D O DGE & COX F UNDS. Semi-Annual Report June 30, Stock Fund E S TABLIS HED 1965 TIC KER: DO D GX. 06/17 SF SAR Printed on recycled paper

Transcription

1 D O DGE & COX F UNDS 2017 Semi-Annual Report June 30, 2017 Stock Fund E S TABLIS HED 1965 TIC KER: DO D GX 06/17 SF SAR Printed on recycled paper

2 TO OUR SHAREHOLDERS The Dodge & Cox Stock Fund had a total return of 6.8% for the six months ended June 30, 2017, compared to a return of 9.3% for the S&P 500 Index. MARKET COMMENTARY U.S. equity markets continued to climb during the first half of 2017: the S&P 500 reached an all-time high in mid-june and ended the period up 9%, marking its strongest first half since Information Technology was the best-performing sector of the S&P 500, and Energy was the worst-performing sector amid lower oil prices. Solid corporate earnings growth, combined with expectations of an improving economy, boosted U.S. equity returns and propelled valuations further above longer-term averages. We see signs of continuing steady economic growth, increasing corporate earnings, and rising interest rates, all of which would benefit the Fund. Economic data released during the first half has been generally strong, confirming that the U.S. economy remains solid. The Trump administration s objectives for tax cuts and increased infrastructure spending could further stimulate growth. Meanwhile, the Federal Reserve (Fed) has signaled that additional rate hikes are forthcoming, indicating the Fed has confidence in the economy. These factors, combined with accelerating global GDP growth, a recovery in energy and commodity prices, and corporate cost reductions could drive corporate earnings higher and support current market valuations. INVESTMENT STRATEGY At Dodge & Cox, we approach each investment from the perspective of being a long-term part owner of a business and make gradual changes based on a three- to five-year investment horizon. The Fund has historically had low portfolio turnover; 2017 has been no exception with turnover of only 4%inthe first half. As a result of individual stock selection, the Fund holds 63 companies across nine sectors; areas of emphasis are Financials, Health Care, and Information Technology. (a) During the volatility of 2016, we highlighted how the Fund s financial services holdings were trading at inexpensive valuations despite their asset growth, improved credit quality, cost reductions, and capital return prospects. Since then, however, share prices have risen and we have trimmed a number of the Fund s Financials holdings, including Bank of America and Bank of New York Mellon. (b) Nevertheless, we remain enthusiastic about the Fund s position in Financials (27.7% compared to 14.5% for the S&P 500) and specific holdings, which continue to have attractive fundamentals as well as attributes that could lead to higher share prices. Increased profitability and strong capital generation allow banks to return capital to shareholders via share buybacks and dividends, making them a compelling alternative to other dividend-paying stocks, in our view. The Trump administration may create potential tailwinds for the banking system through tax reform and regulatory relief. Moreover, the Fed raised short-term rates twice in the first half ofthe year and signaled expectations for one additional hike in 2017, which should increase the federal funds rate to 1.5%. If interest rates increase further, the Financials sector stands to benefit from improved earnings and higher net interest margins. While we have trimmed Financials and certain other holdings amid higher U.S. equity market valuations, we continue to find areas of value offering long-term investment opportunities. For example, we recently added to several Health Care holdings, including AstraZeneca, and Energy companies in the Fund. AstraZeneca AstraZeneca, which is based in the United Kingdom, is a global pharmaceutical company with strengths in treatments for cancer, respiratory illnesses, cardiovascular problems, and infectious diseases. In the second half of 2016, the share price was under pressure due to concerns about recent and upcoming patent expirations for several of its major drugs. Despite this headwind, we added to the Fund s holding in early 2017 after reaffirming our investment thesis. The company s long-term growth outlook is favorable given its robust new drug pipeline, particularly in oncology (cancer treatment). AstraZeneca has an attractive position in the revolutionary field of cancer immunotherapy, which harnesses the disease-fighting capabilities of the body s immune system to attack cancerous tumors. We have conducted extensive due diligence, which included industry conferences and management meetings, and we continue to believe the immuno-oncology (IO) field holds great promise. Since the IO market is in its very early stages, sponsors and the scientific community are investing heavily into understanding which tumors can be targeted with IO and which patients will be most responsive to IO treatments (i.e., biomarkers). We think the field will evolve rapidly over the next five to ten years as physicians develop a better understanding of how these drugs work, creating a massive revenue and profit opportunity. With a 4.3% dividend yield, the current valuation is reasonable at 17 times forward earnings and does not appear to reflect potential success from the immunotherapy drug pipeline. AstraZeneca represented 1.9% of the Fund on June 30. Energy Oil prices dropped 16% over the past six months, weighing heavily on the outlook for profitability and growth in the Energy sector. While the short-term direction of oil prices is difficult to forecast, we believe the long-term fundamentals of supply and demand point to higher prices. The current demand for oil, which is about 98 million barrels a day, continues to grow about one percent per year, driven by growing transportation demand in the developing world. Oil fields deplete as the resource is extracted, reducing the global production base about two to three percent per year, so continuing investment is required to meet current demand and to prepare for future demand growth. We anticipate that 15 to 20 million barrels per day of additional production will be needed over the next five years to meet demand if these trends continue. However, upstream capital investment has declined to a 10-year low, fewer new projects are being approved, and North American PAGE 2 D O D G E & C OX S T OCK F U ND

