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March 12, 1996
File No. 2-22963
File No. 811-1294
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. 40 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 18 [X]
DODGE & COX STOCK FUND
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(exact name of registrant as specified in charter)
ONE SANSOME STREET, 35TH FLOOR, SAN FRANCISCO, CA 94104
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(Address of Principal Executive Offices) (Zip Code)
(415) 981-1710
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(Registrant's Telephone Number, including Area Code)
MITCHELL E. NICHTER, ESQ.,
HELLER, EHRMAN, WHITE AND MCAULIFFE,
333 BUSH STREET
SAN FRANCISCO, CA 94104
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(Name and Address of Agent for Service)
Approximate date of proposed public offering: March 13, 1996
--------------
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
x on March 13, 1996 pursuant to paragraph (b)
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___ 60 days after filing pursuant to paragraph (a)(1)
___ on ________ pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph(a)(2)
___ on _______________ pursuant to paragraph (a)(2) of Rule 485
CALCULATION OF REGISTRATION OF FEES UNDER THE SECURITIES ACT OF 1933
====================================================================
An indefinite number of shares are being registered by this registration
statement pursuant to Rule 24f-2 of the Investment Company Act of 1940.
The registrant filed its required 24f-2 Notice for the fiscal year ended
December 31, 1995 on February 27, 1996. A Rule 24f-2 Notice for the fiscal
year ending December 31, 1996 will be filed on or before February 28,
1997.
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DODGE & COX STOCK FUND
CROSS REFERENCE SHEET
PART A
(Prepared as part of Form N-1A)
<TABLE>
<CAPTION>
Item Number in Form N-1A Prospectus
Registration Statement Caption in Prospectus Page
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<S> <C> <C>
1 (Cover Page) Cover
2 Expense Information 1
3 Financial Highlights 2
4 Capital Stock and
Organization 9
Investment Objectives and Policies 2
Investment Restrictions 3
Investment Risks 3
5 Management and Investment
Adviser 9
Custodian and Transfer
Agent 10
Expenses 9
6 Capital Stock and
Organization 9
Shareholder Inquiries 10
Income Dividends and
Capital Gains Distributions 4
Reinvestment Plan 8
Federal Income Taxes 10
7 How to Purchase Shares 4
Pricing of Shares 7
Shareholder Services 8
8 How to Redeem Shares 5
9 (None-Not Applicable)
</TABLE>
<PAGE>
DODGE & COX STOCK FUND
CROSS REFERENCE SHEET
PART B
(Prepared as part of Form N-1A)
<TABLE>
<CAPTION>
Additional
Item Number in Form N-1A Caption in Statement of Information
Registration Statement Additional Information Page
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<S> <C> <C>
10 (Cover Page) Cover
11 Table of Contents Cover
12 (None-Not Applicable)
13 Investment Objectives and Policies 1
Investment Restrictions 1
14 Officers and Directors 3
15 Officers and Directors 3
16 Investment Adviser 4
Custodian (Page 10 of Prospectus)
Independent Accountants 5
17 Portfolio Transactions 4
18 (None-See Prospectus)
19 Purchase, Redemption and
Pricing of Shares 2
20 Additional Tax Considerations 5
21 (None-Not Applicable)
22 Performance Information 2
23 (See Cover Page)
(Annual Report incorporated by
reference. See Part C)
</TABLE>
<PAGE>
DODGE & COX STOCK FUND
PART A
Prospectus
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DODGE & COX
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Stock Fund
PROSPECTUS
MARCH 13, 1996
DODGE & COX STOCK FUND
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Dodge & Cox Stock Fund is a no-load mutual fund with the primary objective of
providing shareholders with an opportunity for long-term growth of principal and
income. A secondary objective is to achieve a reasonable current income. The
Fund seeks to achieve these objectives by investing primarily in a broadly
diversified and carefully selected portfolio of common stocks.
Shares of the Fund are purchased and redeemed at net asset value. There are no
sales, redemption or Rule 12b-1 plan distribution charges.
This prospectus sets forth concisely the information a prospective investor
should know about the Fund before investing. It should be retained for future
reference. A Statement of Additional Information about the Fund, which is
incorporated by reference in this prospectus, has been filed with the Securities
and Exchange Commission. It is available, at no charge, by writing or calling
the Fund. The date of the Statement of Additional Information is the same as the
date of this prospectus.
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Introduction.............................. 1 Transfer of Shares........................ 7
Expense Information....................... 1 Pricing of Shares......................... 7
Financial Highlights...................... 2 Shareholders Services..................... 8
Investment Objectives and Policies........ 2 Performance Information................... 8
Investment Restrictions................... 3 Management and Investment Adviser......... 9
Investment Risks.......................... 3 Expenses.................................. 9
Income Dividends and Capital Capital Stock and Organization............ 9
Gains Distributions.................... 4 Federal Income Taxes...................... 10
How to Purchase Shares.................... 4 Custodian and Transfer Agent.............. 10
How to Redeem Shares...................... 5 Report to Shareholders.................... 10
Exchanging Shares......................... 6 Shareholders Inquiries.................... 10
Telephone Transactions.................... 7
</TABLE>
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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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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DODGE & COX
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Stock Fund
INTRODUCTION
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Dodge & Cox Stock Fund operates as an open-end diversified investment company
which continuously offers its shares to the public. A unique feature of the
Dodge & Cox Stock Fund and other "no-load" funds is that shares are sold without
sales charge, while many investment companies sell their shares with a varying
sales charge. Shares may be redeemed at net asset value without any charge.
Dodge & Cox Stock Fund enables investors to obtain the benefits of experienced
and continuous investment supervision of that portion of their assets devoted to
equity investment. Shares of the Fund provide investors a broadly diversified
and carefully selected portfolio of common stocks. The Fund is designed to fit
the needs of individuals, trustees, guardians, retirement plans, institutions
and others who have funds available for long-term investment in equities.
In using the Fund, shareholders avoid the time-consuming details involved in
buying and selling individual securities. Use of the Fund also reduces the
amount of record keeping for tax purposes and simplifies the collection of
investment income and the safekeeping of individual securities.
EXPENSE INFORMATION
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SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases.................................. None
Sales Load Imposed on Reinvested Distributions................... None
Deferred Sales Load.............................................. None
Redemption Fees.................................................. None
Exchange Fee..................................................... None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees.................................................. .50%
12b-1 Fees....................................................... None
Other Expenses................................................... .10%
-----
Total Fund Operating Expenses.................................... .60%
EXAMPLE: A shareholder would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each
time period:
Time period 1 Year 3 Years 5 Years 10 Years
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Expenses $6 $19 $33 $75
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the above expense information is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. Expense figures are based on amounts incurred
during the year 1995 (See "Expenses", page 9). Wire redemptions are subject to a
$10 charge which is not reflected in the above example.
