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DODGE & COX
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Stock Fund
Established 1965
Quarterly Report
September 30, 1995
1995
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DODGE & COX
Stock Fund
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Dodge & Cox
Investment Managers
35th Floor
One Sansome Street
San Francisco
California 94104
(415) 981-1710
For Fund literature and
information, please call:
(800) 621-3979
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DODGE & COX
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Stock Fund
<TABLE>
<CAPTION>
Portfolio of Investments September 30, 1995
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SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON CONSUMER: 19.8%
STOCKS: 375,000 Dayton-Hudson Corp............................................................ $ 28,453,125
90.0% 300,000 Dillard Department Stores, Inc. Class A....................................... 9,562,500
195,000 Fleming Cos., Inc............................................................. 4,680,000
485,000 Fruit of the Loom, Inc........................................................ 10,003,125
580,000 General Motors Corp........................................................... 27,187,500
296,500 Genuine Parts Co.............................................................. 11,897,063
1,095,000 Kmart Corp.................................................................... 15,877,500
720,000 Masco Corp.................................................................... 19,800,000
440,000 Melville Corp................................................................. 15,180,000
465,000 Nordstrom, Inc................................................................ 19,443,045
270,000 Procter & Gamble Co........................................................... 20,790,000
210,908 Times Mirror Co. Series A..................................................... 6,063,605
100,000 VF Corp....................................................................... 5,100,000
267,000 Whirlpool Corp................................................................ 15,419,250
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209,456,713
FINANCE: 19.3%
595,000 American Express Co........................................................... 26,403,125
129,000 American International Group, Inc............................................. 10,965,000
268,000 BankAmerica Corp.............................................................. 16,046,500
210,000 Barnett Banks, Inc............................................................ 11,891,250
178,000 Chubb Corp.................................................................... 17,088,000
347,000 Citicorp...................................................................... 24,550,250
71,000 General Re Corp............................................................... 10,721,000
450,000 Golden West Financial Corp.................................................... 22,725,000
77,000 Lehman Brothers Holdings, Inc................................................. 1,780,625
203,000 Morgan (J.P.) & Co............................................................ 15,707,125
445,000 Norwest Corp.................................................................. 14,573,750
235,000 Republic New York Corp........................................................ 13,747,500
300,000 The St. Paul Cos., Inc........................................................ 17,512,500
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203,711,625
BASIC INDUSTRY: 9.0%
341,000 Aluminum Co. of America....................................................... 18,030,375
130,000 Boise Cascade Corp............................................................ 5,248,750
38,500 Crown Vantage, Inc............................................................ 844,613
212,000 Dow Chemical Co............................................................... 15,794,000
416,000 International Paper Co........................................................ 17,472,000
385,000 James River Corp. of Virginia................................................. 12,320,000
279,000 Nalco Chemical Co............................................................. 9,520,875
341,000 Weyerhaeuser Co............................................................... 15,558,125
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94,788,738
ENERGY: 9.0%
387,000 Amerada Hess Corp............................................................. 18,817,875
283,000 Chevron Corp.................................................................. 13,760,875
58,000 Exxon Corp.................................................................... 4,190,500
239,000 Halliburton Co................................................................ 9,978,250
63,000 Mobil Corp.................................................................... 6,276,375
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Stock Fund
<TABLE>
<CAPTION>
Portfolio of Investments September 30, 1995
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SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON ENERGY (continued)
STOCKS 440,000 Phillips Petroleum Co......................................................... $ 14,300,000
(Continued) 100,000 Royal Dutch Petroleum Co...................................................... 12,275,000
100,000 Schlumberger Ltd.............................................................. 6,525,000
171,600 Sonat, Inc.................................................................... 5,491,200
65,000 Western Atlas, Inc............................................................ 3,079,375
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94,694,450
ELECTRONICS AND COMPUTERS: 7.9%
571,600 Digital Equipment Corp........................................................ 26,079,250
184,000 Hewlett-Packard Co............................................................ 15,341,000
239,000 International Business Machines Corp.......................................... 22,555,625
121,400 Motorola, Inc................................................................. 9,271,925
830,600 Tandem Computers, Inc......................................................... 10,174,850
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83,422,650
BUSINESS PRODUCTS AND SERVICES: 5.1%
400,000 Donnelley (R.R.) & Sons Co.................................................... 15,600,000
287,000 Federal Express Corp.......................................................... 23,821,000
108,000 Xerox Corp.................................................................... 14,512,500
