DODGE & COX FUNDS, 485APOS, 1999-02-26

DODGE & COX FUNDS
485APOS, 1999-02-26

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<PAGE>

As filed with the Securities and Exchange Commission on February 26, 1999.

Registration Nos. 2-11522
811-173

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _______ [ ]
Post-Effective Amendment No. 64 [X]

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 23

DODGE & COX FUNDS
(Exact Name of Registrant as Specified in Charter)

One Sansome Street, 35 Floor, San Francisco, CA 94104
(Address of Principal Executive Office)

Registrant's Telephone Number including Area Code: (415) 981-1710

Thomas M. Mistele, Esq., One Sansome Street, 35 Floor, San Francisco, CA 94104
(Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box):

[ ] immediately upon filing pursuant to paragraph (b)
[ ] on ___________ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[x] on May 1, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on __________ pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date
of a previously filed post-effective amendment.

_______________________
<PAGE>

DODGE & COX FUNDS

CROSS REFERENCE SHEET
PART A
(Prepared as part of Form N-1A)

Item Number in Form N-1A
Registration Statement Caption in Prospectus
------------------------ ---------------------
<C> <S>
1 Cover Pages

2 Risk/Return Summary

3 Risk/Return Summary

4 Investment Objectives, Principal Investment
Strategies and Risks

5 Not Applicable

6 Fund Organization and Management

7 How to Purchase Shares
How to Redeem or Exchange Shares
Income Dividends and Capital Gain Distributions
Pricing of Shares

8 Not Applicable

9 Financial Highlights

</TABLE>
<PAGE>

DODGE & COX FUNDS
CROSS REFERENCE SHEET

PART B

(Prepared as part of Form N-1A)

<TABLE>
<CAPTION>
Item Number in Form N-1A
Registration Statement Caption in Statement of Additional Information
------------------------ ----------------------------------------------
<C> <S>
10 Cover Page; Table of Contents

11 Capital Stock

12 Classification, Investment Restrictions,
Investment Strategies and Risks; Appendix A

13 Management of the Fund

14 Management of the Fund

15 Management of the Fund

16 Brokerage Allocation and Other Practices

17 Capital Stock

18 Purchase, Redemption and Pricing of Shares

19 Taxation of the Fund

20 Principal Underwriter

21 Performance Information

22 Financial Statements

</TABLE>

<PAGE>

DODGE & COX
FUNDS

Stock Fund
Established 1965

Balanced Fund
Established 1931

Income Fund
Established 1989

Prospectus
May 1, 1999

These securities have not been approved or
disapproved by the Securities and Exchange Commission, nor has the Commission
passed upon the accuracy or adequacy of this
prospectus. Any representation to the
contrary is a criminal offense.
<PAGE>

DODGE & COX FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Table of Risk/Return Summary 2
Contents Investment Objectives, Principal Investment
Strategies and Risks 10
. Investment Restrictions 13
. Investment Risks 13
. Additional Information on Investments 14 The Funds' investment manager,
How to Purchase Shares 16 Dodge & Cox, was founded in
How to Redeem or Exchange Shares 18 1930 and managed over
General Transaction Information 21 $38 billion for individual and
Pricing of Shares 22 institutional investors in mutual
Income Dividends and Capital Gain Distributions 22 fund and private accounts as of
Performance Information 23 December 31, 1998. Dodge &
Fund Organization and Management 23 Cox is one of the largest privately
Year 2000 24 owned investment advisers in the
Portfolio Transactions 24 United States.
Expenses 25
Federal Income Taxes 25
Custodian and Transfer Agent 25
Investment Information and Shareholder Services 26
Financial Highlights 28
</TABLE>
<PAGE>

DODGE & COX FUNDS (Trust) is a family of three no-load mutual
funds: Dodge & Cox Stock Fund, Dodge & Cox Balanced Fund and
Dodge & Cox Income Fund (Funds). Each Fund is a series of the
Trust. The Trust is registered with the Securities and Exchange
Commission as an open-end diversified management investment
company.

Dodge & Cox Stock Fund
- --------------------------------------------------------------------------------
Investment The Fund seeks long-term growth of principal and income. A
Goals secondary objective is to achieve a reasonable current income.

Principal The Fund invests primarily in a broadly diversified and
Investment carefully selected portfolio of common stocks. In selecting
Strategies investments, the Fund invests in companies that, in Dodge &
Cox's opinion, appear to be temporarily undervalued by the
stock market and have a favorable outlook for long-term growth.
The Fund focuses on the underlying financial condition and
prospects of individual companies. Future earnings and
dividends are major considerations in selecting companies.
Companies are also selected with an emphasis on financial
strength and sound economic background.

For details about the Fund's investment program, please see the
Investment Objectives, Principal Investment Strategies and
Risks section.

Principal Risks You could lose money on your investment in the Fund, or the
of Investing Fund could underperform other investments, if any of the
following occurs:

. The stock market goes down.
. Value stocks fall out of favor with the stock market.
. The market continues indefinitely to undervalue the stocks
in the Fund's portfolio.
. The stocks in the Fund's portfolio turn out not to be
undervalued after all due to intractable or fundamental
problems that are not yet apparent.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

2
<PAGE>

Dodge & Cox Stock Fund (continued)
- --------------------------------------------------------------------------------
Performance The bar chart and table shown below indicate the risks of
Information investing in the Dodge & Cox Stock Fund. The bar chart shows
changes in the performance of the Fund's shares from year to
year over a ten-year period.

The table shows how the Fund's average annual total returns for
one, five and ten years compare to those of the Standard &
Poor's Composite Index(R) of 500 Stocks (S&P 500). The S&P 500
is a widely recognized, unmanaged index of common stock prices.

The Fund's past performance does not necessarily indicate how
the Fund will perform in the future.

Dodge & Cox Stock Fund Annual Total Returns 1989-1998
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

26.94% (5.09)% 21.48% 10.82% 18.32% 5.16% 33.38% 22.26% 28.41% 5.39%
</TABLE>

During the ten-year period shown in the bar chart, the highest
quarterly return was 15.42% (for the quarter ended June 30,
1997) and the lowest quarterly return was -16.04% (for the
quarter ended September 30, 1990).
<TABLE>
<CAPTION>
Average annual total returns for the periods ended December 31, 1998

Past 1 Year Past 5 Years Past 10 Years
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Dodge & Cox Stock Fund 5.39% 18.34% 16.11%
S&P 500 28.57% 24.05% 19.20%
</TABLE>

3
<PAGE>

Dodge & Cox Stock Fund (continued)
- --------------------------------------------------------------------------------
Fees and The table describes the fees and expenses that you may pay if
Expenses you buy and hold shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees
(fees paid directly from your investment)
Sales Load Imposed on Purchases None
Deferred Sales Load None
Sales Load Imposed on Reinvested Distributions None
Redemption Fee None
Exchange Fee None
Maximum Account Fee None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees .50%
Distribution (12b-1) and/or Service Fees None
Other Expenses (transfer agent, custodial,
accounting, legal, etc.) .07%
----
Total Fund Operating Expenses .57%
</TABLE>

Example: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other
mutual funds.

The example assumes that:

. You invest $10,000 in the Fund for the time periods
indicated;
. Your investment has a 5% return each year; and
. The Fund's operating expenses remain the same.

Although your actual costs may be higher or lower, under these
assumptions your costs would be:

Number of Years 1 3 5 10
---------------------------------------------------------------
$58 $183 $318 $714

Dodge & Cox Balanced Fund
- --------------------------------------------------------------------------------
Investment The Fund seeks regular income, conservation of principal and an
Goals opportunity for long-term growth of principal and income.
Principal The Fund invests in a diversified portfolio of common stocks,
Investment preferred stocks and bonds. In selecting equity investments,
Strategies the Fund invests in companies that, in Dodge & Cox's opinion,
appear to be temporarily undervalued by the stock market and
have a favorable outlook for long-term growth. The Fund focuses
on the underlying financial condition and prospects of
individual companies. Future earnings and dividends are major
considerations in selecting companies. Companies are also
selected with an emphasis on financial strength and sound
economic background. Fixed-income investments include U.S.
government obligations, mortgage- and asset-backed securities,
corporate bonds, collateralized mortgage obligations (CMOs),
and others.

4
<PAGE>

Dodge & Cox Balanced Fund (continued)
- --------------------------------------------------------------------------------

The proportions held in the various fixed-income securities
will be revised in light of Dodge & Cox's appraisal of the
economy, the relative yields of securities in the various
market sectors, the investment prospects for issuers and other
factors. In selecting fixed-income securities, Dodge & Cox will
consider many factors, including yield to maturity, quality,
liquidity, current yield and capital appreciation potential.

While the mix of equity and fixed-income securities will vary
depending on Dodge & Cox's outlook on the markets, no more than
approximately 75% of total assets will be invested in common
stocks and that portion of the value of convertible securities
attributable to the conversion right.

For details about the Fund's investment program, please see the
Investment Objectives, Principal Investment Strategies and
Risks section.

Principal Risks You could lose money on your investment in the Fund, or the
of Investing Fund could underperform other investments, if any of the
following occurs:

Equity Securities

Fixed-Income Securities

. Bond prices decline due to rising interest rates.
. A bond issuer's financial condition deteriorates, or it
fails to repay interest and principal in a timely manner.
. Early repayment of principal of mortgage-related securities
(e.g., prepayment of principal due to sale of the underlying
property, refinancing or foreclosure) exposes the Fund to a
lower rate of return upon reinvestment of principal. In
addition, changes in the rate of prepayment also effects the
price and volatility of a mortgage-related security.

The Fund's balance between stocks and fixed-income securities
could limit its potential for capital appreciation relative to
an all stock fund.

5
<PAGE>

Dodge & Cox Balanced Fund (continued)
- --------------------------------------------------------------------------------

Performance The bar chart and table shown below indicate the risks of
Information investing in the Dodge & Cox Balanced Fund. The bar chart shows
changes in the performance of the Fund's shares from year to
year over a ten-year period.

The table shows how the Fund's average annual total returns for
one, five and ten years compare to a Combined Index consisting
of 60% of the Standard & Poor's Composite Index(R) of 500
Stocks (S&P 500) and 40% of the Lehman Brothers Aggregate Bond
Index (LBAG). The S&P 500 and LBAG are widely recognized
unmanaged indices of common stock prices and U.S. dollar-
denominated investment-grade fixed-income securities,
respectively.

The Fund's past performance does not necessarily indicate how
the Fund will perform in the future.

Dodge & Cox Balanced Fund Annual Total Returns 1989-1998
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

23.02% 0.94% 20.72% 10.57% 15.95% 1.99% 28.02% 14.75% 21.21% 6.70%
</TABLE>

During the ten-year period shown in the bar chart, the highest quarterly return
was 10.96% (for the quarter ended June 30, 1997) and the lowest quarterly return
was -9.26% (for the quarter ended September 30, 1990).

Average annual total returns for the periods ended December 31, 1998
<TABLE>
<CAPTION>
Past 1 Year Past 5 Years Past 10 Years
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dodge & Cox Balanced Fund 6.70% 14.14% 14.05%
Combined Index (60% S&P 500 & 40% LBAG) 20.99% 17.32% 15.34%
S&P 500 28.57% 24.05% 19.20%
LBAG 8.67% 7.27% 9.26%
</TABLE>

6
<PAGE>

Dodge & Cox Balanced Fund (continued)
- --------------------------------------------------------------------------------

Fees and The table describes the fees and expenses that you may pay if
Expenses you buy and hold shares of the Fund.

Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees .50%
Distribution (12b-1) and/or Service Fees None
Other Expenses (transfer agent, custodial,
accounting, legal, etc.) .04%
----
Total Fund Operating Expenses .54%
</TABLE>

Example: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other
mutual funds.

The example assumes that:
. You invest $10,000 in the Fund for the time periods
indicated;
. Your investment has a 5% return each year; and
. The Fund's operating expenses remain the same.

Although your actual costs may be higher or lower, under these
assumptions your costs would be:

Number of Years 1 3 5 10
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$55 $173 $302 $677
</TABLE>

Dodge & Cox Income Fund
- --------------------------------------------------------------------------------

Investment The Fund seeks a high and stable rate of current income,
Goals consistent with long-term preservation of capital.
A secondary objective is to take advantage of opportunities to
realize capital appreciation.

Principal The Fund invests in a diversified portfolio consisting
Investment primarily of high-quality bonds and other fixed-income
Strategies securities, including U.S. government obligations,
mortgage- and asset-backed securities, corporate bonds,
collateralized mortgage obligations (CMOs) and others.

The proportions held in the various fixed-income securities
will be revised in light of Dodge & Cox's appraisal of the
economy, the relative yields of securities in the various
market sectors, the investment prospects for issuers and other
factors. In selecting securities, Dodge & Cox will consider
many factors, including yield to maturity, quality, liquidity,
current yield and capital appreciation potential.

For details about the Fund's investment program, please see the
Investment Objectives, Principal Investment Strategies and
Risks section.

7
<PAGE>

Dodge & Cox Income Fund (continued)
- --------------------------------------------------------------------------------

Principal Risks You could lose money on your investment in the Fund, or the
of Investing Fund could underperform other investments, if any of the
following occurs:

. Bond prices decline due to rising interest rates.
. A bond issuer's financial condition deteriorates, or it fails
to repay interest and principal in a timely manner.
. Early repayment of principal of mortgage-related securities
(e.g., prepayment of principal due to sale of the
underlying property, refinancing or foreclosure) exposes
the Fund to a lower rate of return upon reinvestment of
principal. In addition, changes in the rate of prepayment
also effects the price and volatility of a mortgage-related
security.

Performance The bar chart and table shown below indicate the risks of
Information investing in the Dodge & Cox Income Fund. The bar chart shows
changes in the performance of the Fund's shares over a ten-year
period.

The table shows how the Fund's average annual total returns for
one, five and ten years compare to those of the Lehman Brothers
Aggregate Bond Index (LBAG). This is a widely recognized,
unmanaged index of U.S. dollar-denominated investment-grade
fixed-income securities.

The Fund's past performance does not necessarily indicate how
the Fund will perform in the future.

Dodge & Cox Income Fund Annual Total Returns 1989-1998
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

14.09% 7.42% 17.94% 7.80% 11.35% (2.89)% 20.21% 3.62% 10.00% 8.08%
</TABLE>

During the ten-year period shown in the bar chart, the highest
quarterly return was 7.88% (for the quarter ended June 30,
1989) and the lowest quarterly return was -2.38% (for the
quarter ended March 31, 1994).

<TABLE>
<CAPTION>
Average annual total returns for the periods ended December 31, 1998
Past 1 Year Past 5 Years Past 10 Years
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dodge & Cox Income Fund 8.08% 7.54% 9.57%
LBAG 8.67% 7.27% 9.26%
</TABLE>

8
<PAGE>

Dodge & Cox Income Fund (continued)
- --------------------------------------------------------------------------------

Fees and The table describes the fees and expenses that you may pay if
Expenses you buy and hold shares of the Fund.

Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees .41%
Distribution (12b-1) and/or Service Fees None
Other Expenses (transfer agent, custodial,
accounting, legal, etc.) .06%
----
Total Fund Operating Expenses .47%
</TABLE>

Example: This example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other
mutual funds.

The example assumes that:

. You invest $10,000 in the Fund for the time periods
indicated;

. Your investment has a 5% return each year; and

. The Fund's operating expenses remain the same.

Although your actual costs may be higher or lower, under these
assumptions your costs would be:

<TABLE>
<CAPTION>
Number of Years 1 3 5 10
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
$48 $151 $263 $591
</TABLE>

9
<PAGE>

Investment Objectives, Principal Investment Strategies and Risks
- --------------------------------------------------------------------------------
This section takes a closer look at the investment objectives of each Fund,
their principal investment strategies and certain risks of investing in the
Fund.

Dodge & Cox Stock Fund
- --------------------------------------------------------------------------------

Investment The Fund's primary objective is to provide shareholders with an
Objectives opportunity for long-term growth of principal and income. A
and Principal secondary objective is to achieve a reasonable current income.
Investment These objectives may not be changed without shareholder
Strategies approval. Investors should recognize that the market risks
inherent in investment cannot be avoided, nor is there any
assurance that the investment objectives of the Fund will be
achieved. The Fund seeks to achieve its objective by investing
primarily in a diversified portfolio of common stocks. Under
normal market conditions, the Fund will invest at least 65% of
its total assets in common stocks. The Fund may also purchase
other types of securities, for example, preferred stocks and
debt securities which are convertible into common stock (or
which in the opinion of Dodge & Cox have predominantly common
stock investment characteristics). The Fund may also invest up
to 20% of its total assets in U.S. dollar-denominated
securities of foreign issuers traded in the U.S. (such as
American Depositary Receipts (ADRs)). Further information about
specific investments is provided under Additional Information
on Investments.

Moderate reserves in cash or short-term fixed-income securities
may be held from time to time as Dodge & Cox may deem
advisable. Nevertheless, the long-term emphasis shall be the
maintaining of a fully invested equity fund.

Common stocks selected for the Fund will be predominantly those
which in the view of Dodge & Cox have a favorable outlook for
long-term growth of principal and income. Prospective earnings
and dividends are major considerations in these stock
selections. Individual securities are selected with an emphasis
on financial strength and sound economic background. The Fund's
policies as described above may be changed without shareholder
approval; however, these policies will not be changed without
notice to shareholders.