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DODGE & COX
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Stock Fund
FINANCIAL HIGHLIGHTS
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SELECTED DATA AND RATIOS (for a share outstanding throughout each year)
The following table of financial highlights, insofar as it relates to each of
the five years in the period ended December 31, 1995, has been audited by Price
Waterhouse LLP, independent accountants, whose report thereon appears in the
Fund's Annual Report to Shareholders for the year ended December 31, 1995.
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR...... $53.94 $53.23 $48.37 $44.85 $38.79 $42.57 $35.26 $32.94 $31.66 $30.95
Income from investment operations:
Net investment income................... 1.27 1.15 1.04 1.11 1.23 1.35 1.24 1.08 .99 .94
Net realized and unrealized gain (loss)
on investments.......................... 16.54 1.60 7.70 3.68 6.94 (3.50) 8.12 3.42 2.90 4.61
------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Total income (loss) from investment
operations.............................. 17.81 2.75 8.74 4.79 8.17 (2.15) 9.36 4.50 3.89 5.55
------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Distributions:
Dividends from net investment income.... (1.26) (1.15) (1.04) (1.11) (1.24) (1.35) (1.23) (1.07) (1.03) (.94)
Distributions from net realized gain
on investments.......................... (2.66) (.89) (2.84) (.16) (.87) (.28) (.82) (1.11) (1.58) (3.90)
------ ------ ------ ------ ------ ------ ------ ------ ------- ------
Total distributions..................... (3.92) (2.04) (3.88) (1.27) (2.11) (1.63) (2.05) (2.18) (2.61) (4.84)
------ ------ ------ ------ ------ ------ ------ ------ ------- ------
NET ASSET VALUE, END OF YEAR............ $67.83 $53.94 $53.23 $48.37 $44.85 $38.79 $42.57 $35.26 $32.94 $31.66
====== ====== ====== ====== ====== ====== ====== ====== ======= ======
TOTAL RETURN............................% 33.38 5.16 18.31 10.82 21.48 (5.08) 26.94 13.76 11.95 18.30
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)...... $1,228 $ 543 $ 436 $ 336 $ 281 $ 173 $ 125 $ 82 $ 67 $ 45
Ratio of expenses to average
net assets..............................% .60 .61 .62 .64 .64 .65 .65 .69 .65 .66
Ratio of net investment income to
average net assets......................% 2.07 2.16 1.95 2.43 2.87 3.47 3.12 3.09 2.68 2.95
Portfolio turnover rate.................% 13 7 15 7 5 7 4 10 12 10
</TABLE>
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INVESTMENT OBJECTIVES AND POLICIES
- ----------------------------------
The primary objective of the Fund is to provide shareholders with an opportunity
for long-term growth of principal and income. A secondary objective is to
achieve a current income which is considered reasonable for securities selected
primarily for growth potential. However, it should be recognized 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.
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DODGE & COX
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Stock Fund
The Fund is to be maintained as essentially an equity fund with investments
primarily in common stocks. Preferred stocks and debt securities which are
convertible into common stock, or which in the opinion of the Fund's manager
have predominantly common stock investment characteristics, may also be
acquired. A minimum of 65% of the Fund's total assets will be invested in common
stocks except under abnormal market conditions.
Moderate reserves in cash or short-term bonds may be held from time to time as
the Fund's manager may deem advisable. Nevertheless, the long-term emphasis
shall be the maintaining of a fully invested equity fund.
The Fund's policies as set forth above may be changed without shareholder
approval; however, such policies will not be changed without notice to
shareholders. The following policies may not be changed without approval of a
majority of the outstanding shares of the Fund:
Common stocks selected for the Fund will be predominantly those which in the
view of the Fund's manager 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.
In an attempt to minimize unforeseen risks in single securities, it is the
policy of Dodge & Cox Stock Fund 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. During rapidly changing economic and political conditions,
there may necessarily be more portfolio changes than in a more stable period. It
is the general practice of the Fund to invest in securities with ready markets,
mainly issues listed on national securities exchanges.
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INVESTMENT RESTRICTIONS
- -----------------------
The Fund has adopted certain restrictions designed to ensure diversification of
investment and reduce investment risk, which may not be changed without
shareholder approval. The Fund may not: (a) Invest more than 5% of the value of
its total assets in the securities of any one issuer except the United States
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; (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.
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INVESTMENT RISKS
- ----------------
It should be recognized that there are market risks inherent in investment and
that there is no guarantee that the objectives of the Fund will be achieved.
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. The value of stocks 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 the Fund invests will
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DODGE & COX
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Stock Fund
cause the Fund's net asset value to fluctuate. An investment in the Fund
therefore may be more suitable for long-term investors who can bear the risk of
short and long-term fluctuations in net asset value.
- --------------------------------------------------------------------------------
INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
- ------------------------------------------------
It is the practice to pay quarterly dividends from net income, when available,
on or about the 20th day of March, June, September and December. Any capital
gains distributions of net gain on sales of securities will be paid in
conjunction with the December and, if necessary, March quarterly payments. The
term "distributions" is hereinafter used to include both income dividends and
capital gains distributions. After the year-end each shareholder will be advised
for Federal income tax purposes of the amount of distributions to be reported as
ordinary dividends and as capital gains distributions.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
- ----------------------
BY MAIL: Subscriptions for shares should be addressed to the Fund c/o the Fund's
transfer agent:
REGULAR MAIL EXPRESS OR REGISTERED MAIL
Dodge & Cox Stock Fund Dodge & Cox Stock Fund
c/o Firstar Trust Company c/o Firstar Trust Company
P.O. Box 701 615 East Michigan Street, Third Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
BY WIRE: To purchase shares in the Fund by Federal wire transfer, investors
should request their bank to transmit funds to:
Firstar Bank, ABA# 0750-00022
For Credit to: Mutual Fund Services, Account #112-952-137
For Further Credit: Dodge & Cox Stock Fund,
[shareholder account number], [name of account]
Prior to having the funds wired, the shareholder should call Firstar Trust
Company at 1-800-621-3979 and advise the bank that the funds are being wired.
Investors making initial investments by wire must promptly complete an Account
Application Form and mail it to the Fund, c/o Firstar Trust Company, at either
of the addresses listed above. No account services will be established until the
completed application has been received by the Fund. IRA accounts cannot be
opened by wire.
