DODGE
& COX FUNDS®
May 1, 2020
Prospectus
Stock Fund (DODGX)
ESTABLISHED 1965
Global Stock Fund (DODWX)
ESTABLISHED 2008
International Stock Fund (DODFX)
ESTABLISHED 2001
Balanced Fund (DODBX)
ESTABLISHED 1931
Income Fund (DODIX)
ESTABLISHED 1989
Global Bond Fund (DODLX)
ESTABLISHED 2014
The
Securities and Exchange Commission (“SEC”) has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
Beginning
on January 1, 2021, we intend to discontinue mailing paper copies of the
Funds’ shareholder reports as permitted by new regulations adopted by the SEC,
unless you specifically request paper copies from Dodge & Cox Funds or
from your financial intermediary, such as a broker-dealer or bank. The reports
will remain available to you on the Dodge & Cox Funds website
(dodgeandcox.com), and you will be notified by mail each time a report is posted
and provided with a link to access the report.
If
you have already elected to receive shareholder reports electronically, you will
not be affected by this change and do not need to take any action. If you have
not done so already, you may elect to receive shareholder reports and other
communications electronically by enrolling in e-delivery on the Funds website, or, if you
are invested through a financial intermediary, by updating your mailing
preferences through the intermediary.
If
you wish to continue receiving paper copies of all future shareholder reports,
please contact us at (800) 621-3979. Reports will be provided
to you free of charge. If you are invested through a financial intermediary, you
may contact your financial intermediary to request to receive paper copies. Your
election to receive reports in paper form will apply to all funds held with
Dodge & Cox Funds or through your financial intermediary, as
applicable.
05/19
PR
Printed on recycled
paper
Table of Contents
Mutual
fund shares are not deposits or obligations of, or guaranteed by, any depository
institution. Shares are not insured by the FDIC, Federal Reserve, or any other
government agency, and are subject to investment risks, including possible loss
of your investment.
Dodge & Cox Stock Fund
Investment Objectives
The
Fund seeks long-term growth of principal and income. A secondary objective is to
achieve a reasonable current income.
Fees and Expenses
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. The table and example below do not reflect any transaction
fees that may be charged by financial intermediaries or commissions that a
shareholder may be required to pay directly to its financial intermediary when
buying or selling shares.
|
|
|
|
|
Shareholder Fees
(fees
paid directly from your investment) |
|
|
|
Sales
charge (load) imposed on purchases |
|
|
None |
|
Deferred
sales charge (load) |
|
|
None |
|
Sales
charge (load) imposed on reinvested distributions |
|
|
None |
|
Redemption
fee |
|
|
None |
|
Exchange
fee |
|
|
None |
|
|
|
|
|
|
Annual Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
|
Management
fees |
|
|
0.50 |
% |
Distribution
and/or service (12b-1)
fees |
|
|
None |
|
Other
expenses (transfer agent, custody, accounting, legal, etc.) |
|
|
0.02 |
% |
|
|
|
|
|
Total
Annual Fund Operating Expenses |
|
|
0.52 |
% |
Example:
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The
example assumes that:
∎ |
|
You invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
time periods; |
∎ |
|
Your investment has a 5% return each year; and
|
∎ |
|
The Fund’s operating expenses remain the same.
|
Transaction
fees or commissions that may be charged by financial intermediaries on purchases
and sales of shares of the Fund are not reflected in the example.
Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
|
3 Years |
|
|
5 Years |
|
|
10 Years |
|
$ |
53 |
|
|
$ |
167 |
|
|
$ |
291 |
|
|
$ |
653 |
|
Portfolio Turnover
The
Fund incurs transaction costs, such as commissions, when Dodge & Cox
buys and sells securities (or “turns over” the portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Fund shares are held in a taxable account. These transaction costs,
which are not reflected in annual Fund operating expenses or in the example,
affect the Fund’s performance. During the most recent fiscal year, the Fund’s
portfolio turnover rate was 17% of the average value of its portfolio.
Principal Investment Strategies
The
Fund invests primarily in a diversified portfolio of equity securities. Under
normal circumstances, the Fund will invest at least
80%
of its total assets in equity securities, including common stocks, depositary
receipts evidencing ownership of common stocks, preferred stocks, securities
convertible into common stocks, and securities that carry the right to buy
common stocks (e.g., rights and warrants). The Fund may invest up to 20% of its
total assets in U.S. dollar-denominated securities of non-U.S. issuers traded in the
United States that are not in the S&P 500 Index. The Fund may use
futures or options referencing stock indices, such as the S&P 500 Index, to
hedge against a general downturn in the equity markets. The Fund also may also
use equity index futures to equitize, or create equity market exposure,
approximately equal to some or all of its non-equity assets.
The
Fund typically invests in medium-to-large well-established
companies based on standards of the applicable market. In selecting investments,
the Fund typically invests in companies that, in Dodge & Cox’s
opinion, appear to be temporarily undervalued by the stock market but have a
favorable outlook for long-term growth. The Fund focuses on the underlying
financial condition and prospects of individual companies, including future
earnings, cash flow, and dividends. Various other factors, including financial
strength, economic condition, competitive advantage, quality of the business
franchise, and the reputation, experience, and competence of a company’s
management are weighed against valuation in selecting individual securities. The
Fund also considers the economic and political stability of the country where
the issuer is located and the protections provided to shareholders.
Principal Risks of Investing
You
could lose money by investing in the Fund, and the Fund could underperform other
investments. You should expect the Fund’s share price and total return to
fluctuate within a wide range. The Fund’s performance could be hurt by:
∎ |
|
Equity risk. Equity
securities can be volatile and may decline in value because of changes in
the actual or perceived financial condition of their issuers or other
events affecting their issuers. |
∎ |
|
Market risk.
Investment prices may increase or decrease, sometimes suddenly and
unpredictably, due to general market conditions. Local, regional or global
events such as war, acts of terrorism, the spread of infectious illness or
other public health issue, recessions, or other events could also have a
significant impact on the Fund and its investments and potentially
increase the risks described herein. |
∎ |
|
Manager risk.
Dodge & Cox’s opinion about the intrinsic worth or
creditworthiness of a company or security may be incorrect or the market
may continue to undervalue the company or security. Depending on market
conditions, Dodge & Cox’s investing style may perform better or
worse than portfolios with a different investment style. Dodge &
Cox may not make timely purchases or sales of securities for the Fund.
|
∎ |
|
Non-U.S. investment risk.
Securities of non-U.S. issuers
(including ADRs and other securities that represent interests in a non-U.S. issuer’s securities) may be
more volatile, harder to value, and have lower overall liquidity than U.S.
securities. Non-U.S. issuers may
be subject to political, economic, or market instability, or unfavorable
government action in their local jurisdictions or economic sanctions or
other restrictions imposed by U.S. or foreign regulators. There may be
less information publicly available about non-U.S. issuers and their securities
and those issuers may |
DODGE & COX FUNDS ∎ PAGE 1
|
|
be
subject to lower levels of government regulation and oversight. These
risks may be higher when investing in emerging market issuers. Certain of
these elevated risks may also apply to securities of U.S. issuers with
significant non-U.S. operations.
|
∎ |
|
Liquidity risk. The
Fund may not be able to purchase or sell a security in a timely manner or
at desired prices or achieve its desired weighting in a security.
|
∎ |
|
Derivatives risk.
Investing with derivatives, such as equity index futures, involves risks
additional to and possibly greater than those associated with investing
directly in securities. The value of a derivative may not correlate to the
value of the underlying instrument to the extent expected. A derivative
can create leverage because it can result in exposure to an amount of a
security, index, or other underlying investment (a “notional amount”) that
is substantially larger than the derivative position’s market value.
Often, the upfront payment required to enter into a derivative is much
smaller than the potential for loss, which for certain types of
derivatives may be unlimited. The Fund may not be able to close a
derivatives position at an advantageous time or price. For over-the-counter derivatives
transactions, the counterparty may be unable or unwilling to make required
payments and deliveries, especially during times of financial market
distress. Changes in regulation relating to a mutual fund’s use of
derivatives and related instruments may make derivatives more costly,
limit the availability of derivatives, or otherwise adversely affect the
value or performance of derivatives and the Fund. |
∎ |
|
Non-U.S. currency risk. Non-U.S. currencies may decline
relative to the U.S. dollar, which reduces the unhedged value of
securities denominated in or otherwise exposed to those currencies.
Dodge & Cox may not hedge or may not be successful in hedging the
Fund’s currency exposure and may not be able to determine accurately the
extent to which a security or its issuer is exposed to currency risk.
|
An
investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Performance Information
The
following bar chart and table are intended to help you understand the risks of
investing in the Fund. The bar chart shows changes in the Fund’s returns from
year to year. The table shows how the Fund’s average annual total returns for
one, five, and ten years compare to those of a broad measure of market
performance.
The
Fund’s past performance (before and after taxes) does not necessarily indicate
how the Fund will perform in the future. Visit the Fund’s website at
dodgeandcox.com or call 800-621-3979 for current performance
figures.
Highest/Lowest
quarterly results during the time period were:
Highest:
13.29% (quarter ended March 31, 2012)
Lowest:
–18.83% (quarter ended September 30, 2011)
Average Annual Total Returns
for the Periods Ended 12/31/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Dodge &
Cox
Stock
Fund |
|
1 Year |
|
|
5 Years |
|
|
10 Years |
|
Return
before taxes |
|
|
24.80 |
% |
|
|
9.72 |
% |
|
|
12.60 |
% |
Return
after taxes on distributions |
|
|
21.70 |
|
|
|
7.70 |
|
|
|
11.37 |
|
Return
after taxes on distributions and sale of Fund shares |
|
|
16.65 |
|
|
|
7.37 |
|
|
|
10.32 |
|
S&P
500 Index (reflects no deduction for expenses or taxes) |
|
|
31.49 |
|
|
|
11.70 |
|
|
|
13.56 |
|
After-tax returns are calculated using the
historical highest individual federal marginal income tax rates, but do not
reflect the impact of state or local taxes. Actual after-tax returns may differ depending on
your individual circumstances. After-tax return figures do not apply to you
if you hold your Fund shares through a tax-deferred arrangement such as a 401(k)
plan or an individual retirement account.
PAGE
2 ∎ DODGE &
COX FUNDS
Fund Management
Dodge &
Cox serves as investment manager to the Stock Fund. The Fund is managed by
Dodge & Cox’s U.S. Equity Investment Committee (“USEIC”), which
consists of the following eight members:
|
|
|
|
|
Committee Member |
|
Primary Titles with Investment Manager |
|
Years managing the Fund/ Years with
Dodge & Cox |
Charles
F. Pohl |
|
Chairman,
Director, Chief Investment Officer, and member of Global Equity Investment
Committee (“GEIC”), and International Equity Investment Committee
(“IEIC”) |
|
28/36 |
C. Bryan
Cameron |
|
Senior Vice
President and Director of Research |
|
28/37 |
David C.
Hoeft |
|
Senior Vice
President, Director, Associate Chief Investment Officer, and member of
GEIC |
|
18/27 |
Steven C.
Voorhis |
|
Vice
President, Associate Director of Research, and member of GEIC |
|
14/24 |
Philippe
Barret, Jr. |
|
Vice
President and Research Analyst |
|
7/16 |
Kathleen G. McCarthy |
|
Vice
President and Research Analyst |
|
4/13 |
Karol
Marcin |
|
Vice
President, Research Analyst, and member of GEIC |
|
2/20 |
Benjamin
V. Garosi |
|
Vice
President and Research Analyst |
|
1/11 |
Other Important Information About Fund Shares
For
important information about purchase and sale of Fund shares, tax information,
and payments to financial intermediaries please turn to the “Summary of Other
Important Information About Fund Shares” section on page 21 of this prospectus.
DODGE & COX FUNDS ∎ PAGE 3
Dodge & Cox Global Stock Fund
Investment Objective
The
Fund seeks long-term growth of principal and income.
Fees and Expenses
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. The table and example below do not reflect any transaction
fees that may be charged by financial intermediaries or commissions that a
shareholder may be required to pay directly to its financial intermediary when
buying or selling shares.
|
|
|
|
|
Shareholder Fees
(fees paid directly from your investment) |
|
|
|
Sales
charge (load) imposed on purchases |
|
|
None |
|
Deferred
sales charge (load) |
|
|
None |
|
Sales
charge (load) imposed on reinvested distributions |
|
|
None |
|
Redemption
fee |
|
|
None |
|
Exchange
fee |
|
|
None |
|
|
|
|
|
|
Annual Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
|
Management
fees |
|
|
0.60 |
% |
Distribution
and/or service (12b-1)
fees |
|
|
None |
|
Other
expenses (transfer agent, custody, accounting, legal, etc.) |
|
|
0.02 |
% |
|
|
|
|
|
Total
Annual Fund Operating Expenses |
|
|
0.62 |
% |
Example:
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The
example assumes that:
∎ |
|
You invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
time periods; |
∎ |
|
Your investment has a 5% return each year; and
|
∎ |
|
The Fund’s operating expenses remain the same.
|
Transaction
fees or commissions that may be charged by financial intermediaries on purchases
and sales of shares of the Fund are not reflected in the example.
Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
|
3 Years |
|
|
5 Years |
|
|
10 Years |
|
$ |
63 |
|
|
$ |
199 |
|
|
$ |
346 |
|
|
$ |
774 |
|
Portfolio Turnover
The
Fund incurs transaction costs, such as commissions, when Dodge & Cox
buys and sells securities (or “turns over” the portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Fund shares are held in a taxable account. These transaction costs,
which are not reflected in annual Fund operating expenses or in the example,
affect the Fund’s performance. During the most recent fiscal year, the Fund’s
portfolio turnover rate was 22% of the average value of its portfolio.
Principal Investment Strategies
The
Fund invests primarily in a diversified portfolio of equity securities issued by
companies from at least three different countries, which may include emerging
market countries. The Fund
is
not required to allocate its investments in set percentages in particular
countries and may invest in emerging markets without limit. Under normal
circumstances, the Fund will invest at least 40% of its total assets in
securities of non-U.S. companies and at
least 80% of its total assets in equity securities, including common stocks,
depositary receipts evidencing ownership of common stocks, preferred stocks,
securities convertible into common stocks, and securities that carry the right
to buy common stocks (e.g., rights and warrants). The Fund may enter into
currency forward contracts, currency swaps, or currency futures contracts to
hedge direct and/or indirect foreign currency exposure. The Fund may use futures
or options referencing stock indices to hedge against a general downturn in the
equity markets. The Fund also may also use equity index futures to equitize, or
create equity market exposure, approximately equal to some or all of its
non-equity assets.
The
Fund typically invests in medium-to-large well-established
companies based on standards of the applicable market. In selecting investments,
the Fund typically invests in companies that, in Dodge & Cox’s
opinion, appear to be temporarily undervalued by the stock market but have a
favorable outlook for long-term growth. The Fund also focuses on the underlying
financial condition and prospects of individual companies, including future
earnings, cash flow, and dividends. Various other factors, including financial
strength, economic condition, competitive advantage, quality of the business
franchise, and the reputation, experience, and competence of a company’s
management are weighed against valuation in selecting individual securities. The
Fund also considers the economic and political stability of the country where
the issuer is located and the protections provided to shareholders.
Principal Risks of Investing
You
could lose money by investing in the Fund, and the Fund could underperform other
investments. You should expect the Fund’s share price and total return to
fluctuate within a wide range. The Fund’s performance could be hurt by:
∎ |
|
Equity risk. Equity
securities can be volatile and may decline in value because of changes in
the actual or perceived financial condition of their issuers or other
events affecting their issuers. |
∎ |
|
Market risk.
Investment prices may increase or decrease, sometimes suddenly and
unpredictably, due to general market conditions. Local, regional or global
events such as war, acts of terrorism, the spread of infectious illness or
other public health issue, recessions, or other events could also have a
significant impact on the Fund and its investments and potentially
increase the risks described herein. |
∎ |
|
Manager risk.
Dodge & Cox’s opinion about the intrinsic worth or
creditworthiness of a company or security may be incorrect or the market
may continue to undervalue the company or security. Depending on market
conditions, Dodge & Cox’s investing style may perform better or
worse than portfolios with a different investment style. Dodge &
Cox may not make timely purchases or sales of securities for
the Fund. |
∎ |
|
Non-U.S. investment risk.
Securities of non-U.S. issuers
(including ADRs and other securities that represent interests in a non-U.S. issuer’s securities) may be
more volatile, harder to value, and have lower overall liquidity than U.S.
securities. Non-U.S. issuers may be subject to political, economic, or
market |
PAGE
4 ∎ DODGE &
COX FUNDS
|
|
instability
or unfavorable government action in their local jurisdictions or economic
sanctions or other restrictions imposed by U.S. or foreign regulators.
There may be less information publicly available about non-U.S. issuers and their securities,
and those issuers may be subject to lower levels of government regulation
and oversight. Non-U.S. stock
markets may decline due to conditions specific to an individual country,
including unfavorable economic conditions relative to the United States.
There may be increased risk of delayed transaction settlement. These risks
may be higher when investing in emerging market issuers. Certain of these
elevated risks may also apply to securities of U.S. issuers with
significant non-U.S. operations.
|
∎ |
|
Emerging markets
risk. Emerging market securities may present issuer, market,
currency, liquidity, volatility, valuation, legal, political, and other
risks different from, and potentially greater than, the risks of investing
in securities of issuers in more developed markets. |
∎ |
|
Non-U.S. currency risk. Non-U.S. currencies may decline
relative to the U.S. dollar, which reduces the unhedged value of
securities denominated in or otherwise exposed to those currencies.
Dodge & Cox may not hedge or may not be successful in hedging the
Fund’s currency exposure and may not be able to determine accurately the
extent to which a security or its issuer is exposed to currency risk.
|
∎ |
|
Liquidity risk. The
Fund may not be able to purchase or sell a security in a timely manner or
at desired prices or achieve its desired weighting in a security.
|
∎ |
|
Derivatives risk.
Investing with derivatives, such as currency forward contracts, currency
swaps, and equity index futures, involves risks additional to and possibly
greater than those associated with investing directly in securities. The
value of a derivative may not correlate to the value of the underlying
instrument to the extent expected. A derivative can create leverage
because it can result in exposure to an amount of a security, index, or
other underlying investment (a “notional amount”) that is substantially
larger than the derivative position’s market value. Often, the upfront
payment required to enter into a derivative is much smaller than the
potential for loss, which for certain types of derivatives may be
unlimited. The Fund may not be able to close a derivatives position at an
advantageous time or price. For over-the-counter derivatives
transactions, the counterparty may be unable or unwilling to make required
payments and deliveries, especially during times of financial market
distress. Changes in regulation relating to a mutual fund’s use of
derivatives and related instruments may make derivatives more costly,
limit the availability of derivatives, or otherwise adversely affect the
value or performance of derivatives and the Fund. |
An
investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Performance Information
The
following bar chart and table are intended to help you understand the risks of
investing in the Fund. The bar chart shows changes in the Fund’s returns from
year to year. The table shows how the Fund’s average annual total returns for
one year, five years, and since inception compare to those of a broad measure of
market performance.
The
Fund’s past performance (before and after taxes) does not necessarily indicate
how the Fund will perform in the future. Visit the Fund’s website at
dodgeandcox.com or call 800-621-3979 for current performance
figures.
Highest/Lowest
quarterly results during the time period were:
Highest:
14.97% (quarter ended September 30, 2010)
Lowest:
–20.56% (quarter ended September 30, 2011)
Average Annual Total Returns for the Periods Ended 12/31/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Dodge &
Cox
Global
Stock Fund |
|
1 Year |
|
|
5 Years |
|
|
10 Years |
|
Return
before taxes |
|
|
23.85 |
% |
|
|
7.20 |
% |
|
|
9.40 |
% |
Return
after taxes on distributions |
|
|
21.95 |
|
|
|
5.93 |
|
|
|
8.49 |
|
Return
after taxes on distributions and sale of Fund shares |
|
|
15.71 |
|
|
|
5.58 |
|
|
|
7.69 |
|
MSCI
World Index (Net)* (reflects no deduction for expenses or taxes) |
|
|
27.67 |
|
|
|
8.74 |
|
|
|
9.47 |
|
* |
|
MSCI Index (Net) returns are calculated applying
dividend withholding rates applicable to non-resident persons who do not benefit
from double taxation treaties. Withholding rates applicable to the Fund
may be lower. |
After-tax returns are calculated using the
historical highest individual federal marginal income tax rates, but do not
reflect the impact of state or local taxes. Actual after-tax returns may differ depending on
your individual circumstances. After-tax return figures do not apply to you
if you hold your Fund shares through a tax-deferred arrangement such as a 401(k)
plan or an individual retirement account.
DODGE & COX FUNDS ∎ PAGE 5
Fund Management
Dodge &
Cox serves as investment manager to the Global Stock Fund. The Fund is managed
by Dodge & Cox’s Global Equity Investment Committee (“GEIC”),
which consists of the following seven members:
|
|
|
|
|
Committee Member |
|
Primary Titles with Investment Manager |
|
Years managing the Fund/ Years with
Dodge & Cox |
Charles
F. Pohl |
|
Chairman,
Director, Chief Investment Officer, and member of U.S. Equity Investment
Committee (“USEIC”), and International Equity Investment Committee
(“IEIC”) |
|
12/36 |
Diana S. Strandberg |
|
Senior Vice
President, Director, Director of International Equity, and member of
IEIC |
|
12/32 |
David C.
Hoeft |
|
Senior Vice
President, Director, Associate Chief Investment Officer, and member of
USEIC |
|
4/27 |
Roger G.
Kuo |
|
Senior Vice
President, Director, Research Analyst, and member of IEIC |
|
10/22 |
Steven C.
Voorhis |
|
Vice
President, Associate Director of Research, and member of USEIC |
|
12/24 |
Karol
Marcin |
|
Vice
President, Research Analyst, and member of USEIC |
|
12/20 |
Lily S.
Beischer |
|
Vice
President and Research Analyst |
|
12/19 |
Other Important Information About Fund Shares
For
important information about purchase and sale of Fund shares, tax information,
and payments to financial intermediaries please turn to the “Summary of Other
Important Information About Fund Shares” section on page 21 of this prospectus.
PAGE
6 ∎ DODGE &
COX FUNDS
Dodge & Cox International
Stock Fund
Investment Objective
The
Fund seeks long-term growth of principal and income.
Fees and Expenses
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. The table and example below do not reflect any transaction
fees that may be charged by financial intermediaries or commissions that a
shareholder may be required to pay directly to its financial intermediary when
buying or selling shares.
|
|
|
|
|
Shareholder Fees
(fees
paid directly from your investment) |
|
|
|
Sales
charge (load) imposed on purchases |
|
|
None |
|
Deferred
sales charge (load) |
|
|
None |
|
Sales
charge (load) imposed on reinvested distributions |
|
|
None |
|
Redemption
fee |
|
|
None |
|
Exchange
fee |
|
|
None |
|
|
|
|
|
|
Annual Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
|
Management
fees |
|
|
0.60 |
% |
Distribution
and/or service (12b-1)
fees |
|
|
None |
|
Other
expenses (transfer agent, custody, accounting, legal, etc.) |
|
|
0.03 |
% |
|
|
|
|
|
Total
Annual Fund Operating Expenses |
|
|
0.63 |
% |
Example:
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The
example assumes that:
∎ |
|
You invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
time periods; |
∎ |
|
Your investment has a 5% return each year; and
|
∎ |
|
The Fund’s operating expenses remain the same.
|
Transaction
fees or commissions that may be charged by financial intermediaries on purchases
and sales of shares of the Fund are not reflected in the example.
Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
|
3 Years |
|
|
5 Years |
|
|
10 Years |
|
$ |
64 |
|
|
$ |
202 |
|
|
$ |
351 |
|
|
$ |
786 |
|
Portfolio Turnover
The
Fund incurs transaction costs, such as commissions, when Dodge & Cox
buys and sells securities (or “turns over” the portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Fund shares are held in a taxable account. These transaction costs,
which are not reflected in annual Fund operating expenses or in the example,
affect the Fund’s performance. During the most recent fiscal year, the Fund’s
portfolio turnover rate was 15% of the average value of its portfolio.
Principal Investment Strategies
The
Fund invests primarily in a diversified portfolio of equity securities issued by
non-U.S. companies from at least three
different countries, which may include emerging market countries. The Fund is
not
required
to allocate its investments in set percentages in particular countries and may
invest in emerging markets without limit. Under normal circumstances, the Fund
will invest at least 80% of its total assets in equity securities of non-U.S. companies, including common stocks,
depositary receipts evidencing ownership of common stocks, preferred stocks,
securities convertible into common stocks, and securities that carry the right
to buy common stocks (e.g., rights and warrants). The Fund may enter into
currency forward contracts, currency swaps, or currency futures contracts to
hedge direct and/or indirect foreign currency exposure. The Fund may use futures
or options referencing stock indices to hedge against a general downturn in the
equity markets. The Fund also may also use equity index futures to equitize, or
create equity market exposure, approximately equal to some or all of its
non-equity assets.
The
Fund typically invests in medium-to-large well-established
companies based on standards of the applicable market. In selecting investments,
the Fund typically invests in companies that, in Dodge & Cox’s
opinion, appear to be temporarily undervalued by the stock market but have a
favorable outlook for long-term growth. The Fund also focuses on the underlying
financial condition and prospects of individual companies, including future
earnings, cash flow, and dividends. Various other factors, including financial
strength, economic condition, competitive advantage, quality of the business
franchise, and the reputation, experience, and competence of a company’s
management are weighed against valuation in selecting individual securities. The
Fund also considers the economic and political stability of the country where
the issuer is located and the protections provided to shareholders.
Principal Risks of Investing
You
could lose money by investing in the Fund, and the Fund could underperform other
investments. You should expect the Fund’s share price and total return to
fluctuate within a wide range. The Fund’s performance could be hurt by:
∎ |
|
Equity risk. Equity
securities can be volatile and may decline in value because of changes in
the actual or perceived financial condition of their issuers or other
events affecting their issuers. |
∎ |
|
Market risk.
Investment prices may increase or decrease, sometimes suddenly and
unpredictably, due to general market conditions. Local, regional or global
events such as war, acts of terrorism, the spread of infectious illness or
other public health issue, recessions, or other events could also have a
significant impact on the Fund and its investments and potentially
increase the risks described herein. |
∎ |
|
Manager risk.
Dodge & Cox’s opinion about the intrinsic worth or
creditworthiness of a company or security may be incorrect or the market
may continue to undervalue the company or security. Depending on market
conditions, Dodge & Cox’s investing style may perform better or
worse than portfolios with a different investment style. Dodge &
Cox may not make timely purchases or sales of securities for the Fund.
|
∎ |
|
Non-U.S. investment risk.
Securities of non-U.S. issuers
(including ADRs and other securities that represent interests in a non-U.S. issuer’s securities) may be
more volatile, harder to value, and have lower overall liquidity than U.S.
securities. Non-U.S. issuers may
be subject to political, economic, or market instability, or unfavorable
government action in their local jurisdictions or economic sanctions or
other restrictions imposed |
DODGE & COX FUNDS ∎ PAGE 7
|
|
by
U.S. or foreign regulators. There may be less information publicly
available about non-U.S. issuers
and their securities, and those issuers may be subject to lower levels of
government regulation and oversight. Non-U.S. stock markets may decline due
to conditions specific to an individual country, including unfavorable
economic conditions relative to the United States. There may be increased
risk of delayed transaction settlement. These risks may be higher when
investing in emerging market issuers. Certain of these elevated risks may
also apply to securities of U.S. issuers with significant non-U.S. operations.
|
∎ |
|
Emerging markets
risk. Emerging market securities may present issuer, market,
currency, liquidity, volatility, valuation, legal, political, and other
risks different from, and potentially greater than, the risks of investing
in securities of issuers in more developed markets. |
∎ |
|
Non-U.S. currency risk. Non-U.S. currencies may decline
relative to the U.S. dollar, which reduces the unhedged value of
securities denominated in or otherwise exposed to those currencies.
Dodge & Cox may not hedge or may not be successful in hedging the
Fund’s currency exposure and may not be able to determine accurately the
extent to which a security or its issuer is exposed to currency risk.
|
∎ |
|
Liquidity risk. The
Fund may not be able to purchase or sell a security in a timely manner or
at desired prices or achieve its desired weighting in a security.
|
∎ |
|
Derivatives risk.
Investing with derivatives, such as currency forward contracts, currency
swaps, and equity index futures, involves risks additional to and possibly
greater than those associated with investing directly in securities. The
value of a derivative may not correlate to the value of the underlying
instrument to the extent expected. A derivative can create leverage
because it can result in exposure to an amount of a security, index, or
other underlying investment (a “notional amount”) that is substantially
larger than the derivative position’s market value. Often, the upfront
payment required to enter into a derivative is much smaller than the
potential for loss, which for certain types of derivatives may be
unlimited. The Fund may not be able to close a derivatives position at an
advantageous time or price. For over-the-counter derivatives
transactions, the counterparty may be unable or unwilling to make required
payments and deliveries, especially during times of financial market
distress. Changes in regulation relating to a mutual fund’s use of
derivatives and related instruments may make derivatives more costly,
limit the availability of derivatives, or otherwise adversely affect the
value or performance of derivatives and the Fund.
|
An
investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Performance Information
The
following bar chart and table are intended to help you understand the risks of
investing in the Fund. The bar chart shows changes in the Fund’s returns from
year to year. The table shows how the Fund’s average annual total returns for
one, five, and ten years compare to those of a broad measure of market
performance.