In an attempt to minimize unforeseen risks in single
securities, the Fund seeks to provide adequate investment
diversification. Although there is no restriction on the number
of changes in security holdings, purchases are made with a view
to long-term holding and not for short-term trading purposes.
(The Fund's portfolio turnover rates for the fiscal years ended
December 31, 1998, 1997 and 1996 were 19%, 19%, and 10%,
respectively.) However, during rapidly changing economic,
market and political conditions, there may necessarily be more
portfolio changes than in a more stable period. A higher
turnover rate might result in increased transaction expenses
and the realization of capital gains and losses (see Federal
Income Taxes). It is the general practice of the Fund to invest
in securities with ready markets, mainly issues listed on
national securities exchanges.

10
<PAGE>

Dodge & Cox Balanced Fund
- --------------------------------------------------------------------------------
Investment The Fund's objectives are to provide shareholders with regular
Objectives income, conservation of principal and an opportunity for long-
and Principal term growth of principal and income. These objectives may not
Investment be changed without shareholder approval. Investors should
Strategies recognize that the market risks inherent in investment cannot
be avoided, nor is there any assurance that the investment
objectives of the Fund will be achieved. Reasonable
appreciation in favorable periods and conservation of principal
in adverse times are objectives that require flexibility in
managing the assets of the Fund under constantly changing
investment conditions. Therefore, the proportions held in
common and preferred stocks and bonds are revised by Dodge &
Cox when considered advisable in light of its appraisal of
business and investment prospects.

Under normal market conditions, it is the policy of the Fund to
maintain no more than approximately 75% of its total assets in
common stocks and that portion of the value of convertible
securities attributable to the conversion right. Fixed-income
securities are held for their relative stability of principal
and income as well as for a reserve which can be used to take
advantage of investment opportunities. The Fund may also invest
up to 20% of its total assets in U.S. dollar-denominated
securities of foreign issuers traded in the U.S. (such as
American Depositary Receipts (ADRs) and Yankee bonds). Moderate
reserves in cash or short-term fixed-income securities may be
held from time to time as Dodge & Cox may deem advisable.
Further information about specific investments is provided
under Additional Information on Investments.

It is the Fund's policy to invest in investment-grade debt
securities rated in the top four rating categories by either
Moody's Investors Service ("Moody's")(Aaa, Aa, A, Baa) or
Standard & Poor's Ratings Group ("S&P")(AAA, AA, A, BBB).
Securities rated Baa or BBB may have speculative
characteristics. Securities that are downgraded below Baa or
BBB subsequent to purchase may continue to be held by the Fund,
if Dodge & Cox believes it advantageous to do so. Unrated debt
securities may be purchased if they are, in the opinion of
Dodge & Cox, of equivalent quality to debt securities rated at
least A by Moody's and S&P. An explanation of Moody's and S&P's
rating groups is included in the Appendix to the Statement of
Additional Information.

A substantial position will be maintained in common stocks
which in the view of Dodge & Cox have a favorable outlook for
long-term growth of principal and income. Prospective earnings
and dividends are major considerations in these stock
selections. The level of security prices and the trend of
business activity are considered in determining the total
investment position of the Fund in equities at any time.
Individual securities are selected with an emphasis on
financial strength and a sound economic background. The Fund's
policies as described above may be changed without shareholder
approval; however, these policies will not be changed without
notice to shareholders.

The proportions held in the various fixed-income securities
will be revised as appropriate in light of Dodge & Cox's
appraisal of the economy, the relative yields of securities in
the various market sectors, the investment prospects for
issuers and other factors. In making investment decisions,
Dodge & Cox will take many factors into consideration including
yield to maturity, quality, liquidity, current yield and
capital appreciation potential.

In an attempt to minimize unforeseen risks in single
securities, the Fund seeks to provide adequate investment
diversification. Although there is no restriction on the number
of changes in security holdings, purchases are made with a view
to long-term holding and not for short-term trading purposes.
(The Fund's portfolio turnover rates for the fiscal years ended
December 31, 1998, 1997 and 1996 were 26%, 32% and 17%,
respectively.) However, during rapidly changing economic,
market and political conditions, there may necessarily be more
portfolio changes than in a more stable period. A higher
turnover rate might result in increased transaction expenses
and the realization of capital gains and losses (see Federal
Income Taxes). It is the general practice of the Fund to invest
in equity securities mainly listed on national securities
exchanges and securities with ready markets.

11
<PAGE>

Dodge & Cox Income Fund
- --------------------------------------------------------------------------------

Investment The Fund's primary objective is to provide shareholders with a
Objectives high and stable rate of current income consistent with long-
and Principal term preservation of capital. A secondary objective is to take
Investment advantage of opportunities to realize capital appreciation.
Strategies These objectives may not be changed without shareholder
approval. Investors should recognize that the market risks
inherent in investments cannot be avoided, nor is there any
assurance that the investment objectives of the Fund will be
achieved.

The Fund seeks to achieve its objectives by investing in a
diversified portfolio of fixed-income securities. It is the
policy of the Fund to invest at least 80% of the market value
of its total assets in the following: (1) debt obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; (2) investment-grade debt securities,
including U.S. dollar-denominated foreign issues and
supranational agencies, rated in the top four rating groups by
either Moody's (Aaa, Aa, A, Baa) or S&P (AAA, AA, A, BBB); (3)
unrated securities if deemed to be of investment-grade quality
by Dodge & Cox; and (4) bankers' acceptances, bank certificates
of deposit, repurchase agreements and commercial paper. At
least 65% of the market value of the portfolio will be invested
in category (1) securities and in category (2) securities rated
in the top three rating groups. In addition, the Fund will
invest no more than 25% of its total assets in U.S. dollar-
denominated securities of foreign issuers. Further information
about specific investments is provided under Additional
Information on Investments.

No more than 20% of the Fund may be invested in other fixed-
income instruments including: debt obligations rated below
investment grade if, in the opinion of Dodge & Cox, they are of
suitable quality, provide attractive investment opportunities
and have a minimum rating of B by Moody's and/or S&P at the
time of investment; preferred stock; corporate bonds
convertible into common stocks or carrying warrants to purchase
common stock. The Fund will invest in unrated securities only
if deemed to be of investment-grade quality by Dodge & Cox. It
should be noted that securities rated Baa or BBB and below have
speculative characteristics. Securities rated B may yield a
higher level of current income than higher quality securities
but generally have less liquidity, greater market risk and more
price fluctuation. An explanation of Moody's and S&P's rating
groups is included in the Appendix to the Statement of
Additional Information.

The Fund attempts to achieve its secondary objective of capital
appreciation through such techniques as fundamental research
(i.e., seeking a security or group of securities which Dodge &
Cox believes to be undervalued), purchasing securities at a
discount from their maturity or call value and making gradual
adjustments in the average maturity of the Fund's portfolio.

The average maturity of the Fund's portfolio at any given time
depends, in part, on Dodge & Cox's assessment of economic and
market conditions, the future level of inflation and interest
rates, and on the relative yields of securities in the
marketplace. Dodge & Cox normally invests in an array of
securities with short, intermediate and long maturities in
varying proportions, with greater emphasis on long maturities.

12
<PAGE>

Purchases and sales of securities are generally made for long-
term fundamental investment reasons rather than for short-term
trading purposes. Nevertheless, Dodge & Cox may sell any of the
securities in the Fund, regardless of the length of time held,
in seeking to achieve the objectives of the Fund.

In seeking to achieve the objectives of the Fund, Dodge & Cox
may purchase securities on a when-issued basis, purchase or
sell securities for delayed delivery and lend portfolio
securities. The Fund's investment policies as set forth above
may be changed without shareholder approval; however, these
policies will not be changed without notice to shareholder.

Dodge & Cox maintains a long-term investment orientation and
therefore anticipates a relatively low turnover rate. (The
Fund's portfolio turnover rates for the fiscal years ended
December 31, 1998, 1997, and 1996 were 35%, 28%, and 37%,
respectively.) However, during rapidly changing economic,
political and market environments, there may be more portfolio
changes than in a more stable period. A higher turnover rate
might result in increased transaction expenses and the
realization of capital gains and losses (see Federal Income
Taxes).

- --------------------------------------------------------------------------------

Investment The Funds have adopted certain restrictions designed to achieve
Restrictions diversification of investment and to reduce investment risk.
Each Fund may not: (a) invest more than 5% of the value of its
total assets in the securities of any one issuer except the
U.S. Government, nor acquire more than 10% of the voting
securities of any one issuer; (b) concentrate investments of
more than 25% of the value of its total assets in any one
industry, except that the restriction does not apply to
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities (or related repurchase
agreements); (c) borrow money except as a temporary measure for
extraordinary or emergency purposes; (d) make loans to other
persons, except this shall not exclude the purchase of publicly
issued debt securities of a type purchased by institutional
investors. The investment restrictions described in this
paragraph and in the Statement of Additional Information may be
changed only with the approval of that Fund's shareholders.

- --------------------------------------------------------------------------------

Investment You should understand that all investments involve risks, and
Risks there can be no guarantee against loss resulting from an
investment in the Funds, nor can there be any assurance that a
Fund's investment objectives will be attained. There are
further risk factors described elsewhere in this prospectus and
in the Statement of Additional Information.

Investments in common stock in general are subject to market
risks that cause their prices to fluctuate over time, i.e., the
possibility that stock prices will decline over short or even
extended periods. Prices of bonds are sensitive to changes in
the market level of interest rates. In general, as interest
rates rise, the prices of fixed-income securities fall, and
conversely, as interest rates fall, the prices of these
securities rise. Yields on short, intermediate and long-term
securities are dependent on a variety of factors, including the
general conditions of the money and bond markets, the size of a
particular offering, the maturity of the obligation, and the
credit quality and rating of the issue. Debt securities with
longer maturities tend to have higher yields and are generally
subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities and lower
yields. Furthermore, because yield levels on securities vary
with changing interest rates, no specific yield on shares of a
Fund can be guaranteed. Since the Dodge & Cox Income Fund and
the bond portion of the Dodge & Cox Balanced Fund

13
<PAGE>

portfolio will be invested primarily in higher quality debt
securities, the Funds may not yield as high a level of current
income as funds that invest primarily in lower quality debt
securities which generally have less liquidity, greater market
risk and greater price fluctuation. The value of stocks and
bonds may also be affected by changes in the financial
condition of, and other events affecting, specific issuers.
Fluctuations in the value of the securities in which a Fund
invests will cause the Fund's share price to fluctuate. An
investment in the Funds, therefore, may be more suitable for
long-term investors who can bear the risk of short and long-
term fluctuations in a Fund's share price.

Foreign securities involve some special risks such as exposure
to potentially adverse local political and economic
developments; nationalization and exchange controls;
potentially lower liquidity and higher volatility; possible
problems arising from accounting, disclosure, settlement and
regulatory practices that differ from U.S. standards; foreign
taxes; and the risk that fluctuations in foreign exchange rates
will decrease the investment's value (although favorable
changes can increase its value).

The Dodge & Cox Balanced Fund, with its mixture of investments
in common stocks and bonds, may entail less investment risk
(and a potentially lower return) than a mutual fund investing
only in common stocks.

- --------------------------------------------------------------------------------

Additional COMMON STOCKS (DODGE & COX STOCK FUND and DODGE & COX BALANCED
Information FUND) Stocks represent shares of ownership in a company. After
on Investments other claims are satisfied, common stockholders participate in
company profits on a pro rata basis; profits may be paid out in
dividends or reinvested in the company to help it grow.
Increases and decreases in earnings are usually reflected in a
company's stock price, so common stocks generally have the
greatest appreciation and depreciation potential of all
corporate securities.

PREFERRED STOCKS Each Fund may invest in preferred stocks.
Generally, preferred stock has a specified dividend and ranks
after bonds but before common stocks in its claim on income for
dividend payments and on assets should the company be
liquidated.

CONVERTIBLE SECURITIES Each Fund may invest in debt or
preferred equity securities convertible into or exchangeable
for equity securities. Traditionally, convertible securities
have paid dividends or interest at rates higher than common
stocks but lower than nonconvertible securities. They generally
participate in the appreciation or depreciation of the
underlying stock into which they are convertible, but to a
lesser degree. In recent years, convertibles have been
developed which combine higher or lower current income with
other features.

FOREIGN SECURITIES Each Fund may invest in U.S. dollar-
denominated securities of foreign issuers traded in the U.S.
Such investments increase a portfolio's diversification and may
enhance return, but they also involve some special risks.

U.S. GOVERNMENT OBLIGATIONS A portion of each Fund may be
invested in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. Some of the
obligations purchased by a Fund are backed by the full faith
and credit of the U.S. Government and are guaranteed as to both
principal and interest by the U.S. Treasury. Examples of these
include direct obligations of the U.S. Treasury, such as U.S.
Treasury bills, notes and bonds, or indirect obligations of the
U.S. Treasury, such as obligations of the Government National
Mortgage Association, the Maritime Administration, the Farmers
Home Administration and the Department of Veterans Affairs.

While the obligations of many of the agencies and
instrumentalities of the U.S. Government are not direct
obligations of the U.S. Treasury, they are generally backed
indirectly by the U.S. Government. Some

14
<PAGE>

of the agencies are indirectly backed by their right to borrow
from the U.S. Government, such as the Federal Financing Bank,
the Federal Home Loan Bank and the U.S. Postal Service. Others
are supported solely by the credit of the agency or
instrumentality itself, but are given additional support due to
the U.S. Treasury's authority to purchase their outstanding
debt obligations. These agencies include the Federal Farm
Credit Banks, the Federal Home Loan Mortgage Corporation and
the Federal National Mortgage Association. No assurance can be
given that the U.S. Government would provide financial support
to U.S. Government-established or sponsored agencies.
Furthermore, with respect to the U.S. Government securities
purchased by the Fund, guarantees as to the timely payment of
principal and interest do not extend to the value or yield of
these securities nor do they extend to the value of a Fund's
shares. A Fund may invest in these securities if it believes
they offer an expected return commensurate with the risks
assumed.

MORTGAGE PASS-THROUGH SECURITIES (DODGE & COX BALANCED FUND and
DODGE & COX INCOME FUND) Mortgage pass-through securities are
guaranteed by an agency of the U.S. Government or are issued by
a private entity. These securities represent ownership in
"pools" of mortgage loans and are called "pass-throughs"
because principal and interest payments are passed through to
security holders monthly. The security holder may also receive
unscheduled principal payments representing prepayments of the
underlying mortgage loans. When a Fund reinvests the principal
and interest payments, it may receive a rate of interest which
is either higher or lower than the rate on the existing
mortgage.

During periods of declining interest rates there is increased
likelihood that mortgage securities may be prepaid. Such
prepayment would most likely be reinvested at lower rates. On
the other hand, if the pass-through securities had been
purchased at a discount, then such prepayment of principal may
benefit the portfolio.

COLLATERALIZED MORTGAGE OBLIGATIONS (DODGE & COX BALANCED FUND
and DODGE & COX INCOME FUND) Collateralized Mortgage
Obligations (CMOs) are private entity or U.S. Government
agency-issued MULTI-CLASS bonds that are collateralized by
U.S. agency-guaranteed mortgage pass-through securities. The
issuer typically issues several classes, or "tranches", of
bonds, the debt service of which is provided by the principal
and interest payments from the mortgage pass-through securities
in the trust. Each of these tranches is valued and traded
separately based on its distinct cash flow characteristics.
Dodge & Cox will purchase a tranche with the weighted-average
life and cash flow characteristics that it believes will
contribute to achieving the objectives of a Fund.

All CMOs purchased by a Fund will be issued or guaranteed by an
agency of the U.S. government or have a AA rating by either S&P
or Moody's, the major rating services. To qualify for this
rating, a CMO is structured so that even under conservative
prepayment and reinvestment assumptions, the principal and
interest payments from the collateral are expected to meet or
exceed the cash flow obligations of all the tranches of the
CMO. However, there are risks associated with CMOs which relate
to the risks of the underlying mortgage pass-through securities
(i.e., an increase or decrease in prepayment rates, resulting
from a decrease or increase in mortgage interest rates, will
affect the yield, average life and price of CMOs). In a falling
interest rate environment, the mortgage securities may be
prepaid faster than the assumed rate. In this scenario, the
prepayments of principal will generally be reinvested at a rate
which is lower than the rate that the security holder is
currently receiving. Conversely, in a rising interest rate
environment, the mortgage collateral may be prepaid at a rate
which is slower than the assumed rate. In this case, the cash
flow of the bond decreases. A reduced prepayment rate
effectively lengthens the time period the security will be
outstanding and may adversely affect the value and volatility
of the security.

