankings or ratings of the Adviser or the Fund’s transfer agent and of the investor services provided by them to shareholders of the Fund. Those ratings or rankings of
shareholder and investor services by third parties may include comparisons of their services to those provided by other mutual
fund families selected by the rating or ranking services. They may be based on the opinions of the rating or ranking service
itself, using its research or judgment, or based on surveys of investors, brokers, shareholders or others.
Other Performance Statistics
In reports or other communications to shareholders and in advertising material, the
performance of the Fund may be compared to recognized unmanaged indices or averages of the performance of similar securities.
Also, the performance of the Fund may be compared to that of other funds of comparable size and objectives as listed in
the rankings prepared by Lipper, Morningstar, or similar independent mutual fund rating services, and the Fund may use evaluations
published by nationally recognized independent ranking services and publications. Any given performance comparison should
not be considered representative of the Fund’s performance for any future period.
In advertising and sales literature, the Fund may publish various statistics relating
to investment portfolios such as the average price to book and price to earnings ratios, beta, alpha, R-squared, standard deviation, etc. of the Fund’s portfolio holdings.
The performance of the Fund may be compared in publications to the performance of
various indices and investments for which reliable performance data is available and to averages, performance rankings
or other information prepared by
Statement of Additional Information | Clipper Fund | 37
recognized mutual fund statistical services. The Fund’s annual report and semi-annual report contain additional performance information and are available on request and without charge by calling Clipper Fund
toll-free at 1-800-432-2504, Monday through Friday, 9 a.m. to 6 p.m. Eastern time.
Statement of Additional Information | Clipper Fund | 38
Appendix A:
Quality Ratings of Debt Securities
Quality Ratings of Debt Securities
Moody’s Credit Ratings
|
Aaa
|
Obligations rated Aaa are judged to be of the highest quality, with minimal risk.
|
|
Aa
|
Obligations rated Aa are judged to be of high quality and are subject to very low
credit risk.
|
|
A
|
Obligations rated A are considered upper medium-grade-obligations and are subject
to low credit risk.
|
|
Baa
|
Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade
and as such may
possess speculative characteristics.
|
|
Ba
|
Obligations rated Ba are judged to have speculative elements and are subject to substantial
credit risk.
|
|
B
|
Obligations rated B are considered speculative and are subject to high credit risk.
|
|
Caa
|
Obligations rated Caa are judged to be of poor standing and are subject to very high
credit risk.
|
|
Ca
|
Obligations rated Ca are highly speculative and are likely in, or very near, default,
with some prospect of recovery
in principal and interest.
|
|
C
|
Obligations rated C are the lowest-rated class of bonds, and are typically in default,
with little prospect for
recovery of principal and interest.
|
S&P Global’s Credit Ratings
|
AAA
|
Extremely strong capacity to meet financial commitments. Highest rating.
|
|
AA
|
Very strong capacity to meet financial commitments.
|
|
A
|
Strong capacity to meet financial commitments, but somewhat susceptible to adverse
economic conditions and
changes in circumstances.
|
|
BBB
|
Adequate capacity to meet financial commitments, but more subject to adverse economic
conditions.
|
|
BBB-
|
Considered lowest investment-grade by market participants.
|
|
BB+
|
Considered highest speculative-grade by market participants.
|
|
BB
|
Less vulnerable in near-term but faces major ongoing uncertainties to adverse business,
financial and economic
conditions.
|
|
B
|
More vulnerable to adverse business, financial and economic conditions but currently
has the capacity to meet
financial commitments.
|
|
CCC
|
Currently vulnerable and dependent on favorable business, financial and economic conditions
to meet financial
commitments.
|
|
CC
|
Highly vulnerable; default has not yet occurred, but is expected to be a virtual certainty.
|
|
C
|
Currently highly vulnerable to non-payment, and ultimate recovery is expected to be
lower than that of higher rated
obligations.
|
|
D
|
Payment default on a financial commitment or breach or an imputed promise; also used
when a bankruptcy
petition has been filed or similar action taken.
|
Statement of Additional Information | Clipper Fund | 39
Appendix B:
Summary of the Adviser’s Proxy Voting Policies and Procedures
Summary of the Adviser’s Proxy Voting Policies and Procedures
Davis Selected Advisers, L.P. (the “Adviser”) votes on behalf of its clients in matters of corporate governance through the proxy voting process. The Adviser takes its ownership responsibilities very seriously
and believes the right to vote proxies for its clients’ holdings is a significant asset of the clients. The Adviser exercises its voting responsibilities as a fiduciary, solely with the goal of maximizing the value of its clients’ investments.