All subscriptions are subject to acceptance by the Fund, and the price of the
shares will be the net asset value per share which is next computed after
receipt by the Fund's transfer agent, or other authorized agent or sub-agent, of
the subscription in proper form (see "Pricing of Shares", page 7). Payment for
the subscription is to be made to Dodge & Cox Stock Fund. The minimum initial
subscription is $2,500 ($1,000 for an IRA account) and must be accompanied by a
completed and signed Account Application Form (Adoption Agreement for an IRA).
The minimum for each subsequent subscription is $100. No cash or third-party
checks will be accepted and checks must be drawn on U.S. banks. If a check or
Automatic Investment Plan transaction does not clear, the purchase will be
canceled and the purchaser will be liable for any losses incurred and a $20 fee,
which is subject to change without notice. All subscriptions will be invested in
full and fractional shares and the shareholder will receive a confirmation of
all transactions. Certificates are not issued unless requested by the
shareholder or ordered by the Fund and will be issued for full shares only.
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DODGE & COX
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Stock Fund
A Social Security or Taxpayer Identification Number must be supplied and
certified on the Account Application Form before an account can be established.
The Fund may be required to withhold Federal income tax at a rate of 31%
("backup withholding") from dividend payments and redemption proceeds if a
shareholder fails to furnish the Fund with the shareholder's correct Social
Security or Taxpayer Identification Number.
The purchase or redemption of shares through broker-dealers or other financial
institutions may be subject to a service fee by those entities. The Fund
reserves the right to reject any purchase order. It is the policy of the Fund
not to accept subscriptions under circumstances or in amounts believed to be
disadvantageous to existing shareholders. It is also the policy of the Fund not
to apply or continue to use any shareholder plan under conditions believed
disadvantageous to existing shareholders.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
- --------------------
BY MAIL: Written redemption requests should be submitted to the Fund:
REGULAR MAIL EXPRESS OR REGISTERED MAIL
Dodge & Cox Stock Fund Dodge & Cox Stock Fund
c/o Firstar Trust Company c/o Firstar Trust Company
P.O. Box 701 615 East Michigan Street, Third Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
The request must specify the shareholder's name, account number, and dollar
amount or number of shares redeemed, and be properly signed. Requests for joint
accounts require signatures of all owners.
BY TELEPHONE: Telephone redemption requests can be initiated by calling Firstar
Trust Company at 1-800-621-3979. (See "Telephone Transactions", page 7.)
REDEMPTION PAYMENTS MAY BE MADE BY CHECK OR BY WIRE:
BY CHECK: Checks will be made payable to the shareholder and will be sent to the
address of record. If the proceeds of the redemption are requested to be sent to
other than the address of record or to an address that has been changed within
15 days of the redemption request, the request must be in writing with
signature(s) guaranteed.
BY WIRE: The Fund will wire redemption proceeds only to the bank account
designated on the initial Account Application Form or in written instructions --
with signature guarantee -- received in advance of the redemption order. Wire
redemption requests are subject to a $10 charge, which is subject to change
without notice.
SIGNATURE GUARANTEES: Certain redemption requests must include a signature
guarantee for each person in whose name the account is registered to protect
shareholders and the Fund from fraud. Signature guarantees may be obtained from
a commercial bank or trust company, a member firm of the New York Stock Exchange
or by another eligible guarantor institution. A notary public is not an
acceptable guarantor.
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DODGE & COX
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Stock Fund
IRA ACCOUNTS: Redemption requests for IRA accounts must be in writing and must
include instructions regarding income tax withholding. Such requests which do
not indicate an election not to have Federal income tax withheld will be subject
to withholding.
Under certain circumstances, the Fund's transfer agent may require additional
documents such as, but not restricted to, 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 the Fund's transfer agent. For any questions
regarding documentation or signature requirements for trusts, estates,
corporations, etc., please telephone Firstar Trust Company
(1-800-621-3979).
The redemption price will be the net asset value per share which is next
computed after receipt in proper form of the redemption order by the Fund's
transfer agent, or other authorized agent or sub-agent (see "Pricing of Shares",
page 7). The redemption price may be more or less than the shareholder's cost,
depending upon the market value of the 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, the Fund may delay payment
of the redemption proceeds until the purchase check has cleared, which may take
up to 12 days or more. There is no such delay when shares being redeemed were
purchased by wiring Federal Funds.
Under the Investment Company Act of 1940, the Fund may suspend the right of
redemption or postpone the date of payment when: (a) trading on the New York
Stock Exchange is restricted as determined by the Securities and Exchange
Commission or such Exchange is closed for other than weekends and holidays; (b)
the Securities and Exchange Commission has by order permitted such suspension;
or (c) an emergency, as defined by the rules of the Securities and Exchange
Commission, exists making disposal of portfolio securities or valuation of net
assets of the Fund not reasonably practicable.
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EXCHANGING SHARES
- -----------------
Shareholders may exchange their shares for shares of another Dodge & Cox Fund,
provided that the registration and Taxpayer Identification Number of both
accounts are identical. An exchange may be initiated by contacting the Fund's
transfer agent in writing or by telephone. (See "Telephone Transactions", page
7.) An exchange is treated as a redemption and a purchase and, therefore, the
shareholder may realize a taxable gain or loss. The shareholder should obtain
and read a 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 Fund
reserves the right to terminate or materially modify the exchange privilege upon
60 days advance notice to shareholders.
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DODGE & COX
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Stock Fund
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TELEPHONE TRANSACTIONS
- ----------------------
The ability to initiate redemptions and exchanges by telephone is automatically
established for the shareholder's account unless the option is specifically
declined on the account application or in writing by the shareholder. Neither
the Fund nor its transfer agent will be responsible for the authenticity of
transaction instructions received by telephone, provided that reasonable
security procedures have been followed. Security procedures currently include
recording conversations, requesting verification of account information,
restricting transmittal of proceeds to preauthorized designations, and supplying
transaction verification information. If the Fund fails to follow reasonable
procedures, it may be liable for any losses resulting from unauthorized or
fraudulent telephone transactions in the account. If an account has multiple
owners, the Fund may rely on the instructions of any one account owner. Any
shareholder wishing to remove telephone privileges should contact the Fund's
transfer agent.
Shareholders should note that purchase and sales orders will not be canceled or
modified once received in good form. If shareholders are unable to reach the
Fund by telephone (for example, during periods of unusual market activity), they
should consider sending written instructions. The Fund reserves the right to
modify or suspend telephone privileges upon reasonable notice. The Fund may also
temporarily suspend telephone options without notice when economic or market
changes make them impracticable to implement.