3 unconventional resources (including shale) are unlikely to grow enough to bridge this eventual gap. The Fund remains modestly overweight the Energy sector (7.4% compared to 6.0% for the S&P 500). Amid depressed valuations for energy companies, we recently added to selected holdings, including Anadarko Petroleum (discussed below) and Schlumberger (the world s leading provider of oil services for drilling, production, and processing), among other holdings. Anadarko Petroleum Anadarko Petroleum (a 1.3% position) is an independent oil and gas exploration and production (E&P) company, one of three held in the Fund. The company s stock price has been negatively impacted in 2017 by a gas leak that caused a fatal explosion. While tragic, this incident did not materially impact our long-term investment outlook for the company. Recent meetings with company management affirmed our belief that Anadarko remains an attractive investment over our three- to five-year investment horizon. As a leading global explorer with strong operational capabilities, Anadarko has a record of success in generating high returns on capital over energy price cycles. In the coming years, we believe the key differentiators for E&Ps will be a company s asset quality and its ability to develop those assets, particularly largescale unconventional resources. Anadarko is well positioned to manage these challenges. For example, in the DJ Basin in Colorado, Anadarko systematically developed all of the needed infrastructure to execute its plan, which allowed the company to achieve growth targets at competitive costs; Anadarko is now applying the same approach of systematic field and infrastructure development to the Permian Basin. The company s conservative management team has an excellent track record of disciplined capital allocation. In addition, Anadarko continues to invest substantially in exploration, which it sees as the means to create upside opportunity for the company. This focus on exploration differentiates Anadarko from its peers and will likely create value across business cycles. After considering the company s risks, opportunities, and valuation, we added to Anadarko during the first half of We believe the rewards of active management are most likely to accrue to those investors who have the discipline to maintain a long-term investment horizon. Thank you for your continued confidence in our firm. As always, we welcome your comments and questions. For the Board of Trustees, Charles F. Pohl, Chairman July 31, 2017 Dana M. Emery, President (a) Unless otherwise specified, all weightings and characteristics are as of June 30, (b) The use of specific examples does not imply that they are more or less attractive investments than the portfolio s other holdings. IN CLOSING Since U.S. equity valuations are now near recent highs, we have adopted a tempered outlook for broader U.S. equity market returns. However, as an active manager with a value-oriented approach, we remain optimistic about the long-term prospects for the portfolio to preserve and enhance purchasing power. On June 30, the Fund s equity holdings collectively traded at 15.4 times forward earnings, a discount to the S&P 500, which traded at 18.6 times forward earnings. D O D GE & C OX S TOCK F U ND PAG E 3

4 YEAR-TO-DATE PERFORMANCE REVIEW The Fund underperformed the S&P 500 by 2.5 percentage points year to date. Key Detractors from Relative Results The Fund s average overweight position (29% versus 14%) and holdings in the Financials sector (up 4% compared to up 7% for the S&P 500 sector) hurt relative performance. Goldman Sachs (down 7%) and Capital One Financial (down 4%) lagged. Poor returns from the Fund s holdings in the Energy sector (down 21% compared to down 13% for the S&P 500 sector), combined with a slightly higher average weighting (8% versus 7%), detracted from results. Anadarko Petroleum (down 35%), Apache (down 24%), and Schlumberger (down 21%) were especially weak. Outstanding performance from several large internet and technology stocks not held by the Fund (e.g., Facebook, Amazon, Apple, Netflix) boosted S&P 500 returns and hurt the Fund s relative results. The negative impact was particularly significant in the Information Technology sector (up 12% compared to up 17% for S&P 500 sector), which was the strongest area of the market. Key Contributors to Relative Results The Fund s average overweight position (19% versus 14%) and holdings in the Health Care sector (up 17% compared to up 16% for the S&P 500 sector) enhanced performance. Alnylam Pharmaceuticals (up 113%), AstraZeneca (up 29%), Cigna (up 26%), and Sanofi (up 21%) were particularly strong. Returns from holdings in the Telecommunication Services sector (down 3% compared to down 11% for the S&P 500 sector)helped relative results. Charter Communications (up 17%) also contributed. KEY CHARACTERISTICS OF DODGE & COX Independent Organization Dodge & Cox is one of the largest privately owned investment managers in the world. We remain committed to independence, with a goal of providing the highest quality investment management service to our existing clients. Over 85 Years of Investment Experience Dodge & Cox was founded in We have a stable and wellqualified team of investment professionals, most of whom have spent their entire careers at Dodge & Cox. Experienced Investment Team The U.S. Equity Investment Committee, which is the decisionmaking body for the Stock Fund, is an eight-member committee with an average tenure at Dodge & Cox of 24 years. One Business with a Single Research Office Dodge & Cox manages equity (domestic, international, and global), fixed income (domestic and global), and balanced investments, operating from one office in San Francisco. Consistent Investment Approach Our team decision-making process involves thorough, bottomup fundamental analysis of each investment. Long-Term Focus and Low Expenses We invest with a three- to five-year investment horizon, which has historically resulted in low turnover relative to our peers. We manage Funds that maintain low expense ratios. Risks: The Fund is subject to market risk, meaning holdings in the Fund may decline in value for extended periods due to the financial prospects of individual companies, or due to general market and economic conditions. Please read the prospectus and summary prospectus for specific details regarding the Fund s risk profile. PAGE 4 D O D G E & C OX S T OCK F U ND