The Adviser votes proxies with a focus on the investment implications of each issue.
For each proxy vote, the Adviser takes into consideration its duty to clients and all other relevant facts known to the Adviser
at the time of the vote. Therefore, while these guidelines provide a framework for voting, votes are ultimately cast on a case-by-case
basis.
The Adviser has adopted written Proxy Voting Policies and Procedures and established
a Proxy Oversight Group to oversee voting policies and deal with potential conflicts of interest. In evaluating issues,
the Proxy Oversight Group may consider information from many sources, including the Portfolio Managers for each client account,
management of a company presenting a proposal, shareholder groups, and independent proxy research services.
While the Proxy Oversight Group may consider information from many sources, there
is no requirement that it consider each source and the Proxy Oversight Group shall have the discretion in its professional
judgement to determine each matter to be voted on. The Adviser may utilize research provided by an independent third-party
proxy advisory firm. As a policy, the Adviser does not follow the voting recommendations provided by these firms.
Clients may obtain a copy of the Adviser’s Proxy Voting Policies and Procedures, and/or a copy of how their own proxies were voted, by writing to:
Davis Selected Advisers, L.P.
Attn: Chief Compliance Officer
2949 East Elvira Road, Suite 101
Tucson, Arizona, 85756
Attn: Chief Compliance Officer
2949 East Elvira Road, Suite 101
Tucson, Arizona, 85756
Guiding Principles
Creating Value for Existing Shareholders. The most important factors that the Adviser will consider in evaluating proxy issues are: (1) the company’s or management’s long-term track record of creating value for shareholders (e.g., in general, the Adviser will consider the recommendations of a management with a good record of creating
value for shareholders as more credible than the recommendations of a management with a poor record); (2) whether, in the Adviser’s estimation, the current proposal being considered will significantly enhance or detract from long-term value
for existing shareholders; and (3) whether a poor record of long term performance resulted from poor management or from factors outside of management’s control.
Other factors which the Adviser will consider may include:
◼
Shareholder oriented management. One of the factors that the Adviser considers in selecting stocks for investment
is the presence of shareholder-oriented management. In general, such managements will have
a large ownership stake in the company. They will also have a record of taking actions and supporting policies designed
to increase the value of the company’s shares and thereby enhance shareholder wealth. The Adviser’s research analysts are active in meeting with top management of portfolio companies and in discussing their views on policies or actions
which could enhance shareholder value. Whether management shows evidence of responding to reasonable shareholder suggestions,
and otherwise improving general corporate governance, is a factor which may be taken into consideration
in proxy voting.
◼
Allow responsible management teams to run the business. Because the Adviser tries, generally, to invest with “owner oriented” managements (see above), it will vote with the recommendation of management on most routine matters, unless circumstances such as long standing poor performance or a change from its initial
assessment indicates otherwise. Examples include the election of directors and ratification of auditors. The Adviser
supports policies, plans, and structures that give management teams the appropriate latitude to run the business in the way
that is most likely to maximize value for owners. Conversely, the Adviser opposes proposals that limit management’s ability to do this. The Adviser will generally vote with management on shareholder social and environmental proposals on
the basis that their impact on share value is difficult to judge and is therefore best done by management.
◼
Preserve and expand the power of shareholders in areas of corporate governance. Equity shareholders are owners of the business, and company boards and management teams are ultimately accountable to them.
The Adviser will support policies, plans, and structures that promote accountability of the board and management
to owners, and align the interests of the board and management with owners. Examples include: annual election of all
board members and incentive plans that are contingent on delivering value to shareholders. The Adviser will generally
oppose proposals that reduce accountability or misalign interests, including but not limited to classified boards,
poison pills, excessive option plans, and repricing of options.
Statement of Additional Information | Clipper Fund | 40
◼
Support compensation policies that reward management teams appropriately for performance. The Adviser believes that well thought out incentives are critical to driving long-term shareholder value creation.
Management incentives ought to be aligned with the goals of long-term owners. In the Adviser’s view, the basic problem of skyrocketing executive compensation is not high pay for high performance, but high pay for mediocrity or
worse. In situations where the Adviser feels that the compensation practices at companies the Funds own are not acceptable,
the Adviser will exercise its discretion to vote against compensation committee members and specific compensation
proposals.
The Adviser exercises its professional judgment in applying these principles to specific proxy votes. The Adviser’s Proxy Policies and Procedures provide additional explanation of the analysis which the Adviser
may conduct when applying these guiding principles to specific proxy votes.