The
Fund’s past performance (before and after taxes) does not necessarily indicate
how the Fund will perform in the future. Visit the Fund’s website at
dodgeandcox.com or call 800-621-3979 for current performance
figures.
Highest/Lowest
quarterly results during the time period were:
Highest:
18.14% (quarter ended September 30, 2010)
Lowest:
–21.72% (quarter ended September 30, 2011)
Average Annual Total Returns For The Periods Ended 12/31/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Dodge & Cox
International
Stock Fund |
|
1 Year |
|
|
5 Years |
|
|
10 Years |
|
Return
before taxes |
|
|
22.78 |
% |
|
|
3.68 |
% |
|
|
5.76 |
% |
Return
after taxes on distributions |
|
|
22.00 |
|
|
|
3.15 |
|
|
|
5.39 |
|
Return
after taxes on distributions and sale of Fund shares |
|
|
14.60 |
|
|
|
2.96 |
|
|
|
4.77 |
|
MSCI
EAFE (Europe, Australasia, Far East) Index (Net)* (reflects no
deduction for expenses or taxes) |
|
|
22.01 |
|
|
|
5.67 |
|
|
|
5.50 |
|
* |
|
MSCI Index (Net) returns are calculated applying
dividend withholding rates applicable to non-resident persons who do not benefit
from double taxation treaties. Withholding rates applicable to the Fund
may be lower. |
After-tax returns are calculated using the
historical highest individual federal marginal income tax rates, but do not
reflect the impact of state or local taxes. Actual after-tax returns may differ depending on
your individual circumstances. After-tax return figures do not apply to you
if you hold your Fund shares through a tax-deferred arrangement such as a 401(k)
plan or an individual retirement account.
PAGE
8 ∎ DODGE &
COX FUNDS
Fund Management
Dodge &
Cox serves as investment manager to the International Stock Fund. The Fund is
managed by Dodge & Cox’s International Equity Investment Committee
(“IEIC”), which consists of the following eight members:
|
|
|
|
|
Committee Member |
|
Primary Titles with Investment Manager |
|
Years managing the Fund/ Years with
Dodge & Cox |
Charles
F. Pohl |
|
Chairman,
Director, Chief Investment Officer, and member of U.S. Equity Investment
Committee (“USEIC”), and Global Equity Investment Committee (“GEIC”) |
|
13/36 |
Diana S. Strandberg |
|
Senior Vice
President, Director, Director of International Equity, and member of
GEIC |
|
19/32 |
Roger G.
Kuo |
|
Senior Vice
President, Director, Research Analyst, and member of GEIC |
|
14/22 |
Mario C.
DiPrisco |
|
Vice
President and Research Analyst |
|
16/22 |
Keiko
Horkan |
|
Vice
President and Research Analyst |
|
13/20 |
Richard
T. Callister |
|
Vice
President and Research Analyst |
|
8/18 |
Englebert T. Bangayan |
|
Vice
President and Research Analyst |
|
5/18 |
Raymond J. Mertens |
|
Vice
President and Research Analyst |
|
2/17 |
Other Important Information About Fund Shares
For
important information about purchase and sale of Fund shares, tax information,
and payments to financial intermediaries please turn to the “Summary of Other
Important Information About Fund Shares” section on page 21 of this prospectus.
DODGE & COX FUNDS ∎ PAGE 9
Dodge & Cox Balanced Fund
Investment Objectives
The
Fund seeks regular income, conservation of principal, and an opportunity for
long-term growth of principal and income.
Fees and Expenses
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. The table and example below do not reflect any transaction
fees that may be charged by financial intermediaries or commissions that a
shareholder may be required to pay directly to its financial intermediary when
buying or selling shares.
|
|
|
|
|
Shareholder Fees
(fees
paid directly from your investment) |
|
|
|
Sales
charge (load) imposed on purchases |
|
|
None |
|
Deferred
sales charge (load) |
|
|
None |
|
Sales
charge (load) imposed on reinvested distributions |
|
|
None |
|
Redemption
fee |
|
|
None |
|
Exchange
fee |
|
|
None |
|
|
|
|
|
|
Annual Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
|
Management
fees |
|
|
0.50 |
% |
Distribution
and/or service (12b-1)
fees |
|
|
None |
|
Other
expenses (transfer agent, custody, accounting, legal, etc.) |
|
|
0.03 |
% |
|
|
|
|
|
Total
Annual Fund Operating Expenses |
|
|
0.53 |
% |
Example:
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The
example assumes that:
∎ |
|
You invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
time periods; |
∎ |
|
Your investment has a 5% return each year; and
|
∎ |
|
The Fund’s operating expenses remain the same.
|
Transaction
fees or commissions that may be charged by financial intermediaries on purchases
and sales of shares of the Fund are not reflected in the example.
Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
|
3 Years |
|
|
5 Years |
|
|
10 Years |
|
$ |
54 |
|
|
$ |
170 |
|
|
$ |
296 |
|
|
$ |
665 |
|
Portfolio Turnover
The
Fund incurs transaction costs, such as commissions, when Dodge & Cox
buys and sells securities (or “turns over” the portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Fund shares are held in a taxable account. These transaction costs,
which are not reflected in annual Fund operating expenses or in the example,
affect the Fund’s performance. During the most recent fiscal year, the Fund’s
portfolio turnover rate was 35% of the average value of its portfolio.
Principal Investment Strategies
The
Fund invests in a diversified portfolio of equity securities and debt
securities. Under normal circumstances no less than 25% and
no
more than 75% of the Fund’s total assets will be invested in equity securities.
The Fund may invest up to 20% of its total assets in U.S. dollar-denominated
equity or debt securities of non-U.S.
issuers traded in the United States that are not in the S&P 500 Index. Asset
allocation between equity and debt securities is based on the Fund’s assessment
of the potential risks and returns for each asset class over a three- to
five-year horizon. Factors used to estimate the range of potential returns
include: future earnings growth, the outlook for the economy, inflation and
interest rate trends, and current valuations relative to historical ranges.
Equity
securities in which the Fund may invest include common stocks, depositary
receipts evidencing ownership of common stocks, preferred stocks, securities
convertible into common stocks, and securities that carry the right to buy
common stocks (e.g., rights and warrants). The Fund’s equity investments are
typically in medium-to-large well-established
companies based on standards of the applicable market. In selecting equity
investments, the Fund typically invests in companies that, in Dodge &
Cox’s opinion, appear to be temporarily undervalued by the stock market but have
a favorable outlook for long-term growth. The Fund focuses on the underlying
financial condition and prospects of individual companies, including future
earnings, cash flow, and dividends. Various other factors, including financial
strength, economic condition, competitive advantage, quality of the business
franchise, and the reputation, experience, and competence of a company’s
management are weighed against valuation in selecting individual securities. The
Fund also considers the economic and political stability of the country where
the issuer is located and the protections provided to shareholders.
Debt
securities in which the Fund may invest include government and
government-related obligations, mortgage- and asset-backed securities, corporate
and municipal bonds, and may include other fixed and floating rate instruments.
The proportion of Fund assets invested in various classes of debt securities is
determined based on Dodge & Cox’s appraisal of the economy, the
relative yields of securities in the various market sectors, the investment
prospects for issuers, and other factors. In selecting debt securities,
Dodge & Cox considers many factors, including yield, credit quality,
liquidity, covenants, call risk, duration, structure, and capital appreciation
potential. A maximum of 20% of the debt portion of the Fund may be invested in
debt securities rated below investment grade, commonly referred to as high-yield
or “junk” bonds; provided no more than 5% of the debt portion of the Fund may be
invested in securities rated below B3 or B- by Moody’s, S&P, or Fitch.
“Investment-grade” means (i) securities rated Baa3 or higher by Moody’s
Investors Service (“Moody’s”), or BBB-
or higher by Standard & Poor’s Global Ratings (“S&P”) or Fitch
Ratings (“Fitch”), or equivalently rated by any nationally recognized
statistical rating organization (“NRSRO”), including U.S. dollar-denominated
foreign issues and issues of supranational agencies, or (ii) unrated
securities if deemed to be of investment-grade quality by
Dodge & Cox.
The
Fund invests in hybrid securities, which may be classified as equity or debt
depending on the specific structure and features of each security.
The
Fund may use futures or options referencing stock indices, such as the S&P
500 Index, to hedge against a general downturn in the equity markets. The Fund
also may also use equity index futures
PAGE
10 ∎ DODGE &
COX FUNDS
to
equitize, or create equity market exposure, approximately equal to some or all
of its non-equity assets. The Fund may also invest in interest rate derivatives
such as U.S. Treasury futures and swap agreements for a variety of purposes,
including, but not limited to, managing the Fund’s duration or adjusting the
Fund’s exposure to debt securities with different maturities.
Principal Risks of Investing
You
could lose money by investing in the Fund, and the Fund could underperform other
investments. You should expect the Fund’s share price and total return to
fluctuate within a wide range. The Fund’s performance could be hurt by:
∎ |
|
Equity risk. Equity
securities can be volatile and may decline in value because of changes in
the actual or perceived financial condition of their issuers or other
events affecting their issuers. |
∎ |
|
Market risk.
Investment prices may increase or decrease, sometimes suddenly and
unpredictably, due to general market conditions. Local, regional or global
events such as war, acts of terrorism, the spread of infectious illness or
other public health issue, recessions, or other events could also have a
significant impact on the Fund and its investments and potentially
increase the risks described herein. |
∎ |
|
Asset allocation risk.
The assumptions and theses on which Dodge & Cox bases its
allocation of assets may be wrong. The Fund’s balance between equity and
debt securities limits its potential for capital appreciation relative to
an all-stock fund and contributes
to greater volatility relative to an all-bond fund. |
∎ |
|
Manager risk.
Dodge & Cox’s opinion about the intrinsic worth or
creditworthiness of a company or security may be incorrect or the market
may continue to undervalue the company or security. Depending on market
conditions, Dodge & Cox’s investing style may perform better or
worse than portfolios with a different investment style. Dodge &
Cox may not make timely purchases or sales of securities for the Fund.
|
∎ |
|
Interest rate risk.
Debt security prices may decline due to rising interest rates. The
price of debt securities with longer maturities is typically affected more
by rising interest rates than the price of debt securities with shorter
maturities. |
∎ |
|
Credit risk. An
issuer or guarantor of a debt security may be unable or unwilling to make
scheduled payments of interest and principal. Actual or perceived
deterioration in an issuer’s or guarantor’s financial condition may affect
a security’s value. |
∎ |
|
Below investment-grade
securities risk. Debt securities rated below investment-grade, also
known as high-yield or “junk” bonds generally have greater credit risk,
more price volatility, and less liquidity than investment-grade
securities. |
∎ |
|
Mortgage- and asset-backed
securities risk. Mortgage- and certain asset-backed securities
permit early repayment of principal based on prepayment of the underlying
assets; changes in the rate of repayment affect the price and volatility
of an investment. If prepayments occur more quickly than expected, the
Fund receives lower interest payments than it expects. If prepayments
occur more slowly than expected, it delays the return of principal to the
Fund. Securities issued by certain U.S. government sponsored entities
(“GSEs”) are not issued or guaranteed by the U.S. Treasury; there is no
assurance the U.S. government will provide support in the event a GSE
issuer cannot meet its obligations. |
∎ |
|
Liquidity risk. The
Fund may not be able to purchase or sell a security in a timely manner or
at desired prices or achieve its desired weighting in a security.
Liquidity risk may result from the lack of an active market or a reduced
number and capacity of traditional market participants to make a market in
fixed income securities, and may be magnified during times of market
stress or under circumstances that cause increased supply in the market
due to unusually high selling activity. |
∎ |
|
Derivatives risk.
Investing with derivatives, such as equity index futures and interest rate
swaps and futures, involves risks additional to and possibly greater than
those associated with investing directly in securities. The value of a
derivative may not correlate to the value of the underlying instrument to
the extent expected. A derivative can create leverage because it can
result in exposure to an amount of a security, index, or other underlying
investment (a “notional amount”) that is substantially larger than the
derivative position’s market value. Often, the upfront payment required to
enter into a derivative is much smaller than the potential for loss, which
for certain types of derivatives may be unlimited. The Fund may not be
able to close a derivatives position at an advantageous time or price. For
over-the-counter derivatives
transactions, the counterparty may be unable or unwilling to make required
payments and deliveries, especially during times of financial market
distress. Changes in regulation relating to a mutual fund’s use of
derivatives and related instruments may make derivatives more costly,
limit the availability of derivatives, or otherwise adversely affect the
value or performance of derivatives and the Fund. |
∎ |
|
Non-U.S. investment risk.
Securities of non-U.S. issuers
(including ADRs and other securities that represent interests in a non-U.S. issuer’s securities) may be
more volatile, harder to value, and have lower overall liquidity than U.S.
securities. Non-U.S. issuers may
be subject to political, economic, or market instability or unfavorable
government action in their local jurisdictions or economic sanctions or
other restrictions imposed by U.S. or foreign regulators. There may be
less information publicly available about non-U.S. issuers and their securities,
and those issuers may be subject to lower levels of government regulation
and oversight. These risks may be higher when investing in emerging market
issuers. Certain of these elevated risks may also apply to securities of
U.S. issuers with significant non-U.S. operations.
|
∎ |
|
Non-U.S. currency risk. Non-U.S. currencies may decline
relative to the U.S. dollar, which reduces the unhedged value of
securities denominated in or otherwise exposed to those currencies and may
not hedge or may not be successful in hedging the Fund’s currency
exposure. Dodge & Cox may not be able to determine accurately the
extent to which a security or its issuer is exposed to currency risk.
|
∎ |
|
Call risk. If
interest rates fall, issuers of callable bonds may repay securities with
higher interest rates before maturity. This could cause the Fund to lose
potential price appreciation and reinvest the proceeds in securities with
lower interest rates or more credit risk. |
∎ |
|
Sovereign and
government-related debt risk. An issuer of sovereign debt or the
governmental authorities that control the repayment of the debt may be
unable or unwilling to repay principal or interest when due. In the event
of a default by a governmental entity on a sovereign debt obligation,
there may be few or no effective legal remedies for collecting on such
debt. |
DODGE & COX FUNDS ∎ PAGE 11
An
investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Performance Information
The
following bar chart and table are intended to help you understand the risks of
investing in the Fund. The bar chart shows changes in the Fund’s returns from
year to year. The table shows how the Fund’s average annual total returns for
one, five, and ten years compare with different broad measures of market
performance.
The
Fund’s past performance (before and after taxes) does not necessarily indicate
how the Fund will perform in the future. Visit the Fund’s website at
dodgeandcox.com or call 800-621-3979 for current performance
figures.
Highest/Lowest
quarterly results during the time period were:
Highest:
10.85% (quarter ended March 31, 2012)
Lowest:
–14.14% (quarter ended September 30, 2011)
Average Annual Total Returns
For the Periods Ended 12/31/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Dodge &
Cox
Balanced
Fund |
|
1 Year |
|
|
5 Years |
|
|
10 Years |
|
Return
before taxes |
|
|
19.62 |
% |
|
|
7.78 |
% |
|
|
10.25 |
% |
Return
after taxes on distributions |
|
|
16.84 |
|
|
|
5.70 |
|
|
|
8.83 |
|
Return
after taxes on distributions and sale of Fund shares |
|
|
13.14 |
|
|
|
5.71 |
|
|
|
8.11 |
|
S&P
500 Index (reflects no deduction for expenses or taxes) |
|
|
31.49 |
|
|
|
11.70 |
|
|
|
13.56 |
|
Bloomberg
Barclays U.S. Aggregate Bond Index (reflects no deduction for expenses
or taxes) |
|
|
8.72 |
|
|
|
3.05 |
|
|
|
3.75 |
|
Combined
Index* (60% S&P 500 & 40% Bloomberg Barclays U.S. Aggregate
Bond Index) (reflects no deduction for expenses or taxes) |
|
|
22.18 |
|
|
|
8.39 |
|
|
|
9.78 |
|
* |
|
The Combined Index is a composite blend of 60%
of the S&P 500 Index and 40% of the Bloomberg Barclays U.S. Aggregate
Bond Index and represents a broad measure of the U.S. stock and bond
markets, including market sectors in which the Fund may invest.
|
After-tax returns are calculated using the
historical highest individual federal marginal income tax rates, but do not
reflect the impact of state or local taxes. Actual after-tax returns may differ depending on
your individual circumstances. After-tax return figures do not apply to you
if you hold your Fund shares through a tax-deferred arrangement such as a 401(k)
plan or an individual retirement account.
PAGE
12 ∎ DODGE &
COX FUNDS
Fund Management
Dodge &
Cox serves as investment manager to the Balanced Fund. The equity portion of the
Balanced Fund is managed by Dodge & Cox’s U.S. Equity Investment
Committee (“USEIC”), which is also responsible (in consultation with
Dodge & Cox’s U.S. Fixed Income Investment Committee (“USFIIC”))
for determining the asset allocation of the Balanced Fund. The debt portion of
the Balanced Fund is managed by the USFIIC. USEIC consists of the following
eight members:
|
|
|
|
|
Committee Member |
|
Primary Titles with Investment Manager |
|
Years managing the Fund/ Years with
Dodge & Cox |
Charles
F. Pohl |
|
Chairman,
Director, Chief Investment Officer, and member of Global Equity Investment
Committee (“GEIC”), and International Equity Investment Committee
(“IEIC”) |
|
28/36 |
C. Bryan
Cameron |
|
Senior Vice
President and Director of Research |
|
28/37 |
David C.
Hoeft |
|
Senior Vice
President, Director, Associate Chief Investment Officer, and member of
GEIC |
|
18/27 |
Steven C.
Voorhis |
|
Vice
President, Associate Director of Research, and member of GEIC |
|
14/24 |
Philippe
Barret, Jr. |
|
Vice
President and Research Analyst |
|
7/16 |
Kathleen
G. McCarthy |
|
Vice
President and Research Analyst |
|
4/13 |
Karol
Marcin |
|
Vice
President, Research Analyst, and member of GEIC |
|
2/20 |
Benjamin
V. Garosi |
|
Vice
President and Research Analyst |
|
1/11 |
USFIIC |
|
consists of the following nine members:
|
|
|
|
|
|
Committee Member |
|
Primary Titles with Investment Manager |
|
Years managing the Fund/ Years with
Dodge & Cox |
Dana M.
Emery |
|
Chief
Executive Officer, President, Director, and member of Global Fixed
Income Investment Committee (“GFIIC”) |
|
34/37 |
Thomas S.
Dugan |
|
Senior Vice
President, Director, Director of Fixed Income, and member of GFIIC |
|
26/26 |
Larissa
K. Roesch |
|
Vice
President, Client Portfolio Manager, and Client Portfolio Counselor |
|
22/23 |
James H.
Dignan |
|
Vice
President, Client Portfolio Manager, Research Analyst, and member of
GFIIC |
|
18/21 |
Anthony
J. Brekke |
|
Vice
President, Client Portfolio Manager, and Research Analyst |
|
12/17 |
Adam S.
Rubinson |
|
Vice
President, Client Portfolio Manager, Research Analyst, and member of
GFIIC |
|
10/18 |
Lucinda
I. Johns |
|
Vice
President, Associate Director of Fixed Income, Research Analyst, and
member of GFIIC |
|
8/18 |
Nils M.
Reuter |
|
Vice
President, Research Analyst, and Trader |
|
2/17 |
Michael
Kiedel |
|
Vice
President and Research Analyst |
|
2/12 |
Other Important Information About Fund Shares
For
important information about purchase and sale of Fund shares, tax information,
and payments to financial intermediaries please turn to the “Summary of Other
Important Information About Fund Shares” section on page 21 of this prospectus.
DODGE & COX FUNDS ∎ PAGE 13
Dodge & Cox Income Fund
Investment Objectives
The
Fund seeks a high and stable rate of current income, consistent with long-term
preservation of capital. A secondary objective is to take advantage of
opportunities to realize capital appreciation.
Fees and Expenses
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. The table and example below do not reflect any transaction
fees that may be charged by financial intermediaries or commissions that a
shareholder may be required to pay directly to its financial intermediary when
buying or selling shares.
|
|
|
|
|
Shareholder Fees
(fees
paid directly from your investment) |
|
|
|
Sales
charge (load) imposed on purchases |
|
|
None |
|
Deferred
sales charge (load) |
|
|
None |
|
Sales
charge (load) imposed on reinvested distributions |
|
|
None |
|
Redemption
fee |
|
|
None |
|
Exchange
fee |
|
|
None |
|
|
|
|
|
|
Annual Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
|
Management
fees |
|
|
0.40 |
% |
Distribution
and/or service (12b-1)
fees |
|
|
None |
|
Other
expenses (transfer agent, custody, accounting, legal, etc.) |
|
|
0.02 |
% |
|
|
|
|
|
Total
Annual Fund Operating Expenses |
|
|
0.42 |
% |
Example:
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The
example assumes that:
∎ |
|
You invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
time periods; |
∎ |
|
Your investment has a 5% return each year; and
|
∎ |
|
The Fund’s operating expenses remain the same.
|
Transaction
fees or commissions that may be charged by financial intermediaries on purchases
and sales of shares of the Fund are not reflected in the example.
Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
|
3 Years |
|
|
5 Years |
|
|
10 Years |
|
$ |
43 |
|
|
$ |
135 |
|
|
$ |
235 |
|
|
$ |
530 |
|
Portfolio Turnover
The
Fund incurs transaction costs when Dodge & Cox buys and sells
securities (or “turns over” the portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These transaction costs, which are not
reflected in annual Fund operating expenses or in the example, affect the Fund’s
performance. During the most recent fiscal year, the Fund’s portfolio turnover
rate was 49% of the average value of its portfolio.
Principal Investment Strategies
The
Fund invests in a diversified portfolio of bonds and other debt securities.
Under normal circumstances, the Fund will invest at least
80%
of its total assets in (1) investment-grade debt securities and
(2) cash equivalents. “Investment grade” means (i) securities rated
Baa3 or higher by Moody’s Investors Service (“Moody’s”), or BBB- or higher by Standard & Poor’s
Global Ratings (“S&P”) or Fitch Ratings (“Fitch”), or equivalently rated by
any nationally recognized statistical rating organization (“NRSRO”), or,
(ii) if unrated, deemed to be of similar quality by Dodge & Cox.
The Fund may invest up to 25% of its total assets in U.S. dollar-denominated
securities of non-U.S. issuers,
including emerging market issuers.
Debt
securities in which the Fund invests include obligations issued or guaranteed by
the U.S. government, its agencies or government sponsored entities (“GSEs”),
mortgage- and asset-backed securities, corporate and municipal bonds, and may
include other fixed and floating rate instruments. The Fund may invest up to 20%
of its total assets in debt securities rated below investment grade, commonly
referred to as high-yield or “junk” bonds; provided no more than 5% of the
Fund’s total assets may be invested in securities rated below B3 or B- by Moody’s, S&P, or Fitch. The Fund
may also invest in interest rate derivatives, such as U.S. Treasury futures
contracts and swap agreements for a variety of purposes, including, but not
limited to, managing the Fund’s duration or adjusting the Fund’s exposure to
debt securities with different maturities.
The
proportions of Fund assets invested in various classes of debt securities will
be revised in light of Dodge & Cox’s appraisal of the economy, the
relative yields of securities in the various market sectors, the investment
prospects for issuers, and other factors. In selecting securities,
Dodge & Cox considers many factors, including yield, credit quality,
liquidity, covenants, call risk, duration, structure, and capital appreciation
potential.
Principal Risks of Investing
You
could lose money by investing in the Fund, and the Fund could underperform other
investments. You should expect the Fund’s share price and total return to
fluctuate. The Fund’s performance could be hurt by:
∎ |
|
Interest rate risk.
Debt security prices may decline due to rising interest rates. The price
of debt securities with longer maturities is typically affected more by
rising interest rates than the price of debt securities with shorter
maturities. |
∎ |
|
Credit risk. An
issuer or guarantor of a debt security may be unable or unwilling to make
scheduled payments of interest and principal. Actual or perceived
deterioration in an issuer’s or guarantor’s financial condition may affect
a security’s value. |
∎ |
|
Below investment-grade
securities risk. Debt securities rated below investment-grade, also
known as high-yield or “junk” bonds, generally have greater credit risk,
more price volatility, and less liquidity than investment-grade
securities. |
∎ |
|
Mortgage- and asset-backed
securities risk. Mortgage- and certain asset-backed securities
permit early repayment of principal based on prepayment of the underlying
assets; changes in the rate of repayment affect the price and volatility
of an investment. If prepayments occur more quickly than expected, the
Fund receives lower interest payments than it expects. If prepayments
occur more slowly than expected, it delays the return of principal to the
Fund. Securities issued by certain GSEs are not issued or guaranteed by
the U.S. Treasury; there is no assurance the U.S. government will provide
support in the event a GSE issuer cannot meet its obligations.
|
PAGE
14 ∎ DODGE &
COX FUNDS
∎ |
|
Non-U.S. investment
risk. Securities of non-U.S. issuers may be more volatile,
harder to value, and have lower overall liquidity than U.S. securities.
Non-U.S. issuers may be subject
to political, economic, or market instability, or unfavorable government
action in their local jurisdictions or economic sanctions or other
restrictions imposed by U.S. or foreign regulators. There may be less
information publicly available about non-U.S. issuers and their securities,
and those issuers may be subject to lower levels of government regulation
and oversight. Non-U.S.
securities may decline in value due to conditions specific to an
individual country, including unfavorable economic conditions relative to
the United States. There may be increased risk of delayed transaction
settlement. These risks may be higher when investing in emerging market
issuers. Certain of these elevated risks may also apply to securities of
U.S. issuers with significant non-U.S. operations.
|
∎ |
|
Emerging markets
risk. Emerging market securities present issuer, market, currency,
liquidity, volatility, valuation, legal, political, and other risks
different from, and potentially greater than, the risks of investing in
securities of issuers in more developed markets. |
∎ |
|
Liquidity risk. The
Fund may not be able to purchase or sell a security in a timely manner or
at desired prices or achieve its desired weighting in a security.
Liquidity risk may result from the lack of an active market or a reduced
number and capacity of traditional market participants to make a market in
fixed income securities, and may be magnified during times of market
stress or under circumstances that cause increased supply in the market
due to unusually high selling activity. |
∎ |
|
Derivatives risk.
Investing with derivatives, such as interest rate swaps and futures,
involves risks additional to and possibly greater than those associated
with investing directly in securities. The value of a derivative may not
correlate to the value of the underlying instrument to the extent
expected. A derivative can create leverage because it can result in
exposure to an amount of a security, index, or other underlying investment
(a “notional amount”) that is substantially larger than the derivative
position’s market value. Often, the upfront payment required to enter into
a derivative is much smaller than the potential for loss, which for
certain types of derivatives may be unlimited. The Fund may not be able to
close a derivatives position at an advantageous time or price. For over-the-counter derivatives
transactions, the counterparty may be unable or unwilling to make required
payments and deliveries, especially during times of financial market
distress. Changes in regulation relating to a mutual fund’s use of
derivatives and related instruments may make derivatives more costly,
limit the availability of derivatives, or otherwise adversely affect the
value or performance of derivatives and the Fund.
|
∎ |
|
Call risk. If
interest rates fall, issuers of callable bonds may repay securities with
higher interest rates before maturity. This could cause the Fund to lose
potential price appreciation and reinvest the proceeds in securities with
lower interest rates or more credit risk. |
∎ |
|
Sovereign and
government-related debt risk. An issuer of sovereign debt or the
governmental authorities that control the repayment of the debt may be
unable or unwilling to repay principal or interest when due. In the event
of a default by a governmental entity on a sovereign debt obligation,
there may be few or no effective legal remedies for collecting on such
debt. |
∎ |
|
Manager risk.
Dodge & Cox’s opinion about the intrinsic worth or
creditworthiness of a company or security may be incorrect or the market
may continue to undervalue a company or security. Dodge & Cox may
not make timely purchases or sales of securities for the Fund.
|
∎ |
|
Market risk.
Investment prices may increase or decrease, sometimes suddenly and
unpredictably, due to general market conditions. Local, regional or global
events such as war, acts of terrorism, the spread of infectious illness or
other public health issue, recessions, or other events could also have a
significant impact on the Fund and its investments and potentially
increase the risks described above. |
An
investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Performance Information
The
following bar chart and table are intended to help you understand the risks of
investing in the Fund. The bar chart shows changes in the Fund’s returns from
year to year. The table shows how the Fund’s average annual total returns for
one, five, and ten years compare to those of a broad measure of market
performance.
The
Fund’s past performance (before and after taxes) does not necessarily indicate
how the Fund will perform in the future. Visit the Fund’s website at
dodgeandcox.com or call 800-621-3979 for current performance
figures.