5 GROWTH OF $10,000 OVER 10 YEARS FOR AN INVESTMENT MADE ON JUNE 30, 2007 $30,000 20,000 10,000 Dodge & Cox Stock Fund $17,724 S & P 500 Index $20,010 4,000 6/30/07 6/30/09 6/30/11 6/30/13 6/30/15 6/30/17 AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED JUNE 30, Year 5 Years 10 Years 20 Years Dodge & Cox Stock Fund 28.62% 16.36% 5.89% 9.45% S&P 500 Index Returns represent past performance and do not guarantee future results. Investment return and share price will fluctuate with market conditions, and investors may have a gain or loss when shares are sold. Fund performance changes over time and currently may be significantly lower than stated. Performance is updated and published monthly. Visit the Fund s website at dodgeandcox.com or call for current performance figures. The Fund s total returns include the reinvestment of dividend and capital gain distributions, but have not been adjusted for any income taxes payable by shareholders on these distributions or on Fund share redemptions. Index returns include dividends but, unlike Fund returns, do not reflect fees or expenses. The S&P 500 Index is a market capitalization-weighted index of 500 largecapitalization stocks commonly used to represent the U.S. equity market. S&P 500 is a trademark of S&P Global Inc. FUND EXPENSE EXAMPLE As a Fund shareholder, you incur ongoing Fund costs, including management fees and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The following example shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The example assumes a $1,000 investment held for the six months indicated. ACTUAL EXPENSES The first line of the table below provides information about actual account values and expenses based on the Fund s actual returns. You may use the information in this line, together with your account balance, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading Expenses Paid During Period to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER MUTUAL FUNDS Information on the second line of the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical Ending Account Value is based on the actual expense ratio of the Fund and an assumed 5% annual rate of return before expenses (not the Fund s actual return). The amount under the heading Expenses Paid During Period shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of othermutual funds. Six Months Ended June 30, 2017 Beginning Account Value 1/1/2017 Ending Account Value 6/30/2017 Expenses Paid During Period* Based on Actual Fund Return $1, $1, $2.69 Based on Hypothetical 5% Yearly Return 1, , * Expenses are equal to the Fund s annualized expense ratio of 0.52%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The expenses shown in the table highlight ongoing costs only and do not reflect any transactional fees or account maintenance fees. Though other mutual funds may charge such fees, please note that the Fund does not charge transaction fees (e.g., redemption fees, sales loads) or universal account maintenance fees (e.g., small account fees). D O D GE & C O X S T OCK F U ND PAG E 5

6 FUND INFORMATION (unaudited) June 30, 2017 GENERAL INFORMATION Net Asset Value Per Share $ Total Net Assets (billions) $66.1 Expense Ratio 0.52% Portfolio Turnover Rate (1/1/17 to 6/30/17, unannualized) 4% 30-Day SEC Yield (a) 1.13% Number of Companies 63 Fund Inception 1965 No sales charges or distribution fees Investment Manager: Dodge & Cox, San Francisco. Managed by the U.S. Equity Investment Committee, whose eight members average tenure at Dodge & Cox is 24 years. ASSET ALLOCATION Equity Securities: 97.4% Net Cash & Other: (e) 2.6% PORTFOLIO CHARACTERISTICS Fund S&P 500 Median Market Capitalization (billions) $41 $21 Weighted Average Market Capitalization (billions) $125 $169 Price-to-Earnings Ratio (b) 15.4x 18.6x Foreign Securities not in the S&P 500 (c) 10.0% 0.0% TEN LARGEST HOLDINGS (%) (d) Fund Charles Schwab Corp. 3.8 Bank of America Corp. 3.8 Wells Fargo&Co. 3.6 Capital One Financial Corp. 3.4 Charter Communications, Inc. 3.0 Novartis AG (Switzerland) 3.0 Sanofi (France) 3.0 Time Warner, Inc. 2.9 Goldman Sachs Group, Inc. 2.8 Alphabet, Inc. 2.8 SECTOR DIVERSIFICATION (%) Fund S&P 500 Financials Health Care Information Technology Consumer Discretionary Energy Industrials Telecommunication Services Consumer Staples Materials Utilities Real Estate (a) (b) (c) (d) (e) SEC Yield is an annualization of the Fund s net investment income for the trailing 30-day period. Dividends paid by the Fund may be higher or lower than implied by the SEC Yield. Price-to-earnings (P/E) ratios are calculated using 12-month forward earnings estimates from third-party sources. Foreign securities are U.S. dollar denominated. The Fund s portfolio holdings are subject to change without notice. The mention of specific securities is not a recommendation to buy, sell, or hold any particular security and is not indicative of Dodge & Cox s current or future trading activity. Net Cash & Other includes cash, short-term investments, derivatives, receivables, and payables. PAGE 6 D O D G E & C OX S T OCK F U ND