Purchases and sales should be made for long-term investment purposes only.
Because excessive trading may be disadvantageous to the Fund, the Fund reserves
the right to limit purchase and sale transactions, including exchanges, when a
pattern of frequent trading appears evident.
- --------------------------------------------------------------------------------
TRANSFER OF SHARES
- ------------------
Changes in account registrations -- such as changing the name(s) on an account,
or transferring shares to another person or legal entity -- must be submitted in
writing. Please telephone Firstar Trust Company (1-800-621-3979) for full
instructions.
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PRICING OF SHARES
- -----------------
The price of the shares is the net asset value per share determined by dividing
the total net asset value of the Fund by the total number of shares then
outstanding. The price is computed only as of the close of the New York Stock
Exchange on each regular business day on which the New York Stock Exchange is
open and is in effect only for properly completed subscription and redemption
orders received by the transfer agent or other authorized agent or sub-agent
prior to the close of such Exchange, presently 4:00 p.m. Eastern Time. On orders
received after the close of the New York Stock Exchange, the price will be the
net asset value per share as of the close of the New York Stock Exchange on the
next succeeding regular business day on which such Exchange is open. The
Exchange is not open on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
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DODGE & COX
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Stock Fund
In determining total net asset value of the Fund, securities owned 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, then a representative price within the limits of
the bid and ask prices for the day. Securities for which market quotations are
not readily available and all other assets are valued at fair value as
determined by or at the direction of the Board of Directors.
- --------------------------------------------------------------------------------
SHAREHOLDERS SERVICES
- ---------------------
The Fund provides the following services to shareholders. Please telephone or
write the Fund (1-800-621-3979) for applications and additional information.
REINVESTMENT PLAN: Shareholders may direct that dividend and capital gains
distributions be reinvested in additional Fund shares.
AUTOMATIC INVESTMENT PLAN: Shareholders may make regular monthly or quarterly
investments of $100 or more through automatic deductions from the shareholder's
bank account.
WITHDRAWAL PLAN: A shareholder owning $10,000 or more of the Fund's shares may
receive regular monthly or quarterly payments of $50 or more. Shares will
automatically be redeemed at net asset value per share to make the withdrawal
payments.
INDIVIDUAL RETIREMENT ACCOUNT (IRA): Individuals who have earned income or who
are entitled to certain distributions from eligible retirement plans may make or
authorize contributions to their own Individual Retirement Accounts. The Fund
has an IRA Plan available for shareholders of the Fund.
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PERFORMANCE INFORMATION
- -----------------------
The Fund may, from time to time, include figures indicating its total return in
advertisements or reports to shareholders or prospective investors. Quotations
of the 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 a specified period, will reflect the deduction of a proportional share
of Fund expenses (on an annual basis) and will assume that all dividends and
capital gains distributions are reinvested when paid. 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.
Performance information for the Fund may be compared, in reports and promotional
literature to: (i) the Standard & Poor's 500 Stock Index, the Dow Jones
Industrial Average, or various other unmanaged indices, 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 the 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
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DODGE & COX
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Stock Fund
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 the Fund's expenses and in the asset size of the Fund. Performance
information should be considered in light of the Fund's investment objectives
and policies, the types and quality of the Fund's portfolio investments, market
conditions during the particular time period and operating expenses. For a
description of the methods used to determine the Fund's total return, see
"Performance Information" in the Statement of Additional Information. Further
information about the performance of the Fund is contained in the Fund's Annual
Report which may be obtained without charge from the Fund.
- --------------------------------------------------------------------------------
MANAGEMENT AND INVESTMENT ADVISER
- ---------------------------------
The Board of Directors has overall management responsibility for the Fund. Since
January 22, 1965, Dodge & Cox, One Sansome St., San Francisco, California 94104,
a corporation, has been employed by the Stock Fund as manager and investment
adviser, subject to the direction of the Board of Directors. Dodge & Cox (herein
called the "Manager") is one of the oldest professional investment management
firms in the United States, having acted continuously as investment managers
since 1930. The Fund's investments are managed by Dodge & Cox's Investment
Policy Committee, and no one person is primarily responsible for making
investment recommendations to the Committee.
The revenues of the Manager are derived from fees for investment management
services. Its activities are devoted to investment research and the supervision
of investment accounts for individuals and institutions. In addition, the
Manager has managed two other registered mutual funds, the Dodge & Cox Balanced
Fund since 1931 and the Dodge & Cox Income Fund since 1989. The Fund pays the
Manager a management fee which is payable quarterly at the annual rate of 1/2 of
1% of the average net asset value of the Fund at the end of each week. However,
the contract provides that the Manager shall waive its fee for any calendar year
to the extent that such fee plus all other expenses of the Fund exceeds 3/4 of
1% of the average net asset value of the Fund. Under the contract provisions, no
waiver of management fee was necessary in 1995.
- --------------------------------------------------------------------------------
EXPENSES
- --------
In addition to the Manager's fee, the Fund pays other direct expenses primarily
for bank custody of assets, stock transfer agent, printing of reports and
prospectuses, registration fees, and legal and auditing services. In 1995 the
ratio of total operating expenses to average net assets of the Fund was .60%.
The Manager furnishes personnel and other facilities necessary for the operation
of the Fund for which it receives no additional compensation.
- --------------------------------------------------------------------------------
CAPITAL STOCK AND ORGANIZATION
- ------------------------------
The Fund is a corporation organized under the laws of California in 1964 and is
registered as an open-end diversified management investment company under the
Investment Company Act of 1940. The authorized capital stock of the Fund
consists of 50,000,000 shares of $1.00 par value each. All shares have the same
rights as to voting, redemption, dividends, and in liquidation. Shares have
cumulative voting rights for election of directors, which means that each share
is entitled to as many
=======================================---======================================
9
<PAGE>
DODGE & COX
=======================================---======================================
Stock Fund
votes as there are directors to be elected, all of which may be cast for one
nominee or distributed as the shareholder sees fit. 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 Fund is not required to hold annual shareholder meetings and will do so only
when required by law or when specially called in accordance with the Fund's
bylaws. Shareholders holding at least 10% of the Fund's shares may, in
accordance with the Fund's bylaws, cause a meeting of shareholders to be held
for the purpose of considering such matters as are permitted under California
law and under the Investment Company Act of 1940, including the election or
removal of directors and such shareholders will be assisted in shareholder
communication in that regard.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
- --------------------
The Fund intends to qualify each year as a regulated investment company under
the Internal Revenue Code of 1986. Under applicable sections thereof, 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 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 amounts by which
the 98% requirements exceed actual distributions.