15
<PAGE>

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How to Purchase Shares

If the Fund's transfer agent, Boston Financial Data Services Inc. (Boston
Financial Data Services), receives your request in good order before the close
of trading on the New York Stock Exchange (generally 4 p.m. Eastern time (ET)),
your transactions will be priced at that day's net asset value (NAV). If your
request is received after 4 p.m., it will be priced at the next business day's
NAV. The Funds are offered on a no-load basis. You do not pay sales commissions
or 12b-1 marketing fees.
<TABLE>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT

MINIMUM INVESTMENT $2,500 (regular account); $1,000 (IRAs) $100

BY MAIL Complete and sign the Account Mail your check with an Invest-By-Mail
Application (Adoption Agreement for an form detached from your confirmation
IRA). statement.
REGULAR MAIL:
Call 1-800-621-3979 or visit the Fund's Make your check payable to:
Dodge & Cox Funds web site at www.dodgeandcox.com to Dodge & Cox Funds.
c/o Boston Financial Data Services receive the appropriate forms.
P.O. Box 9051 All purchases must be made in U.S.
Boston, MA 02205-9051 Make your check payable to: dollars, and checks must be drawn on
Dodge & Cox Funds. U.S. banks.
EXPRESS, CERTIFIED OR REGISTERED MAIL:
All purchases must be made in U.S.
Dodge & Cox Funds dollars, and checks must be drawn on
c/o Boston Financial Data Services U.S. banks.
66 Brooks Drive, Suite 1
Braintree, MA 02184-3839

BY TELEPHONE You may not use telephone transactions Complete "Investment/Redemption
for initial purchases of a Fund's shares. Options" in the Account Application to
transfer assets from your bank account.
1-800-621-3979 Call Client Services during business hour
Client Services to exchange from another Dodge & Cox Call Client Services during business hours
Fund account with the same registration to make subsequent investments directly
BUSINESS HOURS: (name, address, taxpayer I.D. and from your bank account or exchange
Monday-Friday account type). from another Dodge & Cox Fund account
8 a.m.-8 p.m. ET with the same registration (name,
address, taxpayer I.D. and account type).
</TABLE>

IMPORTANT NOTE: To prevent check fraud, the Funds will not accept third party
checks.

IMPORTANT NOTE: Only bank accounts held at domestic financial institutions that
are Automated Clearing House (ACH) members may be used for telephone
transactions. This option will become effective approximately 15 business days
after the Account Application is received by Boston Financial Data Services. The
price paid for shares of a Fund will be the next determined NAV after Boston
Financial Data Services receives your investment instructions. Your order may be
canceled if payment is not received by the third business day after your order
is placed.

16
<PAGE>

<TABLE>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT

BY WIRE Call Client Services (1-800-621-3979) Call Client Services
to notify the Fund of your wire transaction. (1-800-621-3979) to notify the
WIRE TO: Fund of your wire transaction.
After making initial investments by wire,
State Street Bank and Trust Company you must promptly complete an Account Wire transactions are not
Boston, MA Application and mail it to the Fund, c/o available for IRA accounts,
ABA 0110 0002 8 Boston Financial Data Services, at either except for asset transfers and
Deposit DDA 9905-351-4 of the addresses listed above. No account direct rollovers.
FFC Dodge & Cox (Fund Name) Fund services will be established until the
Fund #/ Account #/ Account Registration completed Account Application has been
received by the Fund.

Wire transactions are not available for
IRA accounts, except for asset transfers
and direct rollovers.

AUTOMATICALLY The Funds offer ways to invest automatically. Call Client Services or visit the
Fund's website at www.dodgeandcox.com and request the Account Options Form to
establish this service. See Automatic Investment Plan.
</TABLE>

IMPORTANT NOTE: If Boston Financial Data Services receives your call before 4:00
p.m. ET and the bank receives the wired funds the same day, the Fund will credit
the purchase to your account that day. If we receive your call after 4:00 p.m.
or the bank receives the wire after 6:00 p.m., we will credit the purchase to
your account the following business day.

IMPORTANT NOTE: If you buy Fund shares through a registered broker/dealer,
financial institution or investment adviser, the broker/dealer or adviser may
charge you a service fee.

17
<PAGE>

- --------------------------------------------------------------------------------

Additional All subscriptions are subject to acceptance by the Fund and the
Information price of the shares will be the NAV which is next computed
About after receipt by Boston Financial Data Services, or other
Purchases authorized agent or sub-agent, of the subscription in proper
form (see Pricing of Shares). If your payment is not received
or you pay with a check or ACH transfer that does not clear,
your purchase will be canceled. You will be responsible for any
losses or expenses (including a $20 fee) incurred by a Fund or
Boston Financial Data Services, and a Fund can redeem shares
you own in this or another identically registered Dodge & Cox
Fund account as reimbursement. The Funds and their agents have
the right to reject or cancel any purchase, exchange or
redemption due to nonpayment. All subscriptions will be
invested in full and fractional shares, and you will receive a
confirmation.

Certificates (for full shares only) are not issued unless
requested by you.

A Social Security or Taxpayer Identification Number must be
supplied and certified on the Account Application before
an account can be established. If you fail to furnish a Fund
with your correct Social Security or Taxpayer Identification
Number, the Fund may be required to withhold Federal income tax
at a rate of 31% ("backup withholding") from dividends, capital
gain distributions and redemptions.

The Funds and their agents reserve the right to accept initial
purchases by telephone; to cancel or rescind any purchase or
exchange (for example, if an account has been restricted due to
excessive trading or fraud) upon notice to the shareholder
within five business days of the trade; to freeze any account
and temporarily suspend services on the account when notice has
been received of a dispute between the registered or beneficial
account owners or there is reason to believe a fraudulent
transaction may occur; to otherwise modify the conditions of
purchase and any services at any time; or to act on
instructions believed to be genuine.

- --------------------------------------------------------------------------------

How to You may withdraw any part of your account by selling shares.
Redeem or The sale price of your shares will be the Fund's next-
Exchange Shares determined NAV after Boston Financial Data Services receives
all required documents in good order.

Good order means that the request includes:
. Fund name and account number.
. Amount of the transaction (in dollars or shares).
. Signatures of all owners exactly as registered on the
account.
. Signature guarantees (if required).
. Any supporting legal documentation that may be required.
. Any certificates you are holding for the account.

Sales or exchange requests received after the close of trading
on the New York Stock Exchange (generally 4 p.m. Eastern time)
are processed at the next business day's NAV. No interest will
accrue on amounts represented by uncashed redemption checks.

The Funds reserve the right to close any non-IRA account in
which the balance falls below the minimum initial investment.

18
<PAGE>

- --------------------------------------------------------------------------------
REDEEMING OR EXCHANGING SHARES ACCOUNT TYPE

BY TELEPHONE ALL TYPES EXCEPT IRA ACCOUNTS

Call Client Services during business
1-800-621-3979 hours to sell or exchange shares. You
Client Services can exchange shares from a Fund to open
an account in another Fund or to add to
an existing account with an identical
registration.

IRA ACCOUNTS
BUSINESS HOURS: You can sell and exchange shares by
Monday-Friday calling Client Services. You must
8 a.m.-8 p.m. ET complete an IRA Account Options Form
to authorize the telephone redemption
service.

ALL TYPES EXCEPT IRA ACCOUNTS
REDEEMING OR EXCHANGING SHARES

BY MAIL Send a letter of instruction signed by
all registered account holders. Include
the Fund name and account number and (if
REGULAR MAIL: you are selling) a dollar amount or
number of shares OR (if you are
Dodge & Cox Funds exchanging) the name of the Fund you
c/o Boston Financial Data Services want to exchange into and a dollar
P.O. Box 9051 amount or number of shares. To exchange
Boston, MA 02205-9051 into an account with a different
registration (including a different
name, address, or taxpayer
identification number), you must
provide Boston Financial Data Services
with written instructions that include
the guaranteed signatures of all current
account owners. See Signature Guarantees.

EXPRESS, CERTIFIED OR REGISTERED MAIL: IRA ACCOUNTS
To make a distribution from your IRA,
Dodge & Cox Funds call Client Services or visit the Funds'
c/o Boston Financial Data Services website at www.dodgeandcox.com and
66 Brooks Drive, Suite 1 request an IRA distribution form.
Braintree, MA 02184-3839

AUTOMATICALLY The Funds offer ways to sell shares
automatically. Call Client Services or
visit the Funds' website at
www.dodgeandcox.com and request the
Account Options Form to establish this
service. See Systematic Withdrawal Plan.

19
<PAGE>

REDEMPTION PAYMENTS MAY BE MADE BY CHECK, WIRE
OR ACH

BY CHECK Checks will be made payable to you and will be sent to your address of
record. If the proceeds of the redemption are requested to be sent to other than
the address of record or if the address of record has been changed within 30
days of the redemption request, the request must be in writing with your
signature(s) guaranteed.

BY WIRE The Fund will wire redemption proceeds only to the bank account
designated on the Account Application or in written instructions"with
signature guarantee"received with the redemption order.

BY ACH Redemption proceeds can be sent to your bank account by ACH transfer.
You can elect this option by completing the appropriate section of the Account
Application. There is a $100 minimum per ACH transfer.

SIGNATURE GUARANTEES You may need to have your signature guaranteed in certain
situations, such as:

. Written requests to wire redemption proceeds
(if not previously authorized on the Account Application).
. Sending redemption proceeds to any person, address or bank account not on
record.
. Transferring redemption proceeds to a Dodge & Cox account with a different
registration (name/ownership) from yours.
. Establishing certain services after the account is opened.

You can obtain a signature guarantee from most banks, savings institutions,
broker-dealers and other guarantors acceptable to the Funds. A Fund cannot
accept guarantees from notaries public or organizations that do not provide
reimbursement in the case of fraud.

REDEMPTIONS-IN-KIND The Funds reserve the right, if conditions exist which make
cash payments undesirable, to honor any request for redemption by making payment
in whole or in part in readily marketable securities chosen by a Fund and valued
as they are for purposes of computing a Fund's NAV (a redemption-in-kind). If
payment is made in securities, a shareholder may incur transaction expenses in
converting these securities to cash. The Funds have elected, however, to be
governed by Rule 18f-1 under the Investment Company Act, as a result of which a
Fund is obligated to redeem shares, with respect to any one shareholder during
any 90-day period, solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund at the beginning of the period.

IRA ACCOUNTS Redemption requests for IRA accounts must include instructions
regarding Federal income tax withholding. Unless you have elected otherwise,
your redemptions will be subject to income tax withholding.

ADDITIONAL INFORMATION ABOUT REDEMPTIONS Under certain circumstances, Boston
Financial Data Services may require additional documents, including stock powers
with signatures guaranteed, trust instruments, death certificates, appointments
as executor and certificates of corporate authority. If certificates have been
issued for any of the shares to be redeemed, such certificates must be endorsed
with signatures guaranteed and delivered to Boston Financial Data Services. For
any questions regarding documentation or signature requirements for trusts,
estates, corporations, etc., please call Client Services (1-800-621-3979).

The redemption price will be the NAV which is next computed after receipt of a
redemption request in good order (see Pricing of Shares) by Boston Financial
Data Services or other authorized agent or sub-agent. The redemption price may
be more or less than your cost, depending upon the market value of a Fund's
investments at the time of redemption. Redemption payments are made as soon as
practicable, generally within two business days, but no later than the seventh
day after the effective date for redemption, or within such shorter period as
may legally be required. If shares are redeemed within two weeks of purchase, a
Fund may delay payment of the redemption proceeds until your purchase check has

20
<PAGE>

cleared, which may take up to 15 days. There is no such delay
when shares redeemed were purchased by wiring Federal funds.
The Funds may suspend your redemption right or postpone payment
at times when the New York Stock Exchange is closed or under
any emergency circumstances as determined by the SEC. If the
Post Office cannot deliver your check, or if your check remains
uncashed for six months, the Funds reserve the right to
reinvest your redemption proceeds in your account at the then
current NAV.

- --------------------------------------------------------------------------------
General EXCHANGING SHARES An exchange is treated as a redemption and a
Transaction purchase; and, therefore, you may realize a taxable gain or
Information loss. You should read the current prospectus of the Fund into
which the exchange is being made.

There is a $1,000 minimum for all exchanges. If a new account
is being opened by exchange, the minimum investment
requirements must be met. After the exchange, the account from
which the exchange is made must have a remaining balance of at
least $2,500 ($1,000 for an IRA account) in order to remain
open. The Funds reserve the right to terminate or materially
modify the exchange privilege upon 60 days advance notice to
shareholders.

TELEPHONE TRANSACTIONS By using telephone purchase, redemption
and/or exchange options, you agree to hold the Trust, Dodge &
Cox, Boston Financial Data Services and each of their
respective directors, trustees, officers, employees and agents
harmless from any losses, expenses, costs or liability
(including attorney fees) which may be incurred in connection
with the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these options.
However, you may elect to decline these options in the Account
Application or by writing Boston Financial Data Services. (You
may also reinstate them at any time by writing Boston Financial
Data Services.) If a Fund does not employ reasonable procedures
to confirm that the instructions received from any person with
appropriate account information are genuine, the Fund may be
liable for losses due to unauthorized or fraudulent
instructions. If you are unable to reach a Fund by telephone
because of technical difficulties, market conditions, or a
natural disaster, you should make purchase, redemption and
exchange requests by regular or express mail. If an account has
multiple owners, a Fund may rely on the instructions of any one
account owner. You should note that purchase and sales orders
will not be canceled or modified once received in good order.

Purchases and sales should be made for long-term investment
purposes only. Because excessive trading may be disadvantageous
to a Fund, each Fund reserves the right to limit purchase and
sale transactions, including exchanges, when a pattern of
frequent trading appears evident.

TRANSACTIONS THROUGH PROCESSING ORGANIZATIONS You may purchase
or sell Fund shares through a broker-dealer, bank or other
financial institution, or an organization that provides
recordkeeping and consulting services to 401(k) plans or other
employee benefit plans (Processing Organization). Processing
Organizations may charge you a fee for this service and may
require different minimum initial and subsequent investments
than the Funds. Processing Organizations may also impose other
charges or restrictions different from those applicable to
shareholders who invest in the Funds directly. A Processing
Organization, rather than its customers, may be the shareholder
of record of your shares. The Funds are not responsible for the
failure of any Processing Organization to carry out its
obligations to its customers. Certain Processing Organizations
may receive compensation from Dodge & Cox for shareholder
recordkeeping and similar services.

21
<PAGE>

TRANSFER OF SHARES Changes in account registrations - such as
changing the name(s) on your account or transferring shares to
another person or legal entity - must be submitted in writing -
and require a signature guarantee. Please call Client Services
(1-800-621-3979) for full instructions.

- --------------------------------------------------------------------------------

Pricing of The share price (also called "net asset value per share" or
Shares "NAV") for a Fund is calculated at 4:00 p.m. ET each day the
New York Stock Exchange is open for business. To calculate the
NAV, a Fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by
the number of shares outstanding.

If a Fund, or its authorized agent or sub-agent receives your
request in good order by 4 p.m. ET, your transactions will be
priced at that day's NAV.

If your request is received after 4 p.m., it will be priced at
the next business day's NAV.

A Fund cannot accept orders that request a particular day or
price for your transaction or any other special conditions. The
time at which transactions and shares are priced and the time
until which orders are accepted may be changed in case of an
emergency or if the New York Stock Exchange closes at a time
other than 4 p.m. ET.

- --------------------------------------------------------------------------------

Income Dividend and capital gain distributions are reinvested in
Dividends and additional Fund shares in your account unless you select
Capital Gain another option on your Account Application. The advantage of
Distributions reinvesting distributions arises from compounding; that is, you
receive income dividends and capital gain distributions on an
increasing number of shares.

Distributions not reinvested are paid by check or transmitted
to your bank account via electronic transfer using the
Automated Clearing House (ACH) network. If the Post Office
cannot deliver your check, or if your check remains uncashed
for six months, the Funds reserve the right to reinvest your
distribution check in your account at your Fund's then current
NAV and to reinvest all subsequent distributions in shares of
the Fund.

INCOME DIVIDENDS

. Each Fund declares and pays dividends (if any) quarterly in
March, June, September and December.

CAPITAL GAIN DISTRIBUTIONS

. A capital gain or loss is the difference between the
purchase and sale price of a security. If a Fund has net
capital gains for the year (after subtracting any capital
losses), they are usually declared and paid in December to
shareholders of record on a specified date that month. If a
second distribution is necessary, it is usually declared
and paid in March.

IMPORTANT TAX NOTE: The Funds' distributions, whether received
in cash or reinvested in additional shares of the Fund, may be
subject to Federal and state income tax.

In January, you will be sent Form 1099-DIV indicating the tax
status of any dividend and capital gain distributions made to
you during the previous year. This information will also be
reported to the IRS.

22
<PAGE>

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Performance A Fund may include figures indicating its total return and/or
Information yield in advertisements or reports to shareholders or
prospective investors and, as appropriate, performance
information for a Fund may be compared, in reports and
promotional literature to: (i) the Standard & Poor's 500(R)
Stock Index, the Dow Jones Industrial Average, the Lehman
Brothers Aggregate Bond Index, or various other unmanaged
indices of the performance of various types of investments, so
that investors may compare a Fund's results with those of
indices widely regarded by investors as representative of the
security markets in general, and (ii) the performance of other
mutual funds. Unmanaged indices may assume the reinvestment of
income distributions, but generally do not reflect deductions
for administrative and management costs and expenses.