Highest/Lowest
quarterly results during the time period were:
Highest:
3.70% (quarter ended March 31, 2019)
Lowest:
–1.84% (quarter ended June 30, 2013)
Average Annual Total Returns
for the Periods Ended 12/31/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Dodge &
Cox
Income
Fund |
|
1 Year |
|
|
5 Years |
|
|
10 Years |
|
Return
before taxes |
|
|
9.73 |
% |
|
|
3.69 |
% |
|
|
4.43 |
% |
Return
after taxes on distributions |
|
|
8.18 |
|
|
|
2.32 |
|
|
|
3.00 |
|
Return
after taxes on distributions and sale of Fund shares |
|
|
5.80 |
|
|
|
2.22 |
|
|
|
2.83 |
|
Bloomberg
Barclays U.S. Aggregate Bond Index (reflects no deduction for expenses
or taxes) |
|
|
8.72 |
|
|
|
3.05 |
|
|
|
3.75 |
|
DODGE & COX FUNDS ∎ PAGE 15
After-tax returns are calculated using the
historical highest individual federal marginal income tax rates, but do not
reflect the impact of state or local taxes. Actual after-tax returns may differ depending on
your individual circumstances. After-tax return figures
do
not apply to you if you hold your Fund shares through a tax-deferred arrangement such as a 401(k)
plan or an individual retirement account.
Fund Management
Dodge &
Cox serves as investment manager to the Income Fund. The Fund is managed by
Dodge & Cox’s U.S. Fixed Income Investment Committee (“USFIIC”),
which consists of the following nine members:
|
|
|
|
|
Committee Member |
|
Primary Title with Investment Manager |
|
Years managing the Fund/ Years with
Dodge & Cox |
Dana M.
Emery |
|
Chief
Executive Officer, President, Director, and member of Global Fixed Income
Investment Committee (“GFIIC”) |
|
34/37 |
Thomas S.
Dugan |
|
Senior Vice
President, Director, Director of Fixed Income, and member of GFIIC |
|
26/26 |
Larissa
K. Roesch |
|
Vice
President, Client Portfolio Manager, and Client Portfolio Counselor |
|
22/23 |
James H.
Dignan |
|
Vice
President, Client Portfolio Manager, Research Analyst, and member of
GFIIC |
|
18/21 |
Anthony
J. Brekke |
|
Vice
President, Client Portfolio Manager, and Research Analyst |
|
12/17 |
Adam S.
Rubinson |
|
Vice
President, Client Portfolio Manager, Research Analyst, and member of
GFIIC |
|
10/18 |
Lucinda
I. Johns |
|
Vice
President, Associate Director of Fixed Income, Research Analyst, and
member of GFIIC |
|
8/18 |
Nils M.
Reuter |
|
Vice
President, Research Analyst, and Trader |
|
2/17 |
Michael
Kiedel |
|
Vice
President and Research Analyst |
|
2/12 |
Other Important Information About Fund Shares
For
important information about purchase and sale of Fund shares, tax information,
and payments to financial intermediaries please turn to the “Summary of Other
Important Information About Fund Shares” section on page 21 of this
prospectus.
PAGE
16 ∎ DODGE &
COX FUNDS
Dodge & Cox Global Bond Fund
Investment Objectives
The
Fund seeks a high rate of total return consistent with long-term preservation of
capital.
Fees and Expenses
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. The table and example below do not reflect any transaction
fees that may be charged by financial intermediaries or commissions that a
shareholder may be required to pay directly to its financial intermediary when
buying or selling shares.
|
|
|
|
|
Shareholder Fees
(fees
paid directly from your investment) |
|
|
|
Sales
charge (load) imposed on purchases |
|
|
None |
|
Deferred
sales charge (load) |
|
|
None |
|
Sales
charge (load) imposed on reinvested distributions |
|
|
None |
|
Redemption
fee |
|
|
None |
|
Exchange
fee |
|
|
None |
|
|
|
|
|
|
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
|
Management
fees |
|
|
0.50 |
% |
Distribution
and/or service (12b-1)
fees |
|
|
None |
|
Other
expenses (transfer agent, custody, accounting, legal, etc.) |
|
|
0.33 |
% |
|
|
|
|
|
Total
Annual Fund Operating Expenses |
|
|
0.83 |
% |
Expense
Reimbursement |
|
|
0.38 |
%* |
|
|
|
|
|
Net
Expenses |
|
|
0.45 |
%* |
* |
|
Dodge & Cox has contractually agreed to
reimburse the Fund for all ordinary expenses to the extent necessary to
maintain Total Annual Fund Operating expenses at 0.45% through
April 30, 2021. The term of the agreement renews annually unless
terminated with 30 days’ written notice by either party prior to the end
of the term. |
Example:
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The
example assumes that:
∎ |
|
You invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
time periods; |
∎ |
|
Your investment has a 5% return each year; and
|
∎ |
|
The Fund’s operating expenses remain the same
but Dodge & Cox or the Fund terminates the expense
reimbursement agreement as of April 30, 2021. |
Transaction
fees or commissions that may be charged by financial intermediaries on purchases
and sales of shares of the Fund are not reflected in the example.
Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
|
3 Years |
|
|
5 Years |
|
|
10 Years |
|
$ |
46 |
|
|
$ |
227 |
|
|
$ |
423 |
|
|
$ |
990 |
|
Portfolio Turnover
The
Fund incurs transaction costs when Dodge & Cox buys and sells
securities (or “turns over” the portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These transaction
costs,
which are not reflected in annual Fund operating expenses or in the example,
affect the Fund’s performance. During the most recent fiscal year, the Fund’s
portfolio turnover rate was 60% of the average value of its portfolio.
Principal Investment Strategies
The
Fund invests in a diversified portfolio of bonds and other debt instruments of
issuers from at least three different countries, which may include emerging
market countries. The Fund is not required to allocate its investments in set
percentages to particular countries and may invest in emerging markets without
limit. Under normal circumstances, the Fund invests at least 40% of its total
assets in securities of non-U.S.
issuers and at least 80% of its total assets in debt instruments, which may, in
each case, be represented by derivatives such as forward contracts, futures
contracts, or swap agreements. Debt instruments in which the Fund may invest
include, but are not limited to, government and government-related obligations,
mortgage- and asset-backed securities, corporate and municipal bonds, and other
fixed and floating rate instruments. The Fund invests in both U.S.
dollar-denominated and non-U.S.
dollar-denominated debt instruments.
The
Fund invests primarily in investment-grade debt instruments (instruments rated
Baa3 or higher by Moody’s Investors Service (“Moody’s”), BBB- or higher by Standard & Poor’s
Global Ratings (“S&P”) or Fitch Ratings (“Fitch”), or equivalently rated by
any nationally recognized statistical rating organization (“NRSRO”), or, if
unrated, deemed to be of investment-grade quality by Dodge & Cox). Up
to 20% of the Fund’s total assets may be invested in debt securities rated below
investment grade, commonly referred to as high-yield or “junk” bonds.
The
Fund may buy or sell non-U.S.
currencies and may enter into various currency or interest rate-related
transactions involving derivative instruments, including forward contracts,
futures contracts, and swap agreements. The Fund may use derivatives to seek to
minimize the impact of losses to one or more of its investments (as a “hedging
technique”) or to implement its investment strategy. For example, the Fund may
invest in derivative instruments that create exposure to a specific security or
market sector as a substitute for a direct investment in the security or sector
itself or to benefit from changes in the relative values of selected currencies.
The Fund may use interest rate derivatives for a variety of purposes, including,
but not limited to, managing the Fund’s duration or adjusting the Fund’s
exposure to debt securities with different maturities.
In
selecting securities, Dodge & Cox considers many factors,
including, without limitation, yield, structure, covenants, credit quality,
liquidity, call risk, duration, and capital appreciation potential. For all
securities that are denominated in a foreign currency, Dodge & Cox
analyzes whether to accept or hedge the associated interest rate and currency
risks. Dodge & Cox considers, among other things, a country’s
economic outlook and political stability, the protections provided to foreign
investors, relative interest rates, exchange rates, a country’s monetary and
fiscal policies, its debt stock, and its ability to meet its funding needs.
The
Fund may purchase or sell holdings for a variety of reasons such as to alter
sector, geographic, or currency exposure or to shift the overall portfolio’s
risk profile. The proportions of the Fund’s
DODGE & COX FUNDS ∎ PAGE 17
assets
held in various debt instruments will be revised in light of
Dodge & Cox’s appraisal of the global economy, the relative yields
of securities in the various market sectors and countries, the potential for a
currency’s appreciation, the investment prospects for issuers, the countries’
domestic and political conditions, and other factors.
Principal Risks of Investing
You
could lose money by investing in the Fund, and the Fund could underperform other
investments. You should expect the Fund’s share price and total return to
fluctuate within a wide range. The Fund’s performance could be hurt by:
∎ |
|
Interest rate risk.
Debt security prices may decline due to rising interest rates. The price
of debt securities with longer maturities is typically affected more by
rising interest rates than the price of debt securities with shorter
maturities. |
∎ |
|
Credit risk. An
issuer or guarantor of a debt security may be unable or unwilling to make
scheduled payments of interest and principal. Actual or perceived
deterioration in an issuer’s or guarantor’s financial condition may affect
a security’s value. |
∎ |
|
Below investment-grade
securities risk. Debt securities rated below investment grade, also
known as high-yield or “junk” bonds generally have greater credit risk,
more price volatility, and less liquidity than investment-grade
securities. |
∎ |
|
Non-U.S. investment risk.
Securities of non-U.S. issuers
may be more volatile, harder to value, and have lower overall liquidity
than U.S. securities. Non-U.S.
issuers may be subject to political, economic, or market instability, or
unfavorable government action in their local jurisdictions or economic
sanctions or other restrictions imposed by U.S. or foreign regulators.
There may be less information publicly available about non-U.S. issuers and their securities
and those issuers may be subject to lower levels of government regulation
and oversight. Non-U.S.
securities may decline in value due to conditions specific to an
individual country, including unfavorable economic conditions relative to
the United States. There may be increased risk of delayed transaction
settlement. These risks may be higher when investing in emerging market
issuers. Certain of these elevated risks may also apply to securities of
U.S. issuers with significant non-U.S. operations.
|
∎ |
|
Emerging markets
risk. Emerging market securities may present issuer, market,
currency, liquidity, volatility, valuation, legal, political, and other
risks different from, and potentially greater than, the risks of investing
in securities of issuers in more developed markets. |
∎ |
|
Non-U.S. currency
risk. Non-U.S. currencies
may decline relative to the U.S. dollar, which reduces the unhedged value
of investments denominated in or otherwise exposed to those currencies.
Dodge & Cox may not hedge or may not be successful in hedging the
Fund’s currency exposure and may not be able to determine accurately the
extent to which a security or its issuer is exposed to currency risk.
|
∎ |
|
Sovereign and
government-related debt risk. An issuer of sovereign debt or the
governmental authorities that control the repayment of the debt may be
unable or unwilling to repay principal or interest when due. In the event
of a default by a governmental entity on a sovereign debt obligation,
there may be few or no effective legal remedies for collecting on such
debt. |
∎ |
|
Derivatives risk.
Investing with derivatives, such as currency forward contracts, interest
rate swaps, and futures contracts involves risks additional to and
possibly greater than those associated with investing directly in
securities. The value of a derivative may not correlate to the value of
the underlying instrument to the extent expected. A derivative can create
leverage because it can result in exposure to an amount of a security,
index, or other underlying investment (a “notional amount”) that is
substantially larger than the derivative position’s market value. Often,
the upfront payment required to enter into a derivative is much smaller
than the potential for loss, which for certain types of derivatives may be
unlimited. The Fund may not be able to close a derivatives position at an
advantageous time or price. For over-the-counter derivatives
transactions, the counterparty may be unable or unwilling to make required
payments and deliveries, especially during times of financial market
distress. Changes in regulation relating to a mutual fund’s use of
derivatives and related instruments may make derivatives more costly,
limit the availability of derivatives, or otherwise adversely affect the
value or performance of derivatives and the Fund.
|
∎ |
|
Liquidity risk. The
Fund may not be able to purchase or sell a security in a timely manner or
at desired prices or achieve its desired weighting in a security.
Liquidity risk may result from the lack of an active market or a reduced
number and capacity of traditional market participants to make a market in
fixed income securities and may be magnified during times of market stress
or under circumstances that cause increased supply in the market due to
unusually high selling activity. |
∎ |
|
Mortgage- and asset-backed
securities risk. Mortgage- and certain asset-backed securities
permit early repayment of principal based on prepayment of the underlying
assets; changes in the rate of repayment affect the price and volatility
of an investment. If prepayments occur more quickly than expected, the
Fund receives lower interest payments than it expects. If prepayments
occur more slowly than expected, it delays the return of principal to the
Fund. Securities issued by certain U.S. government-sponsored entities
(“GSEs”) are not issued or guaranteed by the U.S. Treasury; there is no
assurance the U.S. government will provide support in the event a GSE
issuer cannot meet its obligations. |
∎ |
|
Call risk. If
interest rates fall, issuers of callable bonds may repay securities with
higher interest rates before maturity. This could cause the Fund to lose
potential price appreciation and reinvest the proceeds in securities with
lower interest rates or more credit risk. |
∎ |
|
Manager risk.
Dodge & Cox’s opinion about the intrinsic worth or
creditworthiness of a company or security may be incorrect or the market
may continue to undervalue the company or security. Dodge & Cox
may not make timely purchases or sales of securities for the Fund.
|
∎ |
|
Market risk.
Investment prices may increase or decrease, sometimes suddenly and
unpredictably, due to general market conditions. Local, regional or global
events such as war, acts of terrorism, the spread of infectious illness or
other public health issue, recessions, or other events could also have a
significant impact on the Fund and its investments and potentially
increase the risks described above. |
PAGE
18 ∎ DODGE &
COX FUNDS
An
investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Performance Information
The
following bar chart and table are intended to help you understand the risks of
investing in the Fund. The bar chart shows changes in the Fund’s returns from
year to year. The table shows how the Fund’s average annual total returns
compare to those of a broad measure of market performance. The Fund has
benefited since its inception from an expense reimbursement agreement. Without
the expense reimbursement, Fund returns would have been lower.
Dodge & Cox
Global Bond Fund, L.L.C., a private fund managed and funded by
Dodge & Cox (the “Private Fund”), was reorganized into the Fund
and the Fund commenced operations on May 1, 2014. The Private Fund was
organized as Delaware limited liability company and was treated as a disregarded
entity under the Internal Revenue Code of 1986, as amended (the “Code”). The
Private Fund commenced operations on December 5, 2012, and had an
investment objective, policies, and strategies that were, in all material
respects, the same as those of the Fund, and was managed in a manner that, in
all material respects, complied with the investment guidelines and restrictions
of the Fund. However, the Private Fund was not registered as an investment
company under the Investment Company Act of 1940 (the “1940 Act”), and therefore
was not subject to certain investment limitations, diversification requirements,
liquidity requirements, and other restrictions imposed by the 1940 Act and the
Code, which, if applicable, may have adversely affected its performance. The
Fund’s performance for periods prior to the commencement of operations on
May 1, 2014, is that of the Private Fund. The performance of the Private
Fund has not been restated because the net total operating expense ratio of the
Private Fund and the Fund (after the application of the expense reimbursement
agreement) are the same. The 2012 and 2013 audited financial statements of the
Private Fund are available from the Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) database on the SEC’s website (sec.gov), or by calling the
Fund at 800-621-3979.
The
Fund’s past performance (before and after taxes) does not necessarily indicate
how the Fund will perform in the future. Visit the Fund’s website at
dodgeandcox.com or call 800-621-3979 for current performance
figures.
Highest/Lowest
quarterly results during the time period were:
Highest:
4.69% (quarter ended March 31, 2019)
Lowest:
–4.16% (quarter ended September 30, 2015)
Average Annual Total Returns
for the Periods Ended 12/31/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Dodge &
Cox
Global
Bond Fund |
|
1 Year |
|
|
5 Years |
|
|
Since Inception (12/5/2012) |
|
Return
before taxes |
|
|
12.23 |
% |
|
|
4.07 |
% |
|
|
3.51 |
% |
Return
after taxes on distributions |
|
|
10.71 |
|
|
|
3.01 |
|
|
|
2.68 |
|
Return
after taxes on distributions and sale of Fund shares |
|
|
7.23 |
|
|
|
2.67 |
|
|
|
2.35 |
|
Bloomberg
Barclays Global Aggregate Bond Index (reflects no deduction for expenses
or taxes) |
|
|
6.84 |
|
|
|
2.31 |
|
|
|
1.23 |
|
After-tax returns are calculated using the
historical highest individual federal marginal income tax rates, but do not
reflect the impact of state or local taxes. Actual after-tax returns may differ depending on
your individual circumstances. After-tax return figures do not apply to you
if you hold your Fund shares through a tax-deferred arrangement such as a 401(k)
plan or an individual retirement account.
DODGE & COX FUNDS ∎ PAGE 19
Fund Management
Dodge &
Cox serves as investment manager to the Global Bond Fund. The Fund is managed by
Dodge & Cox’s Global Fixed Income Investment Committee
(“GFIIC”), which consists of the following seven members:
|
|
|
|
|
Committee Member |
|
Primary Titles with Investment Manager |
|
Years managing the
Fund/ Years with Dodge & Cox |
Dana M.
Emery |
|
Chief
Executive Officer, President, Director, and member of U.S. Fixed Income
Investment Committee (“USFIIC”) |
|
6/37 |
Thomas S.
Dugan |
|
Senior Vice
President, Director, Director of Fixed Income, and member of USFIIC |
|
6/26 |
James H.
Dignan |
|
Vice
President, Client Portfolio Manager, Research Analyst, and member of
USFIIC |
|
6/21 |
Adam S.
Rubinson |
|
Vice
President, Client Portfolio Manager, Research Analyst, and member of
USFIIC |
|
6/18 |
Lucinda
I. Johns |
|
Vice
President, Associate Director of Fixed Income, Research Analyst, and
member of USFIIC |
|
6/18 |
Matthew
B. Schefer |
|
Vice
President and Research Analyst |
|
2/12 |
Jose
F. Ursua |
|
Vice
President and Macro Research Analyst |
|
*/5 |
* |
|
Mr. Ursua was appointed to the GFIIC
effective January 2020. |
Other Important Information About Fund Shares
For
important information about purchase and sale of Fund shares, tax information,
and payments to financial intermediaries please turn to the “Summary of Other
Important Information About Fund Shares” section on page 21 of this
prospectus.
PAGE
20 ∎ DODGE &
COX FUNDS
Summary of Other Important Information
About Fund Shares
Purchase and Sale of Fund Shares
The
minimum initial investment for shares of a Fund is $2,500 ($1,000 for Individual
Retirement Accounts (“IRAs”)) and the minimum subsequent investment is
$100. The Funds reserve the right to waive minimum investment amounts for
certain financial intermediaries that use the Funds as part of an asset
allocation program, certain retirement plans, and accounts that hold the Funds
in omnibus name. Financial intermediaries may impose their own minimum
investment amounts.
You
may withdraw (redeem) any part of your account by selling shares. The sale price
of your shares will be the Fund’s next-determined net asset value after DST
Asset Manager Solutions, Inc. (the “Transfer Agent”) or an authorized agent or
sub-agent receives all required
documents in good order. You may sell shares as described below:
∎ |
|
Online: Visit the Dodge & Cox Funds’
website at dodgeandcox.com, click on “Account Access” to log into your
account and submit your request online. |
∎ |
|
Mail: Visit Dodge & Cox Funds’ website
at dodgeandcox.com and click on “Forms & Guides.” Download and
complete the Redemption Request Form for a non-IRA and/or the IRA Distribution
Request Form for an IRA. Mail the completed form(s) to
“Dodge & Cox Funds, c/o DST Asset Manager Solutions, Inc.,
P.O. Box 219502, Kansas City, MO 64121-9502” to process your request(s).
|
∎ |
|
Phone: You may call Client Services at 800-621-3979 during business
hours to place redemption or distribution requests for either a non-IRA or an IRA.
|
Tax Information
Each
Fund will distribute substantially all of its income and capital gains to its
shareholders every year. You will be taxed on dividends you receive from a Fund
as ordinary income and/or capital gains unless you hold your Fund shares in a
tax-deferred retirement account, such
as an IRA, or are otherwise tax exempt in which case you will generally be taxed
only upon withdrawal of monies from the retirement account.
Payments to Financial Intermediaries
If
you purchase a Fund through an employee benefit plan, Dodge & Cox may
make payments to the recordkeeper, broker/dealer, bank, or other financial
institution or organization (each a “Financial Intermediary”) that provides
shareholder recordkeeping or other administrative services to the plan as
compensation for those services. These payments may create a conflict of
interest by influencing your Financial Intermediary to make available a Fund
over other mutual funds or investments. You should ask your Financial
Intermediary about differing and divergent interests and how it is compensated
for administering your Fund investment.
DODGE & COX FUNDS ∎ PAGE 21
Investment Objectives, Principal
Investment Strategies, Related Risks, and Disclosure of Portfolio Holdings
This
section takes a closer look at the investment objectives and certain risks of
investing in the Dodge & Cox Funds (each a “Fund” and, collectively,
the “Funds”). This section also provides information regarding the Funds’
disclosure of portfolio holdings.
Dodge & Cox Investment Management Approach
Fundamental
bottom-up research, a long-term
investment horizon, and rigorous valuation discipline are central to
Dodge & Cox’s investment philosophy. Investment decisions are made by a
team of seasoned investment professionals based on key fundamental factors that
we believe determine investment value over the long term. Our investment
analysts operate from a single location to foster communication and
collaboration, and each investment idea is subject to committee review for both
its merits as a specific investment and its role in the overall portfolio. Our
approach stresses an evaluation of risk relative to opportunity and we seek
investments that we believe are undervalued by the market.
Equity Investing
Dodge &
Cox’s equity investment strategy is to build a portfolio of individual
securities that we believe are undervalued given their long-term prospects.
Individual company research drives the selection of equity securities for the
Funds’ portfolios. Our team of global research analysts, organized by industry,
conducts detailed primary research, which provides us the necessary perspective
about industry dynamics to assess company fundamentals and compare valuations.
We identify investment opportunities by analyzing the long-term fundamentals of
a business, including prospective earnings, cash flow, and dividends over a
three-to-five year period. We focus
our research efforts on factors — such as franchise strength, competitive
dynamics, growth opportunities, and management quality — that we believe
ultimately determine business success. When evaluating investment opportunities,
Dodge & Cox may also consider whether environmental, social and/or
corporate governance factors are likely to have a material impact on an issuer’s
risk/reward profile. The Funds typically invest in medium-to-large well-established
companies. It is the general practice of the Funds to invest in equity
securities that have liquid secondary markets. Particularly when investing in
securities of non-U.S. issuers,
Dodge & Cox considers the economic and political stability of the
country where the issuer is located and the protections provided to
shareholders. We consider the sale of a holding when we believe the price of a
company’s equity securities reflects more optimistic expectations about the
company’s prospects than our own expectations, when our assessment of a
company’s long-term fundamentals grows negative or when we identify more
attractive opportunities elsewhere.
Fixed Income Investing
Dodge &
Cox’s fixed income investment strategy is to construct and manage a high average
quality portfolio of securities selected through bottom-up fundamental analysis and with an
emphasis on valuation. By combining fundamental research with a long-term
investment horizon, we seek to uncover and act upon inefficiencies
in
the relative valuations of individual securities. Our credit research focuses on
the factors that can influence an individual issuer’s creditworthiness and any
downside protection that exists. At the security level, our analysis emphasizes
the terms and conditions and structural characteristics of each instrument. We
also consider economic trends and special circumstances that may affect an
industry or a specific issuer or issue. While considering factors such as yield,
credit quality, liquidity, call risk, duration, structure, covenants, and
capital appreciation potential, we seek to construct a fixed income portfolio
that will generate a relatively high, sustainable income stream without assuming
undue levels of risk.
Particularly
when investing outside the United States, Dodge & Cox considers a
country’s financial strength and the rights of foreign creditors. In particular,
we evaluate a country’s economic outlook and political stability, its monetary
and fiscal policies, its debt stock, its regulatory framework, including its
insolvency regime, and its ability to meet its funding needs. For securities
denominated in or otherwise exposed to foreign currency, we consider relative
interest rates and exchange rates in deciding whether to accept or hedge those
risks.
Dodge &
Cox normally invests in an array of debt securities with short, intermediate,
and long maturities in varying proportions. The average maturity at any given
time of the debt securities in the Funds depends, in part, on
Dodge & Cox’s assessment of the factors described above and
Dodge & Cox’s expectation regarding the future level of inflation
and interest rates.
Yields
on a debt security depend on a variety of factors, including the general
conditions of the money and debt securities markets, the size of a particular
offering, the terms and conditions of the obligation (e.g., maturity, coupon,
and call features), and the credit rating of the issue. Debt securities with
longer maturities or lower credit ratings tend to have higher yields and are
generally subject to greater price volatility due to their higher interest rate
and credit risks. No specific yield on shares of a Fund can be guaranteed.
Dodge & Cox Stock Fund (“SF”)
Investment
Objective: The Fund seeks long-term
growth of principal and income. A secondary objective is to achieve a reasonable
current income. The Fund’s investment objective may not be changed without
shareholder approval.
The
Fund seeks to achieve its objective by investing primarily in a diversified
portfolio of equity securities. Under normal circumstances, the Fund will invest
at least 80% of its total assets in equity securities, including common stocks,
depositary receipts evidencing ownership of common stocks, preferred stocks, and
securities convertible into common stocks, and securities that carry the right
to buy common stocks (e.g., rights and warrants). The Fund may invest up to 20%
of its total assets in U.S. dollar-denominated securities of non-U.S. issuers traded in the United States
that are not in the S&P 500 Index. The investment policies of the Fund as
described above may be changed without shareholder approval; however, these
investment policies will not be changed without 60 days’ prior notice to
shareholders.
PAGE
22 ∎ DODGE &
COX FUNDS
The
Fund may enter into currency forward contracts, currency swaps, or currency
futures contracts to hedge direct and/or indirect foreign currency exposure. The
Fund may use futures or options referencing stock indices, such as the S&P
500 Index, to hedge against a general downturn in the equity markets.
While
the Fund’s long-term intent is to maintain a fully invested equity fund, the
Fund may hold moderate reserves in cash and/or short-term debt securities as
Dodge & Cox deems advisable. The Fund may purchase equity index futures
contracts, such as S&P 500 futures, to equitize, or create equity market
exposure approximately equal to, some or all of its non-equity assets, such as cash, cash
equivalents, unrealized gains on derivatives, and receivables. For temporary,
defensive purposes, the Fund may invest, without limitation, in U.S.
dollar-denominated short-term debt instruments. As a result of taking such a
defensive position, the Fund may not achieve its investment objectives.
In
an attempt to minimize unforeseen risks in holding the securities of any single
issuer, the Fund seeks to provide investment diversification. Although there is
no restriction on the number of changes in the Fund’s security holdings,
purchases generally are made with a view to holding for the long term and not
for short-term trading purposes. (The Fund’s portfolio turnover rates for the
fiscal years ended December 31, 2019, 2018, and 2017 were 17%, 20%, and
13%, respectively.) However, during rapidly changing economic, market, and
political conditions, portfolio turnover may be higher than in a more stable
period. A higher turnover rate might result in increased transaction expenses
and the realization of capital gains and losses, some of which may be short-term
capital gains taxed as ordinary income (see Federal Income Taxes).
Further
information about specific investments is provided under Additional
Information on Investments.
Dodge & Cox Global Stock Fund (“GSF”)
Investment
Objective: The Fund seeks long-term
growth of principal and income. The Fund’s investment objective may not be
changed without shareholder approval.
The
Fund seeks to achieve its objective by investing primarily in a diversified
portfolio of equity securities from at least three different countries, which
may include emerging market countries. The Fund is not required to allocate its
investments in set percentages in particular countries and may invest in
emerging markets without limit. Under normal circumstances, the Fund will invest
at least 40% of its total assets in securities of non-U.S. companies and at least 80% of its
total assets in equity securities, including common stocks, depositary receipts
evidencing ownership of common stocks, preferred stocks, securities convertible
into common stocks, and securities that carry the right to buy common stocks
(e.g., rights and warrants). The investment policies of the Fund as described
above may be changed without shareholder approval; however, these investment
policies will not be changed without 60 days’ prior notice to shareholders.
The
Fund may enter into currency forward contracts, currency swaps, or currency
futures contracts to hedge direct and/or indirect foreign currency exposure. The
Fund may use futures or options referencing stock indices to hedge against a
general downturn in the equity markets.
While
the Fund’s long-term intent is to maintain a fully invested equity fund, the
Fund may hold moderate reserves in cash or
short-term debt securities as
Dodge & Cox deems advisable. The Fund may purchase equity index futures
contracts, referencing U.S. and/or non-U.S. stock indices, to equitize, or
create equity market exposure approximately equal to, some or all of its non-equity assets, such as cash, cash
equivalents, unrealized gains on derivatives, and receivables. For temporary,
defensive purposes, the Fund may invest, without limitation, in U.S.
dollar-denominated short-term debt instruments. As a result of taking such a
defensive position, the Fund may not achieve its investment objectives.