Distributions designated as capital gains 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 the Fund and regardless of the
period of time shares of the Fund have been held. All taxable distributions,
except for capital gains distributions, are taxed to a shareholder as ordinary
income dividends whether received in cash or shares of the Fund. 91% of the
Fund's 1995 ordinary dividends qualified for the "70% deduction" for dividends
received by corporations in 1995. State taxation of distributions to
shareholders varies from state to state. Investors should consult their own tax
advisers about the Federal, state and local tax consequences of an investment in
the Fund.
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT
- ----------------------------
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701, (Telephone
1-800-621-3979), acts as custodian of all cash and securities of the Fund and
receives and disburses cash and securities for the account of the Fund. The
Trust Company also acts as transfer and dividend disbursing agent for the Fund.
- --------------------------------------------------------------------------------
REPORTS TO SHAREHOLDERS
- -----------------------
A copy of the annual report is sent to each shareholder and is supplemented
throughout the year by quarterly reports prepared by the Fund. All reports
contain financial information and a schedule showing investments in marketable
securities.
- --------------------------------------------------------------------------------
SHAREHOLDER INQUIRIES
- ---------------------
For Fund literature and information, or if you have questions concerning your
account, please telephone Firstar Trust Company (1-800-621-3979).
=======================================---======================================
10
<PAGE>
DODGE & COX
- --------------------------------------------------------------------------------
Stock Fund
Established 1965
Prospectus
March 13, 1996
- --------------------------------------------------------------------------------
DODGE & COX
Stock Fund
- --------------------------------------------------------------------------------
Officers and Directors
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 Advisors
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 1-800-621-3979
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
San Francisco, California
LEGAL COUNSEL
Heller, Ehrman, White & McAuliffe
San Francisco, California
- --------------------------------------------------------------------------------
<PAGE>
DODGE & COX STOCK FUND
PART B
Statement of Additional Information
<PAGE>
DODGE & COX STOCK FUND
c/o Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
(800) 621-3979
STATEMENT OF ADDITIONAL INFORMATION
Dated March 13, 1996
This Statement of Additional Information is not the Fund's Prospectus,
but provides additional information which should be read in conjunction with the
Fund's Prospectus dated March 13, 1996. The Fund's Prospectus and most recent
annual financial statements may be obtained from the Fund at no charge by
writing or telephoning the Fund at the address or telephone number shown above.
___________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Objectives and Policies........... 1
Investment Restrictions...................... 1
Purchase, Redemption, and Pricing of Shares.. 2
Performance Information...................... 2
Officers and Directors....................... 3
Investment Adviser........................... 4
Portfolio Transactions....................... 4
Additional Tax Considerations................ 5
Independent Accountants...................... 5
</TABLE>
____________________________
Please refer to the 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 1995 Annual Report to
Shareholders. The Financial Statements and the report (but no other material
from that Annual Report) are incorporated herein by reference. Additional copies
of the Annual Report may be obtained from the Fund at no charge by writing or
telephoning the Fund at the address or telephone number shown above.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
- ----------------------------------
The primary objective of the Fund is to provide shareholders with an
opportunity for long-term growth of principal and income. A secondary objective
is to achieve a current income which is considered reasonable for securities
selected primarily for growth potential. However, it should be recognized 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 is to be maintained as essentially an equity fund with
investments primarily in common stocks. Preferred stocks and debt securities
which are convertible into common stock, or which in the opinion of the Fund's
manager have predominantly common stock investment characteristics may also be
acquired. A minimum of 65% of the Fund's total assets will be invested in common
stocks except under abnormal market conditions.
Moderate reserves in cash or short-term bonds may be held from time to
time as the manager may deem advisable. Nevertheless, the long-term emphasis
shall be the maintaining of a fully invested equity fund.
The Fund's policy as set forth above may be changed without
shareholder approval; however, such policy will not be changed without notice to
shareholders. The following policies may not be changed without approval of a
majority of the outstanding shares of the Fund:
Common stocks selected for the Fund will be predominantly those which
in the view of the Fund's manager 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.
In an attempt to minimize unforeseen risks in single securities, it is
the policy of Dodge & Cox Stock Fund to provide adequate investment
diversification. It is not the policy to concentrate investments in any
particular industry or group of industries but 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 the Fund's manager.
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. See "Financial Highlights" in the Prospectus for portfolio
turnover rates.
It is the general practice of the Fund to invest in securities with
ready markets, mainly issues listed on national securities exchanges. The Fund
does not own any securities which are restricted as to resale under federal
securities laws and has no present intention of making investments in such
securities. The Fund does not write put and call options and has no present
intention of writing such options.
INVESTMENT RESTRICTIONS
- -----------------------
The Fund has adopted the following restrictions, which may not be
changed without the approval of 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 the Fund. The Fund may not:
1. Invest more than 5% of the value of its total assets in the securities of
any one issuer except the United States Government, nor acquire more than
10% of the voting securities of any one issuer.
2. Invest in other investment companies except in the open market at customary
brokers' commissions.
3. Invest in any company for the purpose of exercising control or management.
4. Issue senior securities.
5. 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%.
6. Underwrite securities of other issuers.
7. Purchase or sell commodities, commodity contracts or real estate
(investments in real estate trusts are not deemed purchases of real
estate).
8. Make loans to other persons except this shall not exclude the purchase of
publicly issued debt securities of a type purchased by institutional
investors.
9. Purchase securities on margin or sell short.
- 1 -
<PAGE>
10. Concentrate investments of more than 25% of the value of its total assets
in any one industry.
11. Purchase any security if as a result the Fund would then have more than 15%
of its total assets invested in securities which are illiquid, including
securities restricted as to disposition under federal securities laws.
12. Purchase warrants if as a result the Fund would then have more than 5% of
its net assets invested in warrants (valued at the lower of cost or
market), or more than 2% of its net assets invested in warrants which are
not listed on the New York or American Stock Exchanges.
13. Purchase interests in oil, gas and mineral leases or other mineral
exploration or development programs, although the Fund may invest in stocks
of companies which invest in or sponsor such programs.
14. Purchase securities of another investment company ("acquired company")
except in connection with a merger, consolidation, acquisition or
reorganization and except as otherwise permitted by Section 12(d) of the
Investment Company Act of 1940, if after such purchase more than 5% of the
value of the Fund's total assets would be invested in securities issued by
the acquired company, or the Fund would own more than 3% of the total
outstanding voting stock of the acquired company, or more than 10% of the
value of the Fund's total assets would be invested in securities of
investment companies.