Performance information for a Fund reflects only the
performance of hypothetical investments in the Fund during the
particular time periods on which the calculations are based.
Such information should not be considered as representative of
the performance of a Fund in the future because, unlike some
bank deposits or other investments which pay a fixed yield for
a stated period of time for a fixed principal amount, the
performance of a Fund will vary based not only on the current
market value of the securities held in its portfolio, but also
on changes in a Fund's expenses and in the asset size of the
Fund. Performance information should be considered in light of
a Fund's investment objectives and policies, the types and
quality of a Fund's portfolio investments, market conditions
during the particular time period and operating expenses. For a
description of the methods used to determine a Fund's total
return and yield, see Performance Information in the Statement
of Additional Information. Further information about Fund
performance is contained in each Fund's Annual Report which may
be obtained without charge from the Fund.

- --------------------------------------------------------------------------------

Fund FUND ORGANIZATION AND VOTING RIGHTS The Trust, organized as a
Organization Delaware business trust in 1998, has three classes of
and beneficial shares and each share evidences an equal beneficial
Management ownership in a Fund. The three series of the Trust are
successors to Dodge & Cox Stock Fund established in 1965, Dodge
& Cox Balanced Fund established in 1931 and Dodge & Cox Income
Fund established in 1989.

INVESTMENT MANAGER Dodge & Cox, a California corporation, has
served as investment manager to the Funds and their
predecessors since inception. Dodge & Cox is one of the oldest
professional investment management firms in the United States,
having acted continuously as investment managers since 1930.
The Funds' investments are managed by Dodge & Cox's Investment
Policy Committee (the Fixed-Income Strategy Committee for
fixed-income securities), and no one person is primarily
responsible for making investment recommendations to the
Committees. Dodge & Cox is located at One Sansome Street, 35th
Floor, San Francisco, California 94104-4405.

Dodge & Cox's activities are devoted to investment research and
the supervision of investment accounts for individuals and
institutions. Dodge & Cox Balanced Fund and Dodge & Cox Stock
Fund each pay Dodge & Cox a management fee which is payable
monthly at the annual rate of 0.50% of the average daily net
asset value of the Fund. Dodge & Cox Income Fund pays Dodge &
Cox a management fee which is payable monthly at the annual
rate of 0.50% of the average daily net asset value of the Fund
up to $100 million and 0.40% of the average daily net asset
value of the Fund in excess of $100 million.

23
<PAGE>

The investment management agreements with Dodge & Cox Income
Fund and Dodge & Cox Stock Fund provide that Dodge & Cox will
waive its fee for any calendar year to the extent that such fee
plus all other ordinary operating expenses paid by the Fund
exceed 1% and 0.75%, respectively, of the average daily net
asset value of the Fund. No waiver of management fee was
required for 1998 under the agreements.

Dodge & Cox has adopted a Code of Ethics that restricts
personal investing practices by its employees. Among other
provisions, the Code of Ethics requires that employees with
access to information about the purchase or sale of securities
in a Fund's portfolio obtain preclearance before executing
certain personal trades. The Code of Ethics is designed to
ensure that the interests of the Funds' shareholders come
before the interests of the people who manage the Funds.

- --------------------------------------------------------------------------------

Year 2000 The services provided to the Funds by Dodge & Cox and the
Funds' other key service providers (Boston Financial Data
Services, transfer agent, and State Street Bank and Trust
Company, custodian and Fund accountant) are dependent on those
service providers' computer software and hardware systems. The
common practice in computer software and hardware systems of
using just two digits to identify a year has resulted in the
Year 2000 challenge throughout the information technology
industry. If unchanged, many computer applications and systems
could misinterpret dates occurring after December 31, 1999,
leading to errors or failure.

Preparing for the Year 2000 is a high priority for Dodge & Cox
and the Funds' other service providers, and they are taking
steps that each believes are reasonably designed to address the
Year 2000 issue with respect to the systems that they use. For
example, the service providers have established comprehensive
Year 2000 readiness programs to identify, evaluate and resolve
Year 2000 readiness issues. The Funds believe these steps will
be sufficient to avoid any material adverse impact on the
Funds, although there can be no assurances to that effect.

Despite Dodge & Cox's and the Funds' other service providers'
efforts and planning, noncompliant systems could have a
material adverse effect on the Funds' business, operations, or
financial condition. Additionally, the Funds' performance could
be hurt if a computer-system failure at a company, financial
market or governmental unit causes disruptions in securities
markets or clearance and settlement systems generally or
adversely affects the price of individual securities the Funds
own.

For further information on Year 2000 readiness, please contact
Client Services or visit the Year 2000 page on the Funds' web
site at www.dodgeandcox.com.

- --------------------------------------------------------------------------------

Portfolio Orders for a Fund's portfolio securities transactions are
Transactions placed by Dodge & Cox, which seeks to obtain the best available
prices, taking into account the costs and quality of
executions. In the over-the-counter market, purchases and sales
are transacted directly with principal market-makers except in
those circumstances where it appears better prices and
executions are available elsewhere.

24
<PAGE>

Subject to the above policy, when two or more brokers are in a
position to offer comparable prices and executions, preference
may be given to brokers that have provided investment research,
statistical and other related services for the benefit of a
Fund and/or accounts over which Dodge & Cox exercises
investment and brokerage discretion.

- --------------------------------------------------------------------------------
Expenses In addition to Dodge & Cox's management fee, each Fund pays
other direct expenses, including custodian, transfer agent,
legal, accounting and audit fees; costs of preparing and
printing prospectuses and reports sent to shareholders;
registration fees and expenses; proxy and shareholder meeting
expenses (if any); and trustees fees and expenses. In 1998, the
ratios of total operating expenses to average net assets of
Dodge & Cox Stock Fund, Dodge & Cox Balanced Fund and Dodge &
Cox Income Fund were 0.57%, 0.54% and 0.47%, respectively.
Dodge & Cox furnishes personnel and other facilities necessary
for the operation of the Funds for which it receives no
additional compensation.

- --------------------------------------------------------------------------------
Federal Each Fund intends to qualify each year as a regulated
Income investment company under the Internal Revenue Code. A regulated
Taxes investment company that distributes for the year all of its
ordinary income and capital gains pays no tax on its ordinary
income or capital gains. A regulated investment company that
fails to distribute all of its ordinary income and capital
gains must pay tax on the undistributed amounts at a maximum
rate of 35%. If the company does not distribute at least 98% of
its ordinary income and capital gains, it must pay an
additional 4% excise tax on the amount by which the 98%
requirements exceed actual distributions.

Distributions designated as long-term capital gain
distributions are taxed to a shareholder as though they were
long-term capital gains realized by the shareholder whether
received in cash or shares of a Fund and regardless of the
period of time shares of a Fund have been held. All taxable
distributions, except for long-term capital gain distributions,
are taxed to a shareholder as ordinary income dividends whether
received in cash or shares of a Fund. Part of Dodge & Cox Stock
and Balanced Funds' ordinary dividends may be eligible for the
70% deduction for dividends received by corporations. State
taxation of distributions to shareholders varies from state to
state. You should consult your own tax adviser about the
Federal, state and local tax consequences of an investment in a
Fund.

- --------------------------------------------------------------------------------

Custodian and State Street Bank and Trust Company, P.O. Box 9051, Boston, MA
Transfer Agent 02205-9051, (1-800-621-3979), acts as custodian of all cash and
securities of the Funds and receives and disburses cash and
securities for the account of the Funds. Boston Financial Data
Services, P.O. Box 9051, Boston, MA 02205-9051, (1-800-621-
3979), acts as transfer and dividend disbursing agent for the
Funds.

25
<PAGE>

- --------------------------------------------------------------------------------
Investment Information and Shareholder Services

STATEMENTS AND REPORTS As a shareholder of the Fund you will receive the
following statements and reports:

CONFIRMATION STATEMENT Sent each time you buy, sell or exchange shares;
confirms the trade date and the amount of your
transaction. Purchases through the Automatic Investment
Plan will be confirmed at least quarterly, unless
otherwise requested.

ACCOUNT STATEMENT Mailed quarterly; shows the market value of your account
at the close of the statement period, as well as
distributions, purchases, sales, and exchanges for the
current calendar year.

FUND FINANCIAL REPORTS Mailed in February, May, August and November. NOTE: To
reduce Fund expenses, the Funds attempt to identify
related shareholders within a household and send only
one copy of a shareholder report. Call 1-800-621-3979 or
visit the Funds' web site at www.dodgeandcox.com if you
would like an additional free copy of a Fund's report.

TAX STATEMENTS Mailed in January; report previous year's dividend
distributions, proceeds from the sale of shares, and
distributions from IRAs.

AVERAGE COST STATEMENT Mailed annually in February for most taxable accounts
for which shares were redeemed; shows the average cost
of shares that you redeemed during the calendar year,
using the average cost single category method.

The Funds offer you the following services: (Please call Client
Services at 1-800-621-3979, write or visit the Fund's web site
at www.dodgeandcox.com for applications and additional
information.)

AUTOMATED TELEPHONE SERVICES 24-hour service, seven days a
week, via toll-free access to Fund and account information. The
system provides total returns, share prices and price changes
for the Funds and gives you account balances and history (e.g.,
last transaction, latest dividend distribution).

COMPUTER ACCESS Information on the Funds is available via
personal computer on the Funds' web site at
www.dodgeandcox.com.

On the site you can: Learn more about Dodge & Cox's approach to
investing; review the objectives, strategies, characteristics
and risks of the Funds; review the biographies of the Funds'
portfolio managers; review the Funds' daily prices and
performance; and download or order the Funds' prospectus and
Account Application, shareholder reports, IRA plans and other
forms.

AUTOMATIC INVESTMENT PLAN You may make regular monthly or
quarterly investments of $100 or more through automatic
deductions from your bank account.

SYSTEMATIC WITHDRAWAL PLAN If you own $10,000 or more of a
Fund's shares, you may receive regular monthly or quarterly
payments of $50 or more. Shares will be redeemed automatically
at NAV to make the withdrawal payments.

REINVESTMENT PLAN You may direct that dividend and capital gain
distributions be reinvested in additional Fund shares.

26
<PAGE>

- --------------------------------------------------------------------------------
INDIVIDUAL RETIREMENT ACCOUNT (IRA) If you have earned income
or are entitled to certain distributions from eligible
retirement plans, you may make or authorize contributions to
your own Individual Retirement Account. The Funds have
Traditional IRA and Roth IRA Plans available for shareholders
of the Funds.

IMPORTANT NOTE: The services described may not be available
through some retirement plans or accounts held by investment
dealers. If you are investing in such a manner, you should
contact your plan administrator/trustee, financial institution
or dealer about what services are available and with questions
about your account.

27
<PAGE>

Financial The financial highlights table is intended to help you
Highlights understand the Fund's financial performance for the past five
years. 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 on an investment in the
Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, are included in the annual report, which
is available upon request.
<TABLE>
<CAPTION>
Dodge & Cox Stock Fund
- ----------------------------------------------------------------------------------------------------------------------

Year Ended December 31, 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................................. $94.57 $79.81 $67.83 $53.94 $ 53.23

Income from investment operations:
Net investment income......................................... 1.57 1.48 1.28 1.27 1.15
Net realized and unrealized gain (loss)....................... 3.54 20.86 13.67 16.54 1.60
------ ------ ------ ------ ------
Total from investment operations.............................. 5.11 22.34 14.95 17.81 2.75
------ ------ ------ ------ ------

Distributions to shareholders from:
Net investment income......................................... (1.56) (1.49) (1.29) (1.26) (1.15)
Net realized gain............................................. (7.42) (6.09) (1.68) (2.66) (.89)
------ ------ ------ ------ ------
Total distributions........................................... (8.98) (7.58) (2.97) (3.92) (2.04)
------ ------ ------ ------ ------
Net asset value, end of year....................................... $90.70 $94.57 $79.81 $67.83 $ 53.94
====== ====== ====== ======= ======

Total return....................................................... 5.39% 28.41% 22.26% 33.38% 5.16%

Ratios/supplemental data:
Net assets, end of year (millions)............................ $4,355 $4,087 $2,252 $ 1,228 $ 543
Ratio of expenses to average net assets....................... .57% .57% .59% .60% .61%
Ratio of net investment income to
average net assets.......................................... 1.63% 1.67% 1.79% 2.07% 2.16%
Portfolio turnover rate....................................... 19% 19% 10% 13% 7%
</TABLE>

28
<PAGE>

<TABLE>
<CAPTION>
Dodge & Cox Balanced Fund
- -----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................................ $66.78 $59.82 $54.60 $45.21 $ 46.40
Income from investment operations:
Net investment income........................................ 2.24 2.21 1.98 1.90 1.76
Net realized and unrealized gain (loss)...................... 2.17 10.24 5.92 10.58 (.83)
------ ------ ------ ------- ------
Total from investment operations............................. 4.41 12.45 7.90 12.48 .93
------ ------ ------ ------- ------
Distributions to shareholders from:
Net investment income........................................ (2.23) (2.22) (1.99) (1.90) (1.76)
Net realized gain............................................ (3.74) (3.27) (.69) (1.19) (.36)
------ ------ ------ ------- ------
Total distributions.......................................... (5.97) (5.49) (2.68) (3.09) (2.12)
------ ------ ------ ------- ------
Net asset value, end of year...................................... $65.22 $66.78 $59.82 $54.60 $ 45.21
====== ====== ====== ======= ======
Total return...................................................... 6.70% 21.21% 14.75% 28.02% 1.99%

Ratios/supplemental data:
Net assets, end of year (millions)........................... $5,693 $5,077 $3,630 $ 1,800 $ 725
Ratio of expenses to average net assets...................... .54% .55% .56% .57% .58%
Ratio of net investment income to
average net assets........................................... 3.29% 3.39% 3.60% 3.85% 3.94%
Portfolio turnover rate...................................... 26% 32% 17% 20% 20%

Dodge & Cox Income Fund
- -----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year................................ $12.08 $11.68 $12.02 $10.74 $ 11.89
Income from investment operations:
Net investment income........................................ .72 .73 .74 .78 .77
Net realized and unrealized gain (loss)...................... .23 .40 (.34) 1.34 (1.11)
------ ------ ------ ------- ------
Total from investment operations............................. .95 1.13 .40 2.12 (.34)
------ ------ ------ ------- ------
Distributions to shareholders from:
Net investment income........................................ (.72) (.73) (.74) (.78) (.76)
Net realized gain............................................ (.06) - - (.06) (.05)
------ ------ ------ ------- ------
Total distributions.......................................... (.78) (.73) (.74) (.84) (.81)
------ ------ ------ ------- ------
Net asset value, end of year...................................... $12.25 $12.08 $11.68 $12.02 $ 10.74
====== ====== ====== ======= ======
Total return...................................................... 8.08% 10.00% 3.62% 20.21% (2.89)%
Ratios/supplemental data:
Net assets, end of year (millions)........................... $ 952 $ 705 $ 533 $ 303 $ 195
Ratio of expenses to average net assets...................... .47% .49% .50% .54% .54%
Ratio of net investment income to
average net assets........................................... 6.00% 6.32% 6.65% 6.85% 6.90%
Portfolio turnover rate...................................... 35% 28% 37% 53% 55%
</TABLE>

29
<PAGE>

DODGE & COX FUNDS

For investors who want more information about the Funds, the
following documents are available free upon request:

Annual/Semi-Annual Reports: Additional information about the
Funds' investments is available in the Funds' annual and semi-
annual reports to shareholders. In each 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.

Statement of Additional Information (SAI): The SAI provides
more detailed information about the Funds and is incorporated
into this prospectus by reference.

You can get free copies of reports and the SAI, request other
information and discuss your questions about the Funds by
contacting the Funds at:

Dodge & Cox Funds
c/o Boston Financial Data Services
P.O. Box 9051
Boston, MA 02205-9051
Telephone: 1-800-621-3979
Internet: www.dodgeandcox.com

You can review the Funds' reports and SAI at the Public
Reference Room of the Securities and Exchange Commission. You
can get text-only copies:

For a fee, by writing to or calling the Public Reference Room
of the SEC, Washington, D.C. 20549-6009.

Telephone: 1-800-SEC-0330.

Free from the SEC's Internet
web site at http://www.sec.gov. (SEC file no. 811-173)

30
<PAGE>

DODGE & COX FUNDS

Dodge & Cox Stock Fund
Dodge & Cox Balanced Fund
Dodge & Cox Income Fund
c/o Boston Financial Data Services Inc.
P.O. Box 9051
Boston, Massachusetts 02205-9051
(800) 621-3979
www.dodgeandcox.com

STATEMENT OF ADDITIONAL INFORMATION
Dated May 1, 1999

This Statement of Additional Information (SAI) pertains to the Dodge & Cox
Funds (Trust), a family of three no-load mutual funds, Dodge & Cox Stock Fund,
Dodge & Cox Balanced Fund and Dodge & Cox Income Fund (Funds). Each Fund is a
series of the Trust.

This Statement of Additional Information is not the Funds' Prospectus, but
provides additional information which should be read in conjunction with the
Prospectus dated May 1, 1999, which is incorporated by reference into this SAI.
The Funds' Prospectus and most recent annual financial statements may be
obtained from the Funds at no charge by writing, visiting our web site, or
contacting the Funds at the address, web site, or telephone number shown above.
This SAI contains additional and more detailed information about the Funds'
operations and activities than the Prospectus.