In
an attempt to minimize unforeseen risks in holding the securities of any single
issuer, the Fund seeks to provide investment diversification. Although there is
no restriction on the number of changes in the Fund’s security holdings,
purchases generally are made with a view to holding for the long term and not
for short-term trading purposes. (The Fund’s portfolio turnover rates for the
fiscal years ended December 31, 2019, 2018, and 2017 were 22%, 31%, and
18%, respectively.) However, during rapidly changing economic, market, and
political conditions, portfolio turnover may be higher than in a more stable
period. A higher turnover rate might result in increased transaction expenses
and the realization of capital gains and losses, some of which may be short-term
capital gains taxed as ordinary income (see Federal Income Taxes).
Further
information about specific investments is provided under Additional
Information on Investments.
Dodge & Cox International Stock Fund (“ISF”)
Investment
Objective: The Fund seeks long-term
growth of principal and income. The Fund’s investment objective may not be
changed without shareholder approval.
The
Fund seeks to achieve its objective by investing primarily in a diversified
portfolio of equity securities issued by non-U.S. companies from at least three
different countries, which may include emerging market countries. The Fund is
not required to allocate its investments in set percentages in particular
countries and may invest in emerging markets without limit. Under normal
circumstances, the Fund will invest at least 80% of its total assets in equity
securities of non-U.S. companies,
including common stocks, depositary receipts evidencing ownership of common
stocks, preferred stocks, securities convertible into common stocks, and
securities that carry the right to buy common stocks (e.g., rights and
warrants). The investment policies of the Fund as described above may be changed
without shareholder approval; however, these investment policies will not be
changed without 60 days’ prior notice to shareholders.
The
Fund may enter into currency forward contracts, currency swaps, or currency
futures contracts to hedge direct and/or indirect foreign currency exposure. The
Fund may use futures or options referencing stock indices to hedge against a
general downturn in the equity markets.
While
the Fund’s long-term intent is to maintain a fully invested equity fund, the
Fund may hold moderate reserves in cash or short-term debt securities as
Dodge & Cox deems advisable. The Fund may purchase equity index futures
contracts, referencing U.S. and/or non-U.S. stock indices, to equitize, or
create equity market exposure approximately equal to, some or all of its non-equity assets, such as cash, cash
equivalents, unrealized gains on derivatives, and receivables. For temporary,
defensive purposes,
DODGE & COX FUNDS ∎ PAGE 23
the
Fund may invest, without limitation, in U.S. dollar-denominated short-term debt
instruments.
In
an attempt to minimize unforeseen risks in holding the securities of any single
issuer, the Fund seeks to provide investment diversification. Although there is
no restriction on the number of changes in security holdings, purchases
generally are made with a view to holding for the long term and not for
short-term trading purposes. (The Fund’s portfolio turnover rates for the fiscal
years ended December 31, 2019, 2018, and 2017 were 15%, 17%, and 17%,
respectively.) However, during rapidly changing economic, market, and political
conditions, portfolio turnover may be higher than in a more stable period.
A
higher turnover rate might result in increased transaction expenses and the
realization of capital gains and losses, some of which may be short-term capital
gains taxed as ordinary income (see Federal Income Taxes).
Further
information about specific investments is provided under Additional
Information on Investments.
Dodge & Cox Balanced Fund (“BF”)
Investment
Objective: The Fund seeks regular
income, conservation of principal, and an opportunity for long-term growth of
principal and income. The Fund’s investment objective may not be changed without
shareholder approval.
The
Fund invests in a diversified portfolio of equity securities and debt
securities. Under normal circumstances, the Fund will invest no less than 25%
and no more than 75% of its total assets in equity securities. Reasonable
appreciation in favorable periods and conservation of principal in adverse times
are objectives that require flexibility in managing the assets of the Fund under
constantly changing investment conditions. Asset allocation between equity and
debt securities is based on the Fund’s assessment of the potential risks and
returns for each asset class over a three- to five-year horizon. Factors used to
estimate the range of potential returns include: future earnings growth, the
outlook for the economy, inflation and interest rate trends, and current
valuations relative to historical ranges. The Fund may invest up to 20% of its
total assets in U.S. dollar-denominated equity or debt securities of non-U.S. issuers traded in the United States
that are not in the S&P 500 Index. The investment policies of the Fund as
described above may be changed without shareholder approval; however, these
investment policies will not be changed without 60 days’ prior notice
to shareholders.
Equity
securities in which the Fund may invest include common stocks, depositary
receipts evidencing ownership of common stocks, preferred stocks, securities
convertible into common stocks, and securities that carry the right to buy
common stocks (e.g., rights and warrants). The Fund may use futures or options
referencing stock indices, such as the S&P 500 Index, to hedge against a
general downturn in the equity markets. The Fund may also purchase equity index
futures contracts, such as S&P 500 futures, to equitize, or create equity
market exposure approximately equal to, some or all of its available non-equity assets, such as cash, cash
equivalents, unrealized gains on derivatives, and receivables.
Debt
securities in which the Fund may invest include, but are not limited to,
obligations issued or guaranteed by the U.S. government, its agencies, or GSEs,
mortgage- and asset-backed securities, corporate and municipal bonds,
inflation-linked securities,
and
other fixed and floating rate instruments. The Fund invests the debt portion of
its assets primarily in debt securities issued or guaranteed by the U.S.
government, its agencies or GSEs, and other investment-grade debt securities
(securities rated Baa3 or higher by Moody’s, BBB- or higher by S&P or Fitch, or
equivalently rated by any NRSRO or, if unrated, are deemed to be of
investment-grade quality by Dodge & Cox). A maximum of 20% of the debt
portion of the Fund may be invested in debt securities rated below investment
grade, commonly referred to as high-yield or “junk” bonds; provided no more than
5% of the debt portion of the Fund may be invested in securities rated below B3
or B- by Moody’s, S&P, or Fitch. In
addition, up to 5% of the debt portion of the Fund may be invested in non-U.S. dollar-denominated securities. The
Fund may invest in exchange-traded funds as a means to temporarily gain exposure
to a portion of the bond market in the debt portion of the Fund while awaiting
the purchase of securities or to more efficiently gain exposure to a particular
asset class. Such investment will be considered an investment in debt securities
by the Fund.
The
Fund invests in hybrid securities, including preferred stock and capital
securities such as contingent convertible bonds. These securities may be
classified as equity or debt depending on the specific structure and features of
each security.
The
Fund may enter into currency forward contracts, currency swaps, or currency
futures contracts to hedge direct and/or indirect foreign currency exposure. The
Fund may invest in interest rate derivatives such as U.S. Treasury futures and
swap agreements for a variety of purposes, including, but not limited to,
managing the Fund’s duration or adjusting the Fund’s exposure to debt securities
with different maturities. In addition, the Fund may invest in credit default
swaps to increase or decrease credit exposure to a particular issuer, group of
issuers, or index.
In
seeking to achieve the objectives of the Fund, Dodge & Cox may
purchase securities on a when-issued basis and purchase or sell securities for
delayed delivery. The Fund may hold moderate reserves in cash or short-term debt
securities and for temporary, defensive purposes, may invest without limitation
in U.S. dollar-denominated short-term debt instruments.
In
an attempt to minimize unforeseen risks in holding the securities of any single
issuer, the Fund seeks to provide investment diversification. Although there is
no restriction on the number of changes in the Fund’s security holdings,
purchases generally are made with a view to holding for the long term and not
for short-term trading purposes. (The Fund’s portfolio turnover rates for the
fiscal years ended December 31, 2019, 2018, and 2017 were 35%, 24%, and
19%, respectively.) However, during rapidly changing economic, market, and
political conditions, portfolio turnover may be higher than in a more stable
period. A higher turnover rate might result in increased transaction expenses
and the realization of capital gains and losses, some of which may be short-term
capital gains taxed as ordinary income (see Federal Income Taxes).
Further
information about specific investments is provided under Additional
Information on Investments.
Dodge & Cox Income Fund (“IF”)
Investment
Objective: The Fund seeks a high and
stable rate of current income, consistent with long-term preservation of
capital. A secondary objective is to take advantage of opportunities to realize
PAGE
24 ∎ DODGE &
COX FUNDS
capital
appreciation. The Fund’s investment objective may not be changed without
shareholder approval.
The
Fund seeks to achieve its objectives by investing in a diversified portfolio of
debt securities. Under normal circumstances, the Fund will invest at least 80%
of its total assets in (1) investment-grade debt securities and
(2) cash equivalents. “Investment grade” means (i) securities rated
Baa3 or higher by Moody’s, or BBB- or
higher by S&P or Fitch, or equivalently rated by any NRSRO, or, (ii) if
unrated, deemed to be of similar quality by Dodge & Cox. Debt
securities in which the Fund may invest include, but are not limited to,
obligations issued or guaranteed by the U.S. government, its agencies, or GSEs,
mortgage- and asset-backed securities, corporate and municipal bonds,
inflation-linked securities, and other fixed and floating rate instruments. The
Fund may invest up to 25% of its total assets in U.S. dollar-denominated
securities of non-U.S. issuers,
including emerging market issuers. The investment policies of the Fund as
described above may be changed without shareholder approval; however, these
investment policies will not be changed without 60 days’ prior notice to
shareholders.
The
Fund may also invest in securities not mentioned above, including hybrid
securities such as preferred stocks and convertible securities. Up to 20% of the
Fund’s total assets may be invested in debt securities rated below investment
grade, commonly referred to as high-yield or “junk” bonds; provided no more than
5% of the Fund’s total assets may be invested in securities rated below B3 or
B- by Moody’s, S&P, or Fitch. In
addition, up to 5% of the Fund’s total assets may be invested in non-U.S. dollar-denominated securities. The
Fund may invest in exchange-traded funds as a means to temporarily gain exposure
to a portion of the bond market while awaiting the purchase of securities or to
more efficiently gain exposure to a particular asset class. Such investment will
be considered an investment in debt securities by the Fund.
The
Fund seeks relative price appreciation by selecting securities Dodge &
Cox believes to be undervalued based on research and fundamental analysis and by
making gradual adjustments in the average duration of the Fund’s portfolio.
The
Fund may invest in interest rate derivatives, such as U.S. Treasury futures
contracts and swap agreements, for a variety of purposes, including, but not
limited to, managing the Fund’s duration or adjusting the Fund’s exposure to
debt securities with different maturities. Under normal circumstances, the Fund
intends to hedge the direct currency exposure of its non-U.S. dollar-denominated investments with
currency derivatives, such as forward contracts, futures contracts, and swap
contracts. In addition, the Fund may invest in credit default swaps to increase
or decrease credit exposure to a particular issuer, group of issuers, or index.
In
seeking to achieve the objectives of the Fund, Dodge & Cox may
purchase securities on a when-issued basis and purchase or sell securities for
delayed delivery. The Fund may hold moderate reserves in cash or short-term debt
securities and, for temporary, defensive purposes, may invest without limitation
in U.S. dollar-denominated short-term debt instruments.
Although
there is no restriction on the number of changes in the Fund’s security
holdings, purchases generally are made with a view to holding for the long term
and not for short-term trading purposes. (The Fund’s portfolio turnover rates
for the fiscal years ended December 31, 2019, 2018, and 2017 were 49%, 37%,
and
19%,
respectively.) However, during rapidly changing economic, market, and political
conditions, portfolio turnover may be higher than in a more stable period. A
higher turnover rate might result in increased transaction expenses and the
realization of capital gains and losses (see Federal Income Taxes).
Further
information about specific investments is provided under Additional
Information on Investments.
Dodge & Cox Global Bond Fund (“GBF”)
Investment
Objective: The Fund seeks a high rate of
total return consistent with long-term preservation of capital.
The
Fund seeks to achieve its investment objective by investing in a diversified
portfolio of bonds and other debt instruments of issuers from at least three
different countries, which may include emerging market countries. The Fund is
not required to allocate its investments in set percentages to particular
countries and may invest in emerging markets without limit. Under normal
circumstances, the Fund invests at least 40% of its total assets in securities
of non-U.S. issuers and at least 80% of
its total assets in debt instruments, which may, in each case, be represented by
derivatives such as forwards contracts, futures contracts, or swap agreements.
The investment policies of the Fund as described above may be changed without
shareholder approval; however, these investment policies will not be changed
without 60 days’ prior notice to shareholders.
Debt
instruments in which the Fund may invest include, but are not limited to,
government and government-related obligations, mortgage- and asset-backed
securities, corporate and municipal bonds, collateralized mortgage obligations,
inflation-linked securities, and other fixed and floating rate instruments. The
Fund invests in both U.S. dollar-denominated and non-U.S. dollar-denominated debt instruments
across all sectors. The Fund invests primarily in investment-grade debt
instruments (instruments rated Baa3 or higher by Moody’s, BBB- or higher by S&P or Fitch, or
equivalently rated by any NRSRO, or, if unrated, deemed to be of
investment-grade quality by Dodge & Cox). Up to 20% of the Fund’s total
assets may be invested in below investment-grade debt securities, commonly
referred to as high-yield or “junk” bonds. The Fund may invest in
exchange-traded funds as a means to temporarily gain exposure to a portion of
the bond market while awaiting the purchase of securities or to more efficiently
gain exposure to a particular asset class. Such investment will be considered an
investment in debt securities by the Fund.
The
Fund may purchase or sell holdings for a variety of reasons, such as to alter
sector, geographic, or currency exposure or to shift the overall portfolio’s
risk profile. In seeking to achieve the objective of the Fund, Dodge &
Cox may purchase securities on a when-issued basis and purchase or sell
securities for delayed delivery. The Fund may hold moderate reserves in cash or
short-term debt securities and for temporary, defensive purposes, may invest
without limitation in U.S. dollar-denominated short-term debt instruments.
The
Fund may buy or sell foreign currencies and enter into various currency- or
interest rate-related transactions involving derivative instruments, including
forwards, futures, swaps, and options. The Fund may use derivatives either to
hedge or seek to reduce risks relating to other investments or to create
exposure to interest rates, securities, or currencies as a substitute for direct
DODGE & COX FUNDS ∎ PAGE 25
investment.
The Fund may use interest rate derivatives for a variety of purposes, including,
but not limited to, managing the Fund’s duration or adjusting the Fund’s
exposure to debt securities with different maturities. In addition, the Fund may
invest in credit default swaps to increase or decrease credit exposure to an
issuer, group of issuers, or index. The Fund’s use of derivatives is related to
the implementation of its overall primary investment strategy. The Fund does not
invest primarily in derivatives and is not intended to be a vehicle through
which shareholders can invest in, or otherwise seek exposure to, derivatives.
Although
there is no restriction on the number of changes in the Fund’s security
holdings, purchases generally are made with a view to holding for the long term
and not for short-term trading purposes. (The Fund’s portfolio turnover rates
for the fiscal years ended December 31, 2019, 2018, and 2017 were 60%, 55%,
and 46%, respectively.) However, during rapidly changing economic, market, and
political conditions, portfolio turnover may be higher than in a more stable
period. A higher turnover rate might result in increased transaction expenses
and the realization of capital gains and losses (see Federal
Income Taxes).
Further
information about specific investments is provided under Additional
Information on Investments.
Investment Restrictions
The
Funds are subject to additional investment restrictions which are described in
the SAI.
The
percentage limitations included in this prospectus and SAI apply at the time of
purchase of a security. So, for example, if a Fund exceeds a limit as a result
of market fluctuations or the sale of other securities, it will not be required
to dispose of any securities.
Disclosure of Portfolio Holdings
A
complete description of the Funds’ policies and procedures with respect to the
disclosure of the Funds’ portfolio securities is available in the Statement of
Additional Information (“SAI”).
The
Funds provide a complete list of their holdings on a quarterly basis by filing
the lists with the SEC on Form N-CSR
(as of the end of the second and fourth quarters) and on Part F of Form N-PORT (as of the end of the first
and third quarters). Shareholders may view the Funds’ Form N-CSR and Part F of Form N-PORT on the SEC’s website at sec.gov. A
list of the Funds’ quarter-end holdings
is also available at dodgeandcox.com on or about the 15th day
following each quarter end and remains available on the website until the
list is updated for the subsequent quarter.
PAGE
26 ∎ DODGE &
COX FUNDS
Additional Information
on Investments
The
following table identifies investments and investment practices that are likely
to be used by the Funds in seeking to achieve their objectives. The table
highlights the differences and similarities among the Funds in their use of
these techniques and other investment practices and investment instruments. This
is not a complete list of every investment type that a Fund may use and a Fund
may use an investment type even if it is not marked below. Information about
these investments is provided below; more information about these and other
investments and investment practices that the Funds may use is provided in the
SAI.
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment or
Practice |
|
SF |
|
GSF |
|
ISF |
|
BF |
|
IF |
|
GBF |
Asset-Backed
Securities |
|
|
|
|
|
|
|
X |
|
X |
|
X |
Cash Equivalents |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Corporate Bonds |
|
|
|
|
|
|
|
X |
|
X |
|
X |
Depositary Receipts |
|
X |
|
X |
|
X |
|
X |
|
|
|
X |
Derivatives |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Credit
Derivatives |
|
|
|
|
|
|
|
X |
|
X |
|
X |
Credit
Default Swaps |
|
|
|
|
|
|
|
X |
|
X |
|
X |
Bond
Total Return Swaps |
|
|
|
|
|
|
|
X |
|
X |
|
X |
Currency
Derivatives |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Currency
Forwards, Swaps, and Futures |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Cross-Currency
Swaps |
|
|
|
|
|
|
|
|
|
|
|
X |
Currency
Options |
|
|
|
|
|
|
|
|
|
|
|
X |
Equity
Derivatives |
|
X |
|
X |
|
X |
|
X |
|
|
|
|
Equity
Index Futures |
|
X |
|
X |
|
X |
|
X |
|
|
|
|
Equity
Index Put Options |
|
X |
|
X |
|
X |
|
X |
|
|
|
|
Equity
Total Return Swaps |
|
X |
|
X |
|
X |
|
X |
|
|
|
|
Interest
Rate Derivatives |
|
|
|
|
|
|
|
X |
|
X |
|
X |
Equity Securities |
|
X |
|
X |
|
X |
|
X |
|
|
|
|
Common
Stocks |
|
X |
|
X |
|
X |
|
X |
|
|
|
|
Standby
Commitment Agreements |
|
X |
|
X |
|
X |
|
X |
|
|
|
|
Exchange-Traded Funds |
|
|
|
|
|
|
|
X |
|
X |
|
X |
Hybrid Securities |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Mortgage-Backed
Securities |
|
|
|
|
|
|
|
X |
|
X |
|
X |
Collateralized
Mortgage Obligations |
|
|
|
|
|
|
|
X |
|
X |
|
X |
Mortgage
Pass-Through Securities |
|
|
|
|
|
|
|
X |
|
X |
|
X |
Municipal Bonds |
|
|
|
|
|
|
|
X |
|
X |
|
X |
Non-U.S. Securities |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Private Placement
Securities |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Sovereign and Government-Related
Debt |
|
|
|
|
|
|
|
X |
|
X |
|
X |
U.S. Government
Obligations |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
When-Issued Securities |
|
X |
|
X |
|
X |
|
X |
|
X |
|
X |
Asset-Backed
Securities. Asset-backed securities
(“ABS”) are bonds issued through special purpose vehicles and backed by pools of
loans or other receivables. ABS are created from many types of assets, including
home equity loans, auto loans, student loans, and credit card receivables. The
credit quality of an ABS security depends on the quality and performance of its
underlying assets and/or the level of any credit support provided to its
structure.
Cash Equivalents.
Cash equivalents are short-dated
instruments that are readily convertible into cash. They may include bank
obligations, commercial paper, and repurchase agreements.
Bank
obligations include certificates of deposit and bankers’ acceptances. Commercial
paper is a short-term promissory note issued by a corporation, which may have a
floating or variable rate. Repurchase agreements are transactions under which a
Fund purchases a security from a bank or securities dealer and agrees to resell
the security to that bank or securities dealer on a specified future date at the
same price, plus a specified interest rate.
Corporate Bonds.
Corporate bonds are debt securities
issued by corporations and similar entities, including real estate investment
trusts or limited partnerships. Corporate bonds pay a specified
DODGE & COX FUNDS ∎ PAGE 27
amount
of interest, usually at regular intervals, and repay the amount of their
principal investment, usually at maturity.
Depositary Receipts.
Depositary receipts, including American
Depositary Receipts, Global Depositary Receipts, European Depositary Receipts,
Global Depositary Notes, and similar instruments are certificates evidencing
ownership of securities of a foreign issuer. The certificates are issued by
depositary banks and the underlying securities are held in trust by a custodian
bank or similar institution. Depositary receipts may be purchased on securities
exchanges or directly from dealers.
Credit Default Swaps.
Credit default swaps can be used to
manage the credit risk associated with an investment or to increase credit
exposure without investing directly in the underlying security or securities.
Credit derivatives are swap agreements based on the credit risk of one or more
referenced issuers of debt. In a single-name credit default swap, one party (the
“buyer” of credit protection) pays the other party (the “seller” of credit
protection) an upfront amount and/or a periodic stream of payments over the term
of the contract or until the occurrence of a “credit event,” such as the
bankruptcy of an issuer referenced in the contract. If a credit event occurs,
the seller pays the buyer the “par value” (full notional value) of the credit
default swap in exchange for an equal face amount of the referenced issuer’s
debt securities. If the credit default swap is cash settled, the seller is
required to make a payment equal to the difference between the par value and the
market value of such securities. An index credit default swap refers to a
published list of issuers, each representing a pro-rata portion of the total notional
amount. If a credit event occurs with respect to any issuer, the parties settle
only the portion of the trade related to that issuer, and the trade continues
with respect to the remaining names.
Bond Total Return
Swaps. A total return swap is a contract
that can create long or short economic exposure to an underlying security, or to
a basket or index of securities. Under such a contract, one party agrees to make
payments to another based on the total return of a notional amount of the
security or securities underlying such contract (including income and capital
gains) during a specified period, in return for periodic payments based on the
application of a fixed or variable interest rate to the same notional amount.
The purchaser of a long total return swap is paid the amount of any increase in
value and pays the amount of any decrease in value, while the purchaser of a
short total return swap is paid the amount of any decrease and pays the amount
of any increase. Total return swaps may be written on many different kinds of
underlying reference assets, and may include different indices for various kinds
of fixed income securities (e.g., U.S. investment grade bonds, high-yield bonds,
or emerging market bonds).
Currency Derivatives.
Currency derivatives can be used to
manage non-U.S. currency exposure, to
hedge non-U.S. interest rate risk, or
to take long or short positions with respect to currencies or non-U.S. interest rates. A Fund may use
currency derivatives to lock in the U.S. dollar purchase price of a non-U.S. dollar-denominated security or to
hedge other types of exposure to non-U.S. currencies. A Fund may hedge a
currency by entering into a transaction in an instrument that is denominated in
a currency other than the currency being hedged (a “cross-hedge”) if
Dodge & Cox believes that there is a correlation between the currency
in which the cross-hedge is denominated and the currency being
hedged.
Currency derivatives may be used in anticipation of an increase or decrease of
the value of one currency relative to another. The Funds may also exchange
currencies on a “spot” basis. The Global Bond Fund may take long or short
positions in currencies regardless of whether those positions are intended to
hedge exposure created by other investments.
Currency Forwards,
Swaps and Futures. Currency forward
contracts (or “FX forwards”) are agreements under which one party agrees to
make, and the other party agrees to accept, delivery of a specified currency
amount at a specified future time and price. FX forwards are individually
negotiated and privately traded. Although some FX forwards by their terms call
for actual delivery or acceptance of currency, in many cases the contracts are
settled with a cash payment representing the difference in value between two
amounts of different currencies. A currency swap (or “FX swap”) is a transaction
under which the parties agree to buy and sell identical amounts of two
currencies on two different dates. This is typically arranged as a spot currency
transaction (or short-dated currency forward contract) that will be reversed at
a set future date through an offsetting currency forward transaction.
Currency
futures contracts are agreements that are economically similar to currency
forward contracts, but are standardized, traded through a national (or foreign)
exchange, and cleared through an affiliate of the exchange.
Cross-Currency Swaps.
A cross-currency swap is an interest
rate swap in which each party makes payments in a different currency. Typically,
upon initiation of a cross-currency swap, the two parties exchange principal
amounts of the specified currencies. During the life of the swap, each party
makes payments to the other in a specified currency based on applying a
specified rate to the principal amount. At the maturity of the swap, the parties
reverse the initial exchange of the principal amounts in the two currencies.
Currency Options.
Currency options provide the holder the
right to buy or sell a currency at a fixed price on a future date. The buyer of
a put option on a currency has the right to sell the currency at the exercise
price, while the buyer of a call option on a currency has the right to purchase
the currency at the exercise price. Currency options may be traded over-the-counter, with negotiated
strike prices, expiration dates, and other terms, or on exchanges, subject to
standardized terms. Currency options are influenced by all of the risk factors
inherent in currency and foreign exchange investments generally, and may be more
volatile than their underlying currencies.
Equity Index Futures.
Equity index futures contracts can be
used to create exposure to a stock index such as the S&P 500, and short
positions in equity index futures can be used to hedge the equity exposure of a
Fund’s portfolio with regard to market risk. The purchaser of an equity index
future buys the right to receive a payment corresponding to any increase in the
value of referenced index as of a specified future date and incurs the
obligation to make a payment corresponding to any decrease in the value of
referenced index as of such date. By establishing a short position in an equity
index futures contract, a Fund may seek to protect the value of its portfolio
against an overall decline in the market. Futures contracts are standardized,
traded through a national (or foreign) exchange, and cleared through an
affiliate of the exchange.
PAGE
28 ∎ DODGE &
COX FUNDS
Equity Index Put
Options. The buyer of an equity index
put option receives the right to a payment equal to the difference between the
strike price and the price of the referenced index upon exercise. If the value
of the referenced index increases, the put option has no value, but the buyer is
not obligated to make payments. Equity index put options may be used to hedge
against a general downturn in the equity markets.
Equity Total Return
Swaps. An equity total return swap is a
contract that can create long or short economic exposure to an underlying equity
security, or to a basket or index of securities. Under such a contract, one
party agrees to make payments to another based on the total return of a notional
amount of the security or securities underlying such contract (including
dividends and changes in market value) during a specified period, in return for
periodic payments based on the application of a fixed or variable interest rate
to the same notional amount. The purchaser of a long total return swap is paid
the amount of any increase in value and pays the amount of any decrease in
value, while the purchaser of a short total return swap is paid the amount of
any decrease and pays the amount of any increase.
Interest Rate
Derivatives: Interest Rate Futures and Interest Rate Swaps. Interest rate futures contracts include agreements
under which one party agrees to make, and the other party agrees to accept,
delivery of a specified interest-bearing security, at a specified future time
and price. Interest rate derivatives also include futures contracts that relate
to a particular referenced interest rate (e.g., LIBOR or EURIBOR) and futures
contracts on U.S. or non-U.S.
government debt (e.g., Treasury or Bund futures contracts). Interest rate
futures are standardized, traded through a national (or foreign) exchange and
cleared through an affiliate of the exchange. Interest rate swaps are
transactions under which each party agrees to make payments to the other based
on applying a different interest rate to the same notional amount. One of the
rates may be fixed and the other floating, or both rates may be floating. Some
interest rate swaps are traded on swap execution facilities, while others are
traded directly with dealer counterparties. Some interest rate swaps are cleared
through central counterparties. A Fund may enter into interest rate futures or
swaps for a variety of purposes in connection with the management of the
interest rate exposure of its portfolio, including adjusting portfolio duration,
hedging against possible increases or decreases in rates, or increasing or
decreasing exposure to interest rates.
Equity Securities.
Equity securities represent ownership
shares in a company, and include securities that convey an interest in, may be
converted into or give holders a right to purchase or otherwise acquire such
ownership shares in a company.
Common
Stocks. Common stocks represent shares
of ownership in a company. After other company obligations are satisfied, common
stock holders 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. Ownership of common stock of a non-U.S. company may be represented by
depositary receipts (which represent an interest in non-U.S. securities held by a custodian
bank).
Standby Commitment
Agreements. A standby commitment
agreement obligates one party, for a set period of time, to purchase a certain
amount of a security that may be issued and sold to that party at a
predetermined price at the option of the issuer or its underwriter. The
purchasing party receives a commitment fee in exchange for its promise to
purchase the security, whether or not it is eventually required to purchase the
security. The value of the securities when they are issued may be more or
less than the predetermined price.
Exchange-Traded
Funds. An exchange-traded fund (“ETF”)
is a fund that is comprised of a basket of securities that is traded on an
exchange. Investing in an ETF is subject to the same primary risks as investing
directly in the underlying securities in the basket. In addition, ETFs are
subject to certain unique risks including, but not limited to, the risk that:
(i) the market price of the ETF’s shares may trade at a discount or premium
to their net asset value; (ii) an active trading market for an ETF’s shares
may not develop or be maintained; and (iii) trading of an ETF’s shares may
be halted by the listing exchange. Shareholders of a Fund that invests in ETFs
will bear indirectly expenses of the ETF because such expenses impact the net
asset value of the shares of the ETFs, which impacts the net asset value of the
Fund.
Hybrid Securities.
Hybrid securities have characteristics
that differ from both common stocks and senior debt securities, typically
ranking senior to common stock and subordinate to senior debt in an issuer’s
capital structure. Hybrid securities may have features such as deferrable and/or
non-cumulative interest payments,
long-dated maturity or no maturity, reduced or no acceleration rights, and may
be subject to principal reduction without default under certain circumstances.
