<PAGE>
D O D G E & C O X
Stock Fund
- --------------------------------------------------------------------------------
Dodge & Cox
Investment Managers
35th Floor
One Sansome Street
San Francisco
California 94104
(415) 981-1710
For Fund literature and
information, please call:
(800) 621-3979
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.
- --------------------------------------------------------------------------------
D O D G E & C O X
- --------------------------------------------------------------------------------
Stock Fund
Established 1965
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
32nd Annual Report
December 31, 1996
1996
================================================================================
<PAGE>
D O D G E & C O X
================================================================================
Stock Fund
Fellow Shareholders
- --------------------------------------------------------------------------------
U.S. equity markets had a strong 1996, following the outstanding performance of
1995 - partly the result of continued modest economic growth and relatively low
inflation. The Dodge & Cox Stock Fund had a total return of 22.3% in 1996, 0.7%
below the return of the Standard & Poor's 500 Index (S&P 500) of common stocks.
Return figures for longer time periods are presented on page 3 of this report.
Performance Review
The net asset value per share of the Fund rose from $67.83 at the end of 1995 to
$79.81 at December 31, 1996. The Fund paid dividends of $1.29 per share and
distributed net realized short and long-term capital gains of $1.68 per share.
At year-end 1996, 92% of the Fund was invested in stocks and 8% in cash
equivalents, and total net assets were $2.3 billion.
The Fund's 1996 return was driven by the strong appreciation of a number of the
Fund's holdings in the banking, retail, consumer products and energy industries.
Among the most significant contributors to return were IBM, American Express,
BankAmerica, Citicorp and Dayton-Hudson.
Holdings that did not perform well in 1996 included those in the consumer
durables (e.g., appliances and autos), industrial commodities, business services
and electric utility industries. The Fund's investments that registered the
weakest performance included Digital Equipment, R.R. Donnelley, Nordstrom and
Whirlpool.
New Holdings
Because we invest with a long-term investment horizon, it is critical that we
develop an understanding of the key factors that we believe will affect an
individual company's business fortunes. This analysis, along with our
assessment of the company's relative and absolute value, are the primary
elements of our investment approach. To provide insight into how we invest your
money, we highlight two of the new holdings in the Fund in 1996. Please note
that these companies are discussed as an example of our research and investment
process, not because we believe they are necessarily more attractive than the
Fund's other investments.
. Bausch & Lomb is a leading provider of eye care products and
accessories. The company's profitability has been under pressure due to
a shift in consumer preferences and aggressive competition in contact
lenses and sunglasses. However, the company does have a strong
franchise, and its new management has moved to shore up its product
line. The current low valuation, relative to its competitors and to the
market, suggests that expectations for a recovery are very modest.
However, we believe the company's long-term strategy is sound and should
lead to improvement in sales and earnings.
. Sony is a world leader in the consumer electronics and entertainment
industries. The Sony brand name is among the world's most respected and
recognizable. The widely publicized problems at the company's film
studio have drawn attention away from Sony's core consumer electronics
franchise and its profitable music and television businesses. This has
helped push its stock valuation to near-historic lows. Our analysis
suggests that new digital products should re-vitalize growth and margins
in the consumer electronics business. As management takes steps to turn
the film business around, we believe investors should begin to
appreciate the strength of the company's world-wide market presence and
growth prospects.
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1
<PAGE>
D O D G E & C O X
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Stock Fund
A Historical Market Perspective
Our investment philosophy emphasizes individual stock selection and utilizes a
long-term (three to five year) investment horizon. Although we do not rely on
"top-down" macro-economic or sector analysis, we think it is useful to review
some of the forces that we believe have propelled the market to its current
levels, and to evaluate what the future might hold for equity investors. Is it
the last half hour of a drunken party, as an article in The Wall Street Journal
recently stated, or are there substantive forces at work?
In mid-1982, with inflation at high levels and the U.S. economy in recession,
the Dow Jones Industrial Average dropped to 800. At year-end 1996, this Index
was eight times higher, at over 6400. Appreciation was not continuous and
smooth, however. The October 1987 crash and the 1990 decline in the wake of the
Iraqi invasion of Kuwait created potholes on the road to high returns. Despite
these "bumps", the S&P 500's annual return of 16.8% over the past 15 years has
been well above the annual average of 10.7% experienced during the last 70
years. We believe there are a number of factors behind the 1982-1996 advance.
