<PAGE>
D O D G E & C O X D O D G E & C O X
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Stock Fund Stock Fund
Established 1965
Officers and Directors
John A. Gunn, President and Director
President, Dodge & Cox
Harry R. Hagey, Vice President and Director
Chairman & CEO, 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
A. Horton Shapiro, Vice President
Senior Vice-President, 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
INVESTMENT MANAGER
Dodge & Cox
One Sansome Street, 35th Floor
San Francisco, California 94104
Telephone (415) 981-1710
TRANSFER AGENT
Boston Financial Data Services Inc. Prospectus
P.O. Box 9051 April 29, 1997
Boston, Massachusetts 02205-9051
Telephone (800) 621-3979
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 9051
Boston, Massachusetts 02205-9051
Telephone (800) 621-3979
As Supplemented
DODGE & COX STOCK FUND January 30, 1998
c/o BFDS
P.O. Box 9051
Boston, Massachusetts 02205-9051
Telephone (800) 621-3979
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D o d g e & C o x
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Stock Fund
PROSPECTUS
April 29, 1997 Dodge & Cox Stock Fund
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As Supplemented The Dodge & Cox Stock Fund (the "Fund") is a no-load mutual
January 30, 1998 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. There can be no assurance that the
Fund will achieve these objectives.
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 you
should know about the Fund before investing. It should be
retained for future reference. A Statement of Additional
Information about the Fund, dated April 29, 1997, as
supplemented January 30, 1998, which is incorporated by
reference in this prospectus, has been filed with the
Securities and Exchange Commission (the "SEC"). To obtain a
free copy, call 1-800-621-3979.
<TABLE>
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<S> <C> <C> <C>
Table of Introduction....................................... 1 Telephone Transactions............................. 9
Contents Expense Information................................ 1 Transfer of Shares................................. 9
Financial Highlights............................... 2 Pricing of Shares.................................. 10
Investment Objectives and Policies................. 2 Shareholder Services............................... 10
Investment Restrictions............................ 3 Performance Information............................ 10
Investment Risks................................... 4 Fund Organization and Management................... 11
Additional Information on Investments.............. 4 Portfolio Transactions............................. 12
Income Dividends and Capital Expenses........................................... 12
Gain Distributions............................... 5 Federal Income Taxes............................... 12
How to Purchase Shares............................. 5 Custodian and Transfer Agent....................... 13
How to Redeem Shares............................... 7 Reports to Shareholders............................ 13
Exchanging Shares.................................. 9 Shareholder Inquiries.............................. 13
</TABLE>
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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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D o d g e & C o x
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Stock Fund
Introduction
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The Fund is an open-end diversified investment company which
continuously offers its shares to the public. A unique feature
of the Fund and other "no-load" funds is that shares are sold
without sales charge, while many other investment companies sell
their shares with a varying sales charge. Shares may be redeemed
at net asset value without any charge.
The Fund enables you to obtain the benefits of experienced and
continuous investment supervision of your assets devoted to
equity investment. Shares of the Fund provide investors with 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.
By investing in the Fund, you avoid the time-consuming details
involved in buying and selling individual securities. The Fund
also reduces your record keeping for tax purposes and simplifies
the collection of investment income and the safekeeping of
individual securities.
The Fund's investment manager, Dodge & Cox, was founded in 1930
and managed over $25 billion for individual and institutional
investors in mutual fund and private accounts as of December 31,
1996.
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 Fees......................................................None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees.....................................................50%
12b-1 Fees.........................................................None
Other Expenses (accounting, transfer agent, custodial,
legal, etc.).......................................................09%
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Total Fund Operating Expenses.......................................59%
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 $74
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 you 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 1996 (See "Expenses").
Wire redemptions are subject to a $12 charge which is not
reflected in the above example.