Types of hybrid securities include, without limitation, preferred stocks,
warrants, capital securities, convertible securities, and contingent convertible
bonds. For a fund that invests in both equity and debt securities, such as the
Dodge & Cox Balanced Fund, hybrid securities will be classified as
equity or debt based on their specific structures and features.
Preferred Stock.
Preferred stock is usually subordinated
to an issuer’s senior debt, but senior to the issuer’s common stock. Typically,
preferred stock is structured as a long-dated or perpetual bond that distributes
income on a regular basis. Issuers are permitted to skip (“non-cumulative” preferred stock) or defer
(“cumulative” preferred stock) distributions. Preferred stock may be convertible
into common stock and may contain call or maturity extension features.
Warrants.
Warrants permit a holder to buy a stated
number of shares of common stock at a specified price anytime during the life of
the warrants (generally two or more years). They can be highly volatile and may
have no voting rights, pay no dividends, and have no rights with respect to the
assets of the entity issuing them.
Capital Securities.
Capital securities may be issued in the
form of preferred securities or subordinated debt securities. Capital securities
may be long-dated or perpetual (i.e., have no maturity) and typically distribute
income on a monthly, quarterly or semi-annual basis. Issuers are permitted to
defer income payments (which may or may not accumulate for future payment).
Capital securities may contain call or maturity extension features.
Convertible
Securities. Convertible securities are
preferred stock or debt securities that are convertible into common stock at a
DODGE & COX FUNDS ∎ PAGE 29
specified
price during a specified period of time or upon the occurrence of a specified
event. Traditionally, convertible securities have paid dividends or interest at
rates higher than common stock dividend rates 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.
Contingent
Convertible Bonds. Contingent
convertible bonds are deeply subordinated debt securities issued by non-U.S. financial institutions for the
purpose of meeting regulatory capital requirements. These bonds are
typically perpetual and have discretionary, non-cumulative interest
payments. Interest payments may be suspended at the discretion of
management, at the direction of the issuer’s regulator or as a result of falling
below certain capital thresholds. In addition, contingent convertible bonds
may be converted to equity securities or be written down in principal value if
the issuer falls below prescribed capital levels.
Mortgage-Backed
Securities. Mortgage-backed securities
(“MBS”) are a type of ABS secured by mortgage loans.
Collateralized
Mortgage Obligations. Collateralized
mortgage obligations (“CMOs”) are a type of MBS backed by U.S. government
agency- or GSE-guaranteed mortgage
pass-through securities. They may be issued by U.S. government agencies, GSEs,
or private issuers. CMOs are typically issued in multiple classes, or
“tranches,” of bonds, each with a different level of seniority and credit risk.
Each tranche is traded and valued separately. Payments of interest and principal
rely on payments made in respect of the underlying mortgage pass-through
securities. Typically, all payments received are applied first to pay interest
on the various tranches, starting with the most senior, and then to pay down
principal on the various tranches, again starting with the most senior. No
principal payments are made on a tranche until the entire principal of the more
senior tranches has been repaid.
Mortgage Pass-Through
Securities. Mortgage pass-through
securities represent ownership in “pools” of mortgage loans and are called
“pass-throughs” because principal and interest payments are passed through to
security holders monthly. These securities may be issued and guaranteed by an
agency of the U.S. government or GSE, or by a private entity. Security holders
receive payments based on scheduled payments of interest and principal and
unscheduled prepayments of principal on the underlying mortgage loans. The
market value of these securities depends, in part, on expectations about the
rate at which the underlying loans will be prepaid or default.
Municipal Bonds.
Municipal bonds are debt obligations
issued by states, municipalities, and other political subdivisions, agencies,
authorities, and instrumentalities of states and multi-state agencies or
authorities, the interest on which may be exempt from federal and/or state
income tax. Municipal bonds include securities from a variety of sectors.
Non-U.S. Securities. Each Fund may invest in U.S. dollar-denominated
securities of non-U.S. issuers traded
in the United States. Some Funds may also invest in foreign currency-denominated
securities of non-U.S. issuers. For
purposes of this prospectus, non-U.S.
(or foreign) issuers are generally non-U.S. governments or companies organized
outside the United States, but the Funds may make a different designation in
certain circumstances.
Private Placement
Securities. The Funds may invest in
securities issued in private placements, including 144A securities. Such
securities are subject to legal or contractual restrictions on resale and may
include equity or debt securities of U.S. and non-U.S. issuers that are issued without
registration with the SEC, including offerings outside the United States.
Private placement or restricted securities often have lower overall liquidity
than registered securities traded on established secondary markets and may be
considered illiquid.
Sovereign and
Government-Related Debt. Sovereign debt
includes securities issued or guaranteed by a foreign sovereign government or
its agencies, authorities, or political subdivisions. Government-related debt
includes securities issued by non-U.S.
regional or local governmental entities or government-controlled entities. In
the event an issuer of sovereign debt or government-related debt is unable or
unwilling to make scheduled payments of interest or principal, holders may be
asked to participate in a restructuring of the debt and to extend further credit
to the issuer.
Sovereign
and Government-Related Debt includes inflation-linked bonds. Inflation-linked
bonds are debt securities, the principal value of which is periodically adjusted
according to the rate of inflation. The actual (inflation-adjusted) interest
rate on these bonds is fixed at issuance at a rate generally lower than typical
bonds. Over the life of an inflation-linked bond, however, interest will be paid
based on a principal value which is adjusted for inflation as measured by
changes in a reference index. Inflation-linked bonds issued by a foreign
government are generally adjusted to reflect an inflation index calculated by
that government. If the value of the inflation index falls, the principal value
of inflation-linked bonds that are related to that index will be adjusted
downward, and consequently the interest payable on such bonds (calculated with
respect to a smaller principal amount) will be reduced. Repayment of the
originally issued principal amount of certain inflation-linked bonds upon
maturity is guaranteed by the issuer; however, the current market value of the
bonds is not guaranteed and will fluctuate. To the extent a Fund invests in
other inflation-linked securities that do not provide a similar guarantee, the
bond repaid at maturity may be less than the original principal. While
inflation-linked securities are expected to be protected from long-term
inflationary trends, short-term increases in inflation may have an adverse
effect on the value of those securities.
U.S. Government
Obligations. A portion of each Fund may
be invested in obligations issued or guaranteed by the U.S. government, its
agencies, or GSEs. Some obligations purchased by the Funds are backed by the
full faith and credit of the U.S. government and are guaranteed as to both
principal and interest by the U.S. Treasury. Examples of these include
direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes, and
bonds, and indirect obligations of the U.S. Treasury, such as obligations of
Government National Mortgage Association, the Small Business Administration, the
Maritime Administration, the Farmers Home Administration, and the Department of
Veterans Affairs.
While
the obligations of many of the agencies of the U.S. government are not direct
obligations of the U.S. Treasury, they are generally backed indirectly by the
U.S. government. Some of the agencies are indirectly backed by their right to
borrow from the U.S. government, such as the Federal Financing Bank and the
PAGE
30 ∎ DODGE &
COX FUNDS
U.S. Postal
Service. Other agencies and GSEs have historically been supported solely by the
credit of the agency or GSE itself, but are given additional support due to the
U.S. Treasury’s authority to purchase their outstanding debt obligations. GSEs
include, among others, the Federal National Mortgage Association (“Fannie Mae”),
Federal Home Loan Mortgage Corporation (“Freddie Mac”), the Federal Home Loan
Banks, and the Federal Farm Credit Banks.
In
September 2008, the U.S. Treasury placed Fannie Mae and Freddie Mac into
conservatorship and has since increased its support of these two GSEs through
substantial capital commitments and enhanced liquidity measures, which include a
line of credit. The U.S. Treasury also extended a line of credit to the Federal
Home Loan Banks. No assurance can be given that the U.S. government will provide
continued support to GSEs, and these entities’ securities are neither issued nor
guaranteed by the U.S. Treasury. The Federal Housing Finance Agency (“FHFA”) and
the U.S. presidential administration have made public statements regarding plans
to consider ending the conservatorships of Fannie Mae and Freddie Mac. In the
event that Fannie Mae and Freddie Mac are taken out of conservatorship, it is
unclear how the capital structure of Fannie Mae and Freddie Mac would be
constructed and what effects, if any, there may be on their creditworthiness and
guarantees of certain mortgage-backed securities. Should Fannie Mae’s or Freddie
Mac’s conservatorship end, there could be an
adverse
impact on the value of their securities, which could have an adverse impact on a
Fund’s performance.
Fannie
Mae and Freddie Mac have entered into a joint venture to develop and operate a
common securitization platform that will support their single-family mortgage
securitization activities, including the issuance of a single, uniform
mortgage-backed security (“UMBS”) (the “Single Security Initiative”). In June
2019, under the Single Security Initiative, Fannie Mae and Freddie Mac started
issuing UMBS in place of their current offerings of to-be-announced (“TBA”) eligible
securities. The Single Security Initiative seeks to support the overall
liquidity of the TBA market and aligns the characteristics of Fannie Mae and
Freddie Mac certificates. The effects that the Single Security Initiative may
have on the market for TBA and other mortgage-backed securities are difficult to
ascertain.
When-Issued
Securities. When-issued securities are
securities that have been authorized, but not yet issued. When-issued securities
are purchased at a specific price for settlement on a future date in order to
secure what is considered an advantageous price or yield at the time of entering
into the transaction. A fund that purchases a when-issued security assumes all
the rights and risks of ownership, including the risks of price and yield
fluctuations and the risk that the security will not be issued
as anticipated.
DODGE & COX FUNDS ∎ PAGE 31
Investment Risks
Investors
should recognize that investing in securities presents certain risks that cannot
be avoided. There is no assurance that the investment objectives of any Fund
will be achieved. The following table summarizes some of the risks involved in
investing in each of the Funds and highlights certain differences and
similarities among the Funds in their exposure to various types of risks.
The
table below is not a complete list of every risk involved in investing in the
Funds and a Fund may have exposure to a risk factor even if it is not marked
below. Investing in securities creates indirect exposure to the various business
risks to which their issuers are subject, which may include sector-, industry-,
or region-specific risks. Investments in equity securities may create indirect
exposure to interest rate, credit, and currency risk. Securities of non-U.S. issuers are exposed to currency
risk, even if they are denominated in U.S. dollars. Debt and equity investments
in commodity-related issuers create exposure to commodity risks, which may
include unpredictable changes in value, supply and demand, and government
regulation. There is more information about these and other risks in the SAI.
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Risk |
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SF |
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GSF |
|
ISF |
|
BF |
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IF |
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GBF |
Asset Allocation Risk |
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|
|
X |
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Below Investment-Grade Securities Risk |
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X |
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X |
|
X |
Call Risk |
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|
X |
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X |
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X |
Counterparty Risk |
|
X |
|
X |
|
X |
|
X |
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X |
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X |
Credit Risk |
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|
X |
|
X |
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X |
Derivatives Risk |
|
X |
|
X |
|
X |
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X |
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X |
|
X |
Emerging Markets Risk |
|
X |
|
X |
|
X |
|
X |
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X |
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X |
Equity Risk |
|
X |
|
X |
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X |
|
X |
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Hybrid Securities Risk |
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X |
|
X |
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X |
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X |
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X |
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X |
Interest Rate Risk |
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X |
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X |
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X |
Liquidity Risk |
|
X |
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X |
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X |
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X |
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X |
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X |
Manager Risk |
|
X |
|
X |
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X |
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X |
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X |
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X |
Market Risk |
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X |
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X |
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X |
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X |
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X |
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X |
Mortgage- and Asset-Backed Securities Risk |
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X |
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X |
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X |
Non-U.S. Currency
Risk |
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X |
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X |
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X |
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X |
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X |
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X |
Non-U.S. Investment
Risk |
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X |
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X |
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X |
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X |
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X |
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X |
Regulatory Risk |
|
X |
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X |
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X |
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X |
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X |
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X |
Sovereign and Government-Related Debt Risk |
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X |
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X |
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X |
U.S. Municipal Bond Risk |
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X |
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X |
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X |
Asset Allocation
Risk. Dodge & Cox’s
determination of a Fund’s broad asset allocation mix will affect that Fund’s
performance. Dodge & Cox’s evaluations and assumptions regarding
asset classes may not successfully achieve the Fund’s investment objective
in view of actual market movements. A Fund’s balance between equity and debt
securities could limit its potential for capital appreciation relative to an
all-stock fund and contributes to
greater volatility relative to an all-bond fund.
Below
Investment-Grade Securities Risk. Debt
securities rated below investment grade, also known as “high-yield” or “junk”
bonds, have speculative characteristics and may be more volatile than
investment-grade debt securities. Below investment-grade securities are often
issued by smaller, less creditworthy companies or by highly levered (indebted)
companies, which are generally less able than more financially stable companies
to make scheduled payments of interest and principal. These securities typically
yield
a
higher level of current income than higher-rated securities, but generally have
greater credit and call risk, more price volatility, and less liquidity. An
economic downturn, rising interest rates, or
negative
developments with respect to an issuer may affect the price and/or liquidity of
a below investment-grade security more than an investment-grade security, and
may reduce a Fund’s ability to sell these securities at an advantageous time or
price. A security downgraded below investment-grade may lose significant market
value even if no default occurs.
A
Fund’s high yield bonds may include distressed bonds, which may present a high
risk of default or be in default at the time they are purchased. Distressed
securities are speculative and involve even greater risks than other high-yield
bonds, including the risk that interest payments may not be made on a current
basis, or that principal will not be repaid in full. A Fund could incur
significant expenses to the extent it is required to negotiate new terms with
the issuer of a distressed bond or seek recovery upon a default in respect of a
distressed bond. In any reorganization or liquidation proceeding related to a
defaulted security, a Fund could lose its entire investment or could be required
to accept cash or securities with a value substantially less than its original
investment.
PAGE
32 ∎ DODGE &
COX FUNDS
The
below investment-grade securities in which a Fund invests are not typically
listed on any exchange and the secondary market (if any) for such securities may
have lower overall liquidity than other securities, which may cause transactions
in below investment-grade securities to be more costly. A lack of publicly
available information, irregular trading activity, and wide bid-ask spreads, among other factors, may
make these securities more difficult to sell at an advantageous time or price
than other types of investments. These factors may affect the value a Fund may
realize in selling below investment-grade securities, which could result in
losses to a Fund.
An
explanation of Moody’s, Fitch’s, and S&P’s rating categories is included in
Appendix A to the SAI.
Call Risk.
Issuers of callable bonds are permitted
to redeem them before their full maturities. Buying a callable bond exposes a
Fund to economic risks similar to selling call options. Issuers may call
outstanding securities before their maturity for a number of reasons, including
decreases in prevailing interest rates or improvements to the issuer’s credit
profile. If an issuer calls a security in which a Fund is invested, that Fund
could lose potential price appreciation and be forced to reinvest the proceeds
in securities that bear a lower interest rate or more credit risk.
Counterparty Risk.
Non-cleared derivatives, such as currency
forward contracts and currency swaps, and other principal (i.e., non-exchange traded) transactions are subject
to the risk that a counterparty may not make payments or deliveries when
required to do so. Deterioration in the actual or perceived creditworthiness of
a counterparty may affect the value of a derivative or other transaction with
that counterparty. A number of broker-dealers and other financial institutions
have experienced extreme financial difficulty in the past, sometimes resulting
in bankruptcy. Counterparties may become subject to special resolution regimes
in the United States and other jurisdictions, which may affect a fund’s ability
to terminate and exercise remedies in respect of derivative positions. Although
we monitor the creditworthiness of our counterparties, there can be no assurance
that a Fund’s derivative counterparties will not experience financial
difficulties, possibly resulting in losses to that Fund. Cleared derivatives are
subject to the risk that the central clearing counterparty does not
perform, which could occur in the event of large or widespread
member defaults.
Credit Risk.
The value of a debt security may decline
if the market believes it is less likely that the issuer will make all payments
of interest and principal as required. This could occur because of actual or
perceived deterioration (whether by market participants, rating agencies,
pricing services, or otherwise) in the issuer’s or a guarantor’s financial
condition, or in the case of asset-backed securities, the likelihood that the
loans backing a security will be repaid in full. A Fund could lose money if the
issuer or guarantor of a debt security becomes bankrupt or subject to a special
resolution regime, or is otherwise unable or unwilling to make timely interest
and/or principal payments, or honor its obligations. Securities are subject to
varying degrees of credit risk, which may be reflected by their ratings;
however, such ratings may overestimate or underestimate the likelihood of
default and may not accurately reflect the true credit risk of a security. The
credit risk associated with corporate debt securities may change as the result
of an event such
as
a large dividend payment, leveraged buyout, debt restructuring, merger, or
recapitalization; such events are unpredictable and may benefit shareholders or
new creditors at the expense of existing debt holders. Credit risk is likely to
increase during periods of economic uncertainty or downturns. Credit risk
associated with non-U.S. dollar
denominated securities may increase if the value of an issuer’s home currency
declines relative to the U.S. dollar. If a debt security owned by a Fund ceases
to be rated or is downgraded below a permitted threshold, the Fund may (but is
not required to) sell the security.
Derivatives Risk.
Derivatives are financial instruments,
including futures contracts, forwards contracts and swap agreements, the values
of which are based on the value of one or more underlying assets, such as
stocks, bonds, currencies, interest rates, and market indexes. Derivatives
involve risks different from, and possibly greater than, the risks associated
with investing directly in the underlying assets and other more traditional
investments. The market value of derivatives may be more volatile than that of
other investments and can be affected by changes in interest rates, credit risk,
security prices, or other market developments. The use of derivatives may
accelerate the velocity of possible losses. Each type of derivative instrument
may have its own special risks, including the risk of mispricing or improper
valuation and the possibility that a derivative may not correlate perfectly or
as expected with its underlying asset, rate, or index. A derivative can create
leverage because it can result in exposure to an amount of a security, index, or
other underlying investment (a “notional amount”) that is substantially larger
than the derivative position’s market value. Often, the upfront payment required
to enter into a derivative is much smaller than the potential for loss, which
for certain types of derivatives may be unlimited. A derivative may be subject
to liquidity risk, especially during times of financial market distress and
certain types of derivatives may be terminated or modified only with the consent
of their counterparties. Derivatives may require a Fund to post collateral to
secure outstanding exposure, which may cause the Fund to forego other investment
opportunities. Derivatives are subject to Counterparty Risk, as described above.
The use of derivatives may cause a Fund’s investment returns to be impacted by
the performance of securities the Fund does not own.
Derivatives
are specialized instruments that may require investment techniques and risk
analyses different from those associated with stocks and bonds. The successful
use of derivatives will often depend on the ability to accurately forecast
movements in the market relating to the underlying instrument. Although the use
of derivatives is intended to enhance a Fund’s performance, it may instead
reduce returns and increase volatility, or have a different effect than
Dodge & Cox anticipates, especially in unusual or extreme market
conditions. Suitable derivatives transactions may not be available in all
circumstances and there can be no assurance that a particular derivative
position will be available or used by Dodge & Cox or that, if
used, such strategies will be successful. Regulations may require a Fund to
segregate certain of its assets or buy or sell a security at a disadvantageous
time or price to maintain offsetting positions or asset coverage in connection
with certain derivatives transactions. Use of derivatives may increase the
amount and change the timing of taxes payable by shareholders.
DODGE & COX FUNDS ∎ PAGE 33
When
a derivative is used for hedging purposes, gains generated by the derivative
will generally be substantially offset by losses on the hedged investment and
vice versa. Hedging can reduce or eliminate gains. Furthermore, while hedging is
intended to mitigate possible losses due to specific risks, if a derivative used
for hedging purposes does not correlate with the risk(s) and/or asset(s) it is
hedging or otherwise does not perform to the extent expected, a Fund could
experience no benefit from the hedge or lose more than it would have without
seeking to hedge, especially under extreme market conditions. A Fund must also
pay transaction costs associated with investing in derivatives which further
reduce potential gains or increase potential losses.
Future
regulation of derivatives and related instruments by the U.S. and non-U.S.
governments may make derivatives more costly, may limit the availability of
derivatives, or may otherwise adversely affect the value or performance of
derivatives and a Fund.
Emerging Markets
Risk. Non-U.S. Investment Risk (described below)
may be particularly high to the extent a Fund invests in emerging market
securities. Emerging market securities may present issuer, market, currency,
liquidity, legal, political, and other risks different from, and potentially
greater than, the risks of investing in securities and instruments tied to U.S.
or developed non-U.S. issuers. Emerging
markets may have less established legal and accounting systems than those in
more developed markets. Governments in emerging markets may be less stable and
more likely to take extra-legal action with respect to companies, industries,
assets, or foreign ownership than those in more developed markets.
The
economies of emerging markets may be dependent on relatively few industries and
thus affected more severely by local or global changes. Emerging market
securities may also be more volatile, more difficult to value, and have lower
overall liquidity than securities economically tied to U.S. or developed non-U.S. issuers.
Equity Risk.
Equity securities represent an ownership
interest in an issuer rather than a right to receive a specified future payment.
This makes equity securities more sensitive than debt securities to changes in
an issuer’s earnings and overall financial condition; as a result, equity
securities are generally more volatile than debt securities. Equity securities
may lose value as a result of changes relating to the issuers of those
securities, such as management performance, financial leverage, or changes in
the actual or anticipated earnings of a company, or as a result of actual or
perceived market conditions that are not specific to an issuer. Even when the
securities markets are generally performing strongly, there can be no assurance
that equity securities held by a Fund will increase in value. Because the rights
of all of a company’s creditors are senior to those of holders of equity
securities, shareholders are least likely to receive any value if an issuer
files for bankruptcy.
Hybrid Securities
Risk. Hybrid securities are typically
subordinated to an issuer’s senior debt instruments; therefore, they are subject
to greater credit risk than those senior debt instruments. Many hybrid
securities are subject to provisions permitting their issuers to skip or defer
distributions under specified circumstances. Hybrid securities may have limited
or no voting rights and may have substantially lower overall liquidity than many
other securities. Certain types of hybrid securities, such as non-cumulative perpetual preferred stock, are
issued predominantly by companies in the financial services industry and thus
may present increased risk
during
times of financial upheaval, which may affect financial services companies more
than other types of issuers.
Interest Rate Risk.
Debt securities that pay interest based
on a fixed rate are subject to the risk that they will decline in value if
interest rates rise. Changes in interest rates or yields may occur suddenly and
unexpectedly, and may be caused by a wide variety of factors, including central
bank monetary policies, changing inflation or real growth rates, general
economic conditions, increased bond issuances, and reduced market demand for low
yielding investments. A Fund may lose money as a result of such movements. The
longer the remaining maturity of a debt security, the more its value is likely
to be affected by changes in interest rates. Debt securities with longer
durations tend to be more sensitive to changes in interest rates, usually making
them more volatile than securities with shorter durations. The values of equity
and other non-debt securities may also
decline due to fluctuations in interest rates. A Fund may choose not to or be
unable to hedge itself fully against changes in interest rates. If a Fund uses
derivatives to hedge against changes in interest rates, those hedges may not
work as intended and may decrease in value if interest rates move differently
than anticipated. Interest rates are currently at or near historically low
levels in many developed countries, including the United States. Thus, a Fund
faces a heightened level of risk associated with rising interest rates.
Non-fixed rate instruments (i.e., variable
and floating rate securities) generally are less sensitive to interest rate
changes but may decline in value if their interest rates do not rise as much or
as quickly as interest rates in general. Conversely, non-fixed-rate instruments will not generally
increase in value if interest rates decline. If a Fund holds variable or
floating rate securities, a decrease in market interest rates may adversely
affect the income received from such securities.
Liquidity Risk.
Liquidity risk exists when particular
investments are difficult to purchase or sell, which could result in a Fund
being unable to buy or sell an investment at an advantageous time or price. As a
result, a Fund could be forced to hold a security that is declining in value or
forego other investment opportunities. An illiquid instrument is harder to value
because there may be little or no market data available based on purchases or
sales of the instrument.
Liquidity
risk may result from the lack of an active market or a reduced number and
capacity of traditional market participants to make a market in debt securities.
A Fund may also experience liquidity risk to the extent it invests in private
placement securities, securities of issuers with smaller market capitalizations,
or securities with substantial market and/or credit risk. The liquidity of an
issuer’s securities may decrease if its credit rating falls, it experiences
sudden unexpected cash outflows, or some other event causes counterparties to
avoid trading with or lending to the issuer. Liquidity risk is greater for below
investment-grade securities and restricted securities, especially in difficult
market conditions. Over the past three decades, bond markets have grown more
quickly than dealer capacity to engage in fixed income trading. In addition,
recent regulatory changes applicable to financial intermediaries that make
markets in debt securities have restricted or made it less desirable for those
financial intermediaries to hold large inventories of debt securities with lower
overall liquidity. Because market makers
PAGE
34 ∎ DODGE &
COX FUNDS
provide
stability to a market through their intermediary services, a reduction in dealer
inventory may lead to decreased liquidity and increased volatility in the fixed
income markets. Additional legislative or regulatory actions to address
perceived liquidity or other issues in the debt securities markets could alter
or impair a Fund’s ability to pursue its investment objectives or use certain
investment strategies and techniques. Liquidity risk may intensify during
periods of economic uncertainty. Debt securities with longer durations may face
heightened liquidity risk.
Unusually
high redemption requests or other unusual market conditions may make it
difficult for a Fund to honor redemption requests within the permitted period.
Meeting such requests could require a Fund to sell securities at reduced prices
or under unfavorable conditions which could result in significant dilution of
remaining shareholders’ interests in the Fund. Other market participants may be
attempting to liquidate holdings at the same time as a Fund, which could
increase supply in the market and contribute to liquidity risk.
Manager Risk.
Dodge & Cox’s opinion about the
intrinsic worth or creditworthiness of a company, security, or other investment
may be incorrect or the market may continue to undervalue the company, security,
or other investment. Dodge & Cox uses financial and other models as part of
its investment research, portfolio management, and trading processes. An
incorrect assumption or error in a model could adversely affect a Fund. Also,
depending on market conditions, Dodge & Cox’s investing style may
perform better or worse than portfolios with a different investment
style. Dodge & Cox may not make timely purchases or sales of
securities for a Fund and a Fund’s investment objective may not be achieved. A
Fund’s performance could differ significantly from its comparative index, or
other funds with similar objectives and investment strategies.
Dodge & Cox
applies investment ideas, including target allocations, to all eligible client
portfolios within a particular strategy, including funds and separately managed
account clients. This means Dodge & Cox may seek to buy or sell very
large amounts of particular securities. As a result, certain investment
opportunities that might be available to a smaller fund may not be available to
the Funds. A Fund may not be able to take significant positions in limited
investment opportunities or add significantly to existing positions. In
addition, a Fund may not be able to quickly dispose of certain securities
holdings.
The
Funds are subject to various operational risks, including risks associated with
the calculation of net asset value. In particular, errors or systems failures
and other technological issues may adversely impact a Fund’s calculation of its
net asset value, and such net asset value calculation issues could result in
inaccurately calculated net asset values, delays in net asset value calculation
and/or the inability to calculate net asset value for some period. The Funds may
be unable to recover any losses associated with such failures.
Market Risk.
The market price of a security or other
investment may increase or decrease, sometimes suddenly and unpredictably.
Investments may decline in value because of factors affecting markets generally,
such as real or perceived challenges to the economy, national or international
political events, public health emergencies, such as the spread of infectious
illness or disease,
natural
disasters, changes in interest or currency rates, adverse changes to credit
markets, or general adverse investment sentiment.
The
U.S. government’s inability at times to agree on a long-term budget and deficit
reduction plan, has in the past resulted, and may in the future result, in a
government shutdown, which could have an adverse effect on a Fund’s investments
and operations. Additional and/or prolonged government shutdowns may affect
investor and consumer confidence and may adversely impact financial markets and
the broader economy, perhaps suddenly and to a significant degree.
The
prices of investments may reflect factors affecting one or more industries, such
as the price of specific commodities or consumer trends, or factors affecting
particular issuers. During a general downturn in the markets, multiple asset
classes may decline in value simultaneously. Market disruptions may prevent a
Fund from implementing investment decisions in a timely manner. Fluctuations in
the value of the Fund’s investments will cause that Fund’s share price to
fluctuate. An investment in a Fund, therefore, may be more suitable for
long-term investors who can bear the risk of short- and long-term fluctuations
in a Fund’s share price.
Although
it is not a principal investment strategy of any Fund to focus on a specific
sector, Dodge & Cox’s research-oriented, bottom-up approach towards security selection
may at times result in significant exposure to one or more sectors, such as
financials or health care, potentially in excess of 25% of the Fund’s total
assets. To the extent that a Fund has significant exposure to a particular
sector, its share value may fluctuate in response to events disproportionately
affecting that sector. Examples of such events include, but are not limited to,
changes in economic or business conditions, new government regulations, and the
availability of basic resources or supplies.
Many
countries have experienced outbreaks of infectious illnesses in recent decades,
including swine flu, avian influenza, SARS and, more recently, COVID-19. The
global outbreak of COVID-19 in early 2020 has resulted in various disruptions,
including travel and border restrictions, quarantines, supply chain disruptions,
lower consumer demand and general market uncertainty. The effects of COVID-19
have and may continue to adversely affect the global economy, financial markets
and the economies of certain nations and individual issuers, any of which may
negatively impact a Fund and its holdings. The extent and duration of such
effects are difficult to determine. Similar consequences could arise as a result
of the spread of other infectious diseases.