7 PORTFOLIO OF INVESTMENTS (unaudited) June 30, 2017 COMMON STOCKS: 97.4% SHARES VALUE CONSUMER DISCRETIONARY: 15.6% AUTOMOBILES & COMPONENTS: 0.5% Harley-Davidson, Inc. 5,610,647 $ 303,087,151 CONSUMER DURABLES & APPAREL: 0.6% Coach, Inc. 8,813, ,250,026 MEDIA: 11.7% Charter Communications, Inc., Class A (a) 5,934,486 1,999,031,609 Comcast Corp., Class A 44,997,594 1,751,306,358 DISH Network Corp., Class A (a) 9,727, ,496,394 News Corp., Class A 6,892,103 94,421,811 Time Warner, Inc. 18,778,332 1,885,532,316 Twenty-First Century Fox, Inc., Class A 41,334,626 1,171,423,301 Twenty-First Century Fox, Inc., Class B 9,350, ,584,500 7,772,796,289 RETAILING: 2.8% Liberty Interactive Corp. QVC Group, Series A (a) 15,980, ,158,427 Target Corp. 11,761, ,985,514 The Priceline Group, Inc. (a) 453, ,093,768 1,855,237,709 10,348,371,175 CONSUMER STAPLES: 1.5% FOOD &STAPLES RETAILING: 1.5% Wal-Mart Stores, Inc. 12,988, ,935,624 ENERGY: 7.4% Anadarko Petroleum Corp. 19,695, ,994,922 Apache Corp. 18,045, ,944,492 Baker Hughes, Inc. 15,371, ,879,370 Concho Resources, Inc. (a) 3,615, ,330,950 National Oilwell Varco, Inc. 18,798, ,206,120 Schlumberger, Ltd. (Curacao/United States) 17,549,245 1,155,442,291 Weatherford International PLC (a) (Ireland) 28,007, ,388,638 4,918,186,783 FINANCIALS: 27.7% BANKS: 10.6% Bank of America Corp. 102,436,500 2,485,109,490 BB&T Corp. 13,100, ,877,539 JPMorgan Chase & Co. 16,797,800 1,535,318,920 Wells Fargo & Co. 43,253,341 2,396,667,625 7,011,973,574 DIVERSIFIED FINANCIALS: 14.3% American Express Co. 16,997,300 1,431,852,552 Bank of New York Mellon Corp. 27,003,324 1,377,709,590 Capital One Financial Corp. (b) 27,087,711 2,237,986,683 Charles Schwab Corp. 58,867,600 2,528,952,096 Goldman Sachs Group, Inc. 8,488,700 1,883,642,530 9,460,143,451 INSURANCE: 2.8% AEGON NV (Netherlands) 71,584, ,799,146 MetLife, Inc. 26,532,700 1,457,706,538 1,823,505,684 18,295,622,709 HEALTH CARE: 19.7% HEALTH CARE EQUIPMENT & SERVICES: 7.1% Cigna Corp. 8,293,217 1,388,201,593 Danaher Corp. 3,437, ,099,064 Express Scripts Holding Co. (a) 21,234,871 1,355,634,165 Medtronic PLC (Ireland) 6,510, ,842,375 UnitedHealth Group, Inc. 5,830,760 1,081,139,519 4,692,916,716 SHARES VALUE PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES: 12.6% Alnylam Pharmaceuticals, Inc. (a)(b) 5,500,735 $ 438,738,624 AstraZeneca PLC ADR (United Kingdom) 37,517,873 1,278,984,291 Bristol-Myers Squibb Co. 17,941, ,691,409 Eli Lilly and Co. 3,191, ,687,774 Merck & Co., Inc. 7,767, ,844,711 Novartis AG ADR (Switzerland) 23,673,500 1,976,027,045 Roche Holding AG ADR (Switzerland) 27,975, ,617,688 Sanofi ADR (France) 41,035,028 1,965,988,191 8,309,579,733 13,002,496,449 INDUSTRIALS: 5.0% CAPITAL GOODS: 1.4% Johnson Controls International PLC (Ireland) 20,810, ,364,353 TRANSPORTATION: 3.6% FedEx Corp. 6,897,099 1,498,946,525 Union Pacific Corp. 8,070, ,903,700 2,377,850,225 3,280,214,578 INFORMATION TECHNOLOGY: 17.7% SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT: 0.8% Maxim Integrated Products, Inc. 12,064, ,703,908 SOFTWARE & SERVICES: 8.0% Alphabet, Inc., Class A (a) 148, ,685,608 Alphabet, Inc., Class C (a) 1,920,253 1,744,991,509 Dell Technologies, Inc., Class V (a) 4,022, ,815,586 DXC Technology Co. 8,221, ,732,535 Microsoft Corp. 24,747,300 1,705,831,389 Synopsys, Inc. (a) 4,051, ,510,099 VMware, Inc. (a) 5,955, ,690,327 5,281,257,053 TECHNOLOGY, HARDWARE & EQUIPMENT: 8.9% Cisco Systems, Inc. 39,252,711 1,228,609,854 Corning, Inc. 9,831, ,442,585 Hewlett Packard Enterprise Co. (b) 103,083,316 1,710,152,212 HP Inc. 71,435,195 1,248,687,209 Juniper Networks, Inc. 11,497, ,540,960 NetApp, Inc. (b) 7,652, ,475,857 TE Connectivity,Ltd. (Switzerland) 9,976, ,949,053 5,894,857,730 11,717,818,691 MATERIALS: 1.0% Celanese Corp., Series A (b) 7,158, ,618,306 TELECOMMUNICATION SERVICES: 1.8% Sprint Corp. (a) 104,462, ,640,048 Zayo Group Holdings, Inc. (a) 9,750, ,275,000 1,158,915,048 TOTAL COMMON STOCKS (Cost $41,702,810,991) $64,384,179,363 See accompanying Notes to Financial Statements D O D GE & C OX S T OCK F U ND PAG E 7

