<PAGE>
DODGE & COX DODGE & COX
Stock Fund
- --------------------------------------- ---------------------------------------
Stock Fund
Established 1965
---------------------------------------
---------------------------------------
Dodge & Cox
Investment Managers
35th Floor
One Sansome Street
San Francisco
California 94104
(415) 981-1710
31st Annual Report
For Fund literature and December 31, 1995
information, please call:
(800) 621-3979 1995
- --------------------------------------- ---------------------------------------
<PAGE>
DODGE & COX
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Stock Fund
To Our Shareholders
----------------------------------------------------------------------------
1995 was an outstanding year for the U.S. equity markets, fueled by modest
economic growth and low inflation that led to declining interest rates. The
thirty year U.S. Treasury bond yield fell by almost two full percentage
points to about 6% at year-end, and corporate earnings grew by an estimated
17%. In this favorable environment, the Dodge & Cox Stock Fund had its best
annual return of the past decade during 1995. The Fund's 33.4% total return
was driven by the strong performance of various technology, finance and
pharmaceutical stocks. In addition, several companies that went through
asset redeployments and changes of leadership contributed significantly to
performance.
The net asset value of the Fund rose from $53.94 per share at the end of
1994 to $67.83 at December 31, 1995. In addition, the Fund paid income
dividends of $1.26 per share and distributed net realized short and long-
term capital gains of $2.66 per share. Assuming reinvestment of capital
gains distributions, income dividends increased 11% versus the prior year.
At year end, the Fund's total net assets were just over $1.2 billion.
Relative Performance
The Fund's performance in 1995 fell short of the 37.6% total return of the
Standard & Poor's 500 Index (S&P 500) of common stocks. However, the Fund
outperformed this benchmark in the previous three years, and thus our longer
term record remains competitive. Comparative long-term annual returns for
the Fund and S&P 500 can be found on page 3 of this report.
The Fund's shortfall versus the broad equity market return in 1995 was
primarily the result of two factors:
. During the latter portion of 1995, increased worries about the
slowing economy led investors to bid up the perceived "defensive"
market sectors, where good profits are expected to continue even if
the economy has little or no growth. The Fund holds a lower
percentage in these industries than the S&P 500. Due to the high
historic profit margins and increasing competition in these areas --
which include consumer products, telecommunications, and
pharmaceutical companies -- we believe there is significant risk of
profit erosion over the next three to four years.
. While the Fund's cash positions were typically small during the year,
the market rose so sharply that any uninvested cash lowered overall
returns versus a "cashless" index such as the S&P 500.
Individual Stock Selection
Our focus is on individual companies, rather than "top-down" macroeconomic
or sector analysis. We strive to understand these companies as best we can
and identify the best profit prospects over the next three to four years for
your current investment dollar. We are always looking for companies with
both growth potential and an average or below average market valuation.
Consider three examples of this "bottom-up" approach in the Fund portfolio:
. Citicorp has good growth opportunities due to its international
franchise. The company is bringing sophisticated financial services
to the rapidly growing middle class overseas. Recently, its profits
from this area have been growing at a healthy pace. Despite
demonstrated growth, Citicorp has a below average valuation of only
10 times the last twelve months' earnings.
. Federal Express is another company aggressively pursuing
international growth opportunities, as it builds on its commanding
position in overnight delivery to establish a leading worldwide
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DODGE & COX
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Stock Fund
capability. And yet, the company sells at 13 times earnings, well
below the S&P 500 market price-to-earnings (P/E) multiple of
approximately 17.
. Nordstrom is continuing to expand its department store chain to new
locations around the country. Even though Nordstrom's P/E multiple is
approximately that of the S&P 500, its store openings in the next few
years will be numerous, and we believe that profit opportunities look
good.
Value In Cycle Sensitive Companies
While not sector investors, we do believe particular groups of stocks offer
more attractive choices under current financial market and economic
circumstances. For example, we currently believe good opportunities exist in
the cycle sensitive part of the market. The lowest P/E multiples are in this
area, as investors worrying about recession have fled these stocks. Our job
is to identify the best individual companies in the group. Among our choices
are Weyerhaeuser, Dow Chemical, Boise Cascade, International Paper, General
Motors, Whirlpool, and Alcoa. We believe these are well-run businesses with
solid fundamentals, trading at reasonable valuations.