Mortgage- and
Asset-Backed Securities Risk. Mortgage-
and other asset-backed securities are subject to various risks, including
prepayment risk, extension risk, interest rate risk, and credit risk. Prepayment
risk is the risk that principal will be repaid earlier than expected, which
means the security will pay less interest over its life. A Fund may have to
reinvest early repayments of principal in securities that bear a lower rate of
interest or more credit risk. Prepayments are more likely at times when interest
rates decline. Extension risk is the risk that principal will be repaid later
than expected, which delays the return of principal to a Fund and may prevent a
Fund from investing in securities that bear a higher rate of interest or less
credit risk. Delayed repayment of principal may increase the duration and
volatility of a security. Extension risk is
DODGE & COX FUNDS ∎ PAGE 35
more
likely at times when interest rates rise. Mortgage- and other asset-backed
securities can be highly sensitive to rising interest rates, such that even
small movements can cause a Fund to lose value. Mortgage- and other asset-backed
securities are subject to credit risk (as described above). Credit risk is
greater for mortgage- and other asset-backed securities that are not directly or
indirectly guaranteed by a U.S. government-sponsored enterprise (“GSE”) (such as
Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm
Credit Banks). However, GSEs are not guaranteed by the U.S. Treasury and in the
event that a GSE cannot meet its obligations, there can be no assurance that the
U.S. government will provide support. Certain purchases of agency or GSE-guaranteed mortgage-backed securities are
forward transactions (called “to-be-announced” or “TBA”
transactions) that can settle a month or more after the trade date. If the
counterparty to a TBA transaction does not perform its obligation to deliver the
specified mortgage-backed securities, a Fund could be required to replace those
securities at a higher price.
To
the extent a Fund invests in asset-backed securities that use the London
Interbank Offer Rate (“LIBOR”) as the reference rate or benchmark, the impact of
the expected transition away from LIBOR by the end of 2021 is difficult to
ascertain. There remains uncertainty regarding the future use of LIBOR and the
nature of any replacement or alternative rate. Certain debt securities and other
instruments that reference LIBOR in which the Funds invest contain fallback
provisions that could result in their reference rate becoming fixed at the last
published LIBOR rate (effectively transforming to a fixed rate), which
negatively impacts their value given the low interest rate environment.
Furthermore, it is more difficult for issuers of asset-backed securities (or
other securities issued by special purpose vehicles) to amend the terms of their
securities to address the transition risk due to their structure.
Non-U.S. Currency Risk. Non-U.S.
currencies may decline relative to the U.S. dollar and affect a Fund’s
investments in non-U.S. currencies, in
securities that are denominated in non-U.S. currencies, in securities of issuers
that are exposed to non-U.S.
currencies, or in derivatives that provide exposure to non-U.S. currencies. When a given currency
depreciates against the U.S. dollar, the value of securities denominated in that
currency typically declines. A U.S. dollar-denominated depositary receipt is
exposed to currency risk if the security underlying it is denominated in a non-U.S. currency. Currency depreciation may
affect the value of U.S. securities if their issuers have exposure to non-U.S. currencies and non-U.S. issuers may similarly be exposed to
currencies other than those in which their securities are denominated and the
country in which they are domiciled. Dodge & Cox may not be able to
accurately estimate an issuer’s non-U.S. currency exposure and may not hedge
or may not be successful in hedging a Fund’s currency exposure. A Fund bears
transaction charges for currency exchange and currency hedging activities.
Non-U.S. Investment Risk. Non-U.S.
securities (including ADRs and other securities that represent interests in
non-U.S. issuer’s securities) involve
some special risks such as exposure to potentially adverse foreign political and
economic developments; market instability; 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 that could reduce returns; higher transaction
costs and foreign brokerage and custodian fees; inability to vote proxies,
exercise shareholder or bondholder rights, pursue legal remedies, and obtain
judgments with respect to foreign investments in foreign courts; possible
insolvency of a sub-custodian or
securities depository; and fluctuations in foreign exchange rates that decrease
the investment’s value (although favorable changes can increase its value).
Non-U.S. stock markets may decline due
to conditions unique to an individual country or within a region, including
unfavorable economic conditions relative to the United States or political and
social instability or unrest. Non-U.S.
investments may become subject to economic sanctions or other government
restrictions by domestic or foreign regulators, which could negatively impact
the value or liquidity of those investments. There may be increased risk of
delayed settlement of portfolio transactions or loss of certificates of
portfolio securities. Governments in certain foreign countries participate to a
significant degree, through ownership or regulation, in their respective
economies. Action by such a government could have a significant effect on the
market price of securities issued in its country. These risks may be higher
when investing in emerging market issuers. Certain of these risks also apply to
securities of U.S. issuers with significant non-U.S. operations. Global economies and
financial markets are becoming increasingly interconnected, which increases the
possibilities that conditions in one country or region may adversely affect
issuers in a different country or region.
Regulatory Risk.
New laws and regulations promulgated by
governments and regulatory authorities may affect the value of securities issued
by specific companies, in specific industries or sectors, or in all securities
issued in the affected country. In times of political or economic stress or
market turmoil, governments and regulators may intervene directly in markets and
take actions that may adversely affect certain industries, securities, or
specific companies. Government and/or regulatory intervention may reduce the
value of debt and equity securities issued by affected companies and may also
severely limit a Fund’s ability to trade those securities.
Sovereign and
Government-Related Debt Risk. An
investment in sovereign or other government-related debt involves risk,
including special risks not present in other types of debt obligations. The
issuer of the sovereign debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or interest
when due. This may result from political or social factors, the general economic
environment of a country, levels of foreign debt, or foreign currency exchange
rates. Holders of sovereign or other government-related debt may be asked to
participate in the rescheduling of such debt and to extend further loans to
governmental or government-related entities. To the extent a Fund invests in
sovereign or other government-related debt, that Fund may be exposed to the
direct or indirect consequences of political, social, and economic changes in
various countries, as well as to changes in local tax, insolvency, or other
regulatory regimes. A Fund may have limited legal recourse in the event of a
default with respect to certain sovereign debt obligations. For example,
bankruptcy, moratorium, and other similar laws applicable to issuers of
sovereign debt may be substantially different from those applicable to corporate
debt issuers.
PAGE
36 ∎ DODGE &
COX FUNDS
With
respect to inflation-linked debt securities, there can be no assurance that an
inflation index will accurately measure the real rate of inflation in the prices
of goods and services. In addition, there can be no assurance that the rate of
inflation in a non-U.S. country will be
correlated with the rate of inflation in the United States. While
inflation-linked bonds are expected to be protected from long-term inflationary
trends, short-term increases in inflation may have an adverse effect on the
value of those securities. If interest rates rise due to reasons other than
inflation (i.e., due to changes in currency exchange rates), investors in
inflation-linked bonds may not be protected to the extent that the increase is
not reflected in the applicable inflation measure. Repayment of the originally
issued principal amount of certain inflation-linked bonds upon maturity is
guaranteed by the issuer; however, the current market value of the bonds is not
guaranteed and will fluctuate. To the extent a Fund invests in other
inflation-linked debt securities that do not provide a similar guarantee, the
bond repaid at maturity may be less than the original principal.
U.S. Municipal Bond
Risk. Like other bonds, U.S. municipal
bonds are subject to credit risk, interest rate risk, liquidity risk, and call
risk. However, the obligations of some municipal issuers may not be enforceable
through the exercise of traditional creditors’ rights. The reorganization under
federal bankruptcy laws of a municipal bond issuer may result in the bonds being
cancelled without payment or repaid only in part, or in delays in collecting
principal and interest. In the event of a default in the payment of interest
and/or repayment of principal, a Fund may enforce its rights by taking
possession of, and managing, the assets securing the
issuer’s
obligations on such securities. These actions may increase a Fund’s operating
expenses. In addition, lawmakers may seek to extend the time for payment of
principal or interest, or both, or to impose other constraints upon enforcement
of such obligations. State or federal regulation with respect to a specific
sector could impact the revenue stream for a given subset of the market. U.S.
municipal bonds may have lower overall liquidity than other types of bonds, and
there may be less publicly available and timely information about the financial
condition of municipal issuers than for issuers of other securities. Therefore,
the investment performance of a Fund investing in U.S. municipal bonds may be
more dependent on the analytical abilities of Dodge & Cox than if the
Fund held other types of investments, such as stocks or other types of
bonds. The market for U.S. municipal bonds also tends to be less
well-developed or liquid than many other securities markets, which may adversely
affect a Fund’s ability to value U.S. municipal bonds or sell such bonds at
attractive prices.
Some
U.S. municipal bonds are tax-exempt,
which means that income from those bonds is non-taxable. A significant restructuring of
U.S. federal income tax rates or even serious discussion on the topic in
Congress could cause municipal bond prices to fall. The demand for tax-exempt municipal bonds is strongly
influenced by the value of tax-exempt
income to investors. Lower income tax rates could reduce the advantage of owning
tax-exempt municipal bonds. In the case
of a default enforcement action where a Fund gains ownership of an
income-producing asset, any income derived from the Fund’s ownership or
operation of such an asset may not be tax-exempt.
DODGE & COX FUNDS ∎ PAGE 37
How to Purchase Shares
If
the Fund’s transfer agent, DST Asset Manager Solutions, Inc. (the “Transfer
Agent”), or an authorized agent or sub-agent, receives your request in good
order before the time as of which the Fund’s shares are priced (normally at the
scheduled close of trading on the NYSE, generally 4 p.m. Eastern Time
(“ET”), your transactions will be priced at that day’s net asset value
per share (“NAV”). If your request is received after that time, it will
be priced at the next business day’s NAV. Please note that requests delivered to
a post office box or reported as delivered by an expedited shipping service are
not deemed received until they are received and scanned by the processing team
at the Transfer Agent’s office. The Funds are offered on a no-load basis. You do not pay sales charges
or 12b-1 distribution fees.
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To Open and Maintain
an Account |
|
To Add to an
Account |
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|
Minimum
Investment*
$2,500
(regular account)
$1,000
(IRA) |
|
Minimum
Investment*
$100 |
By Internet
dodgeandcox.com |
|
|
|
Current
shareholders can visit the Funds’ website and log in to “Account Access”
to open additional accounts or to exchange shares from an existing
Dodge & Cox Fund account to a new account with the same
registration. You can also roll assets over or transfer a lump sum from a
non-Dodge & Cox Funds
traditional or Roth IRA, or a qualified pension or profit-sharing
plan.
New
shareholders should visit “Invest with Us” to open an account. |
|
Current shareholders can visit
the Funds’ website and log in to “Account Access” to make subsequent
investments directly from your pre-established bank account or
exchange from another Dodge & Cox Fund account with the same
registration. |
By Mail
Regular
Mail:
Dodge &
Cox Funds
c/o
DST Asset Manager Solutions, Inc.
P.O.
Box 219502
Kansas
City, MO 64121-9502
Express,
Certified or Registered Mail:
Dodge &
Cox Funds
c/o
DST Asset Manager Solutions, Inc.
430
W 7th Street Suite
219502
Kansas
City, MO 64105-1407 |
|
|
|
Complete
and sign the Account Application or IRA Application with a check for
investment. To transfer or rollover from another eligible retirement plan,
use the IRA Transfer of Assets Form.
Call
800-621-3979 or visit the Funds’
website at dodgeandcox.com to obtain the appropriate forms. |
|
Mail your
check with an Invest-By-Mail form detached
from your quarterly statement. |
|
|
|
Make
your check payable to Dodge & Cox Funds. All
checks must be made in U.S. dollars and drawn on U.S. banks.
Important
note: The Funds will not accept third party checks (checks not made
payable to Dodge & Cox Funds), traveler’s checks, starter checks,
or money orders. |
Important
note: If you buy Fund shares through a registered broker/dealer, financial
institution, or investment adviser, the broker/dealer, financial institution, or
adviser may charge you a service fee.
* |
|
The Funds reserve the right to waive minimum
investment amounts for certain financial intermediaries that use the Funds
as part of an asset allocation program, certain retirement plans, and
accounts that hold the Funds in omnibus name. Financial intermediaries may
impose their own minimum investment amounts. |
PAGE
38 ∎ DODGE &
COX FUNDS
How to Purchase Shares (continued)
Important
note: Only bank accounts held at domestic financial institutions that are
Automated Clearing House (“ACH”) members may be used for telephone or internet
transactions. This option will become effective approximately 15 business days
after the Account Application or Account Options form is received by the
Transfer Agent. The price paid for shares of a Fund will be the next determined
NAV after the Transfer Agent receives your investment instructions in good
order. If payment is not received by the third business day after your
order is placed, your order may be canceled.
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To Open and Maintain
an Account |
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To Add to an
Account |
By Telephone
800-621-3979 |
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|
Current
shareholders may call Client Services to open an additional account from a
pre-established bank account or
by exchanging shares from an existing Dodge & Cox Fund account
into a new account with the same registration.
New
shareholders may not open an account by telephone at this time.
Current
shareholders may call the automated system to open an additional account
from a pre-established bank
account or by exchanging shares from an existing Dodge & Cox Fund
account to a new account with the same registration
New
shareholders may not open an account by the automated system at this
time. |
|
Current
shareholders may call Client Services to make subsequent investments
directly from a pre-established
bank account or to exchange from another Dodge & Cox Fund account
with the same registration.
Current
shareholders may call the automated system to make subsequent investments
directly from a pre-established
bank account or to exchange shares from another Dodge & Cox Fund
account with the same registration. |
Client
Services
Monday–Friday
8 a.m.–8 p.m. ET
Automated System
7
days a week
24
hours a day |
|
|
By Wire
Wire
to:
State
Street Bank
and
Trust Company
Boston,
MA
ABA
0110 0002 8
Deposit DDA 9905-351-4
FFC
Dodge & Cox
(Fund
Name) Fund
Fund
# / Account #
Account
Registration |
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|
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Prior to making an initial
investment by wire, a completed Account Application or IRA Application
must have been received by the Fund. Once an account number has been
assigned, call 800-621-3979 to notify the Fund
of your incoming wire transaction. |
|
Call Client Services at 800-621-3979 during business
hours to notify the Funds of your incoming wire transaction. |
Automatically
|
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|
The Funds offer ways
to invest automatically or to periodically rebalance investments. Call
Client Services at 800-621-3979 or visit the Funds’
website at dodgeandcox.com to initiate automatic trading. You may also
download the Account Options Form or IRA Options Form to establish this
service. See Automatic Investment Plan and Automatic Periodic
Rebalancing. |
Telephone
conversations may be recorded or monitored for verification, recordkeeping, and
quality-assurance purposes.
Certain
institutional investors may be eligible to establish pre-authorized fax transaction privileges.
Important
Information About Purchases. To help the government prevent the funding of
terrorism and money laundering activities, federal law requires all financial
institutions, including the Funds, to obtain, verify, and record information
that identifies each person who opens an account, and to determine whether such
person’s name appears on government lists of known or suspected terrorists and
terrorist organizations. For your account to be in good order, the Funds must
obtain the following information:
∎ |
|
Date of birth (for individuals);
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∎ |
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Physical residential address (post office boxes
are still permitted for mailing); and |
∎ |
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Social Security Number, Taxpayer Identification
Number, or other identifying number. |
DODGE & COX FUNDS ∎ PAGE 39
Following
receipt of your information, the Funds are required to verify your identity. You
may be asked to provide certain other documentation (such as a copy of a
driver’s license or a passport) in order to verify your identity. Additional
information is required to open accounts for corporations and other non-natural persons. Additional
information regarding beneficial ownership and control persons must be provided
for certain types of legal entities.
The
USA PATRIOT Act prohibits the Funds and other financial institutions from
opening accounts unless the minimum identifying information listed above is
received and the Funds can verify your identity. If the Funds are unable to
verify your identity, the Funds may not open your account, may close your
account, and/or may take other steps the Funds deem reasonable.
All
purchases are subject to acceptance by a Fund, and the price of the shares will
be the NAV which is next computed after receipt by the Transfer Agent, or other
authorized agent or sub-agent, of the
purchase in proper form (see Pricing of Fund Shares). 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 a Fund or the Transfer Agent, and a Fund can
redeem shares you own in this or another identically registered
Dodge & Cox Fund account as reimbursement. The Funds and their
agents have the right to reject or cancel any purchase, exchange, or redemption
due to nonpayment. All purchases will be invested in full and fractional shares,
and you will receive a confirmation statement.
If
you fail to furnish a Fund with your correct and certified Social Security or
Taxpayer Identification Number, the Fund may be required to withhold federal
income tax (backup withholding) from dividends, capital gain distributions, and
redemptions.
The
Funds and their 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); to freeze any
account, temporarily suspend services on the account, and/or stop payment 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 have
occurred; to otherwise modify the conditions of purchase and any services at any
time; or to act on instructions believed to be genuine.
Notice
to Non-U.S. Individual Shareholders:
The Funds and their shares are only registered in the United States.
Regulations outside of the United States may restrict the sale of shares to
certain non-U.S. residents or subject
certain shareholder accounts to additional regulatory requirements. As a
result, the Funds do not offer their shares for sale outside of the
United States. If a current shareholder of a Fund provides a non-U.S. address, this will be deemed a
representation and warranty from such investor that he/she is not a U.S.
resident and will continue to be a non-U.S. resident unless and until the Fund
is notified of a change in the investor’s resident status. Any current
shareholder that has a resident address outside of the United States will be
restricted from purchasing additional Shares.
How to Redeem or Exchange Shares
You
may withdraw any part of your account by selling shares. The sale price of your
shares will be the Fund’s next-determined NAV after the Transfer Agent or an
authorized agent or sub-agent receives
all required documents in good order.
Good
order means that the request includes:
|
∎ |
|
Fund name and account number; |
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∎ |
|
Amount of the transaction in dollars or shares; (if redemption
is requested by internet or mail, the amount of the transaction may be
stated in percentage terms); |
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∎ |
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Signatures of all owners exactly as registered on the account
(for written requests); |
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∎ |
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Medallion Signature Guarantee, if required (see Medallion
Signature Guarantees); |
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∎ |
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Any certificates you are holding for the account; and
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∎ |
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Any supporting legal documentation that may be required.
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∎ |
|
Note: for corporate/institutional accounts only, the required
signature(s) must be either (1) Medallion-guaranteed and clearly
indicate the capacity of the signer to act for the corporation or
institution or (2) that of an authorized signatory named on a
certified corporate resolution dated within the last six months (or a
certified corporate resolution and letter of indemnity) that accompanies
the request or is on file with the Transfer Agent.
|
Sale
or exchange requests received after the time as of which the Fund’s shares are
priced (normally at the scheduled close of trading on the NYSE, generally
4 p.m. ET) are processed at the next business day’s NAV. No interest
will accrue on amounts represented by uncashed redemption checks.
The
Funds reserve the right to redeem shares in any account, including those in the
name of an intermediary, and send the proceeds to the registered owner if the
account value falls below the minimum initial investment amount. The Fund or its
agent may, but is not required to, make reasonable efforts to notify the
registered owner if the account falls below the minimum to provide the owner the
option to contribute additional funds to meet the required minimum.
PAGE
40 ∎ DODGE &
COX FUNDS
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Account
Type |
By Internet
dodgeandcox.com |
|
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All
Accounts (Except retirement plans, corporate, and certain institutional
accounts)
Visit
the Funds’ website at dodgeandcox.com and log in to “Account Access” to
place a sell order.
You
may exchange shares from a Fund to open an account in another Fund or to
add to an existing account with an identical registration. |
By Mail
Regular
Mail:
Dodge &
Cox Funds
c/o
DST Asset Manager Solutions, Inc.
P.O.
Box 219502
Kansas
City, MO 64121-9502
Express,
Certified or Registered Mail:
Dodge &
Cox Funds
c/o
DST Asset Manager Solutions, Inc.
430
W 7th Street Suite
219502
Kansas
City, MO 64105-1407 |
|
|
|
All
Accounts
Visit
the Funds’ website at dodgeandcox.com and download, complete, and mail in
the Redemption Request Form for a taxable account or an IRA Distribution
Request Form for an IRA, to sell shares. These forms can also be obtained
by calling Client Services at 800-621-3979.
Current
shareholders may exchange shares into a new account with the same
registration by providing written instructions. To exchange shares into an
account with a different registration (including a different name,
address, or taxpayer identification number, you must provide the Transfer
Agent with written instructions that include the Medallion guaranteed
signature of all current account owners. See Medallion Signature
Guarantees and Change in Account Registration and Transfer of
Shares. |
By Telephone
800-621-3979
Client
Services
Monday–Friday
8
a.m.–8 p.m. ET
Automated
System
7
days a week
24
hours a day |
|
|
|
Client
Services:
You
may call Client Services during business hours to speak with a
representative to sell or exchange shares. You can exchange shares from a
Fund to open an account in another Fund or to add to an existing account
with an identical registration. This includes exchanges from retirement to
taxable accounts.
Automated
Phone System:
All
accounts (except IRAs, retirement plans, corporate, and certain
institutional accounts) may utilize the automated phone system at any time
to sell shares using the self-service options.
All
accounts including IRAs (except certain retirement plans, corporate, and
certain institutional accounts) may utilize the automated phone system at
any time to exchange shares from a Fund to open an account in
another Fund or to add to an existing account with identical
registration. |
Telephone
conversations may be recorded or monitored for verification, recordkeeping, and
quality-assurance purposes.
|
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|
Automatically
|
|
|
|
The Funds offer ways
to sell shares automatically or to periodically rebalance investments.
Call Client Services at 800-621-3979 or visit the Funds’
website at dodgeandcox.com to initiate automatic trading. You may also
request or download the Account Options Form or IRA Distribution Request
Form to establish this service. See Automatic Redemption Plan and
Automatic Periodic Rebalancing. |
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) Medallion guaranteed.
By
Wire The Fund will wire redemption proceeds only to the bank account
designated on the Account Application or in written instructions—with Medallion
signature guarantee—received with the redemption order.
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. There is a $100 minimum per ACH transfer.
Medallion
Signature Guarantees You will need to have your signature Medallion
guaranteed in certain situations, such as:
∎ |
|
Sending redemption proceeds to any person,
address, or bank account not on record; or |
∎ |
|
Transferring redemption proceeds to a
Dodge & Cox Fund account with a different registration
(name/ownership) from yours. |
DODGE & COX FUNDS ∎ PAGE 41
A
Medallion Signature Guarantee may be obtained from a domestic bank or trust
company, broker, dealer, clearing agency, savings association, or other
financial institution which participates in a Medallion program recognized by
the Securities Transfer Association. Signature guarantees from financial
institutions which do not participate in a Medallion program will not be
accepted. A notary public cannot provide Medallion Signature Guarantees.
Redemptions-in-kind The Funds
reserve 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 a Fund and valued as they are for
purposes of computing a Fund’s net asset value or NAV (a “redemption in kind”).
Such conditions may include, but are not limited to, circumstances under which
raising cash to meet a redemption request could dilute the interests of the
Fund’s remaining shareholders or compromise the Fund’s ability to raise enough
cash to meet foreseeable redemption requests by other shareholders. If payment
is made in securities, a shareholder may incur transaction expenses in
converting these securities to cash. In addition, if a Fund effects a redemption
in kind, the redeeming shareholder will bear market, liquidity, and other risks
associated with such securities. Each of the Stock Fund, the Global Stock Fund,
the International Stock Fund, and the Balanced Fund may also effect redemptions
in kind in an effort to manage cash positions and/or to offset certain of the
liquidity-related risks that arise from significant redemption activity. This
practice may reduce the need for the Stock Fund, the Global Stock Fund, the
International Stock Fund, and the Balanced Fund to maintain significant cash
reserves and to sell portfolio holdings to meet redemption requests and thus may
enable such Funds to reduce cash drag, transaction costs and capital gains.
Dodge & Cox believes that this practice may benefit the applicable
Funds and their shareholders, including the possibility of reducing the amount
of capital gain distributions to their shareholders. Shareholders who redeem
their shares in kind may sell some or all of the securities they receive from
the applicable Funds. There is a risk that this activity could negatively impact
the market value of those securities and, in turn, the NAV of such Funds.
Dodge & Cox believes that the benefits described above outweigh the
risk of potential negative NAV impact.
Some
shareholders may be paid in whole or in part in securities (which may differ
among shareholders), while other shareholders may be paid entirely in cash, even
with respect to redemptions on the same date. Shareholders paid in whole or in
part in securities will receive a basket of securities that corresponds
generally pro rata to the Fund’s portfolio holdings. With respect to the Stock
Fund, the Global Stock Fund, the International Stock Fund, and the Balanced
Fund, shareholders will receive either a pro rata basket or a “Redemption
Basket” valued as they are for purposes of computing a Fund’s NAV. A list of the
designated securities and approximate weightings of the securities comprising
the Redemption Basket will be made available at dodgeandcox.com periodically and
upon request. The Redemption Basket includes only securities that have been
disclosed in the Fund’s latest quarter-end holdings disclosure.
Dodge & Cox may in its discretion omit a security or adjust the
weighting of a security included in the published Redemption Basket when
processing a redemption in kind due to circumstances such as, but not limited
to, changes in
the
applicable Fund’s investment strategy and portfolio holdings, the existence of
material non-public information about
the security, corporate actions, the fact that a security is using fair value
pricing, or other circumstances, as may be determined by Dodge & Cox.
There may be practical limitations on a Fund’s ability to effectuate redemptions
in-kind, and it may not be possible for
a Fund to exercise its right to redeem shares in-kind under certain circumstances. The
Funds are not obligated to honor requests for a redemption in kind.
The
Funds have elected to be governed by Rule 18f-1 under the Investment Company Act, as a
result of which a Fund is obligated to redeem shares, with respect to any one
shareholder of record 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.
IRAs
Redemption requests for Traditional IRAs must include instructions regarding
federal income tax withholding. Unless you have elected otherwise, your
redemptions will be subject to income tax withholding. State withholding may
also apply.
Important
Information About Redemptions Under certain circumstances, the Transfer
Agent may require additional documents, including stock powers with signatures
Medallion 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 delivered
to the Transfer Agent. For any questions regarding documentation or signature
requirements for trusts, estates, corporations, etc., please call Client
Services (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 the Transfer
Agent or other authorized agent or sub-agent. The redemption price may be more
or less than your cost, depending upon the market value of a Fund’s investments
at the time of redemption.
If,
subsequent to placing a redemption order, market fluctuations cause the value of
your account to fall below the requested redemption amount, your entire account
will be redeemed.
Redemption
payments are made as soon as practicable, generally within two business days,
but under normal circumstances 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, a Fund may delay payment of
the redemption proceeds until your purchase check or ACH purchase has cleared,
which may take up to 15 days. Any redemption where payment has not cleared by
the 15th day will be
cancelled.
There
is no such delay when shares being redeemed were purchased by wiring Federal
funds. The Funds may suspend your redemption right or postpone payment at times
when the NYSE is closed, trading on the NYSE is restricted, or under any
emergency or other circumstances as determined by the SEC.
Under
normal conditions, the Funds typically expect to meet shareholder redemptions by
monitoring each Fund’s portfolio and redemption activities and by regularly
holding a reserve of highly liquid assets, such as cash or cash equivalents. In
periods of unusually high redemptions, during stressed market conditions or
PAGE
42 ∎ DODGE &
COX FUNDS
for
other temporary or emergency purposes, a Fund may be required to use additional
methods to meet shareholder redemptions. These methods include, but are not
limited to, selling securities or otherwise liquidating investments, drawing on
a credit facility to fund redemption requests, participating in an interfund
lending facility, and making payment with Fund securities or other Fund assets
rather than in cash (as discussed under “Redemptions-in-kind” above).
The
Transfer Agent, acting on behalf of a Fund, may place a temporary hold on a
pending transaction in a shareholder account, if the Transfer Agent reasonably
believes that such transaction is the result of fraudulent activity or that
financial exploitation of a Specified Adult (as defined below) has occurred, is
occurring, has been attempted, or will be attempted. For purposes of this
paragraph, the term “Specified Adult” refers to an individual who is a natural
person (a) age 65 and older, or (b) age 18 and older and whom the
Transfer Agent reasonably believes has a mental or physical impairment that
renders the individual unable to protect his or her own interests.
Exchanging
Shares. An exchange is treated as a redemption and a purchase; therefore,
you may realize a taxable gain or loss. You should read the current prospectus
of the Fund into which the exchange is being made.
There
is a $100 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) in order to remain open. The Funds reserve the
right to terminate or materially modify the exchange privilege upon 60 days’
advance notice to shareholders.
Telephone
and Internet Transactions. By using telephone or internet purchase,
redemption, and/or exchange options, you agree to hold the Funds,
Dodge & Cox, the Transfer Agent, 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. Although the Funds have adopted reasonable procedures to
confirm that the instructions received are genuine, permitting telephone and
internet redemptions in your account are subject to risk of losses due to
unauthorized or fraudulent instructions. In addition, interruptions in service
may mean that you will be unable to effect a redemption by telephone or internet
when desired. For any questions regarding telephone or Internet
transactions please call Client Services (800-621-3979).
