UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-00173
DODGE & COX FUNDS
(Exact name of registrant as specified in charter)
555 California Street, 40th Floor
San Francisco, CA 94104
(Address of principal executive offices) (Zip code)
Roberta R.W. Kameda, Esq.
555 California Street, 40th Floor
San Francisco, CA 94104
(Name and address of agent for service)
Registrant’s telephone number, including area code: 415-981-1710
Date of fiscal year end: DECEMBER 31, 2023
Date of reporting period: DECEMBER 31, 2023
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
(a) The following are the December 31, 2023 annual reports for the Dodge & Cox Funds, a Delaware statutory trust, consisting of seven series: Dodge & Cox Stock Fund, Dodge & Cox Global Stock Fund, Dodge & Cox International Stock Fund, Dodge & Cox Emerging Markets Stock Fund, Dodge & Cox Balanced Fund, Dodge & Cox Income Fund, and Dodge & Cox Global Bond Fund. The reports of each series were transmitted to their respective shareholders on February 21, 2024.
Stock Fund | Class I (dodgx) | Class X (doxgx)
ESTABLISHED 1965
Important Notice:
The Securities and Exchange Commission has adopted new regulations that will impact the design and delivery of future Semi-Annual and Annual Reports. Beginning with the 2024 Semi-Annual Reports, paper copies will be mailed to you unless you have opted for electronic delivery of the reports.
12/23 SF AR Printed on recycled paper 
To Our Shareholders (unaudited)
The Dodge & Cox Stock Fund—Class I had a total return of 17.49% for the year ended December 31, 2023, compared to a return of 26.29% for the S&P 500 Index and 11.46% for the Russell 1000 Value Index.1
Market Commentary
U.S. equity markets rose during the fourth quarter of 2023 ending a standout year for stocks. The S&P 500 was up 11.7% during the quarter and 26.3% for the year, driven by a resilient U.S. economy, easing inflation, and market optimism about the prospect of lower interest rates.
In 2023, the S&P 500’s performance was led by the outsized returns of the “Magnificent Seven” stocks2 and their respective sectors: Information Technology (Microsoft, Apple, and NVIDIA), Communication Services (Alphabet and Meta), and Consumer Discretionary (Amazon and Tesla). These seven stocks rose 76.2%,3 increasing their share of the S&P 500’s market capitalization from 20% to 28% during the year. Utilities and Energy were the worst-performing sectors for the year, negatively impacted by rising interest rates and lower commodity prices, respectively.
In a reversal of 2022 trends, U.S. growth stocks outperformed value stocks4 during the year, and the valuation disparity between value and growth stocks widened. The Russell 1000 Value ended the year trading at 16.0 times forward earnings5 versus 26.8 times for the Russell 1000 Growth Index.6
Investment Strategy
For 2023, the Fund had a total return of 17.5%,7 trailing the S&P 500’s and surpassing the Russell 1000 Value’s performance. The Fund’s underweight position and holdings in the Information Technology sector, along with its overweight position and holdings in the Financials sector, were the biggest detractors from its relative performance versus the S&P 500. Compared to the Russell 1000 Value, the Fund’s holdings in the Consumer Discretionary sector were the biggest positive contributors.
At Dodge & Cox, we focus on companies’ long-term fundamentals, conduct independent research, and employ a rigorous price discipline. This approach led us to reduce the Fund’s exposures to companies whose valuations rose throughout the year (such as Broadcom/VMware, Meta, and Alphabet) and increase exposures to companies in more defensive and stable sectors with lower valuations, such as Health Care and Utilities.8
The Fund remains overweight the Financials, Health Care, and Communication Services sectors compared to both the S&P 500 and the Russell 1000 Value. Sectors we are underweight include Consumer Staples, Materials, Utilities, and Real Estate. Below we discuss the Fund’s recent activity in Financials and Health Care, the sectors with the largest weights in the portfolio.
Where We Stand on Financials
The Financials sector was a significant detractor from the Fund’s relative results versus both the S&P 500 and the Russell 1000 Value for the full year. In the first half of 2023, three U.S. regional banks,
which had significant concentrations of uninsured deposits and large unrealized losses on their balance sheets, came under pressure and eventually failed. Although the Fund had no exposure to those banks, their failures weighed on the broader Financials sector. As confidence in bank funding improved and the likelihood of future interest rate hikes diminished, the Financials sector recovered and was the largest contributor to the Fund’s relative performance during the fourth quarter versus both the S&P 500 and the Russell 1000 Value.