We have given just a few examples of our thinking. We currently own 76
companies in the Fund. Our investment staff talks to companies' management
and Wall Street analysts, uses outside consultants, reads trade journals,
etc. -- in short, looking for any useful piece of information we can get our
hands on -- to enable us to get a better idea of future profit prospects. We
know that not all of the Fund's individual securities will meet our
expectations. That's one reason why we have 76 investments in the Fund. As
someone once said, "Forecasting is difficult especially when it is about the
future."
Looking Forward
Entering 1996, we remain relatively optimistic about the outlook for U.S.
and world economic growth. Prospects are bright not only in the
industrialized markets but also in developing economies where over three
billion people are rapidly getting organized to produce and consume more.
The spread of technology is creating widespread economic opportunities, as
is the growing worldwide trend toward market liberalization and free trade.
In addition to these positive trends, inflation in the United States is low.
In the past, rising inflation has depressed P/E ratios and led to
disappointing equity returns. For the near term, we believe inflation will
remain under control, but it is a forecast that needs to be continually
revisited.
In closing, we would like to remind our shareholders that, while compelling
opportunities still exist in the equity markets, the returns from stocks in
recent years have been unusually high by historical standards. Overall, we
expect the U.S. equity markets to post "more normal" returns in 1996 and
beyond.
We would also like to recognize and thank two distinguished members of the
Stock Fund's Board of Directors who resigned at the end of 1995. Joseph M.
Fee is a former Chairman of Dodge & Cox and has served on the Board since
the inception of the Fund in 1965. Robert C. Harris also resigned at year-
end after 16 years of service. We have valued their wise counsel and wish
them well in the future.
Thank you for your continued confidence in the Dodge & Cox Stock Fund. As
always, we welcome your comments and suggestions.
For the Board of Directors,
/s/ John A. Gunn, President
January 23, 1996 John A. Gunn, President
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DODGE & COX
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Stock Fund
20 Years of Investment Performance
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE DODGE & COX
STOCK FUND AND THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE (S&P 500)
INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Dodge & Cox S&P 500
Year Stock Fund Index
<S> <C> <C>
75 10,000 10,000
76 12,221 12,399
77 11,475 11,508
78 12,557 12,243
79 15,169 14,527
80 20,204 19,231
81 19,685 18,221
82 24,029 22,146
83 30,406 27,147
84 31,980 28,857
85 44,087 38,027
86 52,159 45,125
87 58,389 47,498
88 66,421 55,387
89 84,316 72,929
90 80,027 70,656
91 97,212 92,186
92 107,728 99,203
93 127,460 109,202
94 134,022 110,640
95 178,785 152,212
</TABLE>
<TABLE>
<CAPTION>
Average annual total return for periods ended December 31, 1995 1 Year 5 Years 10 Years 20 Years
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dodge & Cox Stock Fund 33.38% 17.44% 15.03% 15.51%
S&P 500 Index 37.57 16.59 14.88 14.58
</TABLE>
The chart covers the period from January 1, 1976 to December 31, 1995. It
compares a $10,000 investment made in the Dodge & Cox Stock Fund to a
$10,000 investment made in the Standard & Poor's 500 Composite Stock Price
Index. The chart and average annual total return figures include the
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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<TABLE>
<CAPTION>
Financial Highlights Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
<C> <S> <C> <C> <C> <C> <C>
Selected data NET ASSET VALUE, BEGINNING OF YEAR............ $53.94 $53.23 $48.37 $44.85 $38.79
and ratios for a Income from investment operations:
share outstanding Net investment income......................... 1.27 1.15 1.04 1.11 1.23
throughout each Net realized and unrealized gain on
year investments................................. 16.54 1.60 7.70 3.68 6.94
------ ------ ------ ------ ------
Total income from investment operations....... 17.81 2.75 8.74 4.79 8.17
------ ------ ------ ------ ------
Distributions:
Dividends from net investment income.......... (1.26) (1.15) (1.04) (1.11) (1.24)
Distributions from net realized gain on
investments................................. (2.66) (.89) (2.84) (.16) (.87)
------ ------ ------ ------ ------
Total distributions........................... (3.92) (2.04) (3.88) (1.27) (2.11)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR.................. $67.83 $53.94 $53.23 $48.37 $44.85
====== ====== ====== ====== ======
TOTAL RETURN..................................% 33.38 5.16 18.31 10.82 21.48
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)............ $1,228 $ 543 $ 436 $ 336 $ 281
Ratio of expenses to average net assets.......% .60 .61 .62 .64 .64
Ratio of net investment income to average
net assets..................................% 2.07 2.16 1.95 2.43 2.87
Portfolio turnover rate.......................% 13 7 15 7 5
</TABLE>
<TABLE>
<CAPTION>
THE FUND'S TEN LARGEST COMMON STOCK HOLDINGS
- ------------------------------------------------------------------------------------------------------------------------------------
% of
Fund
----
<S> <C>
General Motors Corp. ............................ 3.0
Digital Equipment Corp. ......................... 3.0
Dayton-Hudson Corp. ............................. 2.8
American Express Co. ............................ 2.2
International Business Machines Corp. ........... 2.2
Masco Corp. ..................................... 2.0