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53,933,500
CAPITAL EQUIPMENT: 4.5%
278,000 Caterpillar, Inc.............................................................. 15,811,250
205,200 Deere & Co.................................................................... 16,698,150
244,000 General Electric Co........................................................... 15,555,000
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48,064,400
PUBLIC UTILITIES: 4.5%
108,000 Carolina Power & Light Co..................................................... 3,631,500
408,000 Central & South West Corp..................................................... 10,404,000
192,000 Consolidated Natural Gas Co................................................... 7,752,000
108,000 FPL Group, Inc................................................................ 4,414,500
74,600 Pacific Enterprises........................................................... 1,874,325
60,000 Pacific Gas & Electric Co..................................................... 1,792,500
129,000 SCEcorp....................................................................... 2,289,750
290,000 Texas Utilities Co............................................................ 10,113,750
183,000 Unicom Corp................................................................... 5,535,750
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47,808,075
DIVERSIFIED TECHNOLOGY: 4.2%
485,000 Corning, Inc.................................................................. 13,883,125
132,000 Grace (W.R.) & Co............................................................. 8,811,000
186,000 Minnesota Mining & Manufacturing Co........................................... 10,509,000
251,100 Raychem Corp.................................................................. 11,299,500
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44,502,625
TRANSPORTATION: 3.4%
950,000 Canadian Pacific Ltd.......................................................... 15,200,000
321,000 Union Pacific Corp............................................................ 21,266,250
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36,466,250
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Portfolio of Investments September 30, 1995
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SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON PHARMACEUTICAL AND HEALTH: 3.3%
STOCKS 190,000 Pfizer, Inc................................................................... $ 10,141,250
(Continued) 270,000 SmithKline Beecham plc ADR.................................................... 13,668,750
257,000 Upjohn Co..................................................................... 11,468,625
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35,278,625
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TOTAL COMMON STOCKS (cost $700,868,166).................................. 952,127,651
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PREFERRED CONSUMER: 0.2%
STOCKS: 90,092 Times Mirror Co. Conversion Preferred Series B................................ 2,173,470
0.2% --------------
TOTAL PREFERRED STOCKS (cost $1,936,755)................................. 2,173,470
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PAR VALUE
SHORT-TERM $ 6,536,210 General Mills, Inc., Variable Demand Note 5.46%, 1995......................... 6,536,210
INVESTMENTS: 16,092,584 Pitney Bowes Credit Corp., Variable Demand Note 5.47%, 1995................... 16,092,584
7.9% 9,500,000 Prudential Funding Corp., Commercial Paper 6 1/4%, 1995....................... 9,500,000
23,916,120 Sara Lee Corp., Variable Demand Note 5.45%, 1995.............................. 23,916,120
20,157,896 Southwestern Bell Telephone Co., Variable Demand Note 5.45%, 1995............. 20,157,896
7,768,478 Wisconsin Electric Power Corp., Variable Demand Note 5.51%, 1995.............. 7,768,478
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TOTAL SHORT-TERM INVESTMENTS (cost $83,971,288).......................... 83,971,288
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TOTAL INVESTMENTS (cost $786,776,209).......................... 98.1% 1,038,272,409
OTHER ASSETS LESS LIABILITIES.................................. 1.9 19,719,466
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TOTAL NET ASSETS............................................... 100.0% $1,057,991,875
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Capital shares outstanding 15,530,823 NET ASSET VALUE PER SHARE $68.12
(par value $1.00 each)
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Condensed Statement of Operations
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For the Nine Months Ended September 30, 1995
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Investment income................................................................................. $ 15,701,941
Expenses.......................................................................................... 3,512,094
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Net investment income............................................................................. $ 12,189,847
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Net realized gain from security transactions (based on identified cost)........................... $ 42,593,033
Change in unrealized appreciation of investments.................................................. 132,591,461
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Net realized and unrealized gain on investments................................................... $175,184,494
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<CAPTION>
Condensed Financial Information
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Net Asset Value Per Share Distributions Per Share
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Year Ended Capital
December 31 Net Assets Actual Adjusted* Income Gains
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<S> <C> <C> <C> <C> <C>
1985 $ 38,493,089 $30.95 $32.47 $ 1.01 $ 1.23
1986 45,062,188 31.66 37.33 .94 3.90
1987 67,466,098 32.94 40.68 1.03 1.58
1988 81,579,776 35.26 44.92 1.07 1.11
1989 125,161,597 42.57 55.30 1.23 .82
1990 172,969,111 38.79 50.74 1.35 .28
1991 281,296,392 44.85 59.92 1.24 .87
1992 335,922,835 48.37 64.82 1.11 .16
1993 435,895,275 53.23 75.21 1.04 2.84
1994 543,475,451 53.94 77.46 1.15 .89
1995 (9/30) 1,057,991,875 68.12 98.16 .92** .18
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$12.09 $13.86
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* Adjusted for assumed reinvestment of capital gains
distributions.