We revisited our investment theses for the Fund’s Financials holdings and believe they are resilient and will remain profitable under various stressed scenarios. Our well-diversified portfolio is invested in global, systemically important banks that are subject to high regulatory capital standards (e.g., Bank of America, Wells Fargo) and capital markets institutions with relatively little credit risk exposure (e.g., Bank of New York Mellon, Charles Schwab, Goldman Sachs). Recent credit quality concerns have been concentrated in commercial real estate, especially the office real estate market. The Fund’s exposure is limited, as office real estate is a small portion of the overall loan portfolios of these companies.
At Dodge & Cox, we seek to invest in companies whose current valuations reflect pessimistic views about future earnings and cash flow prospects, and where our analysis reveals the possibility of more positive developments. Financials is a good example of this. Although shares of many Financials companies were under pressure during 2023, we have a positive view on the long-term prospects for the Fund’s holdings. Valuations are relatively low, and we believe their long-term earnings potential is underappreciated. We maintained the Fund’s overweight position in the Financials sector and added to several positions, including Bank of America, Truist Financial, Fidelity National Information Services, and Charles Schwab.
Charles Schwab
Charles Schwab is a leading financial services company that provides securities brokerage, banking, money management, and financial advisory services to individuals and institutional clients. The company’s ability to deliver services at a lower cost has enabled it to grow market share in attractive segments, fueling the company’s long record of growing customer assets and earnings.
During the regional bank crisis in 2023, market concerns about Schwab’s deposit outflows and the impact of unrealized securities losses on its balance sheet weighed on its stock price. Customers shifting cash out of deposit accounts into money-market funds led to higher funding costs, and proposed regulatory capital rules have reduced the potential for share repurchases over the near term. We believe these headwinds are transitory and were reflected in the stock’s lower valuation. In line with our valuation focus and long-term orientation, we increased the Fund’s position in Schwab. While the stock trailed the broader market in the first nine months of 2023, Schwab was a top contributor to the Fund’s relative return versus both the S&P 500 and the Russell 1000 Value during the fourth quarter.
Market Developments and Portfolio Actions in Health Care
The Health Care sector was another area that underperformed the major indices during 2023. Investor enthusiasm for Information
PAGE 1 ◾ Dodge & Cox Stock Fund
Technology, artificial intelligence, and the Magnificent Seven dampened interest in more stable, defensive areas like Health Care. In addition, regulatory concerns weighed on the sector, and the increased use of GLP-1 inhibitors,9 like Ozempic, have created uncertainty regarding potential shifts in demand for certain health care services and consumer-related products. We believe that the current environment presents challenges in the near term, but also has created attractive long-term opportunities, such as Baxter International and Cigna, for a value-oriented investor.
Baxter International
During the third quarter, we initiated a position in Baxter International, a leading medical supply firm. Baxter holds a large market share in its major markets but has faced considerable headwinds recently. Issues include inflationary cost pressures, the questionable acquisition of hospital bed company Hillrom (and the increase in debt related to the purchase), and concerns about GLP-1’s potential to reduce demand for dialysis supplies. These factors contributed to a share price decline of more than 50% over the last two years.
Looking past these near-term headwinds, we think that the company has a strong underlying business and will be able to maintain stable growth, increase margins, and pay down its debt. Moreover, dialysis demand from chronic kidney patients is unlikely to drastically change over our three to five year investment horizon, despite GLP-1’s potential to reduce obesity. Based on these factors, the company’s valuation at 13.0 times forward earnings and dividend yield of 3.0% presented an attractive opportunity to start a position.
Cigna
Cigna is one of the largest and most diversified health care insurers and service providers in the United States. The company underperformed the market and its peers during 2023. There were concerns that the company could pursue a large acquisition and faces regulatory risks in its Pharmacy Benefit Management business. Regulatory changes may require Cigna to terminate certain business practices that are thought to contribute to higher drug prices for consumers, such as creating narrow networks for retail pharmacies or retaining profits from rebates and fees negotiated with drug manufacturers.
We evaluated the potential impacts of these regulatory changes on Cigna’s earnings prospects and concluded that the decline in its stock price was overdone. The company continues to execute on its 10 to 13% long-term earnings growth10 plans, while still generating significant cash flow that has led to a reduction in shares outstanding by 9% over the past two years, along with debt repayment. The recent share price decline provided an opportunity for us to add to an industry leader at a low valuation of 10.6 times forward earnings.