Conflicts of Interest
A potential conflict of interest arises when the Adviser has business interests that
may not be consistent with the best interests of its client. The Adviser’s Proxy Oversight Group is charged with resolving material potential conflicts of interest which it becomes aware of. It is charged with resolving conflicts in a manner that is consistent
with the best interests of clients. There are many acceptable methods of resolving potential conflicts, and the Proxy Oversight
Group exercises its judgment and discretion to determine an appropriate means of resolving a potential conflict in
any given situation:
◼
Votes consistent with the “General Proxy Voting Policies,” are presumed to be consistent with the best interests of clients;
◼
The Adviser may disclose the conflict to the client and obtain the client’s consent prior to voting the proxy;
◼
The Adviser may obtain guidance from an independent third-party;
◼
The potential conflict may be immaterial; or
◼
Other reasonable means of resolving potential conflicts of interest which effectively
insulate the decision on how to vote client proxies from the conflict.
Statement of Additional Information | Clipper Fund | 41
PART C
OTHER INFORMATION
Item 28.
Exhibits:
|
(a)
|
|
|
(b)
|
|
|
(c)
|
Instruments Defining Rights of Security Holders. Not applicable.
|
|
(d)(1)
|
|
|
(d)(2)
|
|
|
(e)
|
|
|
(f)
|
Bonus or Profit Sharing Contracts. Not applicable.
|
|
(g)
|
|
|
(h)(1)
|
|
|
(h)(2)
|
|
|
(i)*
|
|
|
(j)*
|
|
|
(k)
|
Omitted Financial Statements. Not applicable.
|
|
(l)
|
Initial Capital Agreements. Not applicable. See Undertakings
|
|
(m)
|
Rule 12b-1 Plan. Not applicable.
|
|
(n)
|
Rule 18f-3 Plan. Not applicable.
|
|
(o)
|
Reserved.
|
|
(p)*
|
|
|
(q)(1)
|
*
filed herein
Item 29.
Persons Controlled by or Under Common Control With Registrant
Information pertaining to persons controlled by or under common control with Registrant
is incorporated by reference from the Statement of Additional Information contained in Part B of this
Registration Statement.
Item 30.
Indemnification
Section 8.4 of the Amended and Restated Declaration of Trust provides:
The Trust shall indemnify to the fullest extent permitted by law each of its Trustees,
former Trustees, Trustees emeritus, Advisory Board Members, and officers and persons who serve at the Trust’s request as directors, officers, or trustees of another organization in which the Trust has any
interest as a shareholder, creditor, or otherwise, and may indemnify any trustee, director or officer of a predecessor
organization (each an “Indemnified Person”), and may indemnify its employees and agents, against all liabilities and expenses (including amounts paid in satisfaction of judgments, in compromise, as fines
and penalties, and expenses including reasonable accountants’ and counsel fees) reasonably incurred in connection with the defense or disposition of any action, suit or other proceeding of any kind and nature
whatsoever, whether brought in the right of the Trust or otherwise, and whether of a civil, criminal or
administrative nature, before any court or administrative or legislative body, including any appeal therefrom,
in which he or she may be involved as a party, potential party, non-party witness or otherwise or with
which he or she may be threatened, while as an Indemnified Person or thereafter, by reason of being or having
been such an Indemnified Person, except that no Indemnified Person shall be indemnified against
any liability to the Trust or its Shareholders to which such Indemnified Person would otherwise be subject
by reason of bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties
involved in the conduct of such Indemnified Person’s office (such willful misfeasance, bad faith, gross negligence or reckless disregard being referred to herein as “Disabling Conduct”). Expenses, including accountants’ and counsel fees so incurred by any such Indemnified Person (but excluding amounts paid
in satisfaction of judgments, in compromise or as fines or penalties), shall be promptly paid from time
to time, and the expenses of the Trust’s employees or agents may be paid from time to time, by the Trust or a Series in advance of the final disposition of any such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such Indemnified Person to repay amounts so paid to the Trust if it is
ultimately determined that indemnification of such expenses is not authorized under this Article 8 and either
(i) such Indemnified Person provides security for such undertaking, (ii) the Trust is insured against losses
arising by reason of such payment, or (iii) a majority of a quorum of disinterested, non-party Trustees,
or independent legal counsel in a written opinion, determines, based on a review of readily available facts,
that there is reason to believe that such Indemnified Person ultimately will be found entitled to indemnification.
In addition, the Registrant’s Trustees and officers are covered under a policy to indemnify them for loss (subject to certain deductibles) including costs of defense incurred by reason of
alleged errors or omissions, neglect or breach of duty. The policy has a number of exclusions including
alleged acts, errors, or omissions which are finally adjudicated or established to be deliberate, dishonest,
malicious or fraudulent or to constitute willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties in respect to any registered investment company.