____________________________

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>

CLASSIFICATION, INVESTMENT RESTRICTIONS,
INVESTMENT STRATEGIES AND RISKS....................................... 1
Classification...................................................... 1
Investment Restrictions............................................. 1
Investment Strategies............................................... 2
Characteristics and Risks of Securities and Investment Techniques... 6
MANAGEMENT OF THE FUND................................................ 13
Officers and Trustees............................................... 13
Investment Manager.................................................. 15
Other Service Providers............................................. 16
BROKERAGE ALLOCATION AND OTHER PRACTICES.............................. 16
CAPITAL STOCK......................................................... 18
PURCHASE, REDEMPTION AND PRICING OF SHARES............................ 18
TAXATION OF THE FUND.................................................. 19
PRINCIPAL UNDERWRITER................................................. 20
PERFORMANCE INFORMATION............................................... 20
FINANCIAL STATEMENTS.................................................. 22
APPENDIX: RATINGS.................................................... 23
</TABLE>
____________________________
<PAGE>

CLASSIFICATION, INVESTMENT RESTRICTIONS, INVESTMENT STRATEGIES
- --------------------------------------------------------------
AND RISKS
- ---------

Classification

The Funds are open-end management investment companies. The Investment
Company Act of 1940, as amended (1940 Act) classifies investment companies as
either diversified or nondiversified, and each of the Funds is deemed to be a
diversified fund.

Investment Restrictions

Each Fund has adopted the following restrictions. These restrictions, as
well as a Fund's investment objectives, cannot be changed without the approval
of the holders of a majority of a Fund's outstanding shares. The 1940 Act
defines a majority as the lesser of (1) 67% or more of the voting shares present
at a meeting if the holders of more than 50% of the outstanding voting shares
are present or represented by proxy, or (2) more than 50% of the outstanding
voting shares of a Fund. As applicable, each Fund may not:

Dodge & Cox Balanced Fund, Dodge & Cox Income Fund and Dodge & Cox Stock
------------------------------------------------------------------------
Fund
----

1. Invest more than 5% of the value of its total assets in the securities
of any one issuer, except the obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities, or issues backed
or collateralized by such obligations, nor acquire more than 10% of
the voting securities of any one issuer.

2. Invest in any company for the purpose of exercising control or
management.

3. Underwrite securities of other issuers, except insofar as a Fund may
be deemed an underwriter under the Securities Act of 1933, as amended,
in selling portfolio securities.

4. Purchase securities on margin or sell short.

5. Invest in a security if, as a result of such investment, more than 25%
of its total assets would be invested in the securities of issuers in
any particular industry, except that the restriction does not apply to
securities issued or guaranteed by the U.S. government or its agencies
or instrumentalities (or repurchase agreements with respect thereto).

6. Purchase any security if as a result a Fund would then have more than
15%, (10%, Dodge & Cox Income Fund) of its total assets invested in
securities which are illiquid, including repurchase agreements not
maturing in seven days or less and securities restricted as to
disposition under Federal securities laws.

7. Purchase interests in oil, gas and mineral leases or other mineral
exploration or development programs, although a Fund may invest in
stocks or debt instruments of companies which invest in or sponsor
such programs.

8. Purchase or sell commodities, commodity contracts or real estate
(although a Fund may invest in marketable securities secured by real
estate or interests therein or issued by companies or investment
trusts which invest in real estate or interests therein).

Dodge & Cox Balanced Fund and Dodge & Cox Stock Fund
----------------------------------------------------

9. Issue senior securities.

1
<PAGE>

10. Borrow money except as a temporary measure for extraordinary or
emergency purposes and not for the purchase of investment securities
and then only from banks. The amount borrowed shall not exceed 10% of
the Fund's total assets at cost or 5% of the value of total assets,
whichever is less, provided that such borrowings shall have an asset
coverage of 300%.

11. Make loans to other persons except this shall not exclude the purchase
of publicly issued debt securities of a type purchased by
institutional investors.

Dodge & Cox Income Fund
-----------------------

12. Issue senior securities, as defined in the 1940 Act, or mortgage,
pledge, hypothecate or in any manner transfer, as security for
indebtedness, any securities owned or held by the Fund except as may
be necessary in connection with borrowing, and then such mortgaging,
pledging or hypothecating may not exceed 10% of the Fund's total
assets, taken at the lesser of cost or market value.

13. Borrow money, except the Fund may borrow money from banks as a
temporary measure for extraordinary or emergency purposes. Such
temporary borrowing may not exceed 5% of the value of the Fund's total
assets at the time the loan is made. The Fund may pledge up to 10% of
the lesser of the cost or market value of its total assets to secure
temporary borrowings. The Fund will not borrow for investment
purposes. Immediately after any borrowing, the Fund will maintain an
asset coverage of not less than 300% with respect to all borrowings.

14. Make loans of money, except by the purchase of debt securities or by
entering into repurchase agreements, as permitted by the Fund's other
investment policies and restrictions. Although there is no present
intention of doing so in the foreseeable future, the Fund reserves the
authority to make loans of its portfolio securities in an aggregate
amount not exceeding 20% of its total assets. Such loans will only be
made upon approval of, and subject to any conditions imposed by, the
Fund's Board of Trustees.

15. Write put or call options.

Whenever any investment policy or investment restriction states a maximum
percentage of a Fund's assets which may be invested in any security or other
instrument, it is intended that such maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of such security or
instrument. Industries are determined by reference to the classifications of
industries set forth in a Fund's semi-annual and annual report.

Investment Strategies

Dodge & Cox Stock Fund
----------------------

The Fund's primary objective is to provide shareholders with an opportunity
for long-term growth of principal and income. A secondary objective is to
achieve a reasonable current income. These objectives may not be changed
without shareholder approval. It should be recognized that the market risks
inherent in investment cannot be avoided, nor is there any assurance that the
Fund will achieve its investment objectives.

Under normal circumstances, the Fund will invest at least 65% of total
assets in common stocks. The Fund may also purchase other types of securities,
for example, preferred stocks and debt securities which are convertible into
common stock (or which in the opinion of the Fund's investment manager,

2
<PAGE>

Dodge & Cox, have predominantly common stock investment characteristics). The
Fund may invest up to 20% of its total assets in U.S. dollar-denominated
securities of foreign issuers (such as ADRs).

Moderate reserves in cash or fixed-income securities may be held from time
to time as Dodge & Cox may deem advisable. Nevertheless, the long-term emphasis
shall be the maintaining of a fully invested equity fund.

Common stocks selected for the Fund will be predominantly those which, in
the view of Dodge & Cox have a favorable outlook for long-term growth of
principal and income. Prospective earnings and dividends are major
considerations in these stock selections. Individual securities are selected
with an emphasis on financial strength and a sound economic background. The
Fund's policies as described above may be changed without shareholder approval;
however, these policies will not be changed without notice to shareholders.

In an attempt to reduce unforeseen risks in single securities, the Fund
seeks to provide adequate investment diversification. To that end, the Fund will
not concentrate its investments in any particular industry or group of
industries, but will diversify investments among different industries as well as
among individual companies. The amount invested in any particular industry will
vary from time to time in accordance with the judgment of Dodge & Cox.

Although there is no restriction on the number of changes in security
holdings, purchases are made with a view to long-term holding and not for short-
term trading purposes. During rapidly changing economic and political
conditions, there may necessarily be more portfolio changes than in a more
stable period. A higher turnover rate might result in increased transaction
expenses and the realization of capital gains and losses.

It is the general practice of the Fund to invest in securities with ready
markets, mainly issues listed on national securities exchanges.

The Fund has no present intention of making investments in securities which
are restricted as to resale under Federal securities laws. The Fund does not
write put and call options and has no present intention of writing such options.

Dodge & Cox Balanced Fund
-------------------------

The Fund's objectives are to provide shareholders with regular income,
conservation of principal and an opportunity for long-term growth of principal
and income. These objectives may not be changed without shareholder approval.
It should be recognized that the market risks inherent in investment cannot be
avoided, nor is there any assurance that the Fund will achieve its investment
objectives. Reasonable appreciation in favorable periods and conservation of
principal in adverse times are objectives that require flexibility in managing
the assets of the Fund under constantly changing investment conditions.

Therefore, the proportions of the Fund's portfolio invested in common and
preferred stocks and bonds are revised by the Fund's manager, Dodge & Cox, when
considered advisable in light of Dodge & Cox's appraisal of business and
investment prospects. Under normal market conditions, the Fund seeks to
maintain no more than approximately 75% of its total assets in common stocks and
that portion of the value of convertible securities attributable to the
conversion right.

Fixed-income securities are held for their relative stability of principal
and income as well as for a reserve which can be used to take advantage of
investment opportunities. The Fund may invest up to 20% of its total assets in
U.S. dollar-denominated securities of foreign issuers traded in the U.S. (such
as

3
<PAGE>

ADRs and Yankee bonds). Moderate reserves in cash or short-term fixed-income
securities may be held from time to time as Dodge & Cox may deem advisable.

It is the policy to invest in investment-grade bonds rated in the top four
rating categories by either Moody's Investors Service ("Moody's") (Aaa, Aa, A,
Baa) or Standard & Poor's Ratings Group ("S&P") (AAA, AA, A, BBB). Securities
rated Baa or BBB may have speculative characteristics. Securities that are
downgraded below Baa or BBB subsequent to purchase may continue to be held by
the Fund, if Dodge & Cox believes it advantageous to do so. Unrated bonds may
be purchased if such securities are, in the opinion of Dodge & Cox, of
equivalent quality to bonds rated at least A by Moody's and S&P. An explanation
of the Moody's and S&P ratings groups is included in the Appendix.

The Fund will maintain a substantial position in common stocks which in the
view of Dodge & Cox have a favorable outlook for long-term growth of principal
and income. Prospective earnings and dividends are major considerations in
these stock selections. The level of security prices and the trend of business
activity are given weight in determining the total investment position of the
Fund in equities at any time. Individual securities are selected with an
emphasis on financial strength and a sound economic background. The Fund's
investment policies as set forth above may be changed without shareholder
approval; however, these policies will not be changed without notice to
shareholders.

The proportions held in the various fixed-income securities will be revised
as appropriate in light of Dodge & Cox's appraisal of the economy, the relative
yields of securities in the various market sectors, the investment prospects for
issuers and other factors. In making investment decisions, Dodge & Cox will
take many factors into consideration including yield to maturity, quality,
liquidity, current yield and capital appreciation potential.

In an attempt to reduce unforeseen risks in single securities, the Fund
seeks to achieve adequate investment diversification. The Fund does not
concentrate its investments in any particular industry or group of industries
but seeks instead to diversify investments among different industries as well as
among individual companies. The amount invested in any particular industry will
vary from time to time in accordance with the judgment of Dodge & Cox.

It is the general practice of the Fund to invest in equity securities
mainly listed on national securities exchanges and securities with ready
markets. The Fund does not write put and call options and has no present
intention of writing such options.

Dodge & Cox Income Fund
-----------------------

The Fund's primary objective is to provide shareholders with a high and
stable rate of current income consistent with long-term preservation of capital.
A secondary objective is to take advantage of opportunities to realize capital
appreciation. These objectives may not be changed without shareholder approval.
It should be recognized that the market risks inherent in investment cannot be
avoided nor is there any assurance that the Fund will achieve its investment
objectives.

The Fund seeks to achieve these objectives by investing in a diversified
portfolio of fixed-income securities. It is the policy of the Fund to invest at
least 80% of the market value of its total assets in the following: (1) debt
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities; (2) investment-grade debt securities, including U.S. dollar-
denominated foreign issues,

4
<PAGE>

rated in the top four rating groups by either Moody's (Aaa, Aa, A, Baa) or S&P
(AAA, AA, A, BBB); (3) unrated securities if deemed to be of investment-grade
quality by Dodge & Cox; and (4) cash equivalents, bankers' acceptances, bank
certificates of deposit, repurchase agreements and commercial paper. At least
65% of the market value of the portfolio will be invested in category (1)
securities and in category (2) securities rated in the top three rating groups.
Further information about specific investments is provided below.

No more than 20% of the Fund may be invested in other fixed-income
instruments including: debt obligations rated below investment grade, if, in the
opinion of Dodge & Cox, they are of suitable quality, provide attractive
investment opportunities and have a minimum rating of B by Moody's and/or S&P at
the time of investment; preferred stock; and corporate bonds convertible into
common stocks or carrying warrants to purchase common stock. The Fund will
invest in unrated securities only if deemed to be of investment-grade quality by
Dodge & Cox. It should be noted that securities rated Baa or BBB and those
securities rated below investment grade have speculative characteristics.
Securities rated B by the major rating agencies may yield a higher level of
current income than higher quality securities but generally have less liquidity,
greater market risk and more price fluctuation. An explanation of the Moody's
and S&P rating groups is included in the Appendix.

Under normal market conditions, the Fund will invest no more than 25% of
its total assets in U.S. dollar-denominated securities of foreign issuers.

The proportions held in the various financial instruments will be revised
as appropriate in light of Dodge & Cox's appraisal of the economy, the relative
yields of securities in the various market sectors, the investment prospects for
issuers, and other factors. In making investment decisions, Dodge & Cox will
take many factors into consideration, including yield to maturity, quality,
liquidity, current yield, and capital appreciation potential.

The Fund attempts to achieve its secondary objective of capital
appreciation through such techniques as fundamental research (i.e., seeking a
security or group of securities which Dodge & Cox believes to be undervalued),
purchasing securities at a discount to their maturity or call value and making
gradual adjustments in the average maturity of the Fund's portfolio.

The average maturity of the Fund's portfolio at any given time depends, in
part, on Dodge & Cox's assessment of economic and market conditions, the future
level of inflation and interest rates, and on the relative yields of securities
in the marketplace. Dodge & Cox normally invests in an array of securities with
short, intermediate and long maturities in varying proportions, with greater
emphasis on longer maturities.

Purchases and sales of securities in the Fund are generally made for long-
term fundamental investment reasons rather than for short-term trading purposes.
Nevertheless, Dodge & Cox may sell any of the securities in the Fund, regardless
of the length of time held, in seeking to achieve the objectives of the Fund.

In seeking to achieve the objectives of the Fund, Dodge & Cox may purchase
securities on a when-issued basis, purchase or sell securities for delayed
delivery and lend portfolio securities. The Fund's investment policies as set
forth above may be changed without shareholder approval; however, these policies
will not be changed without notice to shareholders.

Dodge & Cox maintains a long-term investment orientation and therefore
anticipates a relatively low turnover rate, which, under normal circumstances,
should not exceed 50% on an annual basis. However, during rapidly changing
economic, political, and market environments, there may be more portfolio
changes than in a more stable period. A higher turnover rate might result in
increased transaction expenses and the realization of capital gains and losses.

5
<PAGE>

Characteristics and Risks of Securities and Investment Techniques

In seeking to meet its investment objectives, each Fund will invest in
securities or instruments whose investment characteristics are consistent with
the Fund's investment program. The following further describes the principal
types of portfolio securities and investment management practices of the Funds.

Common Stocks (Dodge & Cox Balanced Fund and Dodge & Cox Stock Fund).
---------------------------------------------------------------------
Stocks represent shares of ownership in a company. After other claims are
satisfied, common stockholders participate in company profits on a pro rata
basis; profits may be paid out in dividends or reinvested in the company to help
it grow. Increases and decreases in earnings are usually reflected in a
company's stock price, so common stocks generally have the greatest appreciation
and depreciation potential of all corporate securities.

Preferred Stocks. Each Fund may invest in preferred stocks. Generally,
-----------------
preferred stock has a specified dividend and ranks after bonds but before common
stocks in its claim on income for dividend payments and on assets should the
company be liquidated.

Convertible Securities and Warrants. The Funds may invest in debt or
------------------------------------
preferred equity securities convertible into or exchangeable for equity
securities. Traditionally, convertible securities have paid dividends or
interest at rates higher than common stock dividend rates but lower than
nonconvertible securities. They generally participate in the appreciation or
depreciation of the underlying stock into which they are convertible, but to a
lesser degree. In recent years, convertibles have been developed which combine
higher or lower current income with other features. Warrants are options to buy
a stated number of shares of common stock at a specified price anytime during
the life of the warrants (generally two or more years).

Foreign Securities. The Funds may invest in U.S. dollar-denominated
-------------------
securities of foreign issuers traded in the U.S. There are special risks in
foreign investing. Many of the risks are more pronounced for investments in
developing or emerging countries, such as many of the countries of Southeast
Asia, Latin America, Eastern Europe, and the Middle East. Each Fund has no
present intention of investing in developing or emerging countries.

Political and economic factors. Individual foreign economies of
certain countries may differ favorably or unfavorably from the United States'
economy in such matters as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency, and balance of payments
position. The internal politics of certain foreign countries are not as stable
as in the United States. In addition, significant external political risks
currently affect some foreign countries.

Governments in certain foreign countries continue to participate to a
significant degree, through ownership interest or regulation, in their
respective economies. Action by these governments could have a significant
effect on market prices of securities and payment of dividends. The economies
of many foreign countries are heavily dependent upon international trade and are
accordingly affected by protective trade barriers and economic conditions of
their trading partners. The enactment by these trading partners of
protectionist trade legislation could have a significant adverse effect upon the
securities markets of such countries.