If
you are unable to reach a Fund by telephone or via the internet because of
technical difficulties, market conditions, or a natural disaster, you have the
option to make purchase, redemption, and exchange requests by regular or express
mail. You may experience delays in exercising telephone redemption privileges,
including during periods of abnormal market activity or high call volume. During
periods of volatile economic or market conditions, you may want to consider
transmitting redemption orders by internet or overnight courier.
If
an account has multiple owners, a 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.
Transactions Through Financial
Intermediaries
You
may purchase or sell Fund shares through a financial intermediary, which may
charge you a fee for this service and may require different minimum initial and
subsequent investments than the Funds. Financial intermediaries may also impose
other charges or restrictions different from those applicable to shareholders
who invest in the Funds directly. In addition, a broker may charge a commission
to its customers on transactions in Fund shares, provided the broker acts solely
on an agency basis for its customer and does not receive any
distribution-related payment in connection with the transaction. Shareholders
who are customers of financial intermediaries or participants in programs
serviced by them should contact the financial intermediaries for additional
information. A financial intermediary may be the shareholder of record of your
shares. The Funds, Dodge & Cox, the Transfer Agent, and each of
their respective directors, trustees, officers, employees, and agents are not
responsible for the failure of any Financial Intermediary to carry out its
obligations to its customers.
Payments
to Certain Employee Benefit Plan Financial Intermediaries Dodge &
Cox, at its expense without additional cost to the Funds or their shareholders,
may provide additional compensation to certain employee benefit plan financial
intermediaries with respect to the Funds. These payments may be made, at the
discretion of Dodge & Cox, for shareholder
recordkeeping or other administrative services provided to eligible defined
contribution employee benefit plans holding the Funds, either directly or
indirectly. The level of payments made to such a qualifying employee benefit
plan financial intermediary in any given year will equal approximately 0.10% of
the market value of the Stock, Global Stock, International Stock, and Balanced
Fund accounts and 0.08% of the market value of the Income and
Global Bond Fund accounts serviced by the financial intermediary. A
number of factors will be considered in determining whether compensation should
be paid to a financial intermediary, including the qualifying financial
intermediary’s willingness to enter into an Administrative Service Agreement (or
equivalent), the recordkeeping, reporting, or other services to be provided, and
the quality of the relationship with such Funds. Dodge & Cox makes
these payments to help defray the costs incurred by qualifying financial
intermediaries in connection with efforts to maintain employee benefit plan
accounts for participants in a cost-efficient manner; however,
Dodge & Cox does not audit the financial intermediaries to verify
the extent or nature of services provided. Dodge & Cox will, on a
periodic basis, determine the advisability of continuing these payments. These
payments may be more or less than the payments received by financial
intermediaries with respect to other mutual funds and may influence your
financial intermediary to make available a Fund over other mutual funds. You
should ask your financial intermediary about these differing and divergent
interests and how it is compensated for administering your Fund investment.
DODGE & COX FUNDS ∎ PAGE 43
In
addition to the payments described above, Dodge & Cox may also make
payments to third parties for, among other things, data and other information,
such as underlying customer information with respect to omnibus accounts or
other industry information.
Excessive Trading Limitations
The
Funds are intended for long-term investment purposes and not for market timing
or excessive short-term trading (“excessive trading”). The Funds’ Board
of Trustees has approved policies and procedures designed to detect and deter
excessive trading in the Funds.
Although
there is no generally applied standard in the marketplace as to what level of
trading activity is excessive, a Fund may consider that you have violated the
excessive trading policy if it determines:
∎ |
|
You sell or exchange shares within a short
period of time after the shares were purchased; |
∎ |
|
You enter into a series of transactions that is
indicative of an excessive trading pattern or strategy; or
|
∎ |
|
The Fund reasonably believes that you have
engaged in such practices in connection with other mutual funds.
|
The
following transactions are exempt from the excessive trading policy:
∎ |
|
Shares purchased through reinvested
distributions (dividends and capital gains); |
∎ |
|
Shares purchased or sold through an automatic
investment plan, automatic redemption plan, or automatic periodic
rebalancing; |
∎ |
|
Shares redeemed substantially in kind;
|
∎ |
|
Scheduled retirement plan contributions;
|
∎ |
|
Required distributions from individual
retirement accounts (IRA), pension or other retirement plans, and
charitable organizations or endowments; |
∎ |
|
IRA transfers of assets, Roth IRA conversions,
or IRA recharacterizations; |
∎ |
|
Shares purchased or sold through certain “fund
of funds” and asset allocation programs; and |
∎ |
|
Certain transactions initiated by a trustee or
adviser to a donor-advised charitable gift fund. |
A
Fund may also waive the application of excessive trading policies and procedures
when it is determined that enforcement of such policies and procedures is not
necessary to protect the Fund from the effects of short-term trading.
Excessive
trading may present risks to you and to a Fund in which you are a shareholder,
including negative impact on the Fund’s performance, dilution in the value of
its shares, interference with the efficient management of the Fund’s portfolio,
losses on the sale of investments if securities are sold at unfavorable prices,
increased taxable gains to remaining shareholders resulting from the need to
sell securities to meet redemption requests, and increased brokerage and
administrative costs. These risks may be greater to the extent a Fund invests in
non-U.S. securities, which are believed
to be more susceptible to pricing inefficiencies and time zone arbitrage. Time
zone arbitrage may occur because of time zone differences between the foreign
markets on which the Funds’ non-U.S.
portfolio securities trade and the time as of which the
Funds’
NAV is calculated. For example, traders engaging in time zone arbitrage may seek
to exploit changes in the value of the Funds’ portfolio securities that result
from events occurring after foreign market prices are established, but before
calculation of the Funds’ NAV. Arbitrageurs who are successful may dilute the
interests of other shareholders by trading shares at prices that do not fully
reflect their fair value. The Funds have pricing and valuation procedures that
are intended to reduce the potential for dilution and other adverse effects that
can result from pricing inefficiencies. Although the Funds’ excessive trading
policy and pricing and valuation procedures are designed to prevent time zone
arbitrage, there can be no assurances that such policies and procedures will be
completely effective. See Pricing of Fund Shares.
Trade
Activity Monitoring The Funds monitor selected trades on a daily basis.
Trade activity monitoring may include: reviewing accounts where a purchase and
sale occurs within a short period of time; reviewing transaction amount
thresholds; and making comparisons against the Funds’ “known offenders”
database, which contains information about investors who have violated the
excessive trading policy in the past. If the Funds determine that an
investor has engaged in excessive trading, the Funds may temporarily or
permanently restrict the account from subsequent purchases (including purchases
by exchange). In determining whether to take such actions, the Funds seek to act
in a manner that is consistent with the best interests of Fund shareholders. The
Funds may consider the trading history of accounts under common ownership or
control for the purpose of enforcing the excessive trading policy. If a Fund
believes that trading activity that appears excessive may be for legitimate
purposes, the Fund may permit the investor to justify the activity. Transactions
placed through the same financial intermediary on an omnibus basis may be deemed
part of a group for the purpose of this policy and may be rejected in whole or
in part by a Fund.
The
Funds or an authorized agent or sub-agent may reject any purchase order
(including exchange purchases) by any investor or group of investors
indefinitely, with or without prior notice to the investor, for any reason,
including, in particular, purchases that they believe are attributable to
excessive traders or are otherwise excessive or potentially disruptive to a
Fund. Such purchase orders may be revoked or cancelled by a Fund on the next
business day after receipt of the order.
The
application of the Funds’ excessive trading policy involves judgments that are
inherently subjective and involve some selectivity in their application. The
Funds, however, seek to make judgments that are consistent with the interests of
the Funds’ shareholders. No matter how the Funds define excessive trading, other
purchases and sales of Fund shares may have adverse effects on the management of
a Fund’s portfolio and its performance. Additionally, due to the complexity and
subjectivity involved in identifying excessive trading and the volume of Fund
shareholder transactions, there can be no guarantee that the Funds will be able
to identify violations of the excessive trading policy or to reduce or eliminate
all detrimental effects of excessive trading.
Financial
Intermediaries In general, it is the Funds’ expectation that each financial
intermediary will enforce either the Funds’ or its own excessive trading policy.
As a general matter, the Funds do not directly monitor the trading activity of
beneficial
PAGE
44 ∎ DODGE &
COX FUNDS
owners
of the Funds’ shares who hold those shares through third-party 401(k) and other
group retirement plans and other omnibus arrangements maintained by financial
intermediaries. Although the Funds have entered into information sharing
agreements with financial intermediaries, which give the Funds the ability to
request information regarding the trading activity of beneficial owners and to
prohibit further purchases by beneficial owners who violate the Funds’ excessive
trading policy, the ability of the Funds to monitor, detect, and curtail
excessive trading through financial intermediaries’ accounts may be limited, and
there is no guarantee that the Funds will be able to identify shareholders who
may have violated the Funds’ excessive trading policy. Depending on the portion
of Fund shares held through such financial intermediaries, excessive trading
through financial intermediaries could adversely affect Fund shareholders. Fund
shareholders who invest through Financial Intermediaries should contact the
financial intermediary regarding its excessive trading policies, which may
impose different standards and consequences for excessive trading.
Other Transaction Information
Change
in Account Registration and Transfer of Shares Changes in account
registrations, such as changing the name(s) on your account or transferring
shares to another person or legal entity, must be submitted in writing and may
require a Medallion signature guarantee. If, subsequent to making a transfer
request, market fluctuations cause the value of your account to fall below the
requested transfer amount, your entire account will be transferred. Please call
Client Services at 800-621-3979 or visit the Funds’
website at dodgeandcox.com and request or download the Change of Registration
Form, the Gift of Shares Form, or the Inheritance Form to effect this change.
Escheatment of Abandoned Property
A
Fund may be required to escheat (transfer to the state) your assets if they are
deemed abandoned under a state’s unclaimed or abandoned property law. The
following section provides a general summary of U.S. states’ unclaimed or
abandoned property information.
Abandoned
Property State unclaimed or abandoned property laws generally apply to both:
∎ |
|
Unclaimed securities, including shares of the
Fund; and |
∎ |
|
Uncashed dividends or other distributions from
the Fund. |
In
the event that uncashed dividends or other distributions are deemed abandoned,
the amounts of such dividends or distributions will be required to be reported
and remitted to the applicable state. The state is required to hold such amounts
until reclaimed by the owner, but will generally not pay interest on any amounts
that are reclaimed.
In
the event that your shares of a Fund are deemed abandoned, the Fund will be
required to escheat or deliver the shares to the applicable state. The state is
then typically permitted to sell or liquidate the shares at the prevailing
market price. In the event that you seek to reclaim the escheated shares after
they have been liquidated by the state, you will generally be able to recover
only
the amount that the state received when it sold the shares, and not any
appreciation that may otherwise have been realized had the shares not been
liquidated. The escheatment of shares to the state may also result in automatic
withholding and tax penalties to you if the shares were held in a tax-deferred account such as an IRA. You
should consult your tax adviser for advice about the particular tax consequences
associated with the escheatment of your shares.
The
rules for determining when a security or security distribution is required to be
reported and delivered to the state vary considerably by state and may depend on
the type of account in which the security is held. Some states require
escheatment if you have had no contact with the Fund within a specified time
period (generally, three or five years). Other states require escheatment only
if mailings sent to you are returned as undeliverable by the United States
Postal Service. Other states may apply different rules. States may also change
their rules or their interpretation of such rules form time to time.
Please
check your state’s unclaimed or abandoned property department website for
specific information.
Escheatment
Prevention In order to prevent your assets from being deemed abandoned and
escheated to a state, we recommend that you maintain contact with the Fund in a
manner that demonstrates activity under the relevant state’s laws for each of
your Fund accounts, including both IRAs and non-retirement accounts. These laws can
typically be found on your State Treasurer’s website. It is recommended that you
maintain direct contact with the Funds at least annually. You may initiate
contact in writing, by accessing your account through the Funds’ secure website
at dodgeandcox.com, by calling into Client Services at 800-621-3979 and completing the
automated security verification process or by speaking to a Client Service
representative. Please note that certain states do not deem automatic plans as
activity under such state’s escheatment laws. Additionally, please notify
us of any name or address changes immediately and cash dividend and redemption
checks from your account(s) promptly. It is also important to keep your
beneficiary designations current. The Funds may attempt to notify you by mail if
you are at risk of escheatment due to inactivity. Please open all correspondence
from the Funds and respond, if requested.
Pricing of Fund Shares
The
share price (net asset value per share or NAV) for a Fund is normally calculated
as of the scheduled close of trading on the New York Stock Exchange (“NYSE”),
generally 4 p.m. ET, each day that the NYSE is open for business. The NAV
is calculated by dividing Fund net assets (i.e. total assets minus total
liabilities) by the number of shares outstanding. For purposes of determining
the NAV, security transactions are normally recorded one business day after the
trade date. If the NYSE is unexpectedly closed due to weather or other
extenuating circumstances on a day it would normally be open for business, or if
the NYSE has an unscheduled early closing, the Funds reserve the right to (i)
advance the time as of which the NAV is calculated and, therefore, also the time
by which purchase and redemption orders must be received in order to receive
that day’s NAV or (ii) accept purchase and redemption
DODGE & COX FUNDS ∎ PAGE 45
orders
until, and calculate NAV as of, the normally scheduled close of regular trading
on the NYSE for that day. The Funds generally do not accept purchase and
redemption orders (or calculate their NAV) on days that the NYSE is closed for
business (scheduled or unscheduled). However, on any day that the NYSE is closed
when it would normally be open for business, a Fund may determine to accept
purchase and redemption orders until (and calculate its NAV as of) the normally
scheduled close of regular trading on the NYSE or such other time that the Fund
may determine. The days and times at which transactions and shares are priced,
and until which orders are accepted, may also be changed in the event of an
emergency or otherwise as permitted by applicable regulations.
If
a Fund, or its authorized agent or sub-agent, receives your request in good
order before the time as of which a Fund prices its shares (normally at the
scheduled close of trading on the NYSE, generally 4 p.m. ET), your
transactions will be priced at that day’s NAV. If your request is received after
such time, it will be priced at the next business day’s NAV. A Fund cannot
accept orders that request a particular day or price for your transaction or any
other special conditions.
Some
securities may be listed on foreign exchanges that are open on days (such as
U.S. holidays) when the Funds do not calculate their NAVs. This could cause the
value of a Fund’s portfolio investments to be affected by trading on days when
you cannot buy or sell shares.
For
purposes of calculating the NAV, portfolio holdings for which market quotations
are readily available are valued at market value. Listed securities, for
example, are generally valued using the official quoted close price or the last
sale on the exchange that is determined to be the primary market for the
security. Other portfolio holdings, such as debt securities, certain preferred
stocks, structured investments, and derivatives traded over-the-counter, are valued using
prices received from independent pricing services which utilize dealer quotes,
recent transaction data, pricing models, and other inputs to arrive at
market-based valuations. Pricing models may consider quoted prices for similar
investments, interest rates, cash flows (including prepayment speeds), and
credit risk. Exchange-traded derivatives are generally valued at the settlement
price determined by the relevant exchange and centrally cleared derivatives are
generally valued at the price determined by the relevant clearing house.
Short-term securities with less than 60 days to maturity may be valued at
amortized cost if amortized cost approximates current value. Mutual funds are
valued at their respective net asset values. Security values are not discounted
based on the size of the Fund’s position and may differ from the value a Fund
receives upon the sale of the securities.
If
market quotations are not readily available or if normal valuation procedures
produce valuations that are deemed unreliable or inappropriate under the
circumstances existing at the time, the investment will be valued at fair value
as determined in good faith by or under the direction of the Funds’ Board of
Trustees. The Board of Trustees has appointed Dodge & Cox, the Funds’
investment manager, to make fair value determinations in accordance with the
Dodge & Cox Funds Valuation Policies (“Valuation Policies”), subject to
Board oversight. Dodge & Cox has established a Pricing Committee that
is comprised of representatives from Treasury, Legal, Compliance, and
Operations.
The
Pricing Committee is responsible for implementing the Valuation Policies,
including determining the fair value of securities and other investments when
necessary. The Pricing Committee considers relevant indications of value that
are reasonably available to it in determining the fair value assigned to a
particular security, such as the value of similar financial instruments, trading
volumes, contractual restrictions on disposition, related corporate actions, and
changes in economic conditions. In doing so, the Pricing
Committee
employs various methods for calibrating fair valuation approaches, including a
regular review of key inputs and assumptions, back-testing, and review of any
related market activity.
As
trading in securities on most foreign exchanges is normally completed before the
close of the NYSE, the value of non-U.S. securities can change by the time
the Fund calculates its NAV. To address these changes, the Fund may utilize
adjustment factors provided by an independent pricing service to systematically
value non-U.S. securities at fair
value. These adjustment factors are based on statistical analyses of subsequent
movements and changes in U.S. markets and financial instruments trading in U.S.
markets that represent foreign securities or baskets of securities.
Valuing
securities through a fair value determination involves greater reliance on
judgment than valuation of securities based on readily available market
quotations. In some instances, lack of information and uncertainty as to the
significance of information may lead to a conclusion that a prior valuation is
the best indication of a security’s value. When fair value pricing is employed,
the prices of securities used by a Fund to calculate its NAV may differ from
quoted or published prices for the same securities.
Income Dividends and Capital
Gain Distributions
Income
dividends and capital gain distributions are reinvested in additional Fund
shares in your account unless you elect another option. The advantage of
reinvesting arises from compounding; that is, you receive income dividends
and capital gain distributions on an increasing number of shares.
Income dividends and capital gains distributions not reinvested are paid by
check or transmitted to your bank account electronically using the ACH network.
Important
tax note: A Fund’s income dividends and capital gains distributions, whether
received in cash or reinvested in additional shares of the Fund, may be subject
to federal and state income tax.
Income
Dividends Dodge & Cox Stock, Balanced, Income, and Global Bond
Funds normally pay dividends of substantially all of its income (if any)
quarterly in March, June, September, and December, but may pay less
frequently. Dodge & Cox Global Stock Fund and International Stock Fund
normally pay dividends (if any) annually in December.
Capital
Gain Distributions If a Fund has net capital gains for the period January
through October, those gains are generally paid in December. If a Fund has
additional net capital gains for the period November through December, those
additional gains are generally paid in March (for the Stock, Balanced, Income,
and Global Bond Funds) or December (for the International Stock and
PAGE
46 ∎ DODGE &
COX FUNDS
Global
Stock Funds) of the following year. A Fund may make more frequent
distributions, if necessary, to comply with Internal Revenue Code provisions.
Buying
a Distribution: Unless you are investing through a tax-deferred retirement account (such as an
IRA or 401(k) plan), it may not be to your advantage to buy shares of a Fund
shortly before the Fund makes a distribution. This is known as “buying a
distribution.” Buying a distribution can cost you money in taxes as you will
receive, in the form of a taxable distribution, a portion of the money you just
invested. To avoid buying a distribution, check the Fund’s distribution schedule
(which can be found at dodgeandcox.com or by calling 800-621-3979) before you invest.
Federal Income Taxes
The
following information is meant as a general summary for U.S. taxpayers. Please
see the SAI for additional information. You should consult your own tax adviser
for advice about the particular federal, state, and local or foreign tax
consequences to you of investing in a Fund.
Taxes
and Income Dividends and Capital Gains Distributions Each Fund will
distribute substantially all of its income and capital gains to its shareholders
every year.
In
general, if your Fund shares are held in a taxable account, you will be taxed on
dividends you receive from a Fund, regardless of whether they are paid to you in
cash or reinvested in additional Fund shares. If a Fund declares a dividend in
October, November, or December but pays it in January, you may be taxed on the
dividend as if you received it in the previous year.
Under
current law, a portion of the income dividends paid to you by a Fund may be
qualified dividends subject to a maximum tax rate of either 15% or 20%,
depending on whether your income exceeds certain threshold amounts. In general,
income dividends from domestic corporations and qualified foreign corporations
will be permitted this favored federal tax treatment. Income dividends from
interest earned by a Fund on debt securities and dividends received from
unqualified foreign corporations will continue to be taxed at the higher
ordinary income tax rates. Distributions of qualified dividends will be eligible
for these reduced rates of taxation only if you own your shares for at least 61
days during the 121-day period
beginning 60 days before the ex-dividend date of any dividend.
Fund
distributions of short-term capital gains are taxable to you as ordinary income.
Fund distributions of long-term capital gains are taxable as long-term capital
gains no matter how long you have owned your shares. Long-term capital gain
distributions are currently generally taxed at a maximum rate of either 15% or
20%, depending on whether your income exceeds certain threshold amounts.
An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from a
Fund and net gains from redemptions or other taxable dispositions of Fund
shares) of U.S. individuals, estates, and trusts to the extent that such
person’s “modified adjusted gross income” (in the case of an individual) or
“adjusted
gross
income” (in the case of an estate or trust) exceeds certain threshold amounts.
If
you hold your Fund shares in a tax-deferred retirement account, such as an
IRA, you generally will not have to pay tax on dividends until they are
distributed from the account. These accounts are subject to complex tax rules,
and you should consult your tax adviser about investment through a tax-deferred account.
Each
Fund you invest in will send you a tax report each year. The report will tell
you which dividends must be treated as taxable ordinary income, qualified
dividends, or long-term capital gains.
Part
of Dodge & Cox Stock, Global Stock, International Stock, and
Balanced Funds’ income dividends may be eligible for the 50% deduction for
dividends received by corporations. Foreign taxes paid by Dodge & Cox
Global Stock Fund and International Stock Fund, on its investments may, subject
to certain limitations, be passed through to you as a foreign tax credit,
assuming the Fund satisfies certain requirements. State taxation of
distributions to shareholders varies from state to state.
As
with all mutual funds, a Fund may be required to withhold U.S. federal income
tax (currently at a rate of 24%) on all taxable distributions payable to you if
you fail to provide a Fund with your correct taxpayer identification number or
to make required certifications, or if you or a Fund have been notified by the
IRS that you are subject to backup withholding. Backup withholding is not an
additional tax, but is a method by which the IRS ensures that it will collect
taxes otherwise due. Any amounts withheld may be credited against your U.S.
federal income tax liability.
Cost
Basis and Taxes on Sales (Redemptions) and Exchanges If your shares are held
in a taxable account, you will generally have a taxable capital gain or loss if
you sell your Fund shares or exchange them for shares of a different Fund. The
amount of the gain or loss and the rate of tax will depend primarily upon how
much you paid for the shares (your “cost basis”), how much you sold them for,
and how long you held them.
Your
total cost basis is generally the original amount paid for Fund shares, plus the
value of reinvested dividends and capital gains distributions. If you acquire
Fund shares on or after January 1, 2012, generally referred to as
“covered shares,” and subsequently sell or exchange those shares, the Fund is
required to report cost basis information to you and to the IRS. Unless you
specify an alternate cost basis method, the Funds will default to the average
cost method when calculating cost basis. If you hold Fund shares in an account
held by a broker/dealer, financial institution, or investment adviser, that firm
may select a different default method. In those cases, please contact the firm
holding your account to obtain information with respect to the cost basis
calculation methods available for your account.
Additional
information about cost basis reporting is available at
dodgeandcox.com/tax_center_cost_basis.asp.
Foreign
Shareholders Shareholders other than U.S. persons may be subject to a
different U.S. federal income tax treatment, including withholding tax at the
rate of 30% on amounts treated as ordinary dividends from a Fund, as discussed
in more detail in the SAI.
DODGE & COX FUNDS ∎ PAGE 47
Fund Organization and
Management
Fund
Organization Dodge & Cox Funds, a Delaware statutory trust (the
“Trust”), is a family of six no-load
mutual funds. Dodge & Cox Balanced Fund was established in 1931;
Dodge & Cox Stock Fund in 1965; Dodge & Cox Income Fund
in 1989; Dodge & Cox International Stock Fund in 2001;
Dodge & Cox Global Stock Fund in 2008; and
Dodge & Cox Global Bond Fund in 2014.
Investment
Manager Dodge & Cox, a California corporation, has served as investment
manager to the Funds and their predecessors 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. Dodge & Cox is located at 555 California
Street, 40th Floor, San Francisco, California 94104.
Dodge &
Cox’s activities are devoted to investment research and the supervision of
investment accounts for individuals and institutions. Dodge & Cox Stock
Fund, Dodge & Cox Balanced Fund, and Dodge & Cox Global Bond
Fund each pay 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. Dodge & Cox Global Stock Fund and Dodge & Cox
International Stock Fund each pay Dodge & Cox a management fee
which is payable monthly at the annual rate of 0.60% of the average daily net
asset value of the Fund. Dodge & Cox Income 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 up to
$100 million and 0.40% of the average daily net asset value of the Fund in
excess of $100 million. Until April 30, 2021,
Dodge & Cox has contractually agreed to reimburse the
Dodge & Cox Global Bond Fund for all ordinary expenses to the
extent necessary to maintain the ratio of total operating expenses to average
net assets at 0.45%. The agreement is renewable annually thereafter and is
subject to termination upon 30 days’ written notice by either party prior to the
end of the term. An expense reimbursement agreement has been in effect since the
Global Bond Fund’s inception, without which returns for the Fund would have been
lower.
A
discussion regarding the basis for the Board of Trustees approving the Funds’
Investment Management Agreements is available in each Fund’s Annual Report,
which covers the 12-month period ending
December 31 each year.
The
Board of Trustees’ primary responsibility is oversight of the management of each
Fund for the benefit of its shareholders, not day-to-day management. The Board
authorizes the Trust to enter into service agreements with Dodge & Cox
and other service providers in order to provide necessary or desirable services
on behalf of the Trust and the Funds. Shareholders are not parties to or
third-party beneficiaries of such service agreements. Neither this
prospectus
nor a Fund’s summary prospectus, the SAI, any documents filed as exhibits to the
Trust’s registration statement, nor any other communications, disclosure
documents or regulatory filings from or on behalf of the Trust or a Fund creates
a contract between or among any shareholder of a Fund, on the one hand, and the
Trust, a Fund, a service provider to the Trust or a Fund, and/or the Trustees or
officers of the Trust, on the other hand. The Board of Trustees (or the
Trust and its officers, service providers or other delegates acting under
authority of the Board) may amend or use a new prospectus, summary prospectus,
or SAI with respect to a Fund or the Trust, and/or amend, file and/or issue any
other communications, disclosure documents, or regulatory filings, and may amend
or enter into any contracts to which the Trust or a Fund is a party, and
interpret or amend the investment objective(s), policies, restrictions, and
contractual provisions applicable to any Fund, without shareholder input or
approval, except in circumstances in which shareholder approval is specifically
required by law (such as changes to fundamental investment restrictions) or
where a shareholder approval requirement is specifically disclosed in the
Trust’s then-current prospectus or SAI.
Wholly-Owned
Subsidiaries The Dodge & Cox Global Stock Fund,
Dodge & Cox International Stock Fund, and Dodge & Cox
Global Bond Fund may invest in the Dodge & Cox Global Stock Fund
Cayman, Ltd., Dodge & Cox International Stock Fund Cayman, Ltd.,
and Dodge & Cox Global Bond Fund Cayman, Ltd., respectively, each of
which is a wholly owned subsidiary of the respective Fund organized under the
laws of the Cayman Islands (each a “Cayman Subsidiary”). Each Fund may invest in
its Cayman Subsidiary to gain exposure to non-U.S. registered securities. Each Cayman
Subsidiary has entered into a separate Investment Management Agreement with
Dodge & Cox for the management and administration of the Cayman
Subsidiary’s portfolio. Dodge & Cox is not compensated by a Cayman
Subsidiary for the services it provides to the Cayman Subsidiary. As described
above, Dodge & Cox receives a management fee from each Fund based
on the average daily net assets of the Fund, which includes any amounts invested
in a Cayman Subsidiary. The Dodge & Cox Global Stock Fund,
Dodge & Cox International Stock Fund, and
Dodge & Cox Global Bond Fund each bear the operating expenses of
the relevant Cayman Subsidiary.
PAGE
48 ∎ DODGE &
COX FUNDS
Investment Committees
U.S. Equity Investment Committee
The
Dodge & Cox Stock Fund’s investments and the stock portion of the
Dodge & Cox Balanced Fund are managed by Dodge & Cox’s U.S.
Equity Investment Committee (“USEIC”), and in general no single USEIC
member is primarily responsible for making investment recommendations for the
Stock and Balanced Funds. USEIC is also responsible for determining the asset
allocation of the Dodge & Cox Balanced Fund. USEIC consists of the
following eight members:
|
|
|
|
|
|
|
Committee Member |
|
Position(s) with Funds |
|
Business Experience During the Past Five Years |
|
Years with Dodge & Cox |
Charles
F. Pohl |
|
Chairman and
Trustee |
|
Chairman and
Director of Dodge & Cox; Chief Investment Officer and member
of USEIC, GEIC, and IEIC; member of USFIIC (until 2019) |
|
36 |
C. Bryan
Cameron |
|
Vice
President |
|
Senior Vice
President of Dodge & Cox; Director of Research and member of
USEIC; member of IEIC (until May 2020) |
|
37 |
David C.
Hoeft |
|
Vice
President |
|
Senior Vice
President and Director of Dodge & Cox; Associate Chief Investment
Officer (since 2019), Associate Director of Research (until 2019), and
member of USEIC and GEIC (since 2016) |
|
27 |
Steven C.