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1
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D o d g e & C o x
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Stock Fund
Financial Highlights
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The following table provides information about the Fund's financial history. It
is based on a single share outstanding throughout each year. The table is part
of the Fund's financial statements which are included in the Fund's Annual
Report and incorporated by reference into the Statement of Additional
Information. This document is available to shareholders upon request. The
financial statements in the Annual Report have been audited by Price Waterhouse
LLP, independent accountants, whose unqualified report covers the most recent
five-year period.
<TABLE>
<CAPTION>
Year Ended December 31,
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1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $67.83 $53.94 $53.23 $48.37 $44.85 $38.79 $42.57 $35.26 $32.94 $31.66
Income from investment operations:
Net investment income................. 1.28 1.27 1.15 1.04 1.11 1.23 1.35 1.24 1.08 .99
Net realized and unrealized gain
(loss)................................ 13.67 16.54 1.60 7.70 3.68 6.94 (3.50) 8.12 3.42 2.90
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from investment
operations............................ 14.95 17.81 2.75 8.74 4.79 8.17 (2.15) 9.36 4.50 3.89
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions:
Dividends from net investment income.. (1.29) (1.26) (1.15) (1.04) (1.11) (1.24) (1.35) (1.23) (1.07) (1.03)
Distributions from net realized gain
on investments........................ (1.68) (2.66) (.89) (2.84) (.16) (.87) (.28) (.82) (1.11) (1.58)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions................... (2.97) (3.92) (2.04) (3.88) (1.27) (2.11) (1.63) (2.05) (2.18) (2.61)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year.......... $79.81 $67.83 $53.94 $53.23 $48.37 $44.85 $38.79 $42.57 $35.26 $32.94
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return.......................... 22.26% 33.38% 5.16% 18.31% 10.82% 21.48% (5.08)% 26.94% 13.76% 11.95%
Ratios/Supplemental Data:
Net assets, end of year (millions).... $2,252 $1,228 $ 543 $ 436 $ 336 $ 281 $ 173 $ 125 $ 82 $ 67
Ratio of expenses to average
net assets............................ .59% .60% .61% .62% .64% .64% .65% .65% .69% .65%
Ratio of net investment income to
average net assets.................... 1.79% 2.07% 2.16% 1.95% 2.43% 2.87% 3.47% 3.12% 3.09% 2.68%
Portfolio turnover rate............... 10% 13% 7% 15% 7% 5% 7% 4% 10% 12%
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 SEC beginning in 1996.
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Investment The primary objective of the Fund is to provide shareholders
Objectives and with an opportunity for long-term growth of principal and
Policies income. A secondary objective is to achieve a reasonable current
income. However, investors should recognize that the market
risks inherent in investment cannot be avoided, nor is there any
assurance that the investment objectives of the Fund will be
achieved.
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2
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D o d g e & C o x
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Stock Fund
The Fund seeks to achieve its objectives by investing primarily
in a diversified portfolio of common stocks. Under normal market
conditions, the Fund will invest at least 65% of its total
assets in common stocks. The Fund may also purchase other types
of securities, for example, preferred stocks and debt securities
which are convertible into common stock (or which in the opinion
of Dodge & Cox have predominantly common stock investment
characteristics). The Fund may also invest up to 20% of its
total assets in U.S. dollar-denominated securities of foreign
issuers traded in the U.S. (such as American Depositary Receipts
or ADRs). Further information about specific investments is
provided under "Additional Information on Investments".
Moderate reserves in cash or short-term fixed income securities
may be held from time to time as Dodge & Cox may deem advisable.
Nevertheless, the long-term emphasis shall be the maintaining of
a fully invested equity fund.
The Fund's policies as described above may be changed without
shareholder approval; however, these policies will not be
changed without notice to shareholders. The following policies
may not be changed without shareholder approval:
Common stocks selected for the Fund will be predominantly
those which in the view of the Dodge & Cox have a favorable
outlook for long-term growth of principal and income.
Prospective earnings and dividends are major considerations
in these stock selections. Individual securities are selected
with an emphasis on financial strength and a sound economic
background.
In an attempt to minimize unforeseen risks in single securities,
the Fund seeks to provide adequate investment diversification.