Please note that the following are our opinions - in investing, it is never
entirely clear what has created past returns, let alone what might happen in the
future.
The decline in inflation and interest rates were key factors in the market's
appreciation. Lower inflation led to an improvement in the quality of earnings,
and along with lower interest rates, caused an expansion in the price-to-
earnings (P/E) ratio (an indication of the value investors place on the expected
stream of earnings.) The P/E ratio for the S&P 500 increased from the high
single digits to its current level in the high-teens.
Corporate profits have also expanded significantly. Profitability has increased
in part due to an improving business cycle and the extensive restructuring
undertaken by many U.S. companies in the 1980's and 1990's. Companies changed
due to the need to incorporate rapid advances in technology, to keep up with
vigorous global competition, and because of pressure on company managements to
act more in the long-term interest of shareholders. As a result, U.S. companies
are in much better position to take advantage of emerging global economic
opportunities.
A third factor has been the ascendancy of free market economies during the past
decade. As a result, more than three billion people in the developing world are
organizing to produce and consume more. International trade and an integrating
world economy bode well for worldwide economic activity. Roughly one-third of
the revenues of companies in the S&P 500 are generated outside the United
States, and we believe valuations in the U.S. stock market are more and more
reflective of global economic progress.
In Closing, a Word of Caution
In addition to these positive trends, the U.S. economy has performed well, and
is in the sixth year of an expansion that still shows few signs of the excesses
which could lead to a recession. We believe the stock market advance of the
last 15 years has been propelled by positive and real fundamental economic
developments. However, a great deal of the good news has been incorporated into
stock prices. We believe future returns in stocks are unlikely to equal recent
high past returns. However, low inflation and continued world economic growth
should provide an environment for reasonable long-term returns from equities.
In an era where the stock market is likely to show less appreciation than in
recent years, we believe our emphasis on individual security selection and price
discipline will be important factors in seeking attractive relative returns over
the long-term.
Thank you for your continued confidence in the Dodge & Cox Stock Fund. As
always, we welcome your comments and questions.
For the Board of Directors,
/s/ John A. Gunn, President
January 24, 1997 John A. Gunn, President
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2
<PAGE>
D O D G E & C O X
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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
<TABLE>
<CAPTION>
[LINE GRAPH APPEARS HERE]
DODGE & COX
S&P 500 INDEX STOCK FUND
------------- -----------
<S> <C> <C>
76 $ 10,000 $ 10,000
77 9,281 9,390
78 9,873 10,275
79 11,715 12,412
80 15,509 16,531
81 14,695 16,106
82 17,860 19,659
83 21,893 24,877
84 23,272 26,165
85 30,668 36,072
86 36,390 42,676
87 38,305 47,776
88 44,667 54,350
89 58,813 68,992
90 56,978 65,480
91 74,339 79,546
92 79,996 88,153
93 88,060 104,302
94 89,222 109,684
95 122,743 146,297
96 150,925 178,870
<CAPTION>
Average annual total return for periods ended December 31, 1996 1 Year 5 Years 10 Years 20 Years
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dodge & Cox Stock Fund 22.26% 17.59% 15.41% 15.51%
S&P 500 Index 22.96 15.21 15.29 14.54
</TABLE>
The chart covers the period from January 1, 1977 to December 31, 1996. 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 (S&P 500)
Index. The Fund's total returns include the reinvestment of dividend and capital
gains distributions. The S&P 500 Index is a broad-based, unmanaged measure of
common stocks. Index returns include dividends and, unlike Fund returns, do not
reflect fees or expenses. Past performance does not guarantee future results.
Investment return and share price will fluctuate with market conditions, and
investors may have a gain or loss when shares are sold.