Item 31.
Business and Other Connections of Investment Adviser
Davis Selected Advisers, L.P. (“DSA”) and affiliated companies comprise a financial services organization whose business consists primarily of providing investment management services as the
investment adviser and manager for investment companies registered under the Investment Company Act of
1940, unregistered domestic and off-shore investment companies, and as an investment adviser
to institutional and individual accounts. DSA also serves as sub-adviser to other investment companies.
Affiliated companies include:
Davis Investments, LLC: the sole general partner of DSA. Controlled by its sole member,
Christopher C. Davis.
Venture Advisers, Inc.: a corporation whose primary purpose is to hold limited partner
units in DSA.
Davis Selected Advisers–NY, Inc.: a wholly-owned subsidiary of DSA, is a federally registered investment adviser which serves as sub-adviser for many of DSA’s advisory clients.
Davis Distributors LLC: a wholly-owned subsidiary of DSA, is a registered broker-dealer
which serves as primary underwriter of Davis New York Venture Fund, Inc., Davis Series, Inc., Davis
Variable Account Fund, Inc. (herein collectively referred to as the “Davis Funds”), Selected American Shares, Inc., and Clipper Funds Trust.
Other business of a substantial nature that directors or officers of DSA are or have
been engaged in the last two years:
Lisa Cohen (4/25/89), 2949 East Elvira Road, Suite 101, Tucson, AZ 85756. Vice President and Secretary
of each of Davis New York Venture Fund, Inc., Davis Series, Inc., Davis Variable Account
Fund, Inc., Selected American Shares, Inc., Clipper Funds Trust, and Davis Fundamental ETF Trust.
Vice President, Chief Legal Officer, and Secretary, Davis Investments, LLC. Also serves as a senior
officer for several companies affiliated with DSA which are described above.
Andrew Davis (6/25/63), 620 Fifth Avenue, 3rd Floor, New York, NY 10020. A director and officer of each of Davis New York Venture Fund, Inc., Davis Series, Inc., Davis Variable Account
Fund, Inc., and Selected American Shares, Inc. Trustee of Clipper Funds Trust. President of Davis
Investments, LLC. Also serves as a director and/or senior officer for several companies affiliated with DSA
which are described above.
Christopher Davis (7/13/65), 620 Fifth Avenue, 3rd Floor, New York, NY 10020. A director and officer of each of Davis New York Venture Fund, Inc., Davis Series, Inc., Davis Variable Account
Fund, Inc., and Selected American Shares, Inc. President and Trustee of Clipper Funds Trust. Director,
Chairman of Davis Investments, LLC. Also serves as a director and/or senior officer for several companies
affiliated with DSA, which are described above. Director, Graham Holdings Company. Director, The Coca-Cola
Company. Director, Berkshire Hathaway, Inc.
Kenneth Eich (8/14/53), 2949 East Elvira Road, Suite 101, Tucson, AZ 85756. Executive Vice President and Principal Executive Officer of each of Davis New York Venture Fund, Inc., Davis
Series, Inc., Davis Variable Account Fund, Inc. Selected American Shares, Inc., Clipper Funds Trust; Trustee/Chairman,
Executive Vice President, and Principal Executive Officer of Davis Fundamental ETF
Trust. Chief Operating Officer of Davis Investments, LLC. Also serves as a senior officer for several
companies affiliated with DSA which are described above.
Douglas Haines (3/4/71), 2949 East Elvira Road, Suite 101, Tucson, AZ 85756. Vice President, Treasurer, Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer
of each of Davis New York Venture Fund, Inc., Davis Series, Inc., Davis Variable Account Fund., Inc.,
Selected American Shares, Inc., Clipper Funds Trust, and Davis Fundamental ETF Trust. Vice President
of Davis Investments, LLC.
Michaela McLoughry (3/21/81), 2949 East Elvira Road, Suite 101, Tucson, AZ 85756. Vice President and Chief Compliance Officer of each of Davis New York Venture Fund, Inc., Davis Series,
inc., Davis Variable Account Fund, Inc., Selected American Shares, Inc., Clipper Funds Trust,
and Davis Fundamental ETF Trust. Vice President of Davis Investments, LLC. Also serves as Chief Compliance
Officer for DSA and as a senior officer for several companies affiliated with DSA which are described
above.
Gary Tyc (5/27/56), 2949 East Elvira Road, Suite 101, Tucson, AZ 85756. Vice President, Chief Financial
Officer, Treasurer, and Secretary of Davis Investments, LLC. Also serves as a senior
officer for several companies affiliated with DSA which are described above.