Golden West Financial Corp. ..................... 2.0
Nordstrom, Inc. ................................. 1.9
Citicorp ........................................ 1.9
Deere & Co. ..................................... 1.9
----
22.9%
</TABLE>
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DODGE & COX
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Stock Fund
<TABLE>
<CAPTION>
Portfolio of Investments December 31, 1995
--------------------------------------------------------------------------------------------------------------
SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON CONSUMER: 19.9%
STOCKS: 455,000 Dayton-Hudson Corp........................................................... $ 34,125,000
92.4% 435,000 Dillard Department Stores, Inc. Class A...................................... 12,397,500
295,000 Fleming Cos., Inc............................................................ 6,084,375
601,900 Fruit of the Loom, Inc.+..................................................... 14,671,313
699,000 General Motors Corp.......................................................... 36,959,625
296,500 Genuine Parts Co............................................................. 12,156,500
1,275,000 Kmart Corp................................................................... 9,243,750
800,000 Masco Corp................................................................... 25,100,000
480,000 Melville Corp................................................................ 14,760,000
582,500 Nordstrom, Inc............................................................... 23,518,438
270,000 Procter & Gamble Co. ........................................................ 22,410,000
236,000 VF Corp...................................................................... 12,449,000
386,300 Whirlpool Corp............................................................... 20,570,475
--------------
244,445,976
FINANCE: 17.3%
665,000 American Express Co.......................................................... 27,514,375
129,000 American International Group, Inc............................................ 11,932,500
288,000 BankAmerica Corp............................................................. 18,648,000
210,000 Barnett Banks, Inc........................................................... 12,390,000
178,000 Chubb Corp................................................................... 17,221,500
347,000 Citicorp..................................................................... 23,335,750
79,000 General Re Corp.............................................................. 12,245,000
450,000 Golden West Financial Corp................................................... 24,862,500
77,000 Lehman Brothers Holdings, Inc................................................ 1,636,250
203,000 Morgan (J.P.) & Co........................................................... 16,290,750
445,000 Norwest Corp................................................................. 14,685,000
235,000 Republic New York Corp....................................................... 14,599,375
320,000 The St. Paul Cos., Inc....................................................... 17,800,000
--------------
213,161,000
ENERGY: 10.1%
432,000 Amerada Hess Corp............................................................ 22,896,000
283,000 Chevron Corp................................................................. 14,857,500
58,000 Exxon Corp................................................................... 4,647,250
239,000 Halliburton Co............................................................... 12,099,375
63,000 Mobil Corp................................................................... 7,056,000
515,000 Phillips Petroleum Co........................................................ 17,574,375
100,000 Royal Dutch Petroleum Co..................................................... 14,112,500
120,000 Schlumberger Ltd............................................................. 8,310,000
206,600 Sonat, Inc................................................................... 7,360,125
158,000 Union Pacific Resources Group, Inc........................................... 4,009,250
231,700 Western Atlas, Inc.+......................................................... 11,700,850
--------------
124,623,225
</TABLE>
See accompanying Notes to Financial Statements
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DODGE & COX
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Stock Fund
<TABLE>
<CAPTION>
Portfolio of Investments December 31, 1995
--------------------------------------------------------------------------------------------------------------
SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON BASIC INDUSTRY: 9.4%
STOCKS 436,000 Aluminum Co. of America...................................................... $ 23,053,500
(Continued) 169,100 Boise Cascade Corp........................................................... 5,855,088
38,500 Crown Vantage, Inc.+......................................................... 539,000
324,000 Dow Chemical Co.............................................................. 22,801,500
576,000 International Paper Co....................................................... 21,816,000
385,000 James River Corp. of Virginia................................................ 9,288,125
399,000 Nalco Chemical Co............................................................ 12,019,875
456,000 Weyerhaeuser Co.............................................................. 19,722,000
--------------
115,095,088
ELECTRONICS AND COMPUTERS: 8.8%
571,600 Digital Equipment Corp.+..................................................... 36,653,850
229,000 Hewlett-Packard Co........................................................... 19,178,750