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3
<PAGE>
D O D G E & C O X
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Stock Fund
<TABLE>
<CAPTION>
Financial Highlights Year Ended December 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
Selected data and ratios for a share outstanding throughout each year
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $67.83 $53.94 $53.23 $48.37 $44.85
Income from
investment operations:
Net investment
income............. 1.28 1.27 1.15 1.04 1.11
Net realized and
unrealized gain.... 13.67 16.54 1.60 7.70 3.68
------ ------ ------ ------ ------
Total income from
investment
operations......... 14.95 17.81 2.75 8.74 4.79
------ ------ ------ ------ ------
Distributions:
Dividends from net
investment income.. (1.29) (1.26) (1.15) (1.04) (1.11)
Distributions from
net realized gain
on investments..... (1.68) (2.66) (.89) (2.84) (.16)
------ ------ ------ ------ ------
Total distributions (2.97) (3.92) (2.04) (3.88) (1.27)
------ ------ ------ ------ ------
Net asset value,
end of year........ $79.81 $67.83 $53.94 $53.23 $48.37
====== ====== ====== ====== ======
Total return....... 22.26% 33.38% 5.16% 18.31% 10.82%
Ratios/Supplemental Data:
Net assets, end of
year (millions).... $2,252 $1,228 $ 543 $ 436 $ 336
Ratio of expenses
to average net
assets............. .59% .60% .61% .62% .64%
Ratio of net
investment income
to average net
assets............. 1.79% 2.07% 2.16% 1.95% 2.43%
Portfolio turnover
rate............... 10% 13% 7% 15% 7%
Average commission
rate paid*......... $.0506
</TABLE>
* Represents the average commission rate paid per share on securities
transactions for which commissions were charged. Disclosure is
required by the S.E.C. beginning in 1996.
<TABLE>
<CAPTION>
THE FUND'S TEN LARGEST STOCK HOLDINGS AS OF DECEMBER 31, 1996
------------------------------------------------------------------------
% of
Fund
------
<S> <C>
Dayton-Hudson Corp.................................. 2.7
General Motors Corp................................. 2.7
International Business Machines Corp................ 2.6
American Express Co................................. 2.5
Citicorp............................................ 2.4
Digital Equipment Corp.............................. 2.2
Donnelley (R.R.) & Sons Co.......................... 2.0
Aluminum Co. of America............................. 1.9
Amerada Hess Corp................................... 1.7
Golden West Financial Corp.......................... 1.7
</TABLE>
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4
<PAGE>
D O D G E & C O X
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Stock Fund
<TABLE>
<CAPTION>
Portfolio of Investments December 31, 1996
-------------------------------------------------------------------------
SHARES MARKET VALUE
COMMON STOCKS:
92.0%
<C> <S> <C>
CONSUMER: 22.3%
615,000 Bausch & Lomb Inc........................... $ 21,525,000
1,800 CVS Corp.................................... 74,475
1,562,000 Dayton-Hudson Corp.......................... 61,308,500
850,000 Dillard Department Stores, Inc. Class A..... 26,243,750
320,000 Fleming Cos., Inc........................... 5,520,000
109,488 Footstar, Inc.+............................. 2,723,514
950,000 Ford Motor Co............................... 30,281,250
601,900 Fruit of the Loom, Inc.+.................... 22,796,963
1,090,000 General Motors Corp......................... 60,767,500
356,500 Genuine Parts Co............................ 15,864,250
675,000 James River Corp. of Virginia............... 22,359,375
2,610,000 Kmart Corp.+................................ 27,078,750
1,028,700 Masco Corp.................................. 37,033,200
890,000 Nordstrom, Inc.............................. 31,539,375
189,400 Procter & Gamble Co......................... 20,360,500
505,000 Sony Corp. ADR.............................. 33,140,625
173,000 Unilever NV................................. 30,318,250
316,200 VF Corp..................................... 21,343,500
671,300 Whirlpool Corp.............................. 31,299,363
------------
501,578,140
FINANCE: 18.1%
1,000,000 American Express Co......................... 56,500,000
192,000 American International Group, Inc........... 20,784,000
363,000 BankAmerica Corp............................ 36,209,250
640,000 Barnett Banks, Inc.......................... 26,320,000
620,000 Chubb Corp.................................. 33,325,000
522,000 Citicorp.................................... 53,766,000
138,000 General Re Corp............................. 21,769,500
618,400 Golden West Financial Corp.................. 39,036,500
77,000 Lehman Brothers Holdings, Inc............... 2,415,875
303,000 Morgan (J.P.) & Co.......................... 29,580,375
550,000 Norwest Corp................................ 23,925,000
413,000 Republic New York Corp...................... 33,711,125
510,000 The St. Paul Cos., Inc...................... 29,898,750
------------
407,241,375
ELECTRONICS AND COMPUTERS: 11.0%
1,337,000 Digital Equipment Corp.+.................... 48,633,375