Although there is no restriction on the number of changes in
security holdings, purchases are made with a view to long-term
holding and not for short-term trading purposes. (The Fund's
portfolio turnover rates for the fiscal years ended December 31,
1996, 1995 and 1994 were 10%, 13% and 7%, respectively.)
However, during rapidly changing economic, market 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 The Fund has adopted certain restrictions designed to achieve
Restrictions diversification of investment and to reduce investment risk. 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 U.S.
Government, nor acquire more than 10% of the voting securities
of any one issuer; (b) Concentrate investments of more than 25%
of the value of its total assets in any one industry; (c) Borrow
money except as a temporary measure for extraordinary or
emergency purposes; (d) Make loans to other persons except this
shall not exclude the purchase of publicly issued debt
securities of a type purchased by institutional investors. The
investment restrictions described in this paragraph and in the
Statement of Additional Information may be changed only with the
approval of the Fund's shareholders.
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3
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D o d g e & C o x
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Stock Fund
Investment You should understand that all investments involve risks, and
Risks there can be no guarantee against loss resulting from an
investment in the Fund, nor can there be any assurance that the
Fund's investment objectives will be attained. There are further
risk factors described elsewhere in this prospectus and in the
Statement of Additional Information.
Investments in common stock in general are subject to market
risks that cause their prices to fluctuate over time, i.e., the
possibility that stock prices will decline over short or even
extended periods. 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 cause the Fund's share
price 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 the Fund's share price.
Foreign securities involve some special risks such as exposure
to potentially adverse local political and economic
developments; nationalization and exchange controls; potentially
lower liquidity and higher volatility; possible problems arising
from accounting, disclosure, settlement, and regulatory
practices that differ from U.S. standards; foreign taxes; and
the risk that fluctuations in foreign exchange rates will
decrease the investment's value (although favorable changes can
increase its value).
The value of certain fixed income securities fluctuate with
changes in interest rates, rising when interest rates fall and
falling when interest rates rise.
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Additional Common and Preferred Stocks. Stocks represent shares of
Information on ownership in a company. Generally, preferred stock has a
Investments specified dividend and ranks after bonds and before common
stocks in its claim on income for dividend payments and on
assets should the company be liquidated. After other claims are
satisfied, common stockholders participate in company profits on
a pro rata basis; profits may be paid out in dividends or
reinvested in the company to help it grow. Increases and
decreases in earnings are usually reflected in a company's stock
price, so common stocks generally have the greatest appreciation
and depreciation potential of all corporate securities.
Convertible Securities. The Fund may invest in debt or preferred
equity securities convertible into or exchangeable for equity
securities. Traditionally, convertible securities have paid
dividends or interest at rates higher than common stocks but
lower than nonconvertible securities. They generally participate
in the appreciation or depreciation of the underlying stock into
which they are convertible, but to a lesser degree. In recent
years, convertibles have been developed which combine higher or
lower current income with other features.
Foreign Securities. The Fund may invest in U.S. dollar-
denominated securities of foreign issuers traded in the U.S.
(such as ADRs). Such investments increase a portfolio's
diversification and may enhance return, but they also involve
some special risks.
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4
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D o d g e & C o x
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Stock Fund
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Income Dividend and capital gain distributions are reinvested in
Dividends and additional Fund shares in your account unless you select another
Capital Gain option on your Account Application Form. The advantage of
Distributions reinvesting distributions arises from compounding; that is, you
receive income dividends and capital gain distributions on a
rising number of shares.
Distributions not reinvested are paid by check or transmitted to
your bank account via electronic transfer using the Automated
Clearing House (ACH) network. If the Post Office cannot deliver
your check, or if your check remains uncashed for six months,
the Fund reserves the right to reinvest your distribution check
in your account at the Fund's then current net asset value per
share (NAV) and to reinvest all subsequent distributions in
shares of the Fund.
Income dividends
. The Fund declares and pays dividends (if any) quarterly in
March, June, September and December.