8 PORTFOLIO OF INVESTMENTS (unaudited) June 30, 2017 SHORT-TERM INVESTMENTS: 2.5% PAR VALUE VALUE MONEY MARKET FUND: 0.1% State Street Institutional Treasury Plus Money Market Fund $ 66,033,346 $ 66,033,346 REPURCHASE AGREEMENT: 2.4% Fixed Income Clearing Corporation (c) 0.60%, dated 6/30/17, due 7/3/17, maturity value $1,594,166,704 1,594,087,000 1,594,087,000 TOTAL SHORT-TERM INVESTMENTS (Cost $1,660,120,346) $ 1,660,120,346 TOTAL INVESTMENTS (Cost $43,362,931,337) 99.9% $66,044,299,709 OTHER ASSETS LESS LIABILITIES 0.1% 91,371,703 NET ASSETS 100.0% $66,135,671,412 FUTURES CONTRACTS Description Number of Contracts Expiration Date Notional Amount Unrealized Appreciation/ (Depreciation) E-mini S&P 500 Index Long Position 11,647 Sep 2017 $1,409,811,115 $(5,420,299) (a) Non-income producing (b) See Note 9 regarding holdings of 5% voting securities (c) Repurchase agreement is collateralized by U.S. Treasury Notes 1.50%-2.125%, 11/15/21-4/30/23. Total collateral value is $1,625,974,305. In determining a company s country designation, the Fund generally references the country of incorporation. In cases where the Fund considers the country of incorporation to be a jurisdiction of convenience chosen primarily for tax purposes or in other limited circumstances, the Fund uses the country designation of an appropriate broad-based market index. In those cases, two countries are listed the country of incorporation and the country designated by an appropriate index, respectively. ADR: American Depositary Receipt PAG E 8 D O D G E & C OX S T OCK F U ND See accompanying Notes to Financial Statements

9 STATEMENT OF ASSETS AND LIABILITIES (unaudited) June 30, 2017 ASSETS: Investments, at value Unaffiliated issuers (cost $40,404,334,088) $60,977,803,884 Affiliated issuers (cost $2,958,597,249) 5,066,495,825 66,044,299,709 Cash held at broker 48,916,242 Receivable for investments sold 70,023,062 Receivable from broker for variation margin 2,853,515 Receivable for Fund shares sold 43,814,725 Dividends and interest receivable 64,596,846 Prepaid expenses and other assets 104,705 66,274,608,804 LIABILITIES: Payable for investments purchased 68,085,773 Payable for Fund shares redeemed 42,911,344 Management fees payable 27,040,675 Accrued expenses 899, ,937,392 NET ASSETS $66,135,671,412 NET ASSETS CONSIST OF: Paid in capital $42,521,487,606 Undistributed net investment income 7,997,157 Undistributed net realized gain 930,238,576 Net unrealized appreciation 22,675,948,073 $66,135,671,412 Fund shares outstanding (par value $0.01 each, unlimited shares authorized) 343,224,956 Net asset value per share $ STATEMENT OF OPERATIONS (unaudited) Six Months Ended June 30, 2017 INVESTMENT INCOME: Dividends (net of foreign taxes of $25,431,443) Unaffiliated issuers $ 572,988,155 Affiliated issuers 45,348,714 Interest 2,701, ,038,193 EXPENSES: Management fees 160,897,971 Custody and fund accounting fees 402,452 Transfer agent fees 1,710,999 Professional services 81,993 Shareholder reports 612,474 Registration fees 195,797 Trustees fees 130,000 ADR depository services fees 4,024,180 Miscellaneous 557, ,613,845 NET INVESTMENT INCOME 452,424,348 REALIZED AND UNREALIZED GAIN (LOSS): Net realizedgain (loss) Investments in unaffiliated issuers 771,966,460 Investments in affiliated issuers 74,364,617 Futures contracts 114,867,062 Net change in unrealized appreciation/depreciation Investments 2,795,332,975 Futures contracts 9,320,155 Net realized and unrealized gain 3,765,851,269 NET CHANGE IN NET ASSETS FROM OPERATIONS $ 4,218,275,617 STATEMENT OF CHANGES IN NET ASSETS (unaudited) Six Months Ended June 30, 2017 Year Ended December 31, 2016 OPERATIONS: Net investment income $ 452,424,348 $ 1,011,975,095 Net realizedgain 961,198,139 2,967,136,896 Net change in unrealized appreciation/ depreciation 2,804,653,130 7,026,623,876 4,218,275,617 11,005,735,867 DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (451,809,266) (1,006,582,969) Net realized gain (926,622,294) (2,967,981,956) Total distributions (1,378,431,560) (3,974,564,925) FUND SHARE TRANSACTIONS: Proceeds from sale of shares 5,321,067,392 7,078,053,220 Reinvestment of distributions 1,306,390,530 3,757,250,793 Cost of shares redeemed (4,932,106,426) (11,111,123,603) Net change from Fund share transactions 1,695,351,496 (275,819,590) Total change in net assets 4,535,195,553 6,755,351,352 NET ASSETS: Beginning of period 61,600,475,859 54,845,124,507 End of period(including undistributed net investment income of $7,997,157 and $7,382,075, respectively) $66,135,671,412 $ 61,600,475,859 SHARE INFORMATION: Shares sold 27,885,017 42,458,419 Distributions reinvested 6,903,842 21,705,948 Shares redeemed (25,811,424) (66,866,904) Net changeinshares outstanding 8,977,434 (2,702,537) See accompanying Notes to Financial Statements D O D GE & C OX S T OCK F U ND PAG E 9