Voorhis |
|
Vice
President |
|
Vice
President of Dodge & Cox; Associate Director of Research (since
2019), Research Analyst, and member of USEIC and GEIC |
|
24 |
Philippe
Barret, Jr. |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst and member of USEIC |
|
16 |
Kathleen G. McCarthy |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst and member of USEIC
(since 2016) |
|
13 |
Karol
Marcin |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst and member of USEIC
(since 2018) and GEIC |
|
20 |
Benjamin
V. Garosi |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst and member of USEIC
(since 2019) |
|
11 |
DODGE & COX FUNDS ∎ PAGE 49
Global Equity Investment Committee
The
Dodge & Cox Global Stock Fund’s investments are managed by
Dodge & Cox’s Global Equity Investment Committee (“GEIC”), and
in general no single GEIC member is primarily responsible for making investment
recommendations for the Fund. GEIC consists of the following seven members:
|
|
|
|
|
|
|
Committee Member |
|
Position(s) with Funds |
|
Business Experience During the Past Five Years |
|
Years with Dodge & Cox |
Charles
F. Pohl |
|
Chairman and
Trustee |
|
Chairman and
Director of Dodge & Cox; Chief Investment Officer and member
of USEIC, GEIC, and IEIC; member of USFIIC (until 2019) |
|
36 |
Diana S.
Strandberg |
|
Senior Vice
President |
|
Senior Vice
President and Director of Dodge & Cox; Director of International
Equity and member of GEIC and IEIC; member of GFIIC (until 2018) and USEIC
(until May 2020) |
|
32 |
David C.
Hoeft |
|
Vice
President |
|
Senior Vice
President and Director of Dodge & Cox; Associate Chief Investment
Officer (since 2019), Associate Director of Research (until 2019), and
member of USEIC and GEIC (since 2016) |
|
27 |
Roger G.
Kuo |
|
Vice
President |
|
Senior Vice
President and Director (since 2016) of Dodge & Cox; Research
Analyst and member of GEIC and IEIC |
|
22 |
Steven C.
Voorhis |
|
Vice
President |
|
Vice
President of Dodge & Cox; Associate Director of Research (since
2019), Research Analyst, and member of USEIC and GEIC |
|
24 |
Karol
Marcin |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst and member of USEIC
(since 2018) and GEIC |
|
20 |
Lily S.
Beischer |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst and member of GEIC |
|
19 |
PAGE
50 ∎ DODGE &
COX FUNDS
International Equity Investment Committee
The
Dodge & Cox International Stock Fund’s investments are managed by
Dodge & Cox’s International Equity Investment Committee
(“IEIC”), and in general no single IEIC member is primarily responsible
for making investment recommendations for the Fund. IEIC consists of the
following eight members:
|
|
|
|
|
|
|
Committee Member |
|
Position(s) with Funds |
|
Business Experience During the Past Five Years |
|
Years with Dodge & Cox |
Charles
F. Pohl |
|
Chairman and
Trustee |
|
Chairman and
Director of Dodge & Cox; Chief Investment Officer and member
of USEIC, GEIC, and IEIC; member of USFIIC (until 2019) |
|
36 |
Diana S.
Strandberg |
|
Senior Vice
President |
|
Senior Vice
President and Director of Dodge & Cox; Director of International
Equity and member of GEIC and IEIC; member of GFIIC (until 2018) and USEIC
(until May 2020) |
|
32 |
Roger G.
Kuo |
|
Vice
President |
|
Senior Vice
President and Director (since 2016) of Dodge & Cox; Research
Analyst and member of GEIC and IEIC |
|
22 |
Mario C.
DiPrisco |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst and member of IEIC |
|
22 |
Keiko
Horkan |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst and member of IEIC |
|
20 |
Richard
T. Callister |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst and member of IEIC |
|
18 |
Englebert T. Bangayan |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst and member of IEIC
(since 2015) |
|
18 |
Raymond
J. Mertens |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst and member of IEIC
(since 2018); member of GEIC (until 2018) |
|
17 |
DODGE & COX FUNDS ∎ PAGE 51
U.S. Fixed Income Investment Committee
The
Dodge & Cox Income Fund’s investments and the debt portion of the
Dodge & Cox Balanced Fund are managed by Dodge & Cox’s U.S.
Fixed Income Investment Committee (“USFIIC”), and in general no single
USFIIC member is primarily responsible for making investment recommendations for
the Balanced and Income Funds. USFIIC consists of the following nine members:
|
|
|
|
|
|
|
Committee Member |
|
Position(s) with Funds |
|
Business Experience During the Past Five Years |
|
Years with Dodge & Cox |
Dana M.
Emery |
|
President
and Trustee |
|
Chief
Executive Officer, President, and Director of Dodge & Cox;
Co-Director of Fixed Income
(until January 2020) and member of USFIIC and GFIIC |
|
37 |
Thomas S.
Dugan |
|
Vice
President |
|
Senior Vice
President and Director of Dodge & Cox; Director of Fixed Income
(since January 2020), Co-Director of Fixed Income
(2019-January 2020), Associate Director of Fixed Income (until 2019), and
member of USFIIC and GFIIC |
|
26 |
Larissa
K. Roesch |
|
Vice
President |
|
Vice
President of Dodge & Cox; Client Portfolio Manager, Client
Portfolio Counselor, and member of USFIIC |
|
23 |
James H.
Dignan |
|
Vice
President |
|
Vice
President of Dodge & Cox; Client Portfolio Manager, Research
Analyst, and member of USFIIC and GFIIC |
|
21 |
Anthony
J. Brekke |
|
Vice
President |
|
Vice
President of Dodge & Cox; Client Portfolio Manager, Research
Analyst, and member of USFIIC |
|
17 |
Adam S.
Rubinson |
|
Vice
President |
|
Vice
President of Dodge & Cox; Client Portfolio Manager, Research
Analyst, and member of USFIIC and GFIIC |
|
18 |
Lucinda
I. Johns |
|
Vice
President |
|
Vice
President of Dodge & Cox; Associate Director of Fixed Income
(since January 2020), Research Analyst, and member of USFIIC and GFIIC |
|
18 |
Nils M.
Reuter |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst, Trader, and member of
USFIIC (since 2018) |
|
17 |
Michael
Kiedel |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst and member of USFIIC
(since 2018) |
|
12 |
PAGE
52 ∎ DODGE &
COX FUNDS
Global Fixed Income Investment Committee
The
Dodge & Cox Global Bond Fund’s investments are managed by
Dodge & Cox’s Global Fixed Income Investment Committee
(“GFIIC”), and in general no single GFIIC member is primarily responsible
for making investment recommendations for the Fund. The GFIIC consists of the
following seven members:
|
|
|
|
|
|
|
Committee Member |
|
Position(s) with Funds |
|
Business Experience During the Past Five Years |
|
Years with Dodge & Cox |
Dana M.
Emery |
|
President
and Trustee |
|
Chief
Executive Officer, President, and Director of Dodge & Cox;
Co-Director of Fixed Income
(until January 2020) and member of USFIIC and GFIIC |
|
37 |
Thomas S.
Dugan |
|
Vice
President |
|
Senior Vice
President and Director of Dodge & Cox; Director of Fixed Income
(since January 2020), Co-Director
of Fixed Income (2019-January 2020), Associate Director of Fixed
Income (until January 2019), and member of USFIIC and GFIIC |
|
26 |
James H.
Dignan |
|
Vice
President |
|
Vice
President of Dodge & Cox; Client Portfolio Manager, Research
Analyst, and member of USFIIC and GFIIC |
|
21 |
Adam S.
Rubinson |
|
Vice
President |
|
Vice
President of Dodge & Cox; Client Portfolio Manager, Research
Analyst, and member of USFIIC and GFIIC |
|
18 |
Lucinda
I. Johns |
|
Vice
President |
|
Vice
President of Dodge & Cox; Associate Director of Fixed Income
(since January 2020), Research Analyst, and member of USFIIC and GFIIC |
|
18 |
Matthew
B. Schefer |
|
Vice
President |
|
Vice
President of Dodge & Cox; Research Analyst, and member of GFIIC
(since 2018) |
|
12 |
Jose F.
Ursua |
|
Vice
President |
|
Vice
President of Dodge & Cox; Macro Research Analyst, and member of GFIIC
(since January 2020) |
|
5 |
The
SAI provides additional information about the Dodge & Cox investment
committee members’ compensation, other accounts managed by the members, and the
members’ ownership of securities in the Funds.
DODGE & COX FUNDS ∎ PAGE 53
Investment Information and Shareholder
Services
|
|
|
Statements and
Reports |
|
As a
shareholder of the Fund you will receive the following statements and
reports: |
Confirmation Statement |
|
Sent each
time you buy, sell, or exchange shares; confirms the trade date and the
amount of your transaction, except purchases through the Automatic
Investment Plan and dividend and capital gain distributions, which will be
confirmed only on your account statement. |
Account
Statement |
|
Mailed
quarterly; shows the market value of your account at the close of the
statement period, as well as distributions, purchases, sales, and
exchanges for the current calendar year. You should contact Client
Services immediately regarding any errors or discrepancies on the
statement confirming your transaction(s). The statement will be deemed
correct if we do not hear from you within 90 days. |
Fund
Financial Reports |
|
Mailed in
February and August. |
Tax
Statements |
|
Generally
mailed by January 31st; reports previous year’s dividend distributions,
proceeds from the sale of shares, and distributions from
IRAs. |
The
Funds offer you the following services: (call Client Services at 800-621-3979, write, or visit the
Funds’ website at dodgeandcox.com for forms and additional information.)
Electronic
Delivery of Reports and Prospectus Your Fund reports and the Funds’
prospectus can be delivered to you electronically, if you prefer. If you are a
registered user of dodgeandcox.com, you can consent to the electronic delivery
of Fund reports by logging on and changing your preferences. You can revoke your
electronic consent at any time, and we will send paper copies of Fund reports
within 30 days of receiving your notice.
Web
Access Information on the Funds is available at dodgeandcox.com.
On
the site you can:
∎ |
|
View your account balances and recent
transactions; |
∎ |
|
View or download your account statements,
confirmation statements, and tax forms; |
∎ |
|
Purchase, redeem, and exchange Fund shares;
|
∎ |
|
Learn more about Dodge & Cox’s approach
to investing; |
∎ |
|
Review the objectives, strategies,
characteristics, and risks of the Funds; |
∎ |
|
Review the Funds’ daily NAVs and performance;
|
∎ |
|
Download or order the Funds’ prospectus and
Account Applications, shareholder reports, IRA information, and other
forms; and |
∎ |
|
Sign up for electronic delivery of the Funds’
prospectus, shareholder reports, proxy materials, account statements, and
tax forms. |
Telephone
Services The Funds provide toll-free access (800-621-3979) to Fund and account
information 24 hours a day, 7 days a week. The system provides total returns,
share prices, and price changes for the Funds and gives your account balances
and history (e.g., last transaction, latest dividend distribution). For certain
account types, you can purchase, redeem, and exchange Fund shares.
Automatic
Investment Plan You may make regular monthly, quarterly, semi-annual, or
annual investments of $100 or more through automatic deductions from your
bank account.
Automatic
Redemption Plan If you own $10,000 or more of a Fund’s shares, you may
receive regular monthly, quarterly, semi-annual, or annual payments of $50 or
more. Shares will be redeemed automatically at NAV to make the withdrawal
payments.
Automatic
Periodic Rebalancing You may set a preferred Fund allocation online
indicating the percent of your account to invest in each available Fund and the
frequency with which to rebalance the account. Select a periodic schedule of
quarterly, semi-annual, or annual rebalancing.
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 Funds have
traditional IRA and Roth IRA Plans available for shareholders of the Funds.
Important
Note: The services described may not be available through some retirement plans
or accounts held by Financial Intermediaries. If you are investing in
such a manner, you should contact your plan administrator/trustee or
Financial Intermediaries about what services are available and with questions
about your account.
PAGE
54 ∎ DODGE &
COX FUNDS
Financial Highlights
The
financial highlights table is intended to help you understand each Fund’s
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (before taxes, and assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with each Fund’s financial statements, are included in the
Annual Report, which is available upon request and on the Funds’ web site at
dodgeandcox.com.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dodge &
Cox Stock Fund |
|
Year Ended December 31, |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
Net
asset value, beginning of year |
|
|
$172.81 |
|
|
|
$203.61 |
|
|
|
$184.30 |
|
|
|
$162.77 |
|
|
|
$180.94 |
|
Income
from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
3.65 |
|
|
|
2.90 |
|
|
|
3.09 |
|
|
|
3.05 |
|
|
|
2.42 |
|
Net
realized and unrealized gain (loss) |
|
|
37.98 |
|
|
|
(16.96 |
) |
|
|
30.03 |
|
|
|
30.56 |
|
|
|
(10.55 |
) |
|
|
|
|
|
Total
from investment operations |
|
|
41.63 |
|
|
|
(14.06 |
) |
|
|
33.12 |
|
|
|
33.61 |
|
|
|
(8.13 |
) |
|
|
|
|
|
Distributions
to shareholders from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(3.65 |
) |
|
|
(2.90 |
) |
|
|
(3.11 |
) |
|
|
(3.03 |
) |
|
|
(2.46 |
) |
Net
realized gain |
|
|
(17.03 |
) |
|
|
(13.84 |
) |
|
|
(10.70 |
) |
|
|
(9.05 |
) |
|
|
(7.58 |
) |
|
|
|
|
|
Total
distributions |
|
|
(20.68 |
) |
|
|
(16.74 |
) |
|
|
(13.81 |
) |
|
|
(12.08 |
) |
|
|
(10.04 |
) |
|
|
|
|
|
Net
asset value, end of year |
|
|
$193.76 |
|
|
|
$172.81 |
|
|
|
$203.61 |
|
|
|
$184.30 |
|
|
|
$162.77 |
|
|
|
|
|
|
Total
return |
|
|
24.80 |
% |
|
|
(7.08 |
)% |
|
|
18.32 |
% |
|
|
21.27 |
% |
|
|
(4.47 |
)% |
Ratios/supplemental
data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (millions) |
|
|
$74,585 |
|
|
|
$63,005 |
|
|
|
$70,901 |
|
|
|
$61,600 |
|
|
|
$54,845 |
|
Ratio
of expenses to average net assets |
|
|
0.52 |
% |
|
|
0.52 |
% |
|
|
0.52 |
% |
|
|
0.52 |
% |
|
|
0.52 |
% |
Ratio
of net investment income to average net assets |
|
|
1.93 |
% |
|
|
1.41 |
% |
|
|
1.58 |
% |
|
|
1.83 |
% |
|
|
1.36 |
% |
Portfolio
turnover rate |
|
|
17 |
% |
|
|
20 |
% |
|
|
13 |
% |
|
|
16 |
% |
|
|
15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dodge &
Cox Global Stock Fund |
|
Year Ended December 31, |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
Net
asset value, beginning of year |
|
|
$11.03 |
|
|
|
$13.86 |
|
|
|
$11.91 |
|
|
|
$10.46 |
|
|
|
$11.83 |
|
Income
from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
0.27 |
|
|
|
0.21 |
|
|
|
0.13 |
|
|
|
0.14 |
|
|
|
0.16 |
|
Net
realized and unrealized gain (loss) |
|
|
2.35 |
|
|
|
(1.96 |
) |
|
|
2.42 |
|
|
|
1.65 |
|
|
|
(1.11 |
) |
|
|
|
|
|
Total
from investment operations |
|
|
2.62 |
|
|
|
(1.75 |
) |
|
|
2.55 |
|
|
|
1.79 |
|
|
|
(0.95 |
) |
|
|
|
|
|
Distributions
to shareholders from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.34 |
) |
|
|
(0.25 |
) |
|
|
(0.13 |
) |
|
|
(0.14 |
) |
|
|
(0.19 |
) |
Net
realized gain |
|
|
(0.60 |
) |
|
|
(0.83 |
) |
|
|
(0.47 |
) |
|
|
(0.20 |
) |
|
|
(0.23 |
) |
|
|
|
|
|
Total
distributions |
|
|
(0.94 |
) |
|
|
(1.08 |
) |
|
|
(0.60 |
) |
|
|
(0.34 |
) |
|
|
(0.42 |
) |
|
|
|
|
|
Net
asset value, end of year |
|
|
$12.71 |
|
|
|
$11.03 |
|
|
|
$13.86 |
|
|
|
$11.91 |
|
|
|
$10.46 |
|
|
|
|
|
|
Total
return |
|
|
23.85 |
% |
|
|
(12.65 |
)% |
|
|
21.51 |
% |
|
|
17.09 |
% |
|
|
(8.05 |
)% |
Ratios/supplemental
data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (millions) |
|
|
$10,296 |
|
|
|
$8,614 |
|
|
|
$9,911 |
|
|
|
$7,101 |
|
|
|
$5,708 |
|
Ratio
of expenses to average net assets |
|
|
0.62 |
% |
|
|
0.62 |
% |
|
|
0.63 |
% |
|
|
0.63 |
% |
|
|
0.63 |
% |
Ratio
of net investment income to average net assets |
|
|
2.13 |
% |
|
|
1.52 |
% |
|
|
1.02 |
% |
|
|
1.36 |
% |
|
|
1.39 |
% |
Portfolio
turnover rate |
|
|
22 |
% |
|
|
31 |
% |
|
|
18 |
% |
|
|
25 |
% |
|
|
20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dodge &
Cox International Stock Fund |
|
Year Ended December 31, |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
Net
asset value, beginning of year |
|
|
$36.91 |
|
|
|
$46.32 |
|
|
|
$38.10 |
|
|
|
$36.48 |
|
|
|
$42.11 |
|
Income
from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
1.25 |
|
|
|
1.01 |
|
|
|
0.70 |
|
|
|
0.82 |
|
|
|
0.79 |
|
Net
realized and unrealized gain (loss) |
|
|
7.15 |
|
|
|
(9.34 |
) |
|
|
8.41 |
|
|
|
2.19 |
|
|
|
(5.58 |
) |
|
|
|
|
|
Total
from investment operations |
|
|
8.40 |
|
|
|
(8.33 |
) |
|
|
9.11 |
|
|
|
3.01 |
|
|
|
(4.79 |
) |
|
|
|
|
|
Distributions
to shareholders from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(1.71 |
) |
|
|
(1.08 |
) |
|
|
(0.89 |
) |
|
|
(0.85 |
) |
|
|
(0.84 |
) |
Net
realized gain |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.54 |
) |
|
|
— |
|
|
|
|
|
|
Total
distributions |
|
|
(1.71 |
) |
|
|
(1.08 |
) |
|
|
(0.89 |
) |
|
|
(1.39 |
) |
|
|
(0.84 |
) |
|
|
|
|
|
Net
asset value, end of year |
|
|
$43.60 |
|
|
|
$36.91 |
|
|
|
$46.32 |
|
|
|
$38.10 |
|
|
|
$36.48 |
|
|
|
|
|
|
Total
return |
|
|
22.78 |
% |
|
|
(17.98 |
)% |
|
|
23.94 |
% |
|
|
8.26 |
% |
|
|
(11.35 |
)% |
Ratios/supplemental
data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (millions) |
|
|
$50,228 |
|
|
|
$48,108 |
|
|
|
$65,670 |
|
|
|
$54,187 |
|
|
|
$57,029 |
|
Ratio
of expenses to average net assets |
|
|
0.63 |
% |
|
|
0.63 |
% |
|
|
0.63 |
% |
|
|
0.64 |
% |
|
|
0.64 |
% |
Ratio
of net investment income to average net assets |
|
|
2.85 |
% |
|
|
2.17 |
% |
|
|
1.57 |
% |
|
|
2.12 |
% |
|
|
1.86 |
% |
Portfolio
turnover rate |
|
|
15 |
% |
|
|
17 |
% |
|
|
17 |
% |
|
|
17 |
% |
|
|
18 |
% |
DODGE & COX FUNDS ∎ PAGE 55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dodge &
Cox Balanced Fund |
|
Year Ended December 31, |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
Net
asset value, beginning of year |
|
|
$93.27 |
|
|
|
$107.00 |
|
|
|
$103.35 |
|
|
|
$94.42 |
|
|
|
$102.48 |
|
Income
from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
2.48 |
|
|
|
2.20 |
|
|
|
2.28 |
|
|
|
2.34 |
|
|
|
2.06 |
|
Net
realized and unrealized gain (loss) |
|
|
15.35 |
|
|
|
(7.00 |
) |
|
|
10.45 |
|
|
|
12.89 |
|
|
|
(4.99 |
) |
|
|
|
|
|
Total
from investment operations |
|
|
17.83 |
|
|
|
(4.80 |
) |
|
|
12.73 |
|
|
|
15.23 |
|
|
|
(2.93 |
) |
|
|
|
|
|
Distributions
to shareholders from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(2.46 |
) |
|
|
(2.01 |
) |
|
|
(2.29 |
) |
|
|
(2.34 |
) |
|
|
(2.06 |
) |
Net
realized gain |
|
|
(7.04 |
) |
|
|
(6.92 |
) |
|
|
(6.79 |
) |
|
|
(3.96 |
) |
|
|
(3.07 |
) |
|
|
|
|
|
Total
distributions |
|
|
(9.50 |
) |
|
|
(8.93 |
) |
|
|
(9.08 |
) |
|
|
(6.30 |
) |
|
|
(5.13 |
) |
|
|
|
|
|
Net
asset value, end of year |
|
|
$101.60 |
|
|
|
$93.27 |
|
|
|
$107.00 |
|
|
|
$103.35 |
|
|
|
$94.42 |
|
|
|
|
|
|
Total
return |
|
|
19.62 |
% |
|
|
(4.61 |
)% |
|
|
12.59 |
% |
|
|
16.55 |
% |
|
|
(2.88 |
)% |
Ratios/supplemental
data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (millions) |
|
|
$15,747 |
|
|
|
$14,181 |
|
|
|
$16,387 |
|
|
|
$15,382 |
|
|
|
$14,269 |
|
Ratio
of expenses to average net assets |
|
|
0.53 |
% |
|
|
0.53 |
% |
|
|
0.53 |
% |
|
|
0.53 |
% |
|
|
0.53 |
% |
Ratio
of net investment income to average net assets |
|
|
2.46 |
% |
|
|
2.06 |
% |
|
|
2.12 |
% |
|
|
2.41 |
% |
|
|
2.03 |
% |
Portfolio
turnover rate |
|
|
35 |
% |
|
|
24 |
% |
|
|
19 |
% |
|
|
24 |
% |
|
|
20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dodge & Cox Income Fund |
|
Year
Ended December 31, |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
Net
asset value, beginning of year |
|
|
$13.26 |
|
|
|
$13.76 |
|
|
|
$13.59 |
|
|
|
$13.29 |
|
|
|
$13.78 |
|
Income
from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
0.44 |
|
|
|
0.41 |
|
|
|
0.38 |
|
|
|
0.42 |
|
|
|
0.40 |
|
Net
realized and unrealized gain (loss) |
|
|
0.84 |
|
|
|
(0.45 |
) |
|
|
0.21 |
|
|
|
0.32 |
|
|
|
(0.48 |
) |
|
|
|
|
|
Total
from investment operations |
|
|
1.28 |
|
|
|
(0.04 |
) |
|
|
0.59 |
|
|
|
0.74 |
|
|
|
(0.08 |
) |
|
|
|
|
|
Distributions
to shareholders from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.43 |
) |
|
|
(0.40 |
) |
|
|
(0.38 |
) |
|
|
(0.42 |
) |
|
|
(0.40 |
) |
Net
realized gain |
|
|
(0.08 |
) |
|
|
(0.06 |
) |
|
|
(0.04 |
) |
|
|
(0.02 |
) |
|
|
(0.01 |
) |
|
|
|
|
|
Total
distributions |
|
|
(0.51 |
) |
|
|
(0.46 |
) |
|
|
(0.42 |
) |
|
|
(0.44 |
) |
|
|
(0.41 |
) |
|
|
|
|
|
Net
asset value, end of year |
|
|
$14.03 |
|
|
|
$13.26 |
|
|
|
$13.76 |
|
|
|
$13.59 |
|
|
|
$13.29 |
|
|
|
|
|
|
Total
return |
|
|
9.73 |
% |
|
|
(0.31 |
)% |
|
|
4.36 |
% |
|
|
5.62 |
% |
|
|
(0.59 |
)% |
Ratios/supplemental
data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (millions) |
|
|
$63,546 |
|
|
|
$54,314 |
|
|
|
$54,287 |
|
|
|
$46,632 |
|
|
|
$43,125 |
|
Ratio
of expenses to average net assets |
|
|
0.42 |
% |
|
|
0.42 |
% |
|
|
0.43 |
% |
|
|
0.43 |
% |
|
|
0.43 |
% |
Ratio
of net investment income to average net assets |
|
|
3.12 |
% |
|
|
3.02 |
% |
|
|
2.80 |
% |
|
|
3.11 |
% |
|
|
2.97 |
% |
Portfolio
turnover rate |
|
|
49 |
% |
|
|
37 |
% |
|
|
19 |
% |
|
|
27 |
% |
|
|
24 |
% |
|
|
Dodge & Cox Global Bond Fund |
|
Year Ended
December 31, |
|
|
2019 |
|
|
2018 |
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
Net
asset value, beginning of year |
|
|
$10.23 |
|
|
|
$10.92 |
|
|
|
$10.33 |
|
|
|
$9.67 |
|
|
|
$10.31 |
|
Income
from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
0.38 |
|
|
|
0.40 |
|
|
|
0.37 |
|
|
|
0.30 |
|
|
|
0.34 |
|
Net
realized and unrealized gain (loss) |
|
|
0.87 |
|
|
|
(0.56 |
) |
|
|
0.49 |
|
|
|
0.54 |
|
|
|
(0.98 |
) |
|
|
|
|
|
Total
from investment operations |
|
|
1.25 |
|
|
|
(0.16 |
) |
|
|
0.86 |
|
|
|
0.84 |
|
|
|
(0.64 |
) |
|
|
|
|
|
Distributions
to shareholders from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
(0.38 |
) |
|
|
(0.43 |
) |
|
|
(0.26 |
) |
|
|
(0.18 |
) |
|
|
— |
|
Net
realized gain |
|
|
— |
|
|
|
(0.10 |
) |
|
|
(0.01 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total
distributions |
|
|
(0.38 |
) |
|
|
(0.53 |
) |
|
|
(0.27 |
) |
|
|
(0.18 |
) |
|
|
— |
|
|
|
|
|
|
Net
asset value, end of year |
|
|
$11.10 |
|
|
|
$10.23 |
|
|
|
$10.92 |
|
|
|
$10.33 |
|
|
|
$9.67 |
|
|
|
|
|
|
Total
return |
|
|
12.23 |
% |
|
|
(1.45 |
)% |
|
|
8.31 |
% |
|
|
8.64 |
% |
|
|
(6.21 |
)% |
Ratios/supplemental
data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of year (millions) |
|
|
$435 |
|
|
|
$226 |
|
|
|
$156 |
|
|
|
$110 |
|
|
|
$68 |
|
Ratio
of expenses to average net assets |
|
|
0.45 |
% |
|
|
0.45 |
% |
|
|
0.49 |
% |
|
|
0.60 |
% |
|
|
0.60 |
% |
Ratio
of expenses to average net assets, before reimbursement by investment
manager |
|
|
0.83 |
% |
|
|
0.92 |
% |
|
|
1.06 |
% |
|
|
1.33 |
% |
|
|
1.41 |
% |
Ratio
of net investment income to average net assets |
|
|
4.21 |
% |
|
|
4.15 |
% |
|
|
3.51 |
% |
|
|
3.77 |
% |
|
|
3.39 |
% |
Portfolio
turnover rate |
|
|
60 |
% |
|
|
55 |
% |
|
|
46 |
% |
|
|
73 |
% |
|
|
55 |
% |
PAGE
56 ∎ DODGE &
COX FUNDS
Notes
DODGE & COX FUNDS ∎ PAGE 57
Notes
PAGE
58 ∎ DODGE &
COX FUNDS
DODGE
& COX FUNDS®
For More Information
For
investors who want more information about the Funds, the
following documents are available free upon request:
Annual/Semi-Annual Reports
Additional
information about the Funds’ investments is available in the Funds’ annual and
semi-annual reports to shareholders. In each Fund’s annual report, you will find
a discussion of the market conditions and investment strategies that
significantly affected the Fund’s performance during its last fiscal year.
Statement of Additional Information (SAI)
The
SAI provides more detailed information about the Funds and is incorporated by
reference into (and thus is legally a part of) this prospectus.
You
can get free copies of a Fund’s annual and semi-annual reports and the SAI,
request other information, and discuss your questions about the Funds by
contacting the Funds at:
Dodge &
Cox Funds
c/o
DST Asset Manager Solutions, Inc.
P.O.
Box 219502
Kansas
City, MO 64121-9502
Telephone:
800-621-3979
Internet:
dodgeandcox.com
Reports
and other information about the Funds (including the SAI) are available in the
EDGAR database on the SEC’s website at www.sec.gov. You can also receive copies
of this information, for a duplicating fee, by electronic request at the
following e-mail address:
[email protected].
Funds’
Investment Company Act file no. 811-173