Capital gain distributions
. A capital gain or loss is the difference between the purchase
and sale price of a security.
. If the Fund has net capital gains for the year (after
subtracting any capital losses), they are usually declared
and paid in December to shareholders of record on a specified
date that month. If a second distribution is necessary, it is
usually declared and paid in March.
In January, you will be sent Form 1099-DIV indicating the tax
status of any dividend and capital gain distributions made to
you during the previous year. This information will also be
reported to the IRS.
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How to Purchase Minimum Initial Investment: $2,500; $1,000 for IRA accounts
Shares Subsequent Minimum Investment: $100
By Mail: Please make your check payable to Dodge & Cox Stock
Fund (otherwise it will be returned) and send your check
together with the Account Application Form to the address below.
The Fund does not accept third party checks (except for properly
endorsed IRA Rollover checks).
<TABLE>
<CAPTION>
Regular Mail Mailgram, Express, Certified or Registered Mail
<S> <C>
Dodge & Cox Stock Fund Dodge & Cox Stock Fund
c/o BFDS c/o BFDS
P.O. Box 9051 66 Brooks Drive, Suite 1
Boston, MA 02205-9051 Braintree, MA 02184
</TABLE>
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5
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D o d g e & C o x
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Stock Fund
By Wire: To purchase shares in the Fund by Federal wire
transfer, you should request that your bank transmit funds to:
State Street Bank and Trust Company, Boston, MA 02101
ABA #0110 0002 8
Deposit DDA #9905-351-4
FFC Dodge & Cox Stock Fund
Account # 145/[shareholder account number], [name of account]
Prior to having the funds wired, you should call Boston
Financial Data Services Inc. (BFDS) at 1-800-621-3979 and advise
BFDS 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 BFDS, 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.
By Telephone: By using the Fund's telephone purchase option, you
may make subsequent investments directly from your bank account.
To establish the telephone purchase option for your account,
complete the appropriate section on the Account Application
Form. Only bank accounts held at domestic financial institutions
that are Automated Clearing House (ACH) members may be used for
telephone transactions. To make subsequent investments by
telephone, call 1-800-621-3979. This option will become
effective approximately 15 business days after the Account
Application Form is received. The price you pay for your shares
will be the next price the Fund computes after the Fund receives
your investment from your bank, which is usually three business
days after you authorize the transfer. If you want to make an
investment the same day, you must invest by wire. You may not
use telephone transactions for initial purchases of the Fund's
shares. (See "Telephone Transactions.")
Additional Information about Purchases: All subscriptions are
subject to acceptance by the Fund, and the price of the shares
will be the NAV which is next computed after receipt by the
Fund's transfer agent, or other authorized agent or sub-agent,
of the subscription in the proper form (see "Pricing of
Shares"). All purchases must be paid for in U.S. dollars; checks
must be drawn on U.S. banks. If your payment is not received or
you pay with a check or ACH transfer that does not clear, your
purchase will be canceled. You will be responsible for any
losses or expenses (including a $20 fee) incurred by the Fund or
transfer agent, and the Fund can redeem shares you own in this
or another identically registered Dodge & Cox Fund account as
reimbursement. The Fund and its agents have the right to reject
or cancel any purchase, exchange, or redemption due to
nonpayment. All subscriptions will be invested in full and
fractional shares and you will receive a confirmation of all
transactions. Purchases through the Automatic Investment Plan
will be confirmed at least quarterly. Certificates (for full
shares only) are not issued unless requested by you.
A Social Security or Taxpayer Identification Number must be
supplied and certified on the Account Application Form before an
account can be established. If you fail to furnish the Fund with
your correct Social Security or Taxpayer Identification Number,
the Fund may be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividends, capital gain
distributions and redemptions.