10 NOTES TO FINANCIAL STATEMENTS (unaudited) NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Dodge & Cox Stock Fund (the Fund ) is one of the series constituting the Dodge & Cox Funds (the Trust or the Funds ). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended, asanopen-end management investment company. The Fund commenced operations on January 4, 1965, and seeks longterm growth of principal and income. Risk considerations and investment strategies of the Fund are discussed in the Fund s Prospectus. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require the use of estimates and assumptions by management. Actual results may differ from those estimates. Significant accounting policies are as follows: Security valuation The Fund s net assets are normally valued as of the scheduled close of trading on the New York Stock Exchange (NYSE), generally 4:00 p.m. Eastern Time, each day that the NYSE is open for business. Portfolio holdings for which market quotes 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. Exchange-traded derivatives are generally valued at the settlement price determined by the relevant exchange. Short-term securities 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 sale of the securities. All securities held by the Fund are denominated in U.S. dollars. 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 Fund s Board of Trustees. The Board of Trustees has appointed Dodge & Cox, the Fund s 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. 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 the Fund to calculate its NAV may differ from quoted or publishedprices for the same securities. Security transactions, investment income, expenses, and distributions Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. Dividend income and corporate action transactions are recorded on the ex-dividend date, or when the Fund first learns of the dividend/corporate action if the ex-dividend date has passed. Withholding taxes on foreign dividends have been provided for in accordance with the Fund s understanding of the applicable country s tax rules and rates. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Dividends characterized as return of capital for U.S. tax purposes are recorded as a reduction of cost of investments and/or realized gain. Interest income is recorded on the accrualbasis. Expenses are recorded on the accrual basis. Some expenses of the Trust can be directly attributed to a specific series. Expenses which cannot be directly attributed are allocated among the Funds in the Trust using methodologies determined by the nature of the expense. Distributions to shareholders are recorded on the ex-dividend date. Repurchase agreements Repurchase agreements are transactions under which a Fund purchases a security from a dealer counterparty and agrees to resell the security to that counterparty on a specified future date at the same price, plus a specified interest rate. The Fund s repurchase agreements are secured by U.S. government or agency securities. It is the Fund s policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. In the event of default by the counterparty, the Fund has the contractual right to liquidate the collateral securities and to apply the proceeds in satisfaction of the obligation. Foreign taxes The Fund may be subject to foreign taxes which may be imposed by certain countries in which the Fund invests. The Fund endeavors to record foreign taxes based on applicable foreign tax law. Withholding taxes are incurred on certain foreign dividends and are accrued at the time the associated dividend is recorded. The Fund files withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld. The Fund records a reclaim receivable based on, among other things, a jurisdiction s PAGE 1 0 D O D G E & C O X S T OCK F U ND

11 NOTES TO FINANCIAL STATEMENTS (unaudited) legal obligation to pay reclaims as well as payment history and market convention. In consideration of recent decisions rendered by European courts, the Fund has filed for additional reclaims related to prior years. A corresponding receivable is established when both the amount is known and significant contingencies or uncertainties regarding collectability are removed. These amounts, if any, are reported in dividends and interest receivable on the Statement of Assets and Liabilities. Futures Contracts Futures contracts involve an obligation to purchase or sell (depending on whether the Fund has entered a long or short futures contract, respectively) an asset at a future date, at a price set at the time of the contract. Upon entering into a futures contract, the Fund is required to deposit an amount of cash or liquid assets (referred to as initial margin) in a segregated account with the clearing broker. Subsequent payments (referred to as variation margin) to and from the clearing broker are made on a daily basis based on changes in the market value of futures contracts. Futures contracts are traded publicly and their market value changes daily. Changes in the market value of open futures contracts are recorded as unrealized appreciation or depreciation in the Statement of Operations. Realized gains and losses on futures contracts are recorded in the Statement of Operations at the closing or expiration of the contracts. Cash deposited with a broker as initial margin is recorded on the Statement of Assets and Liabilities. A receivable and/or payable to brokers for daily variation margin is also recorded on the Statement of Assets and Liabilities. Investments in futures contracts may include certain risks, which may be different from, and potentially greater than, those of the underlying securities. To the extent the Fund uses futures, it is exposed to additional volatility and potential losses resulting from leverage. The Fund has maintained long S&P 500 futures contracts to provide equity exposure that approximates the Fund s net cash and other position, which includes cash, short-term investments, receivables, and payables. During the six months ended June 30, 2017, these S&P 500 futures contracts had notional values ranging from 1% to 3% of net assets. Indemnification Under the Trust s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business the Trust enters into contracts that provide general indemnities to other parties. The Trust s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. NOTE 2 VALUATION MEASUREMENTS Various inputs are used in determining the value of the Fund s investments. These inputs are summarized in the three broad levels listed below. Level 1: Quoted prices in active markets for identical securities Level 2: Other significant observable inputs (including quoted prices for similar securities, market indices, interest rates, credit risk, forward exchange rates, etc.) Level 3: Significant unobservable inputs (including Fund management s assumptions in determining the fair value of investments) The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Fund s holdings at June 30, 2017: Classification (a) LEVEL 1 (Quoted Prices) LEVEL 2 (Other Significant Observable Inputs) Securities Common Stocks (b) $64,384,179,363 $ Short-term Investments Money Market Fund 66,033,346 Repurchase Agreement 1,594,087,000 Total Securities $64,450,212,709 $1,594,087,000 Other FinancialInstruments Futures Contracts Depreciation $ (5,420,299) $ (a) (b) There were no transfers between Level 1 and Level 2 during the six months ended June 30, There were no Level 3 securities at June 30, 2017 and December 31, 2016, and there were no transfers to Level 3 during the period. All common stocks held in the Fund are Level 1 securities. For a detailed break-out of common stocks by major industry classification, please refer to the Portfolio of Investments. NOTE 3 RELATED PARTY TRANSACTIONS Management fees Under a written agreement approved by a unanimous vote of the Board of Trustees, the Fund pays an annual management fee of 0.50% of the Fund s average daily net assets to Dodge & Cox, investment manager of the Fund. The agreement further provides that Dodge & Cox shall waive its fee to the extent that such fee plus all other ordinary operating expenses of the Fund exceed 0.75% of the average daily net assets for the year. Fund officers and trustees All officers and two of the trustees of the Trust are officers or employees of Dodge & Cox. The Trust pays a fee only tothose trustees who are not affiliated with Dodge & Cox. NOTE 4 INCOME TAX INFORMATION AND DISTRIBUTIONS TO SHAREHOLDERS A provision for federal income taxes is not required since the Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and distribute all of its taxable income to shareholders. Distributions are determined in accordance with income tax regulations, and such amounts may differ from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book to tax differences at year end to reflect tax character. D O D GE & C OX S T OCK F U ND PAG E 11