** A distribution of $.32 per share from net investment income was
paid to shareholders of record September 14, 1995.
<TABLE>
<CAPTION>
Average annual total return for periods ended September 30, 1995 1 Year 5 Years 10 Years 20 Years
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<S> <C> <C> <C> <C>
Dodge & Cox Stock Fund 28.24% 18.84% 16.56% 15.83%
S&P 500 Index 29.74 17.23 16.04 14.72
</TABLE>
The average annual total return figures include reinvestment of
dividend and capital gain distributions. These results represent
past performance; past performance is no guarantee of future
results. Investment return and share price will vary, and shares
may be worth more or less at redemption than at original
purchase.
* * *
The financial information has been taken from the records of the
Fund and has not been audited by our independent accountants who
do not express an opinion thereon. The financial statements of
the Fund will be subject to audit by our independent accountants
as of the close of the calendar year.
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DODGE & COX
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Stock Fund
Officers and Directors
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John A. Gunn, President and Director
President, Dodge & Cox
Joseph M. Fee, Vice President and Director
Retired Officer, Dodge & Cox
W. Timothy Ryan, Secretary-Treasurer
and Director
Senior Vice-President, Dodge & Cox
Katherine Herrick Drake, Assistant
Secretary-Treasurer and Director
Vice-President, Dodge & Cox
Harry R. Hagey, Assistant Secretary-
Treasurer and Director
Chairman & CEO, Dodge & Cox
Max Gutierrez, Jr., Director
Partner, Brobeck, Phleger & Harrison, Attorneys
Robert C. Harris, Director
Of Counsel to Heller, Ehrman, White & McAuliffe, Attorneys
Frank H. Roberts, Director
Retired Partner, Pillsbury, Madison & Sutro, Attorneys
John B. Taylor, Director
Professor of Economics, Stanford University
Will C. Wood, Director
Principal, Kentwood Associates, Financial Advisers
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MANAGERS
Dodge & Cox
One Sansome Street, 35th Floor
San Francisco, California 94104
Telephone (415) 981-1710
CUSTODIAN & TRANSFER AGENT
Firstar Trust Company
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone (800) 621-3979
INDEPENDENT ACCOUNTANTS
Price Waterhouse, LLP
San Francisco, California
LEGAL COUNSEL
Heller, Ehrman, White & McAuliffe
San Francisco, California
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This report is submitted for the general information of the
shareholders of the Fund. The report is not authorized for
distribution to prospective investors in the Fund unless it is
accompanied by an effective prospectus.
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Stock Fund
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General Information
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DODGE & COX The Fund enables investors to obtain the benefits of experienced
STOCK FUND and continuous investment supervision. The Fund is invested in a
broadly diversified and carefully selected list of common stocks
to provide shareholders with an opportunity for long-term growth
of principal and income.
INVESTMENT Since 1930, Dodge & Cox has been providing professional
COUNSEL investment management for individuals, trustees, corporations,
MANAGEMENT pension and profit-sharing funds, and charitable institutions.
In addition, Dodge & Cox manages the Dodge & Cox Balanced Fund
and the Dodge & Cox Income Fund. Dodge & Cox is not engaged in
the brokerage business nor in the business of dealing in or
selling securities.
NO SALES There are no commissions on the purchase or redemption of shares
CHARGE of the Fund.
GIFTS Dodge & Cox Stock Fund shares provide a convenient method for
making gifts to children and to other family members. Fund
shares may be held by an adult custodian for the benefit of
minors under a Uniform Gifts/Transfers to Minors Act. Trustees
and guardians may also hold shares for a minor's benefit.
REINVESTMENT Shareholders may direct that dividend and capital gains
PLAN distributions be reinvested in additional Fund shares.
AUTOMATIC Shareholders may make regular monthly or quarterly investments
INVESTMENT of $100 or more through automatic deductions from their bank
PLAN accounts.
WITHDRAWAL Shareholders owning $10,000 or more of the Fund's shares may
PLAN elect to receive periodic monthly or quarterly payments of at
least $50. Under the plan, all dividend distributions are
automatically reinvested at net asset value with the periodic
payments made from the proceeds of the redemption of sufficient
shares.
The above plans are completely voluntary and involve no service
charge of any kind.