15. Purchase securities of any issuer if, to the knowledge of the Fund, any
officer or director of the Fund or the Fund's manager, owns more than 1/2
of 1% of the outstanding securities of such issuer, or if such officers or
directors in the aggregate own more than 5% of the outstanding securities
of such issuer.
PURCHASE, REDEMPTION, AND PRICING OF SHARES
- -------------------------------------------
The procedures for purchasing and redeeming shares of the Fund and how
the price of shares is determined are described in the Fund's Prospectus, which
is incorporated herein by reference.
PERFORMANCE INFORMATION
- -----------------------
The Fund may, from time to time, include figures indicating its total
return in advertisements or reports to shareholders or prospective investors.
Quotations of the 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:
n
P (1 + T) = ERV
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.
The average annual total return of the Fund for the one, five and ten-year
periods ended December 31, 1995 was 33.38%, 17.44% and 15.03%, respectively.
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.
Performance information for the Fund may be compared, in reports and
promotional literature to: (i) the Standard & Poor's 500 Stock Index, the Dow
Jones Industrial Average, or various other unmanaged indices 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 the 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 the Fund's expenses and in the asset size of
the Fund. Performance information should be considered in light of the Fund's
investment objectives and policies, the types and quality of the Fund's
portfolio investments, market conditions during the particular time period and
operating expenses. Further information about the performance of the Fund is
contained in the Fund's Annual Report which may be obtained without charge from
the Fund.
- 2 -
<PAGE>
OFFICERS AND DIRECTORS
- ----------------------
<TABLE>
<CAPTION>
Aggregate 1995 Total Compensation
Position(s) Principal Occupation Compensation From Fund and
Name and Address Age with Fund During Past 5 Years from Fund Fund Complex **
- ---------------- --- --------- ------------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
John A. Gunn* 52 President and President of Dodge & Cox; $ ---- $ ----
Director Vice-President and Director,
Dodge & Cox Income Fund
W. Timothy Ryan* 58 Secretary- Senior Vice-President and ---- ----
Treasurer Secretary-Treasurer of Dodge &
and Director Cox; Secretary-Treasurer and
Director, Dodge & Cox Income
Fund; Secretary, Dodge & Cox
Balanced Fund
Katherine Herrick 42 Assistant Vice-President of Dodge & Cox ---- ----
Drake* Secretary-
Treasurer and Director
Harry R. Hagey* 54 Assistant Chairman of Dodge & Cox; ---- ----
Secretary- Chairman and Trustee, Dodge &
Treasurer and Director Cox Balanced Fund
Max Gutierrez, Jr. 65 Director Partner in Brobeck, Phleger & 2,500 7,500
One Market Plaza Harrison, Attorneys; Director,
San Francisco, Dodge & Cox Income Fund;
California Trustee, Dodge & Cox Balanced
Fund
Frank H. Roberts 76 Director Retired Partner in Pillsbury, 2,000 6,000
114 Sansome Street Madison & Sutro, Attorneys;
San Francisco, Director, Dodge & Cox Income
California Fund; Trustee, Dodge & Cox
Balanced Fund
John B. Taylor 49 Director Professor of Economics and 2,500 7,500
Department of Director of the Center for
Economics Economic Policy Research,
Stanford University Stanford University; Director,
Stanford, California Dodge & Cox Income Fund;
Trustee, Dodge & Cox Balanced
Fund
Will C. Wood 56 Director Principal, Kentwood Associates, 2,500 7,500
3000 Sand Hill Road Financial Advisers; prior to
Menlo Park, 1994, Managing Director, IDI
California Associates, Financial Advisers;
Director, Dodge & Cox Income
Fund; Trustee, Dodge & Cox
</TABLE>
* Each has been an employee of Dodge & Cox, 35th Floor, One Sansome Street, San
Francisco, California for over ten years in an executive position and is an
"interested person" of the Fund as defined in the Investment Company Act of
1940. As of February 29, 1996, each has a beneficial interest in the 111,795
shares of the Fund (0.6% of total outstanding shares) owned by Dodge & Cox
Pension Trust and 94,540 shares of the Fund (0.5% of total outstanding
shares) owned by Dodge & Cox Profit Sharing Trust.
** Total 1995 Compensation From Fund and Fund Complex consists of compensation
and fees paid to directors and trustees by all of the Dodge & Cox Funds:
Dodge & Cox Balanced Fund, Dodge & Cox Stock Fund and Dodge & Cox Income
Fund.
- ---------------------
Directors and officers of the Fund affiliated with Dodge & Cox hold a
controlling interest in 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
- 3 -
<PAGE>
directors, and has no bonus, profit-sharing, pension or retirement plan. On
February 29, 1996, the officers and directors of the Fund and members of their
families and relatives owned less than 1.0% of the outstanding shares of the
Fund.
On February 29, 1996 Charles Schwab & Co. Inc., 101 Montgomery Street, San
Francisco, California 94101 owned of record 3,595,257 shares (or 18.3% of the
outstanding shares of the Fund). The Fund knows of no other person who owns
beneficially or of record more than 5% of the outstanding shares of the Fund.
INVESTMENT ADVISER
- ------------------
Since January 22, 1965, Dodge & Cox, One Sansome Street, San Francisco,
California 94104, a corporation, has been employed by the Stock Fund as manager
and investment adviser, subject to the direction of the Board of Directors.
Dodge & Cox (herein called the "Manager") is one of the oldest professional
investment management firms in the United States, having acted continuously as
investment managers since 1930. The Fund's investments are managed by Dodge &
Cox's Investment Policy Committee, 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.
The revenues of the Manager are derived from fees for investment management
services. The Manager 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. In addition, the Manager has managed Dodge & Cox Balanced Fund
since 1931 and Dodge & Cox Income Fund since 1989. The investment advisory
contract between the Fund and the Manager was approved by a majority of the
shares of the Fund and provides for a management fee which is accrued daily and
payable quarterly to the Manager at the rate of 1/8 of 1% of the average net
asset value of the Fund at the end of each week, which is equivalent to an
annual fee of 1/2 of 1%. However, the contract provides that the Manager shall
waive its fee for any calendar year to the extent that such fee plus all other
expenses of the Fund exceeds 3/4 of 1% of the average net asset value of the
Fund. (The parties have not treated brokerage commissions and taxes on the
Fund's portfolio transactions as "expenses" for purposes of limiting the
Manager's fee.) Under the contract provisions, no waiver of management fee was
necessary in 1995, 1994 and 1993, and the Manager was paid a fee of $4,332,269
for the year 1995, $2,482,295 for the year 1994 and $1,968,527 for the year
1993. The contract may be terminated at any time without penalty upon 60 days
written notice by action of the directors, shareholders or by Dodge & Cox. The
contract will terminate automatically should there be an assignment thereof. In
addition to the Manager's fee, the Fund pays other direct expenses primarily for
bank custody of assets, stock transfer agent, printing of reports and
prospectuses (not for promotional purposes), registration fees, and legal and
auditing services. The Manager furnishes personnel and other facilities
necessary for the operation of the Fund for which it receives no additional
compensation. The Manager supervises the operations of the Fund and directs the
investment and reinvestment of its assets and furnishes all executive personnel
and office space required.