12 NOTES TO FINANCIAL STATEMENTS (unaudited) Book to tax differences are primarily due to differing treatments of wash sales, net short-term realized gain (loss), certain dividends, and futures contracts. At June 30, 2017, the cost of investments for federal income tax purposes was $43,408,498,879. Distributions during the periods noted below were characterized as follows for federal income tax purposes: Six Months Ended June 30, 2017 Year Ended December 31, 2016 Ordinary income $ 499,423,605 $ 1,056,249,886 ($1.471 per share) ($ per share) Long-term capital gain $ 879,007,955 $ 2,918,315,039 ($2.603 per share) ($ per share) At June 30, 2017, the tax basis components of distributable earnings were as follows: Unrealized appreciation $24,274,482,776 Unrealized depreciation (1,638,681,946) Net unrealized appreciation 22,635,800,830 Undistributed ordinary income 92,385,160 Undistributed long-term capital gain 885,997,816 NOTE 6 PURCHASES AND SALES OF INVESTMENTS For the six months ended June 30, 2017, purchases and sales of securities, other than short-term securities, aggregated $3,495,289,450 and $2,538,000,360, respectively. NOTE 7 NEW ACCOUNTING GUIDANCE In October 2016, the SEC issued a new rule, Investment Company Reporting Modernization, which, among other provisions, amends Regulation S-X to require standardized, enhanced disclosures, particularly related to derivatives, in investment company financial statements. Compliance with the guidance is required for financial statements for fiscal periods ending on or after August 1, Management is currently assessing the impact of this rule to the Fund s financial statements and other filings and does not expect any impact to the Fund s net assets or results of operations. NOTE 8 SUBSEQUENT EVENTS Fund management has determined that no material events or transactions occurred subsequent to June 30, 2017, and through the date of the Fund s financial statements issuance, which require additional disclosure in the Fund s financial statements. Fund management has reviewed the tax positions for open periods (three years and four years, respectively, from filing the Fund s Federal and State tax returns) as applicable to the Fund, and has determined that no provision for income tax is required in the Fund s financial statements. NOTE 5 LOAN FACILITIES Pursuant to an exemptive order issued by the Securities and Exchange Commission (SEC), the Fund may participate in an interfund lending facility (Facility). The Facility allows the Fund to borrow money from or loan money to the Funds. Loans under the Facility are made for temporary or emergency purposes, such as to fund shareholder redemption requests. Interest on borrowings is the average of the current repurchase agreement rate and the bank loan rate. There was no activity in the Facility during the period. All Funds in the Trust participate in a $500 million committed credit facility (Line of Credit) with State Street Bank and Trust Company, to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The maximum amount available to the Fund is $250 million. Each Fund pays an annual commitment fee on its pro-rata portion of the Line of Credit. For the six months ended June 30, 2017, the Fund s commitment fee amounted to $213,688 and is reflected as a Miscellaneous Expense in the Statement of Operations. Interest on borrowings is charged at the prevailing rate. There were no borrowings on the Line of Credit during the period. PAGE 12 D O D G E & C O X S T OCK F U ND