Currency fluctuations. Although a Fund will invest in U.S. dollar-
denominated foreign securities, the underlying securities will be denominated in
various currencies. Accordingly, a change in the value of any such currency
against the U.S. dollar will result in a corresponding change in the U.S. dollar
value of a Fund's assets. Such changes will also affect a Fund's income.
Generally, when a given currency appreciates against the dollar (the dollar
weakens), the value of securities

6
<PAGE>

denominated in that currency will rise. When a given currency depreciates
against the dollar (the dollar strengthens), the value of securities denominated
in that currency would be expected to decline.

Investment and repatriation restrictions. Foreign investment in the
securities markets of certain foreign countries is restricted or controlled in
varying degrees. These restrictions may limit at times and preclude investment
in certain of such countries and may increase the cost and expenses of a Fund.
Investments by foreign investors are subject to a variety of restrictions.
These restrictions may take the form of prior governmental approval, limits on
the amount or type of securities held by foreigners, and limits on the types of
companies in which foreigners may invest. Additional or different restrictions
may be imposed at any time by these or other countries in which a Fund invests.
In addition, the repatriation of both investment income and capital from some
foreign countries is restricted and controlled under certain regulations,
including in some cases the need to obtain certain government consents.

Market characteristics. Foreign markets are generally not as
developed or efficient as, and may be more volatile than, those in the United
States. While growing in volume, they usually have substantially less volume
than U.S. markets and a Fund's portfolio securities may be less liquid and
subject to more rapid and erratic price movements than securities of comparable
U.S. companies. Equity securities may trade at price/earnings multiples higher
than comparable United States securities and such levels may not be sustainable.
Fixed commissions on foreign exchanges are generally higher than negotiated
commissions on United States exchanges. There is generally less government
supervision and regulation of foreign exchanges, brokers and listed companies
than in the United States. Moreover, settlement practices for transactions in
foreign markets may differ from those in United States markets. Such
differences may include delays beyond periods customary in the United States and
practices, such as delivery of securities prior to receipt of payment, which
increase the likelihood of a "failed settlement." Failed settlements can result
in losses to a Fund.

Information and supervision. There is generally less publicly
available information about foreign companies comparable to reports and ratings
that are published about companies in the United States. Foreign companies are
also generally not subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those applicable
to United States companies. It also may be more difficult to keep currently
informed of corporate actions which affect the prices of portfolio securities.

Taxes. The dividends and interest payable on certain of a Fund's
foreign portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to a Fund's
shareholders.

Other. With respect to certain foreign countries, there is the
possibility of adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of a Fund, political or social instability, or diplomatic
developments which could affect investments by U.S. persons in those countries.

U.S. Government Obligations. A portion of each Fund may be invested in
----------------------------
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. Some of the obligations purchased by a Fund are backed by
the full faith and credit of the U.S. government and are guaranteed as to both
principal and interest by the U.S. Treasury. Examples of these include direct
obligations of the U.S. Treasury, such as U.S. Treasury bills, notes and bonds,
or indirect obligations of the U.S. Treasury, such as obligations of the
Government National Mortgage Association, the Maritime Administration, the
Farmers Home Administration, the Veterans Administration, the Federal Housing
Administration and the Export-Import Bank.

7
<PAGE>

While the obligations of many of the agencies and instrumentalities of the
U.S. government are not direct obligations of the U.S. Treasury, they are
generally backed indirectly by the U.S. government. Some of the agencies are
indirectly backed by their right to borrow from the U.S. government, such as the
Federal Financing Bank, the Federal Home Loan Bank and the U.S. Postal Service.
Others are supported solely by the credit of the agency or instrumentality
itself, but are given additional support due to the U.S. Treasury's authority to
purchase their outstanding debt obligations. These agencies include the Federal
Farm Credit Banks, the Federal National Mortgage Association, the Federal Home
Loan Mortgage Corporation, and the Student Loan Marketing Association. No
assurance can be given that the U.S. government would provide financial support
to U.S. government established or sponsored agencies. Furthermore, with respect
to the U.S. government securities purchased by a Fund, guarantees as to the
timely payment of principal and interest do not extend to the value or yield of
these securities nor do they extend to the value of a Fund's shares. A Fund may
invest in these securities if it believes they offer an expected return
commensurate with the risks assumed.

Mortgage Pass-Through Securities (Dodge & Cox Balanced Fund and Dodge & Cox
---------------------------------------------------------------------------
Income Fund). Each Fund may invest a portion of its assets in mortgage pass-
- -------------
through securities which are guaranteed by an agency of the U.S. government or
are issued by a private entity. These securities represent ownership in "pools"
of mortgage loans and are called "pass-throughs" because principal and interest
payments are passed through to security holders monthly. The security holder
may also receive unscheduled principal payments representing prepayments of the
underlying mortgage loans. When a Fund reinvests the principal and interest
payments, it may receive a rate of interest which is either higher or lower than
the rate on the existing mortgage.

During periods of declining interest rates there is increased likelihood
that mortgage securities may be prepaid. Such prepayment would most likely be
reinvested at lower rates. On the other hand, if the pass-through securities had
been purchased at a discount, then such prepayments of principal would benefit
the portfolio.

Collateralized Mortgage Obligations (Dodge & Cox Balanced Fund and Dodge &
------------------------------------------------------------------------------
Cox Income Fund). Collateralized Mortgage Obligations ("CMOs") are private
- ---------------
entity or U.S. government agency-issued multi-class bonds that are
collateralized by U.S. agency-guaranteed mortgage pass-through securities. A CMO
is created when the issuer purchases a collection of mortgage pass-through
securities ("the collateral") and places these securities in a trust, which is
administered by an independent trustee. Next, the issuer typically issues
several classes, or "tranches" of bonds, the debt service of which is provided
by the principal and interest payments from the mortgage pass-through securities
in the trust. Each of these tranches is valued and traded separately based on
its distinct cash flow characteristics.

Although the mortgage pass-through collateral typically has monthly
payments of principal and interest, CMO bonds will generally have semiannual or
quarterly payments of principal and interest. Payments received from the
collateral are reinvested in short-term debt securities by the trustee between
payment dates on the CMO. On the CMO payment dates, the principal and interest
payments received from the collateral plus reinvestment income, are applied
first to pay interest on the bonds and then to repay principal. Generally, the
bonds are retired sequentially; the first payments of principal are applied to
retire the first tranche, while all other tranches receive interest only. Only
after the first tranche is retired do principal payments commence on the second
tranche. The process continues in this sequence until all tranches are retired.

At issuance, each CMO tranche has a stated final maturity date. The stated
final maturity date is the date by which the bonds would be completely retired
assuming standard amortization of principal but no prepayments of principal on
the underlying collateral. However, since it is likely that the collateral will
have principal prepayments, the CMO bonds are actually valued on the basis of an
assumed prepayment rate. The assumed prepayment rate is used in the calculation
of the securities' weighted-average life, a

8
<PAGE>

measure of the securities' cash flow characteristics. Dodge & Cox will purchase
the tranche with the weighted-average life and cash flow characteristics that it
believes will contribute to achieving the objectives of a Fund.

All CMOs purchased by a Fund will be issued or guaranteed by an agency of
the U.S. government or have a AA rating by either S&P or Moody's. To qualify for
this rating, a CMO is structured so that even under conservative prepayment and
reinvestment assumptions, the principal and interest payments from the
collateral are expected to meet or exceed the cash flow obligations of all the
tranches of the CMO. However, there are risks associated with CMOs, which relate
to the risks of the underlying mortgage pass-through securities. In a falling
interest rate environment, the mortgage securities may be prepaid faster than
the assumed rate. In this scenario, the prepayments of principal will generally
be reinvested at a rate which is lower than the rate that the security holder is
currently receiving. Conversely, in a rising interest rate environment, the
mortgage collateral may be prepaid at a rate which is slower than the assumed
rate. In this case, the cash flow of the bond decreases. A reduced prepayment
rate effectively lengthens the time period the security will be outstanding and
may adversely affect the value and volatility of the security.

Restricted Securities (Dodge & Cox Balanced Fund and Dodge & Cox Income
-----------------------------------------------------------------------
Fund). The Fund may invest in restricted securities (privately-placed debt and
- ----
preferred equity securities) and other securities without readily available
market quotations, but will not acquire such securities or other illiquid
securities, including repurchase agreements maturing in more than seven days, if
as a result they would comprise more than 15% of the value of the Fund's total
assets (10% for Dodge & Cox Income Fund).

Restricted securities may be sold only in privately-negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act of 1933. Where registration is required, a Fund
may be obligated to pay all or a part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, a Fund might obtain a less favorable price than prevailed when it
decided to sell. Restricted securities will be priced at fair value as
determined in good faith by the Trust's Board of Trustees.

Structured Investments (Dodge & Cox Balanced Fund and Dodge & Cox Income
------------------------------------------------------------------------
Fund). Included among the issuers of debt securities in which a Fund may invest
- ------
are entities organized and operated solely for the purpose of restructuring the
investment characteristics of various securities. These entities are typically
organized by investment banking firms which receive fees in connection with
establishing each entity and arranging for the placement of its securities.
This type of restructuring involves the deposit with or purchases by an entity,
such as a corporation or trust, of specified instruments and the issuance by
that entity of one or more classes of securities (structured investments) backed
by, or representing interests in, the underlying instruments. The cash flow on
the underlying instruments may be apportioned among the newly issued structured
investments to create securities with different investment characteristics such
as varying maturities, payment priorities or interest rate provisions; the
extent of the payments made with respect to structured investments is dependent
on the extent of the cash flow on the underlying instruments.

Each Fund is permitted to invest in a class of structured investments that
is either subordinated or unsubordinated to the right of payment of another
class. Subordinated structured investments typically have higher yields and
present greater risks than unsubordinated structured investments. Although a
Fund's purchase of subordinated structured investments would have a similar
economic effect to that of borrowing against the underlying securities, the
purchase will not be deemed to be leverage for purposes of the limitations
placed on the extent of a Fund's assets that may be used for borrowing
activities.

9
<PAGE>

Certain issuers of structured investments may be deemed to be "investment
companies" as defined in the Investment Company Act. As a result, a Fund's
investment in these structured investments may be limited by the restrictions
contained in the 1940 Act.

Inflation-Indexed Bonds (Dodge & Cox Balanced Fund and Dodge & Cox Income
-------------------------------------------------------------------------
Fund). Inflation-indexed bonds are fixed-income securities whose principal
- ------
value is periodically adjusted according to the rate of inflation. The
interest rate on these bonds is fixed at issuance at a rate generally lower
than typical bonds. Over the life of an inflation-indexed bond, however,
interest will be paid based on a principal value which is adjusted for
inflation as measured by changes in the Consumer Price Index (CPI). The
securities will pay interest on a semi-annual basis, equal to a fixed
percentage of the inflation-adjusted principal amount.

If the value of the CPI falls, the principal value of inflation-indexed
bonds will be adjusted downward, and consequently the interest payable on these
securities (calculated with respect to a smaller principal amount) will be
reduced. Repayment of the originally issued principal amount upon maturity is
guaranteed by the of U.S. Treasury. However, the current market value of the
bonds is not guaranteed, and will fluctuate. The Fund may also invest in other
inflation-related bonds which may or may not provide a similar guarantee. If
such a guarantee of principal is not provided, the adjusted principal value of
the bond repaid at maturity may be less than the original principal.

The U.S. Treasury began issuing inflation-indexed bonds in 1997. As such,
there is no trading history of these securities, and there can be no assurance
that a liquid market in these instruments will continue. Lack of a liquid market
may impose the risk of higher transaction costs and the possibility that a Fund
may be forced to liquidate positions when it would not be advantageous to do so.
There also can be no assurance that the U.S. Treasury will issue any particular
amount of inflation-indexed bonds.

The CPI is calculated monthly by the U.S. Bureau of Labor Statistics. The
CPI is a measurement of changes in the cost of living, made up of components
such as housing, food, transportation and energy. There can be no assurance that
the CPI will accurately measure the real rate of inflation in the prices of
goods and services.

Any increase in the principal amount of an inflation-indexed bond will be
considered taxable ordinary income, even though investors do not receive their
principal until maturity.

10
<PAGE>

When-Issued Or Delayed-Delivery Securities (Dodge & Cox Balanced Fund and
-------------------------------------------------------------------------
Dodge & Cox Income Fund). Each Fund may purchase securities on a when-issued or
- -------------------------
a delayed-delivery basis, that is, for payment and delivery on a date later than
normal settlement, but generally within 30 days.

The purchase price and yield on these securities are generally set at the
time of purchase. On the date that a security is purchased on a when-issued
basis, a Fund reserves liquid assets with a value at least as great as the
purchase price of the security, in a segregated account at the custodian bank,
as long as the obligation to purchase continues. The value of the delayed-
delivery security is reflected in a Fund's net asset value as of the purchase
date, however, no income accrues to a Fund from these securities prior to their
delivery to the Fund. A Fund makes such purchases for long-term investment
reasons, but may actually sell the securities prior to settlement date if Dodge
& Cox deems it advisable in seeking to achieve the objectives of the Fund. The
purchase of these types of securities may increase a Fund's overall investment
exposure and involves a risk of loss if the value of the securities declines
prior to the settlement date. Unsettled securities purchased on a when-issued or
delayed-delivery basis will not exceed 5% of a Fund's total assets at any one
time.

Cash Position. Each Fund will hold a certain portion of its assets in U.S.
--------------
dollar-denominated money market securities, including repurchase agreements,
commercial paper, and bank obligations in the two highest rating categories
maturing in one year or less. For temporary, defensive purposes, a Fund may
invest without limitation in such securities. This reserve position provides
flexibility in meeting redemptions, expenses, and the timing of new investments
and serves as a short-term defense during periods of unusual market volatility.

Bank Obligations. Certificates of deposit, bankers' acceptances, and
other short-term debt obligations. Certificates of deposit are short-term
obligations of commercial banks. A bankers' acceptance is a time draft drawn on
a commercial bank by a borrower, usually in connection with international
commercial transactions. Certificates of deposit may have fixed or variable
rates. A Fund may invest in U.S. banks, foreign branches of U.S. banks, U.S.
branches of foreign banks, and foreign branches of foreign banks.

Short-Term Corporate Debt Securities. Outstanding nonconvertible
corporate debt securities (such as bonds and debentures) which have one year or
less remaining to maturity. Corporate notes may have fixed, variable, or
floating rates.

Commercial Paper. Short-term promissory notes issued by corporations
primarily to finance short-term credit needs. Certain notes may have floating
or variable rates.

Repurchase Agreements. A Fund may enter into a repurchase agreement
through which an investor (such as a Fund) purchases a security (known as the
"underlying security") from a well-established securities dealer or bank that is
a member of the Federal Reserve System. Any such dealer or bank will be on Dodge
& Cox's approved list and have a credit rating with respect to its short-term
debt of at least A1 by S&P, P1 by Moody's, or the equivalent rating by Dodge &
Cox. At that time, the bank or securities dealer agrees to repurchase the
underlying security at the same price, plus specified interest. Repurchase
agreements are generally for a short period of time, often less than a week.
Repurchase agreements which do not provide for payment within seven days will be
treated as illiquid securities. A Fund will only enter into repurchase
agreements where (i) the underlying securities are issued by the U.S.
government, its agencies and instrumentalities, (ii) the market value of the
underlying security, including interest accrued, will be at all times equal to
or exceed the value of the repurchase agreement, and (iii) payment for the
underlying security is made only upon physical delivery or evidence of book-
entry transfer to the account of the custodian or a bank acting as agent. In the
event of a bankruptcy or other default of a seller of a repurchase agreement, a
Fund could experience both delays in liquidating the underlying security and
losses, including: (a) possible decline in the value of

11
<PAGE>

the underlying security during the period which the Fund seeks to enforce its
rights thereto; (b) possible subnormal levels of income and lack of access to
income during this period; and (c) expenses of enforcing its rights.

Borrowing Money. The Funds can borrow money from banks as a temporary
----------------
measure for emergency purposes or to facilitate redemption requests. Such
borrowing may be collateralized with Fund assets, subject to restrictions.

Lending Of Portfolio Securities (Dodge & Cox Income Fund). The Fund has
----------------------------------------------------------
reserved the right to lend its securities to qualified broker-dealers, banks or
other financial institutions. By lending its portfolio securities, the Fund
would attempt to increase its income by receiving a fixed fee or a percentage of
the collateral, in addition to continuing to receive the interest or dividends
on the securities loaned. The terms, structure and the aggregate amount of such
loans would be consistent with the 1940 Act. The borrower would be required to
secure any such loan with collateral in cash or cash equivalents maintained on a
current basis in an amount at least equal to the total market value and accrued
interest of the securities loaned by the Fund. The Fund does not presently
intend to lend portfolio securities.

Investment Companies. The Funds can purchase the securities of other
---------------------
investment companies as permitted by the 1940 Act.