Russell Wiese (5/18/66), 620 Fifth Avenue, 3rd Floor, New York, NY 10020. Chief Marketing Officer of Davis Investments, LLC. Also serves as a director and/or senior officer for several
companies affiliated with DSA which are described above.
Item 32.
Principal Underwriter
Item 32 (a)
Davis Distributors, LLC, a wholly owned subsidiary of the Adviser, located at 2949
East Elvira Road, Suite 101, Tucson, AZ 85756, is the principal underwriter for Davis New York Venture
Fund, Inc., Davis Series, Inc., Davis Variable Account Fund, Inc., Selected American Shares, Inc., Clipper
Funds Trust, and Davis Funds SICAV.
Item 32 (b)
Management of the Principal Underwriter:
|
Name and Principal
Business Address
|
Positions and Offices with
Underwriter
|
Positions and Offices with
Registrant
|
|
Kenneth Eich
2949 East Elvira
Road, Suite 101
Tucson, AZ 85756
|
President
|
Executive Vice President
and Principal Executive
Officer
|
|
Russell Wiese
620 Fifth Avenue,
3rd Floor
New York, NY
10020
|
Chief Marketing Officer
|
None
|
|
Gary Tyc
2949 East Elvira
Road, Suite 101
Tucson, AZ 85756
|
Vice President, Treasurer and
Secretary
|
None
|
|
Michaela
McLoughry
2949 East Elvira
Road, Suite 101
Tucson, AZ 85756
|
Chief Compliance Officer
|
Vice President and Chief
Compliance Officer
|
|
Lisa Cohen
2949 East Elvira
Road, Suite 101
Tucson, AZ 85756
|
Vice President and Secretary
|
Vice President and
Secretary
|
Item 32 (c)
Not applicable.
Item 33.
Location of Accounts and Records
Accounts and records are maintained at the offices of Davis Selected Advisers, L.P.,
2949 East Elvira Road, Suite 101, Tucson, Arizona 85756, and at the offices of the Registrant’s custodian, State Street Bank and Trust Company, One Congress Street, Suite 1, Boston, MA, 02114-2016, and the Registrant’s transfer agent SS&C GIDS, Inc., 1055 Broadway, Kansas City, MO 64105
Item 34.
Management Services
Not applicable.
CLIPPER FUNDS TRUST
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tucson and State of Arizona on April 29, 2026.
The Registrant hereby certifies that this Post-Effective Amendment meets all the requirements
for effectiveness under paragraph (b) of Rule 485 of the Securities Act of 1933.
CLIPPER FUNDS TRUST
|
*By:
|
/s/ Lisa Cohen
|
|
Lisa Cohen
|
|
|
Attorney-in-Fact
|
|
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities indicated.
|
Signature
|
Title
|
Date
|
|
/s/ Kenneth Eich*
|
Principal Executive Officer
|
April 29, 2026
|
|
Kenneth Eich
|
|
|
|
/s/ Douglas Haines*
|
Principal Financial Officer; and
|
April 29, 2026
|
|
Douglas Haines
|
Principal Accounting Officer
|
|
|
*By:
|
/s/ Lisa Cohen
|
|
Lisa Cohen
|
|
|
Attorney-in-Fact
|
|
*Lisa Cohen signs this document on behalf of the Registrant and each of the foregoing
officers pursuant to the powers of attorney filed as Exhibit 28 (q)(1).
|
*By:
|
/s/ Lisa Cohen
|
|
Lisa Cohen
|
|
|
Attorney-in-Fact
|
|
CLIPPER FUNDS TRUST
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement
has been signed on April 29, 2026, by the following persons in the capacities indicated.
|
Signature
|
Title
|
|
/s/ Francisco Borges*
|
Director
|
|
Francisco Borges
|
|
|
/s/ Andrew Davis*
|
Director
|
|
Andrew Davis
|
|
|
/s/ Christopher Davis*
|
Director
|
|
Christopher Davis
|
|
|
/s/ John Gates*
|
Director
|
|
John Gates
|
|
|
/s/ Samuel Iapalucci*
|
Director
|
|
Samuel Iapalucci
|
|
|
/s/ Katherine MacWilliams*
|
Director
|
|
Katherine MacWilliams
|
|
|
/s/ Lara Vaughan*
|
Director
|
|
Lara Vaughan
|
|
*
Lisa Cohen signs this document on behalf of the Registrant and each of the foregoing
officers pursuant to the powers of attorney filed as Exhibit 28 (q)(1).
|
*By:
|
/s/ Lisa Cohen
|
|
Lisa Cohen
|
|
|
Attorney-in-Fact
|
|