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6
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D o d g e & C o x
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Stock Fund
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 and its agents reserve the right to
accept initial purchases by telephone; to cancel or rescind any
purchase or exchange (for example, if an account has been
restricted due to excessive trading or fraud) upon notice to the
shareholder within five business days of the trade; to freeze
any account and temporarily suspend services on the account when
notice has been received of a dispute between the registered or
beneficial account owners or there is reason to believe a
fraudulent transaction may occur; to otherwise modify the
conditions of purchase and any services at any time; or to act
on instructions believed to be genuine.
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How to Redeem By Mail: Your written instructions to redeem shares should be
Shares sent to the appropriate address below:
<TABLE>
<CAPTION>
Regular Mail Mailgram, Express, Certified or Registered Mail
<S> <C>
Dodge & Cox Stock Fund Dodge & Cox Stock Fund
c/o BFDS c/o BFDS
P.O. Box 9051 66 Brooks Drive, Suite 1
Boston, MA 02205-9051 Braintree, MA 02184
</TABLE>
The request must specify your name, account number, and dollar
amount or number of shares redeemed, and be properly signed. The
Fund requires the signatures of all owners exactly as
registered, and possibly a signature guarantee (see "Signature
Guarantees" below).
By Telephone: Telephone redemption requests can be initiated by
calling BFDS at 1-800-621-3979. (See "Telephone Transactions.")
Telephone redemption requests for IRA accounts will not be
accepted.
Redemption payments may be made by check, wire or ACH:
By Check: Checks will be made payable to you and will be sent to
your address of record. If the proceeds of the redemption are
requested to be sent to other than the address of record or if
the address of record has been changed within 15 days of the
redemption request, the request must be in writing with your
signature(s) guaranteed.
By Wire: The Fund will wire redemption proceeds only to the bank
account designated on the 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 $12 charge, which is subject to change without
notice.
By ACH: Redemption proceeds can be sent to your bank account by
ACH transfer. You can elect this option by completing the
appropriate section of the Account Application Form. If money is
moved by ACH transfer, you will not be charged by the Fund for
these services. There is a $100 minimum per ACH transfer.
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7
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D o d g e & C o x
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Stock Fund
Signature Guarantees: You may need to have your signature
guaranteed in certain situations, such as:
. Written requests to wire redemption proceeds (if not
previously authorized on the Account Application Form).
. Sending redemption proceeds to any person, address, or bank
account not on record.
. Transferring redemption proceeds to a Dodge & Cox account
with a different registration (name/ownership) from yours.
. Establishing certain services after the account is opened.
You can obtain a signature guarantee from most banks, savings
institutions, broker-dealers, and other guarantors acceptable to
the Fund. The Fund cannot accept guarantees from notaries public
or organizations that do not provide reimbursement in the case
of fraud.
Redemptions-in-Kind: The Fund reserves the right, if conditions
exist which make cash payments undesirable, to honor any request
for redemption by making payment in whole or in part in readily
marketable securities chosen by the Fund and valued as they are
for purposes of computing the Fund's NAV (a redemption-in-kind).
If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash. The
Fund has elected, however, to be governed by Rule 18f-1 under
the Investment Company Act, as a result of which the Fund is
obligated to redeem shares, with respect to any one shareholder
during any 90-day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the
beginning of the period.
IRA Accounts: Redemption requests for IRA accounts must be in
writing and must include instructions regarding Federal income
tax withholding. Unless you have elected otherwise, your
redemptions will be subject to income tax withholding.
Additional Information about Redemptions: Under certain
circumstances, the Fund's transfer agent may require additional
documents, including stock powers with signatures guaranteed,
trust instruments, death certificates, appointments as executor
and certificates of corporate authority. If certificates have
been issued for any of the shares to be redeemed, such
certificates must be endorsed with signatures guaranteed and
delivered to the Fund's transfer agent. For any questions
regarding documentation or signature requirements for trusts,
estates, corporations, etc., please call BFDS (1-800-621-3979).
The redemption price will be the NAV which is next computed
after receipt of a redemption request in good order (see
"Pricing of Shares") by BFDS or other authorized agent or sub-
agent. The redemption price may be more or less than your 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 your purchase check has
cleared, which may take up to 15 days. There is no such delay
when shares being redeemed were purchased by wiring Federal
Funds.