598,000 Hewlett-Packard Co.......................... 30,049,500
386,000 International Business Machines Corp........ 58,286,000
506,400 Motorola, Inc............................... 31,080,300
1,000,000 National Semiconductor Corp.+............... 24,375,000
596,600 Sybase, Inc.+............................... 9,955,763
1,050,600 Tandem Computers, Inc.+..................... 14,445,750
496,000 Texas Instruments, Inc...................... 31,620,000
------------
248,445,688
</TABLE>
See accompanying Notes to Financial Statements
================================================================================
5
<PAGE>
D O D G E & C O X
================================================================================
Stock Fund
<TABLE>
<CAPTION>
Portfolio of Investments December 31, 1996
-------------------------------------------------------------------------
SHARES MARKET VALUE
COMMON STOCKS:
(Continued)
<C> <S> <C>
BASIC INDUSTRY: 9.8%
681,000 Aluminum Co. of America..................... $ 43,413,750
620,000 Boise Cascade Corp.......................... 19,685,000
633,000 Champion International Corp................. 27,377,250
1,400 Crown Vantage, Inc.+........................ 11,812
489,000 Dow Chemical Co............................. 38,325,375
771,000 International Paper Co...................... 31,129,125
370,000 Lubrizol Corp............................... 11,470,000
544,000 Nalco Chemical Co........................... 19,652,000
621,000 Weyerhaeuser Co............................. 29,419,875
------------
220,484,187
ENERGY: 8.5%
678,200 Amerada Hess Corp........................... 39,250,825
378,000 Chevron Corp................................ 24,570,000
58,000 Exxon Corp.................................. 5,684,000
239,000 Halliburton Co.............................. 14,399,750
63,000 Mobil Corp.................................. 7,701,750
740,000 Phillips Petroleum Co....................... 32,745,000
171,000 Royal Dutch Petroleum Co.................... 29,198,250
730,024 Union Pacific Resources Group, Inc.......... 21,353,202
231,700 Western Atlas, Inc.+........................ 16,421,737
------------
191,324,514
BUSINESS PRODUCTS AND SERVICES: 5.5%
1,440,000 Donnelley (R.R.) & Sons Co.................. 45,180,000
552,200 Dow Jones & Co.............................. 18,705,775
873,600 Federal Express Corp.+...................... 38,875,200
390,000 Xerox Corp.................................. 20,523,750
------------
123,284,725
PUBLIC UTILITIES: 5.1%
601,500 BCE, Inc.................................... 28,721,625
749,000 Edison International........................ 14,886,375
296,900 FPL Group, Inc.............................. 13,657,400
639,600 Pacific Enterprises......................... 19,427,850
460,000 Texas Utilities Co.......................... 18,745,000
1,081,300 TransCanada PipeLines Ltd................... 18,922,750
------------
114,361,000
CAPITAL EQUIPMENT: 2.9%
418,000 Caterpillar, Inc............................ 31,454,500
826,200 Deere & Co.................................. 33,564,375
------------
65,018,875
DIVERSIFIED TECHNOLOGY: 2.9%
625,000 Corning, Inc................................ 28,906,250
186,000 Minnesota Mining & Manufacturing Co......... 15,414,750
251,100 Raychem Corp................................ 20,119,387
------------
64,440,387
</TABLE>
See accompanying Notes to Financial Statements
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6
<PAGE>
D O D G E & C O X
================================================================================
Stock Fund
<TABLE>
<CAPTION>
Portfolio of Investments December 31, 1996
------------------------------------------------------------------------------
SHARES MARKET VALUE
COMMON STOCKS
(Continued)
<C> <S> <C>
TRANSPORTATION: 2.7%
1,110,000 Canadian Pacific Ltd....................... $ 29,415,000
516,000 Union Pacific Corp......................... 31,024,500
-------------
60,439,500
PHARMACEUTICAL AND HEALTH: 2.3%
810,000 Pharmacia & Upjohn, Inc.................... 32,096,250
300,000 SmithKline Beecham plc ADR................. 20,400,000
-------------
52,496,250
MISCELLANEOUS: 0.9%
524,300 Meditrust.................................. 20,972,000
-------------
Total Common Stocks (cost $1,520,207,907). 2,070,086,641
-------------
PREFERRED
STOCKS:
0.1%
CONSUMER: 0.1%
64,100 Kmart Financing I, 73/4% Trust Convertible
Preferred................................. 3,124,875
-------------
Total Preferred Stocks (cost $3,205,000).. 3,124,875
-------------
SHORT-TERM
INVESTMENTS:
7.1%
PARVALUE
$39,322,153 General Mills, Inc., Variable Demand Note
5.50%, 1997.............................. 39,322,153
38,207,521 Pitney Bowes Credit Corp., Variable
Demand Note 5.51%, 1997.................. 38,207,521
23,000,000 Prudential Funding Corp., Commercial
Paper 6.10%, 1997........................ 23,000,000
28,687,569 Sara Lee Corp., Variable Demand Note
5.49%, 1997.............................. 28,687,569
31,132,478 Southwestern Bell Telephone Co., Variable
Demand Note 5.49%, 1997.................. 31,132,478
884,000 Wisconsin Electric Power Corp., Variable