Additional Risks
----------------

General. Because of its investment policy, each Fund may not be
suitable or appropriate for all investors. The Funds are not money market funds
and are not appropriate investments for those whose primary objective is
principal stability. A Fund's assets will be subject to all of the risks of
investing in the financial markets. There is risk in all investment. The value
of the portfolio securities of a Fund will fluctuate based upon market
conditions. Although a Fund seeks to reduce risk by investing in a diversified
portfolio, such diversification does not eliminate all risk. There can be no
assurance that a Fund will achieve its investment objectives.

Debt Obligations. A Fund will invest in debt securities which hold
the prospect of contributing to the achievement of a Fund's objectives. Yields
on short, intermediate, and long-term securities are dependent on a variety of
factors, including the general conditions of the money and bond markets, the
size of a particular offering, the maturity of the obligation, and the credit
quality and rating of the issue. Debt securities with longer maturities tend to
have higher yields and are generally subject to potentially greater capital
appreciation and depreciation than obligations with shorter maturities and lower
yields. The market prices of debt securities usually vary, depending upon
available yields. An increase in interest rates will generally reduce the value
of portfolio investments, and a decline in interest rates will generally
increase the value of portfolio investments. The ability of a Fund to achieve
its investment objectives is also dependent on the continuing ability of the
issuers of the debt securities in which a Fund invests to meet their obligations
for the payment of interest and principal when due. As discussed below, each
Fund's investment program permits it to hold investment-grade securities that
have been downgraded. In addition, the Dodge & Cox Income Fund may invest in
lower quality securities. Since investors generally perceive that there are
greater risks associated with investment in lower quality securities, the yields
from such securities normally exceed those obtainable from higher quality
securities. However, the principal value of lower-rated securities generally
will fluctuate more widely than higher quality securities. Lower quality
investments entail a higher risk of default--that is, the nonpayment of interest
and principal by the issuer--than higher quality investments. Such securities
are also subject to special risks, discussed below. Although a Fund seeks to
reduce risk by portfolio diversification, credit analysis, and attention to
trends in the economy, industries and financial markets, these efforts will not
eliminate all risk.

12
<PAGE>

After purchase by a Fund, a debt security may cease to be rated or its
rating may be reduced below the minimum required for purchase by a Fund.
Neither event will require a sale of such security by the Fund. However, Dodge
& Cox will consider such event in its determination of whether a Fund should
continue to hold the security. To the extent that the ratings given by Moody's
or S&P may change as a result of changes in such organizations or their rating
systems, a Fund will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in the
Prospectus.

Special Risks of High Yield Investing. As described above, under
limited circumstances, a Fund may hold low quality bonds commonly referred to as
"junk bonds". Junk bonds are regarded as predominantly speculative with respect
to the issuer's continuing ability to meet principal and interest payments.
Because investment in low and lower-medium quality bonds involves greater
investment risk, to the extent a Fund holds such bonds, achievement of its
investment objective will be more dependent on Dodge & Cox's credit analysis
than would be the case if a Fund was investing in higher quality bonds. High
yield bonds may be more susceptible to real or perceived adverse economic
conditions than investment grade bonds. A projection of an economic downturn,
or higher interest rates, for example, could cause a decline in high yield bond
prices because the advent of such events could lessen the ability of highly
leveraged issuers to make principal and interest payments on their debt
securities. In addition, the secondary trading market for high yield bonds may
be less liquid than the market for higher grade bonds, which can adversely
affect the ability of a Fund to dispose of its portfolio securities. Bonds for
which there is only a "thin" market can be more difficult to value inasmuch as
objective pricing data may be less available and judgment may play a greater
role in the valuation process.

MANAGEMENT OF THE FUND
- ----------------------

Officers and Trustees

The Trust is organized as a Delaware business trust. The Trust's Board of
Trustees supervises Trust operations and performs duties required by applicable
state and Federal law.

Total 1998
Position(s) Principal Occupation Compensation
Name and Address Age with Trust During Past 5 Years from the Trust**
- ---------------- --- ---------- ------------------- ------------------
<S> <C> <C> <C> <C>
Harry R. Hagey* 58 Chairman and Chairman and Chief Executive $0
Trustee Officer of Dodge & Cox

John A. Gunn* 55 President and President of Dodge & Cox 0
Trustee

A. Horton Shapiro* 59 Executive Senior Vice-President of Dodge & 0
Vice-President Cox
and Trustee

W. Timothy Ryan* 61 Secretary, Senior Vice-President of Dodge & 0
Treasurer and Cox
Trustee
</TABLE>

13
<PAGE>

<TABLE>
<CAPTION>
Total 1998
Position(s) Principal Occupation Compensation
Name and Address Age with Trust During Past 5 Years from the Trust**
- ---------------- --- ---------- ------------------- ------------------
<S> <C> <C> <C> <C>
Katherine Herrick 45 Vice-President Vice-President of Dodge & Cox 0
Drake* and Trustee

Dana M. Emery* 37 Vice-President Manager-Fixed Income and Senior 0
and Trustee Vice-President of Dodge & Cox

Kenneth E. Olivier* 47 Vice-President Senior Vice-President of Dodge & 0
and Trustee Cox

Max Gutierrez, Jr. 68 Trustee Partner in Brobeck, Phleger & 9,000
One Market Plaza Harrison, Attorneys
San Francisco, CA

Frank H. Roberts 79 Trustee Retired Partner in Pillsbury, 9,000
225 Bush Street Madison & Sutro, Attorneys
San Francisco, CA

John B. Taylor 52 Trustee Professor of Economics and 12,000
Department of Director of the Center for
Economics Economic Policy Research,
Stanford University Stanford University
Stanford, CA

Will C. Wood 59 Trustee Principal, Kentwood Associates, 12,000
1550 El Camino Real Financial Advisers; prior to
Menlo Park, CA 1994, Managing Director, IDI
Associates, Financial Advisers

Thomas M. Mistele 45 Assistant Vice-President and General 0
Secretary and Counsel of Dodge & Cox; formerly
Assistant Senior Vice President of
Treasurer Templeton Global Investors, Inc.
and Secretary/General Counsel of
the Templeton Mutual Funds
</TABLE>

14
<PAGE>

_______________________

* Each has been an employee of Dodge & Cox, 35th Floor, One Sansome
Street, San Francisco, California for over 12 years in an executive
position and is an "interested person" of the Trust as defined in the
1940 Act.

** "Total 1998 Compensation from the Trust" consists of compensation and
fees paid to Trustees by the Trust.

Trustees and officers of the Trust affiliated with Dodge & Cox hold a
controlling interest in Dodge & Cox. Those trustees who are not affiliated with
Dodge & Cox receive from the Trust an annual fee of $3,000 and an attendance fee
of $1,500 (or $500 per Fund) for each Board or Committee meeting attended. The
Trust does not pay any other remuneration to its officers or trustees, and has
no bonus, profit-sharing, pension or retirement plan. On March 31, 1999 the
officers and trustees of the Trust and members of their families and relatives
owned less than 1.0% of the outstanding shares of each Fund.

On March 31, 1999, [ ]
owned of record _________ shares (____%), _________ shares (____%) and _______
shares (___%) of the outstanding shares of Dodge & Cox Stock Fund, Dodge & Cox
Balanced Fund and Dodge & Cox Income Fund, respectively; and [
] owned of record ___________ shares
(or ___% of the outstanding shares of Dodge & Cox Income Fund). The Trust knows
of no other person who owns beneficially or of record more than 5% of the
outstanding shares of each Fund.

Investment Manager

Dodge & Cox, One Sansome Street, San Francisco, California 94104, a
corporation, is employed by the Trust as manager and investment adviser of the
Funds, subject to the direction of the Board of Trustees. Dodge & Cox is one of
the oldest professional investment management firms in the United States, having
acted continuously as investment managers since 1930 and has served as manager
and investment adviser for the Funds since each Fund's inception. Each Fund's
investments are managed by Dodge & Cox's Investment Policy Committee (the Fixed-
Income Strategy Committee for fixed-income securities), and no one person is
primarily responsible for making investment recommendations to the Committee.
The research work of the firm is organized for comprehensive and continuous
appraisal of the economy and of various industries and companies. Supplemental
research facilities are used to obtain additional coverage of business and
financial developments affecting comparative security values.

Dodge & Cox is not engaged in the brokerage business nor in the business of
dealing in or selling securities. Its activities are devoted to investment
research and the supervision of investment accounts for individuals, trustees,
corporations, pension and profit-sharing funds, and charitable institutions.
Dodge & Cox Stock Fund and Dodge & Cox Balanced Fund each pay Dodge & Cox a
management fee which is payable monthly at the annual rate of 0.50% of the
average daily net asset value of each Fund. Dodge & Cox Income Fund pays Dodge
& Cox a management fee which is payable monthly at the annual rate of 0.50% of
the average daily net asset value of the Fund up to $100 million and 0.40% of
the average daily net asset value of the Fund in excess of $100 million.

However, the investment management agreements with Dodge & Cox Income Fund
and Dodge & Cox Stock Fund provide that Dodge & Cox will waive its fee for any
calendar year to the extent that such fee plus all other ordinary operating
expenses paid by the Fund exceed 1% and 0.75%, respectively, of the average
daily net asset value of the Fund. No waiver of management fee was required for
1998

15
<PAGE>

under the agreements. Investment management fees received by Dodge & Cox from
the Funds for the last three years were as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Dodge & Cox Stock Fund $22,197,066 $16,194,151 $ 8,541,819

Dodge & Cox Balanced Fund 28,533,113 23,306,993 13,196,680

Dodge & Cox Income Fund 3,467,781 2,574,712 1,650,053
</TABLE>

The contracts may be terminated at any time without penalty upon 60 days written
notice by action of the Trustees, shareholders or by Dodge & Cox. The contracts
will terminate automatically should there be an assignment thereof. In addition
to Dodge & Cox's fee, each Fund pays other direct expenses, including transfer
agent, custodial, accounting, legal, and audit fees; costs of preparing and
printing prospectuses and reports sent to shareholders; registration fees and
expenses; proxy and shareholder meeting expenses; and Trustee fees and expenses.
In 1998, the ratio of total operating expenses to average net assets of Dodge &
Cox Stock Fund, Dodge & Cox Balanced Fund and Dodge & Cox Income Fund were
0.57%, 0.54% and 0.47%, respectively. Dodge & Cox furnishes personnel and other
facilities necessary for the operation of the Funds for which it receives no
additional compensation. Dodge & Cox supervises the operations of the Funds and
directs the investment and reinvestment of its assets and furnishes all
executive personnel and office space required.

Other Service Providers

Custodian and Transfer Agent
----------------------------

State Street Bank and Trust Company, P.O. Box 9051, Boston, Massachusetts
02205-9051 (1-800-621-3979), acts as custodian of all cash and securities of the
Funds and serves as fund accountant for the Funds. Boston Financial Data
Services, P.O. Box 9051, Boston, Massachusetts 02205-9051 (1-800-621-3979) acts
as transfer and dividend disbursing agent for the Funds.

Independent Accountant
----------------------

PricewaterhouseCoopers LLP, 333 Market Street, San Francisco,
California 94105, are independent accountants to the Funds, subject to annual
appointment by the Board of Trustees. PricewaterhouseCoopers LLP conducts an
annual audit of the accounts and records of each Fund, reports on the Fund's
annual financial statements and performs tax and accounting advisory services.

BROKERAGE ALLOCATION AND OTHER PRACTICES
- ----------------------------------------

The Investment Management Agreements provide that Dodge & Cox is
responsible for selecting members of securities exchanges, brokers and dealers
(such members, brokers and dealers being hereinafter referred to as "brokers")
for the execution of a Fund's portfolio transactions and, when applicable, the
negotiation of commissions. All decisions and placements are made in accordance
with the following principles:

1. Purchase and sale orders will usually be placed with brokers who are
selected by Dodge & Cox as able to achieve "best execution" of such orders.
"Best execution" means prompt and reliable execution at the most favorable
securities price, taking into account the other provisions hereinafter set
forth. The determination of what may constitute best execution and price in
the execution of a securities transaction by a broker involves a number of

16
<PAGE>

considerations, including without limitation, the overall direct net
economic result to a Fund (involving both price paid or received and any
commissions and other costs paid), the efficiency with which the
transaction is effected, the ability to effect the transaction at all where
a large block is involved, availability of the broker to stand ready to
execute possibly difficult transactions in the future, and the financial
strength and stability of the broker. Such considerations are judgmental
and are weighed by Dodge & Cox in determining the overall reasonableness of
brokerage commissions.

2. In selecting brokers for portfolio transactions, Dodge & Cox takes into
account its past experience as to brokers qualified to achieve best
execution, including brokers who specialize in any foreign securities held
by a Fund.

3. Dodge & Cox is authorized to allocate brokerage business to brokers who
have provided brokerage and research services, as such services are defined
in Section 28(e) of the Securities Exchange Act of 1934 (the "1934 Act"),
for a Fund and/or other accounts, if any, for which Dodge & Cox exercises
investment discretion (as defined in Section 3(a)(35) of the 1934 Act) and,
as to transactions as to which fixed minimum commission rates are not
applicable. Such allocation may cause a Fund to pay a commission for
effecting a securities transaction in excess of the amount another broker
would have charged for effecting that transaction, if Dodge & Cox
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by
such broker, viewed in terms of either that particular transaction or with
Dodge & Cox's overall responsibilities with respect to a Fund and the other
accounts, if any, as to which it exercises investment discretion. In
reaching such determination, Dodge & Cox is not required to place or
attempt to place a specific dollar value on the research or execution
services of a broker or on the portion of any commission reflecting
brokerage or research services. In demonstrating that such determinations
were made in good faith, Dodge & Cox will be prepared to show that all
commissions were allocated and paid for purposes contemplated by a Fund's
brokerage policy; that commissions were paid only for products or services
which provide lawful and appropriate assistance to Dodge & Cox in the
performance of its investment decision-making responsibilities; and that
the commissions paid were within a reasonable range. The determination that
commissions were within a reasonable range will be based on any available
information as to the level of commissions known to be charged by other
brokers on comparable transactions, but there will also be taken into
account a Fund's policies that (i) obtaining a low commission is deemed
secondary to obtaining a favorable securities price, since it is recognized
that usually it is more beneficial to a Fund to obtain a favorable price
than to pay the lowest commission; and (ii) the quality, comprehensiveness
and frequency of research studies which are provided for Dodge & Cox are
useful to Dodge & Cox in performing its advisory services under its
Investment Management Agreement with a Fund. Research services provided by
brokers to Dodge & Cox are considered to be in addition to, and not in lieu
of, services required to be performed by Dodge & Cox under its Investment
Management Agreement. Research furnished by brokers through whom a Fund
effects securities transactions may be used by Dodge & Cox for any of its
accounts, and not all such research may be used by Dodge & Cox for the
Funds.

4. Purchases and sales of portfolio securities within the United States other
than on a securities exchange will be executed with primary market makers
acting as principal except where, in the judgment of Dodge & Cox, better
prices and execution may be obtained on a commission basis or from other
sources.

17
<PAGE>

Insofar as known to management, no Trustee or officer of the Trust, nor
Dodge & Cox or any person affiliated with any of them, has any material direct
or indirect interest in any broker employed by or on behalf of a Fund. There is
no fixed method used in determining which broker-dealers receive which order or
how many orders.

Periodically Dodge & Cox reviews the current commission rates and discusses
the execution capabilities and the services provided by the various broker-
dealers Dodge & Cox is utilizing in the execution of orders. Research services
furnished by the brokers through whom Dodge & Cox effects security transactions
for a Fund may be used in servicing some or all of Dodge & Cox's accounts,
however, all such services may not be used by Dodge & Cox in connection with a
Fund. Aggregate brokerage commissions paid by Dodge & Cox Stock Fund and Dodge
& Cox Balanced Fund during the last three years were as follows:

1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Dodge & Cox Stock Fund $2,033,477 $2,419,305 $1,109,157

Dodge & Cox Balanced Fund 1,781,992 1,835,589 1,131,834
</TABLE>

In 1998 securities transactions allocated to brokers based on arrangements to
provide research services to Dodge & Cox Stock Fund and Dodge & Cox Balanced
Fund totaled $166,136,977 and $167,811,970, respectively, and brokerage
commissions paid on such transactions amounted to $230,565 and $219,975,
respectively. Except as indicated above, Dodge & Cox does not intend to place
portfolio transactions with any particular broker-dealers.

Investment decisions for a Fund are made independently from those of the
other Funds and other accounts managed by Dodge & Cox. It may frequently
develop that the same investment decision is made for more than one account.
Simultaneous transactions may often occur when the same security is suitable for
the investment objective of more than one account. When two or more accounts
are simultaneously engaged in the purchase or sale of the same security, the
transactions are averaged as to price and allocated as to amount in accordance
with a formula equitable to each account. It is recognized that in some cases
this system could have a detrimental effect on the price or availability of the
security as far as a Fund is concerned. In other cases, however, it is believed
that the ability of a Fund to participate in volume transactions will produce
better executions for the Fund.

CAPITAL STOCK
- -------------
The Trust has three classes of beneficial shares and each share evidences
an equal beneficial ownership in a Fund and there is no limit to the number of
shares that may be issued. The three series of the Trust are successors to
Dodge & Cox Stock Fund established in 1965, Dodge & Cox Balanced Fund
established in 1931 and Dodge & Cox Income Fund established in 1989. All shares
have the same rights as to redemption, dividends, and in liquidation. All
shares issued are fully paid and non-assessable, are transferable, and are
redeemable at net asset value upon demand of the shareholder. Shares have no
preemptive or conversion rights. The Trust is not required to hold annual
meetings of shareholders.