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8
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D o d g e & C o x
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Stock Fund
The Fund may suspend your redemption right or postpone payment
at times when the New York Stock Exchange is closed or under any
emergency circumstances as determined by the SEC. If the Post
Office cannot deliver your check, or if your check remains
uncashed for six months, the Fund reserves the right to reinvest
your redemption proceeds in your account at the then current
NAV.
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Exchanging You may exchange your shares for shares of another Dodge & Cox
Shares 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") An exchange is
treated as a redemption and a purchase; and, therefore, you may
realize a taxable gain or loss. You 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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Telephone By using telephone purchase, redemption and/or exchange options,
Transactions you agree to hold the Fund, Dodge & Cox (any of its affiliated
mutual funds), BFDS, and each of their respective directors,
trustees, officers, employees and agents harmless from any
losses, expenses, costs or liability (including attorney fees)
which may be incurred in connection with the exercise of these
privileges. Generally, all shareholders are automatically
eligible to use these options. However, you may elect to decline
these options in the Account Application Form or by writing
BFDS. (You may also reinstate them at any time by writing BFDS.)
If the Fund does not employ reasonable procedures to confirm
that the instructions received from any person with appropriate
account information are genuine, the Fund may be liable for
losses due to unauthorized or fraudulent instructions. If you
are unable to reach the Fund by telephone because of technical
difficulties, market conditions, or a natural disaster,
purchase, redemption and exchange requests should be made by
regular or express mail. If your account has multiple owners,
the Fund may rely on the instructions of any one account owner.
You should note that purchase and sales orders will not be
canceled or modified once received in good order.
Purchases and sales should be made for long-term investment
purposes only. Because excessive trading may be disadvantageous
to the Fund, the Fund reserves the right to limit purchase and
sale transactions, including exchanges, when a pattern of
frequent trading appears evident.
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Transfer of Changes in account registrations - such as changing the name(s)
Shares on your account, or transferring shares to another person or
legal entity - must be submitted in writing and require a
signature guarantee. Please call BFDS (1-800-621-3979) for full
instructions.
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Pricing of The share price (also called "net asset value per share" or
Shares "NAV") for the Fund is calculated at 4:00 p.m. ET each day the
New York Stock Exchange is open for business. To calculate the
NAV, the Fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by
the number of shares outstanding.
If the Fund, or its authorized agent or subagent receives your
request in good order by 4 p.m. ET, your transaction will be
priced at that day's NAV. If your request is received after 4
p.m., it will be priced at the next business day's NAV.
The Fund cannot accept orders that request a particular day or
price for your transaction or any other special conditions.
The time at which transactions and shares are priced and the
time until which orders are accepted may be changed in case of
an emergency or if the New York Stock Exchange closes at a time
other than 4 p.m. ET.
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Shareholder The Fund offers you the following services: (Please call or
Services write the Fund (1-800-621-3979) for applications and additional
information.)
Automatic Investment Plan: You may make regular monthly or
quarterly investments of $100 or more through automatic
deductions from your bank account.
Systematic Withdrawal Plan: If you own $10,000 or more of the
Fund's shares you may receive regular monthly or quarterly
payments of $50 or more. Shares will automatically be redeemed
at NAV to make the withdrawal payments.
Reinvestment Plan: You may direct that dividend and capital
gains distributions be reinvested in additional Fund shares.
Individual Retirement Account (IRA): If you have earned income
or are entitled to certain distributions from eligible
retirement plans, you may make or authorize contributions to
your own Individual Retirement Account. The Fund has an IRA Plan
available for shareholders of the Fund.
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Performance The Fund may include figures indicating its total return in
Information 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.
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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. 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.
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Fund Fund Organization and Voting Rights. The Fund, organized as a
Organization California corporation in 1964, is registered as an open-end,
and diversified management investment company under the Investment
Management Company Act. The Fund's Board of Directors supervises Fund
operations and performs duties required by applicable state and
Federal law. 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 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.