Demand Note 5.55%, 1997.................. 884,000
-------------
Total Short-Term Investments (cost
$161,233,721).......................... 161,233,721
-------------
TOTAL INVESTMENTS (cost $1,684,646,628)........ 99.2% 2,234,445,237
OTHER ASSETS LESS LIABILITIES................... 0.8 17,601,357
----- -------------
TOTAL NET ASSETS................................ 100.0% $2,252,046,594
===== =============
+Non-income producing
</TABLE>
See accompanying Notes to Financial Statements
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7
<PAGE>
D O D G E & C O X
================================================================================
Stock Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities December 31, 1996
-------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments (identified cost $1,684,646,628) at market
quotations............................................... $2,234,445,237
Cash...................................................... 13,722,855
Dividends receivable and interest accrued................. 4,854,356
Receivable for investments sold........................... 6,763,114
Prepaid expenses.......................................... 24,325
--------------
2,259,809,887
--------------
LIABILITIES:
Payable for Fund shares redeemed.......................... 3,108,732
Payable for investments purchased......................... 4,380,585
Accounts payable.......................................... 273,976
--------------
7,763,293
--------------
Net asset value
per share $79.81
NET ASSETS................................................ $2,252,046,594
==============
Capital
shares outstanding
28,217,910
(par value $1.00 each,
authorized shares
50,000,000)
NET ASSETS CONSIST OF:
Paid in capital........................................... $1,686,642,196
Accumulated undistributed net investment income........... 212,686
Accumulated undistributed net realized gain on investments 15,393,103
Net unrealized appreciation on investments................ 549,798,609
==============
$2,252,046,594
</TABLE>
See accompanying Notes to Financial Statements
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8
<PAGE>
D O D G E & C O X
================================================================================
Stock Fund
<TABLE>
<CAPTION>
Statement of Operations Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends........................................ $ 34,157,636
Interest......................................... 6,526,736
------------
40,684,372
------------
EXPENSES:
Management fees (Note 2)......................... 8,541,819
Custodian fees................................... 181,420
Transfer agent fees.............................. 710,155
Accounting and audit fees........................ 49,461
Legal fees....................................... 2,239
Shareholder reports.............................. 186,034
S.E.C. and state registration fees............... 290,316
Directors' fees.................................. 10,000
Miscellaneous.................................... 48,385
------------
10,019,829
------------
NET INVESTMENT INCOME............................ 30,664,543
------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments............... 56,765,691
Change in unrealized appreciation of
investments................................... 262,571,381
------------
Net realized and unrealized gain on
investments.................................. 319,337,072
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...................... $350,001,615
============
</TABLE>
See accompanying Notes to Financial Statements
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9
<PAGE>
D O D G E & C O X
================================================================================
Stock Fund
<TABLE>
<CAPTION>
Statement of Changes in Net Assets Year Ended December 31,
- --------------------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income........................ $ 30,664,543 $ 17,958,413
Net realized gain............................ 56,765,691 45,578,106
Net change in unrealized appreciation........ 262,571,381 168,322,489
-------------- --------------
Net increase in net assets from operations... 350,001,615 231,859,008
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................ (30,810,014) (17,733,583)
Net realized gain............................ (44,357,660) (44,623,817)
-------------- --------------
Total distributions to shareholder........... (75,167,674) (62,357,400)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Amounts received from sale of shares......... 929,688,437 556,016,021
Net asset value of shares issued
in reinvestment of distributions........... 70,061,570 58,593,703
-------------- --------------
999,750,007 614,609,724
Amounts paid for shares redeemed............. (250,464,697) (99,659,440)
-------------- --------------
Net increase from capital share transactions. 749,285,310 514,950,284
-------------- --------------
Total increase in net assets................. 1,024,119,251 684,451,892
NET ASSETS:
Beginning of year............................ 1,227,927,343 543,475,451