293,000 International Business Machines Corp......................................... 26,882,750
216,400 Motorola, Inc................................................................ 12,334,800
930,600 Tandem Computers, Inc.+...................................................... 9,887,625
60,000 Texas Instruments, Inc....................................................... 3,105,000
--------------
108,042,775
PUBLIC UTILITIES: 5.3%
455,000 BCE, Inc..................................................................... 15,697,500
108,000 Carolina Power & Light Co.................................................... 3,726,000
408,000 Central & South West Corp.................................................... 11,373,000
192,000 Consolidated Natural Gas Co.................................................. 8,712,000
108,000 FPL Group, Inc............................................................... 5,008,500
224,600 Pacific Enterprises.......................................................... 6,344,950
129,000 SCEcorp...................................................................... 2,289,750
290,000 Texas Utilities Co........................................................... 11,926,250
--------------
65,077,950
CAPITAL EQUIPMENT: 5.2%
393,000 Caterpillar, Inc............................................................. 23,088,750
660,600 Deere & Co................................................................... 23,286,150
244,000 General Electric Co.......................................................... 17,568,000
--------------
63,942,900
BUSINESS PRODUCTS AND SERVICES: 4.9%
485,000 Donnelley (R.R.) & Sons Co................................................... 19,096,875
76,000 Dow Jones & Co............................................................... 3,030,500
307,000 Federal Express Corp.+....................................................... 22,679,625
108,000 Xerox Corp................................................................... 14,796,000
--------------
59,603,000
DIVERSIFIED TECHNOLOGY: 4.6%
625,000 Corning, Inc................................................................. 20,000,000
162,000 Grace (W.R.) & Co............................................................ 9,578,250
186,000 Minnesota Mining & Manufacturing Co.......................................... 12,322,500
251,100 Raychem Corp................................................................. 14,281,313
--------------
56,182,063
</TABLE>
See accompanying Notes to Financial Statements
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Stock Fund
<TABLE>
<CAPTION>
Portfolio of Investments December 31, 1995
--------------------------------------------------------------------------------------------------------------
SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON TRANSPORTATION: 3.5%
STOCKS 1,110,000 Canadian Pacific Ltd......................................................... $ 20,118,750
(Continued) 341,000 Union Pacific Corp........................................................... 22,506,000
--------------
42,624,750
PHARMACEUTICAL AND HEALTH: 3.4%
190,000 Pfizer, Inc.................................................................. 11,970,000
372,650 Pharmacia & Upjohn, Inc...................................................... 14,440,188
270,000 SmithKline Beecham plc ADR................................................... 14,985,000
--------------
41,395,188
--------------
TOTAL COMMON STOCKS (cost $847,361,063)................................. 1,134,193,915
--------------
PREFERRED CONSUMER: 0.2%
STOCKS: 90,092 Times Mirror Co. Conversion Preferred Series B............................... 2,331,131
0.2% --------------
TOTAL PREFERRED STOCKS (cost $1,936,755)............................... 2,331,131
--------------
PAR VALUE
SHORT-TERM $10,000,000 American Express Co., Commercial Paper 5.65%, 1996........................... 10,000,000
INVESTMENTS: 1,913,748 Eli Lilly & Co., Variable Demand Note 5.32%, 1996............................ 1,913,748
8.5% 9,790,614 General Mills, Inc., Variable Demand Note 5.58%, 1996........................ 9,790,614
16,486,584 Pitney Bowes Credit Corp., Variable Demand Note 5.49%, 1996.................. 16,486,584
1,000,000 Prudential Funding Corp., Commercial Paper 5.92%, 1996....................... 1,000,000
32,405,904 Sara Lee Corp., Variable Demand Note 5.47%, 1996............................. 32,405,904
28,926,885 Southwestern Bell Telephone Co., Variable Demand Note 5.72%, 1996............ 28,926,885
4,351,837 Wisconsin Electric Power Corp., Variable Demand Note 5.53%, 1996............. 4,351,837
--------------
TOTAL SHORT-TERM INVESTMENTS (cost $104,875,572)........................ 104,875,572
--------------
TOTAL INVESTMENTS (cost $954,173,390)......................... 101.1% 1,241,400,618
OTHER ASSETS LESS LIABILITIES................................. (1.1) (13,473,275)
----- --------------
TOTAL NET ASSETS.............................................. 100.0% $1,227,927,343
===== ==============
</TABLE>
+Non-income producing
See accompanying Notes to Financial Statements
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Stock Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities December 31, 1995
-------------------------------------------------------------------------------------------
<C> <S> <C>
ASSETS:
Investments (identified cost $954,173,390) at market quotations.......... $1,241,400,618
Cash..................................................................... 2,859,092
Dividends receivable and interest accrued................................ 2,501,096
Deferred charges......................................................... 22,284
--------------
1,246,783,090
--------------
LIABILITIES:
Payable for Fund shares redeemed......................................... 124,653
Payable for investments purchased........................................ 18,626,843
Accounts payable......................................................... 104,251
--------------
18,855,747
NET ASSET VALUE --------------
PER SHARE $67.83 NET ASSETS.......................................................... $1,227,927,343
==============
Capital NET ASSETS CONSIST OF:
shares Paid in capital.......................................................... $ 937,356,886
outstanding Accumulated undistributed net investment income.......................... 358,157
18,104,263 Accumulated undistributed net realized gain on investments............... 2,985,072
(par value Net unrealized appreciation on investments............................... 287,227,228
$1.00 each, --------------
authorized $1,227,927,343
shares ==============
50,000,000)
</TABLE>
See accompanying Notes to Financial Statements
<TABLE>
<CAPTION>
Condensed Financial Information
--------------------------------------------------------------------------------------------------
Net Asset Value Per Share Distributions Per Share
------------------------- -----------------------
Year Ended Capital
December 31 Net Assets Actual Adjusted* Income Gains
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1986 $ 45,062,188 $31.66 $35.62 $ .94 $ 3.90
1987 67,466,098 32.94 38.80 1.03 1.58
1988 81,579,776 35.26 42.84 1.07 1.11
1989 125,161,597 42.57 52.74 1.23 .82
1990 172,969,111 38.79 48.41 1.35 .28
1991 281,296,392 44.85 57.14 1.24 .87
1992 335,922,835 48.37 61.82 1.11 .16
1993 435,895,275 53.23 71.70 1.04 2.84
1994 543,475,451 53.94 73.90 1.15 .89
1995 1,227,927,343 67.83 96.66 1.26 2.66**
------ ------
$11.42 $15.11
====== ======
</TABLE>
*Adjusted for assumed reinvestment of capital gains
distributions.
**The capital gains distribution of $2.66 per share includes a
net short-term capital gain of $.20 per share which was
distributed to shareholders as ordinary income.
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<TABLE>
<CAPTION>
Statement of Operations Year Ended December 31, 1995
------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends....................................................................... $ 19,488,074
Interest........................................................................ 3,689,546
------------
23,177,620
------------
EXPENSES:
Management fees (Note 2)........................................................ 4,332,269
Custodian fees.................................................................. 142,253
Transfer agent fees............................................................. 408,967
Audit fees...................................................................... 30,350
Legal fees (Note 2)............................................................. 7,409
Shareholder reports............................................................. 130,115
S.E.C. and state registration fees.............................................. 116,421
Directors' fees................................................................. 12,000
Miscellaneous................................................................... 39,423
------------
5,219,207
------------
NET INVESTMENT INCOME........................................................... 17,958,413
------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments (excluding short-term investments)........... 45,578,106
Change in unrealized appreciation of investments.............................. 168,322,489
------------
Net realized and unrealized gain on investments............................ 213,900,595
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..................................................... $231,859,008
============
</TABLE>
See accompanying Notes to Financial Statements
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<TABLE>
<CAPTION>
Statement of Changes in Net Assets Year Ended December 31,
---------------------------------------------------------------------------------------------------------
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income................................................. $ 17,958,413 $ 10,700,399
Net realized gain on investments...................................... 45,578,106 7,317,356
Net change in unrealized appreciation................................. 168,322,489 5,767,822
-------------- ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS............................ 231,859,008 23,785,577
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................................. (17,733,583) (10,646,607)
Net realized gain from investment transactions........................ (44,623,817) (8,299,562)
-------------- ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS................................... (62,357,400) (18,946,169)
-------------- ------------
CAPITAL SHARE TRANSACTIONS:
Amounts received from sale of shares.................................. 556,016,021 146,196,163
Net asset value of shares issued in connection with
reinvestment of dividends from net investment income
and from distribution of net realized gain on investments............. 58,593,703 17,173,280
-------------- ------------
614,609,724 163,369,443
Amounts paid for shares redeemed...................................... (99,659,440) (60,628,675)
-------------- ------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS.......................... 514,950,284 102,740,768
-------------- ------------
TOTAL INCREASE IN NET ASSETS.......................................... 684,451,892 107,580,176
NET ASSETS:
Beginning of year..................................................... 543,475,451 435,895,275
-------------- ------------
End of year (including undistributed net investment income