Investment Manager. Dodge & Cox, a California corporation, has
served as investment manager to the Fund since inception. Dodge
& Cox is one of the oldest professional investment management
firms in the United States, having acted continuously as
investment managers since 1930. The 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. Dodge & Cox is located at One
Sansome Street, 35th Floor, San Francisco, California 94104.
Dodge & Cox's activities are devoted to investment research and
the supervision of investment accounts for individuals and
institutions. In addition, Dodge & Cox is investment manager to
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other registered mutual funds, the Dodge & Cox Balanced Fund
since 1931 and the Dodge & Cox Income Fund since 1989. The Fund
pays Dodge & Cox a management fee which is payable monthly at
the annual rate of 0.50% of the average daily net asset value of
the Fund. However, the contract provides that Dodge & Cox shall
waive its fee for any calendar year to the extent that such fee
plus all other expenses of the Fund exceeds 0.75% of the average
net asset value of the Fund. Under the contract provisions, no
waiver of management fee was necessary in 1996.
Dodge & Cox has adopted a Code of Ethics that restricts personal
investing practices by its employees. Among other provisions,
the Code of Ethics requires that employees with access to
information about the purchase or sale of securities in the
Fund's portfolio obtain preclearance before executing certain
personal trades. The Code of Ethics is designed to ensure that
the interests of the Fund's shareholders come before the
interests of the people who manage the Fund.
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Portfolio Orders for the Fund's portfolio securities transactions are
Transactions placed by Dodge & Cox, which seeks to obtain the best available
prices, taking into account the costs and quality of executions.
In the over-the-counter market, purchases and sales are
transacted directly with principal market-makers except in those
circumstances where it appears better prices and executions are
available elsewhere.
Subject to the above policy, when two or more brokers are in a
position to offer comparable prices and executions, preference
may be given to brokers that have provided investment research,
statistical, and other related services for the benefit of the
Fund and/or of other funds and accounts over which Dodge & Cox
exercises investment and brokerage discretion.
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Expenses In addition to Dodge & Cox's fee, the Fund pays other direct
expenses, including custodian, transfer agent, legal, accounting
and audit fees; costs of preparing and printing prospectuses and
reports sent to shareholders; registration fees and expenses;
proxy and annual meeting expenses (if any); and director fees
and expenses. In 1996 the ratio of total operating expenses to
average net assets of the Fund was 0.59%. Dodge & Cox furnishes
personnel and other facilities necessary for the operation of
the Fund for which it receives no additional compensation.
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Federal Income The Fund intends to qualify each year as a regulated investment
Taxes company under the Internal Revenue Code. A regulated investment
company that distributes for the year all of its ordinary income
and capital gains pays no tax on its ordinary income or capital
gains. A regulated investment company 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.
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Distributions designated as long-term 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 long-term capital gains distributions,
are taxed to a shareholder as ordinary income dividends whether
received in cash or shares of the Fund. All or part of the
Fund's ordinary dividends will be eligible for the 70% deduction
for dividends received by corporations. State taxation of
distributions to shareholders varies from state to state. You
should consult your own tax adviser about the Federal, state and
local tax consequences of an investment in the Fund.
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Custodian and State Street Bank and Trust Company, P.O. Box 9051, Boston,
Transfer Agent Massachusetts 02205-9051, (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. BFDS acts as
transfer and dividend disbursing agent for the Fund.
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Reports to In addition to account statements, you receive periodic
Shareholders shareholder reports highlighting relevant information, including
investment results and a review of portfolio characteristics. To
reduce Fund expenses, the Fund attempts to identify related
shareholders within a household and send only one copy of a
report. Call 1-800-621-3979 if you would like an additional free
copy of the Fund's financial report.
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Shareholder For Fund literature and information, or if you have questions
Inquiries concerning your account, please call BFDS (1-800-621-3979).
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