13 NOTES TO FINANCIAL STATEMENTS (unaudited) NOTE 9 HOLDINGS OF 5% VOTING SECURITIES Each of the companies listed below was considered to be an affiliate of the Fund because the Fund owned 5% or more of the company s voting securities during all or part of the six months ended June 30, Purchase and sale transactions and dividend income earned during the period on these securities were as follows: Shares at Beginning of Period Additions Reductions Shares at End ofperiod Dividend Income (a) Value at End ofperiod Alnylam Pharmaceuticals, Inc. 5,430,735 70,000 5,500,735 $ (b) $ 438,738,624 Capital One Financial Corp. 27,167,711 (80,000) 27,087,711 21,702,169 2,237,986,683 Celanese Corp., Series A 7,779,698 (621,300) 7,158,398 6,379, ,618,306 Hewlett Packard Enterprise Co. 93,402,495 9,680, ,083,316 12,888,578 1,710,152,212 NetApp, Inc. 14,368,331 (6,716,000) 7,652,331 4,378,615 (c) $45,348,714 $5,066,495,825 (a) (b) (c) Net of foreign taxes, if any Non-income producing Company was not an affiliate at period end FINANCIAL HIGHLIGHTS (unaudited) SELECTED DATA AND RATIOS (for a share outstanding throughout each period) Six Months Ended June 30, Year Ended December 31, Net asset value, beginning of period $ $ $ $ $ $ Income from investment operations: Net investment income Net realized and unrealized gain (loss) (10.55) Total from investment operations (8.13) Distributions to shareholders from: Net investment income (1.33) (3.03) (2.46) (2.80) (2.11) (1.98) Net realized gain (2.74) (9.05) (7.58) (2.56) Total distributions (4.07) (12.08) (10.04) (5.36) (2.11) (1.98) Net asset value, end of period $ $ $ $ $ $ Total return 6.81% 21.27% (4.47)% 10.43% 40.55% 22.01% Ratios/supplemental data: Net assets, end of period (millions) $66,136 $61,600 $54,845 $60,260 $54,848 $39,841 Ratios of expenses to average net assets 0.52% (a) 0.52% 0.52% 0.52% 0.52% 0.52% Ratios of net investment income to average net assets 1.41% (a) 1.83% 1.36% 1.62% 1.45% 1.72% Portfolio turnover rate 4% 16% 15% 17% 15% 11% (a) Annualized See accompanying Notes to Financial Statements D O D GE & C OX S T OCK F U ND PAG E 13

14 FUND HOLDINGS The Fund provides a complete list of its holdings four times each fiscal year, as of the end of each quarter. The Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-CSR (second and fourth quarters) and Form N-Q (first and third quarters). Shareholders may view the Fund s Forms N-CSR and N-Q on the SEC s website at sec.gov. Forms N-CSR and N-Q may also be reviewed and copied at the SEC s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (direct) or (general SEC number). A list of the Fund s quarter-end holdings is also available at dodgeandcox.com on or about 15 days following eachquarter end and remains available on the website until the list is updated in thesubsequent quarter. PROXY VOTING For a free copy of the Fund s proxy voting policies and procedures, please call , visit the Fund s website at dodgeandcox.com, or visit the SEC s website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ending June 30 is also available at dodgeandcox.com or at sec.gov. HOUSEHOLD MAILINGS The Fund routinely mails shareholder reports and summary prospectuses to shareholders and, on occasion, proxy statements. In order to reduce the volume of mail, when possible, only one copy of these documents will be sent to shareholders who are part of the same family and sharethe same residential address. If you have a direct account with the Funds and you do not want the mailing of shareholder reports and summary prospectuses combined with other members in your household, contact the Funds at Your request will be implemented within 30 days. PAGE 1 4 D O D G E & C OX S T OCK F U ND

15 TRUSTEES AND EXECUTIVE OFFICERS Charles F. Pohl, Chairman and Trustee Chairman, Dodge &Cox Dana M. Emery, Presidentand Trustee Chief Executive Officer and President, Dodge & Cox Thomas A. Larsen, Independent Trustee Senior Counsel, Arnold & Porter Kaye Scholer LLP Ann Mather, Independent Trustee Former Executive Vice President, Chief Financial Officer, and Company Secretary, Pixar Animation Studios Robert B. Morris III, Independent Trustee Former Partner and Managing Director - Global Investment Research, Goldman Sachs; former Advisory Director, The Presidio Group Gary Roughead, Independent Trustee Robert and Marion Oster Distinguished Fellow, Hoover Institution, and former U.S. Navy Chief of Naval Operations Mark E. Smith, Independent Trustee Former Executive Vice President and Managing Director - Fixed Income, Loomis Sayles & Company, L.P. John B. Taylor, Independent Trustee Professor of Economics, Stanford University; Senior Fellow, Hoover Institution; and former Under Secretary for International Affairs, United States Treasury Diana S. Strandberg, Senior Vice President Senior Vice President and Director of International Equity, Dodge & Cox David H. Longhurst, Treasurer Vice President and Assistant Treasurer, Dodge &Cox Thomas M. Mistele, Secretary Executive Vice President, Secretary, and Senior Counsel, Dodge & Cox Katherine M. Primas, Chief Compliance Officer Vice President and Chief Compliance Officer, Dodge & Cox Roberta R.W. Kameda, Assistant Secretary Vice President and General Counsel, Dodge & Cox William W. Strickland, Assistant Secretary and Assistant Treasurer Vice President and Chief Operating Officer, Dodge & Cox Additional information about the Trust s Trustees and Officers is available in the Trust s Statement of Additional Information (SAI). You can get a free copy of the SAI by visiting the Funds website at dodgeandcox.com or calling D O D GE & C OX S T OCK F U ND PAG E 15

16 Stock Fund dodgeandcox.com For Fund literature, transactions, and account information, please visit the Funds website. or write or call: DODGE & COX FUNDS c/o Boston Financial Data Services P.O. Box 8422 Boston, Massachusetts (800) INVESTMENT MANAGER Dodge&Cox 555 California Street, 40th Floor San Francisco, California (415) This report is submitted for the general information of the shareholders of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless it is accompanied by a current prospectus. This report reflects our views, opinions, and portfolio holdings as of June 30, 2017, the end of the reporting period. Any such views are subject to change at any time based upon market or other conditions and Dodge & Cox disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dodge & Cox Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dodge & Cox Fund.