IRA PLAN The Fund has available an Individual Retirement Plan (IRA) for
shareholders of the Fund.
Fund literature and details on all of these plans are available
from the Fund upon request.
DODGE & COX STOCK FUND
c/o Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone (800) 621-3979
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Dodge & Cox
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Stock Fund
Dear Shareholder: October 1995
The Dodge & Cox Stock Fund had a total return of 8.0% for the quarter ended
September 30, 1995, matching the return for the Standard & Poor's 500 Index (S&P
500) over the same period. For the first nine months of 1995 the Stock Fund had
a total return of 28.6%, slightly below the 29.8% total return of the S&P 500.
Our performance year to date has largely been driven by the appreciation of
bank, insurance and technology companies in the Fund. Of the nine stocks in our
portfolio that returned more than 50% in the last nine months, five were
financial companies and two were in the technology area.
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Average Annual Total Return
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<CAPTION>
For periods ended September 30, 1995 1 Year 5 Years 10 Years 20 Years
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<S> <C> <C> <C> <C>
Dodge & Cox Stock Fund 28.24% 18.84% 16.56% 15.83%
S&P 500 Index 29.74 17.23 16.04 14.72
</TABLE>
The average annual total return figures include reinvestment of dividend and
capital gain distributions. These results represent past performance; past
performance is no guarantee of future results. Investment return and share price
will vary, and shares may be worth more or less at redemption than at original
purchase.
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Portfolio Composition
As we noted in last quarter's letter, our long term strategy results in a
portfolio that does not change substantially from quarter to quarter. It is no
surprise then that our positions are largely unchanged since June 30, 1995. The
portfolio continues to emphasize companies in the cycle-sensitive and finance
sectors, and the retail industry.
Our representation in a given industry is a function of many separate investment
decisions. We begin with in-depth research into a company. After thorough
analysis, if we conclude that the company's future earnings power over the next
three to five years is attractive in relation to its current price, we buy it.
It often happens that an operating environment that makes one company in a given
industry attractive will also make other companies in that same industry good
long term investment choices. As we identify more companies to buy in a
particular area, the percentage of the portfolio invested in that industry will
rise.
Retail Pressures Continue
Using this approach, over the past two years we have found an increasing number
of attractive investments in retailing. Profit pressure in retailing continues,
and stock prices reflect the conventional wisdom that future earnings will be
depressed. However, we see many company managements responding and dealing with
the tough environment. While all five of our retail holdings and both of the
wholesale distributors in our portfolio have generated returns lower than the
S&P 500 so far this year, we have maintained our positions in these companies.
We believe that over the longer term, management actions will lead to positive
earnings surprises and good investment returns.
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Dodge & Cox One Sansome Street San Francisco, California 94104
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Dodge & Cox
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Stock Fund
Sell Discipline
In contrast to the retailing industry, the Fund's holdings in the
electronic/computer industry have been an important positive contributor to
performance in 1995. However, we have gradually reduced our positions in this
area, from 11.0% of the portfolio at the start of 1995 to 8.7% at the end of
September 1995. Such decisions to sell--whether liquidating an entire position
or just trimming a holding--begins with a hypothetical question we continually
pose: "What would we buy in our portfolio today, if we knew that all holdings
would be locked in for the next three to five years?" This long term orientation
leads to low portfolio turnover. Of the 75 stocks held in the Stock Fund today,
49 of those were in the portfolio at the end of 1991.
Our long term orientation, however, is not automatic. In July of 1994, we
purchased Apple Computer at $27 per share. The price rose rapidly. In the face
of the higher stock valuation, our long term worries about the Company's
competitive position in personal computers weighed heavier. We sold Apple four
months later at $40 per share. Why? Because we would not have purchased Apple at
$40 for the three to five year time horizon of our portfolio.
Increasing Investment in Energy Sector
As we trim our portfolio, we also continue to seek new attractive long term
investments. Five new equity positions in the Fund were established during the
third quarter, including two energy-related companies. Subsequent to the end of
the quarter, the Fund also participated in the initial public offering of Union
Pacific Resources, a leading oil and gas exploration and production company. We
have followed U.P. Resources for many years as a shareholder in its parent
company, Union Pacific. We have stepped up our research efforts in the energy
sector as the price of petroleum and natural gas products is currently
depressed, while worldwide energy demand is increasing.
In closing, we want to thank you for your continued confidence in Dodge & Cox.
We believe that our ongoing commitment to independent fundamental research and
individual security selection will continue to benefit Fund shareholders in the
years ahead.
Dodge & Cox
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