of $358,157 and $133,327 respectively)................................ $1,227,927,343 $543,475,451
============== ============
Shares sold........................................................... 8,686,950 2,686,290
Shares issued in connection with reinvestment
of dividends from net investment income and
from distribution of net realized gain on investments................. 887,032 314,539
Shares redeemed....................................................... (1,546,148) (1,113,236)
-------------- ------------
Net increase in shares outstanding.................................... 8,027,834 1,887,593
============== ============
</TABLE>
See accompanying Notes to Financial Statements
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Notes to Financial Statements
----------------------------------------------------------------------------
1 The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management company. The Fund consistently follows
accounting policies which are in conformity with generally accepted
accounting principles for investment companies. Significant policies are:
(a) Investments are stated at market value based on latest quoted prices;
(b) Security transactions are accounted for on the trade date. Gains and
losses on securities sold are determined on the basis of identified cost.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis; (c) Distributions to shareholders of income
and capital gains are reflected in the net asset value per share computation
on the date following the date of record; (d) No provision for Federal
income taxes has been included in the accompanying financial statements
since the Fund intends to distribute all of its taxable income and otherwise
continue to comply with requirements for regulated investment companies.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements. Actual results could
differ from those estimates.
2 Under a written agreement, the Fund pays an annual management fee of 1/2 of
1% of the Fund's average weekly net asset value to Dodge & Cox, a
corporation and manager of the Fund. The agreement further provides that
Dodge & Cox shall waive its fee to the extent that such fee plus all other
expenses of the Fund exceed 3/4 of 1% of the average weekly net asset value
for the year. No waiver of management fee was required for 1995 under this
agreement. Four of the officers and directors of the Fund are officers and
employees of Dodge & Cox. Those directors who are not affiliated with Dodge
& Cox receive from the Fund an annual fee of $1,000 and an attendance fee of
$500 for each meeting of the Board of Directors attended. The Fund does not
pay any other remuneration to its officers or directors. Legal fees during
1995 were paid to Heller, Ehrman, White & McAuliffe, legal counsel for the
Fund. Robert C. Harris, an employee of that firm, was a director of the Fund
until December 31, 1995.
3 For the year ended December 31, 1995, purchases and sales of securities,
other than short-term securities, aggregated $503,580,073 and $101,471,798,
respectively. At December 31, 1995, the cost of investments for Federal
income tax purposes was equal to the cost for financial reporting purposes.
Net unrealized appreciation aggregated $287,227,228, of which $303,953,303
represented appreciated securities and $16,726,075 represented depreciated
securities.
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Stock Fund
Report of Independent Accountants
----------------------------------------------------------------------------
To the Directors and Shareholders of Dodge & Cox Stock Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Dodge & Cox
Stock Fund (the "Fund") at December 31, 1995, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended and the financial highlights for each of the
five years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
December 31, 1995 by correspondence with the custodian and brokers, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 23, 1996
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SPECIAL 1995 TAX INFORMATION (UNAUDITED)
Corporate shareholders should note that for the year ended December 31,
1995, a total of 91% of the Fund's ordinary income distributions qualified
for the corporate dividends received deduction.
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12
<PAGE>
DODGE & COX
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Stock Fund
Officers and Directors
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John A. Gunn, President and Director
President, 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
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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13
<PAGE>
DODGE & COX
======================================---=======================================
Stock Fund
THIS PAGE INTENTIONALLY LEFT BLANK
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14
<PAGE>
DODGE & COX
======================================---=======================================
Stock Fund
General Information
-------------------------------------------------------------
DODGE & COX The Fund enables investors to obtain the benefits of
STOCK FUND experienced 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,
MANAGEMENT corporations, 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 CHARGE There are no commissions on the purchase or redemption of
shares 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 a
minor 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
INVESTMENT PLAN investments of $100 or more through automatic deductions from
their bank accounts.
WITHDRAWAL PLAN Shareholders owning $10,000 or more of the Fund's shares may
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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