-------------- --------------
End of year (including undistributed net
investment income of $212,686 and
$358,157, respectively).................... $2,252,046,594 $1,227,927,343
============== ==============
Shares sold.................................. 12,594,155 8,686,950
Shares issued in reinvestment of
distributions.............................. 909,380 887,032
Shares redeemed.............................. (3,389,888) (1,546,148)
-------------- --------------
Net increase in shares outstanding........... 10,113,647 8,027,834
============== ==============
</TABLE>
See accompanying Notes to Financial Statements
================================================================================
10
<PAGE>
D O D G E & C O X
================================================================================
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) Securities are stated at
market value based on latest quoted prices; (b) Security
transactions are accounted for on the trade date in the financial
statements; (c) Gains and losses on securities sold are determined
on the basis of identified cost; (d) Dividend income is recorded on
the ex-dividend date and interest income is recorded on the accrual
basis; (e) Distributions to shareholders of income and capital
gains are reflected in the net asset value per share computation on
the ex-dividend date; (f) 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 1996 under this agreement. All
officers and four of the 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.
3 For the year ended December 31, 1996, purchases and sales of
securities, other than short-term securities, aggregated
$769,890,607 and $152,541,209, respectively. At December 31, 1996,
the cost of investments for Federal income tax purposes was equal
to the cost for financial reporting purposes. Net unrealized
appreciation aggregated $549,798,609, of which $569,394,736
represented appreciated securities and $19,596,127 represented
depreciated securities.
================================================================================
11
<PAGE>
D O D G E & C O X
================================================================================
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, 1996, 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, 1996 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 24, 1997
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Special 1996 Tax Information (unaudited)
Corporate shareholders should note that for the year ended December
31, 1996, a total of 72% of the Fund's ordinary income
distributions qualified for the corporate dividends received
deduction.
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12
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D O D G E & C O X
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Stock Fund
Officers and Directors
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John A. Gunn, President and Director
President, Dodge & Cox
W. Timothy Ryan, Secretary-Treasurer
and Director
Senior Vice-President, Dodge & Cox
Katherine Herrick Drake, Assistant
Secretary-Treasurer and Director
Vice-President, Dodge & Cox
Harry R. Hagey, Director
Chairman & CEO, Dodge & Cox
Thomas M. Mistele, Assistant
Secretary-Treasurer
General Counsel, Dodge & Cox
Max Gutierrez, Jr., Director
Partner, Brobeck, Phleger & Harrison, Attorneys
Frank H. Roberts, Director
Retired Partner, Pillsbury, Madison & Sutro, Attorneys
John B. Taylor, Director
Professor of Economics, Stanford University
Will C. Wood, Director
Principal, Kentwood Associates, Financial Advisers
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MANAGERS
Dodge & Cox
One Sansome Street, 35th Floor
San Francisco, California 94104
Telephone (415) 981-1710
CUSTODIAN & TRANSFER AGENT
Firstar Trust Company
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone (800) 621-3979
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
San Francisco, California
LEGAL COUNSEL
Heller, Ehrman, White & McAuliffe
San Francisco, California
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D O D G E & C O X
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Stock Fund
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14
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D O D G E & C O X
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Stock Fund
General Information
- --------------------------------------------------------------------------------
Dodge & Cox
Stock Fund
The 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.
Investment
Manager
Since 1930, Dodge & Cox has been providing professional investment management
for individuals, trustees, 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.
Automatic
Investment Plan
Shareholders may make regular monthly or quarterly 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.
Reinvestment
Plan
Shareholders may direct that dividend and capital gains distributions be
reinvested in additional Fund 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
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