PORTFOLIO TRANSACTIONS
- ----------------------
The decisions to purchase or to sell securities for the Fund's portfolio are
based on the Manager's appraisal of the investment merits of such transactions.
The Manager provides facilities and personnel for the placement of purchase and
sale orders with brokerage firms and the negotiation of commission rates, where
applicable. One or more of several broker-dealers who the Manager believes can
obtain the most favorable prices and executions will be given orders for
transactions in securities. Subject to this primary requirement, the Manager
places some purchase and sale transactions with broker-dealers who supply
research and quotation services to the Manager. These services, which are merely
supplementary to the Manager's own research effort, include reports on
companies, industries, securities, business conditions, portfolio strategy and
performance measurement and analysis. The Manager may pay a broker-dealer a
commission in excess of that which another broker-dealer might have charged for
effecting the same transaction for the Fund, in recognition of the value of
favorable price and execution or research services if the Manager determines in
good faith that the amount of the commission is reasonable in relation to the
value of those services in terms either of the particular transaction, or in
terms of the overall responsibility of the Manager to the Fund and to any other
accounts over which the Manager exercises investment discretion. No specific
formula is used in allocating such commission business.
Periodically the Manager reviews the current commission rates and discusses
the execution capabilities and the services provided by the various broker-
dealers the Manager is utilizing in the execution of orders. Research services
furnished by the brokers through whom the Manager effects security transactions
for the Fund may be used in servicing all of the Manager's accounts, however,
all such services may not be used by the Manager in connection with the Fund.
Aggregate brokerage commissions paid by the Fund during the last three years
were as follows: $790,822 in 1995, $235,897 in 1994 and $201,339 in 1993.
$221,226 was paid to broker-dealers in 1995 who supplied research and quotation
services to the Manager.
- 4 -
<PAGE>
Brokerage commissions increased from 1994 to 1995 commensurate with the growth
in the Fund's assets. Except as indicated above, the Manager does not intend to
place portfolio transactions with any particular broker-dealers.
Investment decisions for the Fund are made independently from those of Dodge
& Cox Balanced Fund, Dodge & Cox Income Fund, and other accounts managed by the
Manager. 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 the Fund is concerned. In other cases,
however, it is believed that the ability of the Fund to participate in volume
transactions will produce better executions for the Fund. It is the opinion of
the Board of Directors that the possible advantages involved outweigh any
possible detrimental effects that may result from simultaneous transactions.
ADDITIONAL TAX CONSIDERATIONS
- -----------------------------
Any dividend or capital gains distribution reduces the net asset value per
share by the per share amount of such distribution. Distributions received
shortly after the purchase of shares are in effect a return of capital but are
subject to tax.
The discussion above and in the Fund's Prospectus regarding the Federal
income tax consequences of investing in the Fund have been prepared by the
Manager and do not purport to be complete descriptions of all tax implications
of an investment in the Fund. Shareholders are advised to consult with their own
tax advisers concerning the application of Federal, state and local taxes to an
investment in the Fund. The Fund's legal counsel has expressed no opinion in
respect thereof.
INDEPENDENT ACCOUNTANTS
- -----------------------
Price Waterhouse LLP, 555 California Street, San Francisco, California
94104, are independent accountants to the Fund, subject to annual appointment by
the Board of Directors. The accountant conducts an annual audit of the accounts
and records of the Fund, reports on the Fund's annual financial statements and
performs tax and accounting advisory services.
- 5 -
<PAGE>
DODGE & COX STOCK FUND
PART C - OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
- -------- ---------------------------------
(a) Financial Statements:
Statement of Assets and Liabilities*
Statement of Changes in Net Assets*
Statement of Operations*
Portfolio of Investments*
* Incorporated by reference to similarly named financial statement in
Registrant's 1995 Annual Report to Shareholders, including Notes to
Financial Statements and Report of Independent Accountants.
Registrant's 1995 Annual Report dated December 31, 1995, was filed
with the Commission on February 20, 1996 (File No. 811-1294).
(b) Exhibits:
B10 - Consent of Counsel.
B11 - Consent of Independent Accountants.
B12 - 1995 Annual Report -- reference is made to (a) above.
B17 - Financial Data Schedule.
All other exhibits required under this section were filed with the
original registration statement or post-effective amendments and are
herein incorporated by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
- -------- -------------------------------------------------------------
It may be deemed that Dodge & Cox, the investment adviser of
Registrant, is under common control with Registrant in that four of
the eight directors and all officers of Registrant are controlling
stockholders of Dodge & Cox.
Dodge & Cox is a California corporation. As of December 31, 1995, the
persons who are directors and officers of Registrant and also
controlling stockholders of Dodge & Cox are as follows:
<TABLE>
<CAPTION>
% of Stock Owned in
Name Dodge & Cox
---- -------------------
<S> <C>
Katherine Herrick Drake 4.65%
Harry R. Hagey 17.88
John A. Gunn 17.04
W. Timothy Ryan 9.54
</TABLE>
Item 26. NUMBER OF HOLDERS OF SECURITIES
- ------- -------------------------------
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of 12/31/95
-------------- ------------------------
<S> <C>
Capital Stock (only class) 25,649
</TABLE>
<PAGE>
Item 27. INDEMNIFICATION
- -------- ---------------
Under Section 317 of the California Corporations Code, directors,
officers, employees and other agents of Registrant are entitled to
indemnification against expenses actually and reasonably incurred by them
in the successful defense of the merits of any proceeding by reason of
the fact that such persons were agents of Registrant. In certain other
situations, Registrant is authorized to indemnify such persons if they
meet applicable standards of conduct prescribed by said Section 317.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provision, or
otherwise, the Registrant has been advised 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
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer 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 $10,000,000 with a $5,000 deductible
provision. Dodge & Cox has agreed to indemnify officers and directors of
Registrant in the amount of the deductible portion of such insurance.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
- -------- ----------------------------------------------------
Dodge & Cox is also investment adviser to Dodge & Cox Balanced Fund,
Dodge & Cox Income Fund and to numerous individuals and institutions.