18
<PAGE>

PURCHASE, REDEMPTION, AND PRICING OF SHARES
- -------------------------------------------

The procedures for purchasing and redeeming shares of a Fund are described
in the Funds' Prospectus, which is incorporated herein by reference.

Net Asset Value per Share. The purchase and redemption price of a Fund's
shares is equal to a Fund's net asset value per share or share price. A Fund
determines its net asset value per share by subtracting a Fund's total
liabilities (including accrued expenses and dividends payable) from its total
assets (the market value of the securities a Fund holds plus cash and other
assets, including income accrued but not yet received) and dividing the result
by the total number of shares outstanding. The net asset value per share of a
Fund is normally calculated as of the close of trading on the New York Stock
Exchange ("NYSE") every day the NYSE is open for trading. The NYSE is closed on
the following days: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.

Determination of net asset value (and the offering, sale redemption and
repurchase of shares) for a Fund may be suspended when (a) the NYSE is closed,
other than customary weekend and holiday closings, (b) trading on the NYSE is
restricted, (c) an emergency exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for a Fund to fairly determine the value of its net assets, or (d) a
governmental body having jurisdiction over a Fund may by order permit such a
suspension for the protection of a Fund's shareholders; provided that applicable
rules and regulations of the Securities and Exchange Commission (or any
succeeding governmental authority) shall govern as to whether the conditions
prescribed in (b), (c), or (d) exist.

In determining total net asset value of a Fund, stocks are valued at
market, using as a price the last sale of the day at the close of the New York
Stock Exchange or, if no sale, it will be valued at the mean between the bid and
ask prices for the day. Fixed-income securities, including listed issues, are
priced on the basis of valuations furnished by a pricing service which utilizes
both dealer-supplied valuations and electronic data processing techniques.
These values take into account appropriate factors such as institutional-size
trading markets in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data and do
not rely exclusively upon exchange or over-the-counter listed prices. Use of
the pricing service has been approved by the Board of Trustees. A security
which is listed or traded on more than one exchange is valued at the quotation
on the exchange determined to be the primary market for such security.
Securities for which market quotations are not readily available and all other
assets are valued at fair value as determined in good faith by or at the
direction of the Board of Trustees.

Redemptions in Kind. The Funds reserve the right, if conditions exist which
make cash payments undesirable, to honor any request for redemption by making
payment in whole or in part in readily marketable securities chosen by a Fund
and valued as they are for purposes of computing a Fund's NAV (a redemption-in-
kind). If payment is made in securities, a shareholder may incur transaction
expenses in converting these securities to cash. The Funds have elected,
however, to be governed by Rule 18f-1 under the 1940 Act, as a result of which a
Fund is obligated to redeem shares, with respect to any one shareholder during
any 90-day period, solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund at the beginning of the period.

TAXATION OF THE FUND
- --------------------
Each Fund intends to qualify each year as a regulated investment company
under the Internal Revenue Code. A regulated investment company that distributes
for the year all of its ordinary income and capital gains pays no tax on its
ordinary income or capital gains. A regulated investment company

19
<PAGE>

that fails to distribute all of its ordinary income and capital gains must pay
tax on the undistributed amounts at a maximum rate of 35%.

You need to be aware of the possible tax consequences when:

. You sell Fund shares, including an exchange from one Fund to another.

. A Fund makes a distribution to your account.

Taxes on Fund redemptions. When you sell shares in a Fund, you may realize
a gain or loss. An exchange from one Fund to another is a sale for tax
purposes.

In January, you will be sent Form 1099-B, indicating the amount of sales
made in a Fund during the prior year. This information will also be reported to
the IRS. For certain accounts opened after September 30, 1987, the Funds will
provide you with the average cost of the shares sold during the year, based on
the average cost single category method. This information is not reported to the
IRS, and you do not have to use it. You may calculate the cost basis using other
methods acceptable to the IRS, such as "specific identification".

To help you maintain accurate records, you will be sent a confirmation
immediately following each transaction (except for systematic purchases) and
quarterly and year-end statements detailing all transactions in your account
during the year.

Taxes on Fund distributions. The following summary does not apply to
retirement accounts, such as IRAs, which are tax-deferred until shareholders
withdraw money from them.

In January, you will be sent Form 1099-DIV indicating the tax status of any
distributions paid to you during the prior year. This information will also be
reported to the IRS. All distributions made by a Fund are taxable to you for
the year in which they were paid.

Short-term capital gain distributions are taxable as ordinary income and
long-term capital gain distributions are taxable at the applicable long-term
capital gain rate. If you realize a capital loss on the sale or exchange of
Fund shares held six months or less, your short-term capital loss is
reclassified to long-term to the extent of any long-term capital gain
distribution received with respect to such Fund shares.

Tax effect of buying shares before a capital gain or income distribution.
If you buy shares shortly before or on the "record date" for a Fund distribution
- -- the date that establishes you as the person to receive the upcoming
distribution -- you will receive, in the form of a taxable distribution, a
portion of the money you just invested. Therefore, you may wish to find out a
Fund's record date before investing. Of course, a Fund's share price may, at
any time, reflect undistributed capital gains or income and unrealized
appreciation. When these amounts are eventually distributed, they are taxable.

The discussion above and in the Funds' Prospectus regarding the Federal
income tax consequences of investing in a Fund have been prepared by Dodge & Cox
and do not purport to be complete descriptions of all tax implications of an
investment in a Fund. You are advised to consult with your own tax adviser
concerning the application of Federal, state and local taxes to an investment in
a Fund. The Trust's legal counsel has expressed no opinion in respect thereof.

PRINCIPAL UNDERWRITER
- ---------------------

The Trust is the sole and principal underwriter of the shares of the Funds.

20
<PAGE>

PERFORMANCE INFORMATION
- -----------------------

Each Fund may include figures indicating its total return or yield in
advertisements or reports to shareholders or prospective investors. Quotations
of a Fund's average annual total rate of return will be expressed in terms of
the average annual compounded rate of return on a hypothetical investment in the
Fund over periods of one, five and ten years, will reflect the deduction of a
proportional share of Fund expenses (on an annual basis), will assume that all
dividends and capital gains distributions are reinvested when paid, and will be
calculated pursuant to the following formula:

P (1 + T)/n/ = ERV
<TABLE>
<CAPTION>

<C> <C> <S>
where P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years,
ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period.
</TABLE>

The average annual total returns of the Funds for the one, five and
ten-year periods ended December 31, 1998 were as follows:

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------- -------- ---------
<S> <C> <C> <C>
Dodge & Cox Stock Fund 5.39% 18.34% 16.11%

Dodge & Cox Balanced Fund 6.70 14.14 14.05

Dodge & Cox Income Fund 8.08 7.54 9.57
</TABLE>

Total return indicates the positive or negative rate of return that an investor
would have earned from reinvested dividends and distributions and changes in net
asset value per share during the period.

Quotations of yield, as defined by the Securities and Exchange
Commission, will be based on net investment income per share earned during a
given thirty-day period and will be computed by dividing this net investment
income by the net asset value per share on the last day of the period and
annualizing the results according to the following formula:

YIELD = 2[(a-b+1)/6/ -1]
---
cd
<TABLE>
<CAPTION>

<S> <C> <C>
where a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements or waivers),
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the period.
</TABLE>
The Funds' current yields for the thirty days ended December 31, 1998 were
as follows:

Dodge & Cox Stock Fund 1.67%

Dodge & Cox Balanced Fund 3.22%

Dodge & Cox Income Fund 5.68%

Yield does not directly reflect changes in net asset value per share which
occurred during the period.

21
<PAGE>

As appropriate, performance information for a Fund may be compared in reports
and promotional literature to: (i) the Standard & Poor's 500(R) Stock Index, the
Dow Jones Industrial Average, the Lehman Brothers Aggregate Bond Index, or
various other unmanaged indices of the performance of various types of
investments, so that investors may compare a Fund's results with those of
indices widely regarded by investors as representative of the security markets
in general, and (ii) the performance of other mutual funds. Unmanaged indices
may assume the reinvestment of income distributions, but generally do not
reflect deductions for administrative and management costs and expenses.

Performance information for a Fund reflects only the performance of
hypothetical investments in the Fund during the particular time periods on which
the calculations are based. Such information should not be considered as
representative of the performance of the Fund in the future because, unlike some
bank deposits or other investments which pay a fixed yield for a stated period
of time for a fixed principal amount, the performance of the Fund will vary
based not only on the current market value of the securities held in its
portfolio, but also on changes in a Fund's expenses and in the asset size of the
Fund. Performance information should be considered in light of a Fund's
investment objectives and policies, the types and quality of a Fund's portfolio
investments, market conditions during the particular time period and operating
expenses. Further information about the performance of a Fund is contained in
each Fund's Annual Report which may be obtained without charge from the Fund. A
Fund and Dodge & Cox may also refer to the following information:

1. Portfolio information, including median market capitalization,
price to earnings ratio, price to book value, average bond
quality, average bond maturity, and effective bond duration.

2. The asset allocation and sector weightings of a Fund's portfolio
and a Fund's top ten holdings.

3. A description of the Dodge & Cox investment management philosophy
and approach.

FINANCIAL STATEMENTS
- --------------------

Please refer to each Fund's Financial Statements consisting of the
financial statements of the Fund and the notes thereto, and the report of
independent accountants contained in the Fund's 1998 Annual Report to
Shareholders. The Financial Statements and the report of independent
accountants (but no other material from the Annual Report) are incorporated
herein by reference. Additional copies of the Annual Report may be obtained
from a Fund at no charge by writing, visiting our web site at
www.dodgeandcox.com, or telephoning the Fund.

22
<PAGE>

APPENDIX: RATINGS
- ------------------

A debt obligation rating by Moody's or S&P reflects their current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. The purpose of the rating systems is to provide investors with a
simple system of gradation by which the relative investment qualities of bonds
may be noted. A rating is not a recommendation as to investment value, inasmuch
as it does not comment as to market price or suitability for a particular
investor.

The ratings are based on current information furnished by the issuer or
from other sources that the rating agencies deem reliable. The ratings may be
changed, suspended, or withdrawn as a result of changes in, or unavailability
of, such information, or for other circumstances.

The following is a description of the characteristics of ratings as
published by Moody's and S&P.

RATINGS BY MOODY'S (MOODY'S INVESTORS SERVICE)

Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Note: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modification 1 indicates that the security ranks in the higher end of its
generic rating group; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
group.

23
<PAGE>

RATINGS BY S&P (STANDARD & POOR'S RATINGS GROUP)

AAA Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated groups.

BBB Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this group than in higher rated groups.

BB, B Debt rated BB and B is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. While such debt will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.

Plus (+) or Minus (-): The ratings from AA to B may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
groups.

24
<PAGE>

DODGE & COX FUNDS

PART C - OTHER INFORMATION

Item 23. (b) Exhibits:

(1) Trust Instrument *
(2) Bylaws *
(5) Investment Management Agreements **
(8) Form of Custody Agreement **
(9) Form of Transfer Agency Agreement **
(10) Opinion and Consent of Counsel will be filed by amendment.
(11A) Consent of Independent Accountants will be filed by
amendment.
(11B) Signatures/Power of Attorney **
(14) Financial Data Schedules
Part A: Financial Highlights ***
Part B: Statements of Assets and Liabilities ***
Statement of Changes in Net Assets ***
Statements of Operations ***
Portfolios of Investments ***

* Exhibits were filed with Post-Effective Amendment No. 62 and are
herein incorporated by reference.

** Exhibits were filed with Post-Effective Amendment No. 63 and
are herein incorporated by reference.

*** Incorporated by reference to similarly named financial
statements in Registrant's 1998 Annual Reports to Shareholders,
including Notes to Financial Statements and Report of Independent
Accountants. Registrant's 1998 Annual Reports dated December 31,
1998 were filed with the Commission on February 16,1999 (File No.
811-173).

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None.

Item 25. INDEMNIFICATION
Section 10.02 of the Trust Instrument, filed as Exhibit 1 to this
Registration Statement, provides for indemnification of Trustees of
the Registrant.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the foregoing
provision, or otherwise, the Registrant has been advised
<PAGE>

that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustees, officers or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

Registrant and Dodge & Cox maintain officers' and directors' liability
insurance in the amount of $20,000,000 with no deductible for the
Trust's officers and trustees and $150,000 deductible for the joint
insured entities.

Item 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER

The only business of Dodge & Cox Incorporated is to serve as the
investment adviser of the Registrant. Business backgrounds of the
principal executive officers and directors of the adviser who also
hold positions with the Registrant are included under "Management of
the Fund Officers and Trustees" in Part B of the Registration
Statement.

Item 27. PRINCIPAL UNDERWRITERS

The Registrant is the sole and principal underwriter of its shares of
beneficial interest.

Item 28. LOCATION OF ACCOUNTS AND RECORDS

Dodge & Cox
One Sansome Street, 35th Floor
San Francisco, CA 94104

Boston Financial Data Services Inc.
66 Brooks Drive, Suite 1
Braintree, MA 01284

State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171

Item 29. MANAGEMENT SERVICES

None.
<PAGE>

Item 30. UNDERTAKINGS

Registrant hereby undertakes to furnish to each person, to whom
Registrant's Prospectus is delivered, a copy of the most recent Annual
Report to Shareholders of the relevant portfolio upon request and
without charge.
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of San Francisco and State of California
on the 26th day of February, 1999.

DODGE & COX FUNDS

*By: /s/ Harry R. Hagey
------------------
Harry R. Hagey
Chairman
(Principal Executive Officer)

*By: /s/ Thomas M. Mistele
---------------------
Thomas M. Mistele
as attorney-in-fact**

Dodge & Cox Funds is organized under a Trust Instrument dated February 13,
1998, a copy of which is on file with the Secretary of State of the State of
Delaware. The obligations of the Registrant hereunder are not binding upon any
of the Trustees, shareholders, nominees, officers, agents or employees of the
Registrant personally, but bind only the trust property of the Registrant as
provided in the Trust Instrument of the Registrant. The execution of this
Amendment to the Registration Statement has been authorized by the Trustees of
the Registrant and this Amendment to the Registration Statement has been signed
by an authorized officer of the Registrant, acting as such, and neither such
authorization by such Trustees nor such execution by such officer shall be
deemed to have been made by any of them personally, but shall bind only the
trust property of the Registrant as provided in its Declaration of Trust.

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.

Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Harry R. Hagey Chairman and Trustee February 26, 1999
- --------------------------------- (Principal Executive Officer)
Harry R. Hagey*

/s/ W. Timothy Ryan Treasurer and Trustee February 26, 1999
- --------------------------------- (Principal Financial and
W. Timothy Ryan* Accounting Officer)

/s/ John A. Gunn President and Trustee February 26, 1999
- ---------------------------------
John A. Gunn*
</TABLE>
<PAGE>

<TABLE>

<S> <C> <C>
/s/ A. Horton Shapiro Executive Vice President and February 26, 1999
- --------------------------------- Trustee
A. Horton Shapiro*

/s/ Katherine Herrick Drake Vice President and Trustee February 26, 1999
- ---------------------------------
Katherine Herrick Drake*

/s/ Dana M. Emery Vice President and Trustee February 26, 1999
- ---------------------------------
Dana M. Emery*

/s/ Kenneth E. Olivier Vice President and Trustee February 26, 1999
- ---------------------------------
Kenneth E. Olivier*

/s/ Max Gutierrez, Jr. Trustee February 26, 1999
- ---------------------------------
Max Gutierrez, Jr.*

/s/ Frank H. Roberts Trustee February 26, 1999
- ---------------------------------
Frank H. Roberts*

/s/ John B. Taylor Trustee February 26, 1999
- ---------------------------------
John B.Taylor*

/s/ Will C. Wood Trustee February 26, 1999
- ---------------------------------
Will C. Wood*
</TABLE>

* By: /s/ Thomas M. Mistele
---------------------
Thomas M. Mistele
as attorney-in-fact**

** Powers of Attorney were filed with Post-Effective Amendment No. 63.
<PAGE>

Dodge & Cox Funds

Index to Exhibits

ITEM 23(b)1 Trust Instrument* EX-99.B1
ITEM 23(b)2 Bylaws* EX-99.B2
ITEM 23(b)5 Investment Management Agreements** EX-99.B5
ITEM 23(b)8 Form of Custody Agreement** EX-99.B8
ITEM 23(b)9 Form of Transfer Agency Agreement** EX-99.B9
ITEM 23(b)10 Opinion and Consent of Counsel*** EX-99.B10
ITEM 23(b)11A Consent of Independent Accountants*** EX-99.B11A
ITEM 23(b)11B Signatures/Power of Attorney** EX-99.B11B

* Exhibits were filed with Post-Effective Amendment No. 62 as EX-23.B1 and
EX-23.B2, respectively and are herein incorporated by reference.

** Exhibits were filed with Post-Effective Amendment No. 62, and are herein
incorporated by reference.

*** Exhibits to be filed by Amendment.