Item 29. PRINCIPAL UNDERWRITERS
- -------- ----------------------
None.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
- -------- --------------------------------
Dodge & Cox
One Sansome Street, 35th Floor
San Francisco, CA 94104
Firstar Trust Company
615 East Michigan Street
Milwaukee, Wisconsin 53202
Item 31. MANAGEMENT SERVICES
- -------- -------------------
None.
Item 32. UNDERTAKINGS
- -------- ------------
(1) Registrant hereby undertakes to furnish to each person, to whom
Registrant's Prospectus is delivered, with a copy of Registrant's most
recent Annual Report to Shareholders 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 certifies that it meets all of
the requirements for the effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
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
8th day of MARCH , 1996.
DODGE & COX STOCK FUND
By:
/s/ JOHN A. GUNN
--------------------------------------
John A. Gunn, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons as
Directors on the 8th day of MARCH , 1996.
SIGNATURES
----------
/s/ KATHERINE HERRICK DRAKE /s/ FRANK H. ROBERTS
- ----------------------------- ----------------------------------
Katherine Herrick Drake Frank H. Roberts
/s/ JOHN A. GUNN /s/ W. TIMOTHY RYAN
- ----------------------------- ----------------------------------
John A. Gunn W. Timothy Ryan
/s/ HARRY R. HAGEY /s/ JOHN B. TAYLOR
- ----------------------------- ----------------------------------
Harry R. Hagey John B. Taylor
/s/ MAX GUTIERREZ, JR. /s/ WILL C. WOOD
- ----------------------------- ----------------------------------
Max Gutierrez, Jr. Will C. Wood
<PAGE>
DODGE & COX STOCK FUND
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<C> <S> <C>
ITEM 24(b)10 Consent of Counsel................................. EX-23.B10
ITEM 24(b)11 Consent of Independent Accountants................. EX-23.B11
ITEM 24(b)12 1995 Annual Report - Dodge & Cox Stock Fund........ EX-13.B12
ITEM 24(b)17 Financial Data Schedule............................ EX-27.B17
</TABLE>
<PAGE>
HELLER EHRMAN WHITE & MCAULIFFE
333 BUSH STREET
SAN FRANCISCO, CALIFORNIA 94104-2878
FACSIMILE: (415) 772-6268
TELEPHONE: (415) 772-6000
March 1, 1996
CONSENT OF COUNSEL
We hereby consent to the reference to our firm in the Prospectus
contained in Post-Effective Amendment No. 40 to the Registration Statement on
Form N-1A (registration No. 2-22963) of the Dodge & Cox Stock Fund.
Very truly yours,
/S/ HELLER, EHRMAN, WHITE & McAULIFFE
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 40 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
January 23, 1996, relating to the financial statements and financial highlights
of the Dodge & Cox Stock Fund, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Independent Accountants" in
such Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
/S/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
San Francisco, California
March 4, 1996
<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
======================================---=======================================
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
======================================---=======================================
1
<PAGE>
DODGE & COX
======================================---=======================================
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
======================================---=======================================
2
<PAGE>
DODGE & COX
======================================---=======================================
Stock Fund
20 Years of Investment Performance
----------------------------------------------------------------------------
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.
======================================---=======================================
3
<PAGE>
DODGE & COX
======================================---=======================================
Stock Fund
<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>
======================================---=======================================
4
<PAGE>
DODGE & COX
======================================---=======================================
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
======================================---=======================================
5
<PAGE>
DODGE & COX
======================================---=======================================
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
======================================---=======================================
6
<PAGE>
DODGE & COX
======================================---=======================================
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
======================================---=======================================
7
<PAGE>
DODGE & COX
======================================---=======================================
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.
======================================---=======================================
8
<PAGE>
DODGE & COX
======================================---=======================================
Stock Fund
<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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======================================---=======================================
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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
======================================---=======================================
10
<PAGE>
DODGE & COX
======================================---=======================================
Stock Fund
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.
======================================---=======================================
11
<PAGE>
DODGE & COX
======================================---=======================================
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
----------------------------------------------------------------------------
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.
======================================---=======================================
12
<PAGE>
DODGE & COX
======================================---=======================================
Stock Fund
Officers and Directors
----------------------------------------------------------------------------
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
----------------------------------------------------------------------------
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
----------------------------------------------------------------------------
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.
======================================---=======================================
13
<PAGE>
DODGE & COX
======================================---=======================================
Stock Fund
THIS PAGE INTENTIONALLY LEFT BLANK
======================================---=======================================
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
======================================---=======================================
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Dodge &
Cox Stock Fund Annual Report dated December 31, 1995, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 954,173,390
<INVESTMENTS-AT-VALUE> 1,241,400,618
<RECEIVABLES> 2,501,096
<ASSETS-OTHER> 22,284
<OTHER-ITEMS-ASSETS> 2,859,092
<TOTAL-ASSETS> 1,246,783,090
<PAYABLE-FOR-SECURITIES> 18,626,843
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 228,904
<TOTAL-LIABILITIES> 18,855,747
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 937,356,886
<SHARES-COMMON-STOCK> 18,104,263
<SHARES-COMMON-PRIOR> 10,076,429
<ACCUMULATED-NII-CURRENT> 358,157
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,985,072
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 287,227,228
<NET-ASSETS> 1,227,927,343
<DIVIDEND-INCOME> 19,488,074
<INTEREST-INCOME> 3,689,546
<OTHER-INCOME> 0
<EXPENSES-NET> 5,219,207
<NET-INVESTMENT-INCOME> 17,958,413
<REALIZED-GAINS-CURRENT> 45,578,106
<APPREC-INCREASE-CURRENT> 168,322,489
<NET-CHANGE-FROM-OPS> 231,859,008
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17,733,583
<DISTRIBUTIONS-OF-GAINS> 44,623,817
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,686,950
<NUMBER-OF-SHARES-REDEEMED> 1,546,148
<SHARES-REINVESTED> 887,032
<NET-CHANGE-IN-ASSETS> 684,451,892
<ACCUMULATED-NII-PRIOR> 133,327
<ACCUMULATED-GAINS-PRIOR> 2,030,783
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,332,269
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,219,207
<AVERAGE-NET-ASSETS> 866,453,752
<PER-SHARE-NAV-BEGIN> 53.94
<PER-SHARE-NII> 1.27
<PER-SHARE-GAIN-APPREC> 16.54
<PER-SHARE-DIVIDEND> 1.26
<PER-SHARE-DISTRIBUTIONS> 2.66
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 67.83
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