In Closing
We continue to be optimistic about the long-term outlook for the Fund, which is diversified across a broad range of sectors and investment themes. We are also encouraged by the Fund’s attractive valuation of 13.0 times forward earnings, compared to 20.4 and 16.0 times for the S&P 500 and the Russell 1000 Value, respectively. Thank you for your continued confidence in Dodge & Cox. As always, we welcome your comments and questions.
For the Board of Trustees, | |
| |
Dana M. Emery,
Chair and President | |
January 31, 2024
| All returns are stated in U.S. dollars, unless otherwise noted. The Funds’ 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 dividend and/or interest income but, unlike Fund returns, do not reflect fees or expenses. The S&P 500 Index is a market capitalization-weighted index of 500 large-capitalization stocks commonly used to represent the U.S. equity market. The Russell 1000 Value Index is a broad-based, unmanaged equity market index composed of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. |
| The top seven contributors to the S&P 500’s absolute returns in 2023 were Microsoft, Apple, NVIDIA, Amazon, Alphabet, Meta Platforms, and Tesla. |
| Market capitalization-weighted average return. (Market capitalization is a measure of the security’s size. It is the market price of a security multiplied by the number of shares outstanding.) |
| Generally, stocks that have lower valuations are considered “value” stocks, while those with higher valuations are considered “growth” stocks. |
| Unless otherwise specified, all weightings and characteristics are as of December 31, 2023. Price-to-earnings (forward) ratios are calculated using 12-month forward earnings estimates from third-party sources as of the reporting period. Estimates reflect a consensus of sell-side analyst estimates, which may lag as market conditions change. |
| The Russell 1000 Growth Index is a broad-based, unmanaged equity market index composed of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. |
| Return for the Stock Fund’s Class I shares. |
| The use of specific examples does not imply that they are more or less attractive investments than the portfolio’s other holdings. |
| GLP-1 inhibitors are a class of drugs used in patients with type-2 diabetes as glucose-lowering therapies. They also have additional benefits of weight loss and blood pressure reduction. |
| Earnings growth is the percentage change in a firm’s earnings per share (EPS) in a period, as compared with the same period from the previous year. Long-term earnings growth is the forecasted annual change in a firm’s earnings per share (EPS) over the next three-to-five-year period. |
Dodge & Cox Stock Fund ◾ PAGE 2
2023 Performance Review for the Fund's Class I Shares (unaudited)
The Fund underperformed the S&P 500 by 8.80 percentage points in 2023.
Key contributors to relative results included the Fund's:
◾ Stock selection and underweight position in Consumer Staples;
◾ Utilities underweight;
◾ Stock selection in Industrials, particularly General Electric and FedEx;
◾ Materials underweight and holdings; and
◾ Position in VMware.
Key detractors from relative results included the Fund's:
◾ Stock selection and underweight position in Information Technology, mainly underweight position in Microsoft;
◾ Overweight position and holdings in Financials, including Charles Schwab;
◾ Health Care overweight; and
◾ Position in Occidental Petroleum.
The Fund outperformed the Russell 1000 Value by 6.03 percentage points in 2023.
Key contributors to relative results included the Fund's:
◾ Stock selection in Consumer Discretionary;
◾ Overweight in Information Technology, especially VMware and Microsoft;
◾ Consumer Staples underweight and holdings;
◾ Underweight position in Utilities; and
◾ Positions in Alphabet and General Electric.
Key detractors from relative results included the Fund's:
◾ Financials holdings, particularly Charles Schwab and MetLife; and
◾ Positions in Occidental Petroleum, Meta Platforms, and RTX
Corp.
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 90 Years of Investment Experience
Dodge & Cox was founded in 1930. We have a stable and well- qualified 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 decision-making body for the Stock Fund, is a seven-member committee with an average tenure of 21 years at Dodge & Cox.
One Business with a Single Decision-Making Office
Dodge & Cox manages equity (domestic, international, and global), fixed income (domestic and global), and balanced investments, all from one office in San Francisco.
Consistent Investment Approach
Our team decision-making process involves thorough, bottom-up 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.
Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security. Please see the Portfolio of Investments section in this report for a complete list of fund holdings.
PAGE 3 ◾ Dodge & Cox Stock Fund
Growth of $10,000 Over 10 Years (unaudited)
For an Investment Made on December 31, 2013 
Average Annual Total Return
For Periods Ended December 31, 2023
Expense Ratios
Per the Prospectus Dated May 1, 2023
| The Class X shares inception date is May 2, 2022. The returns shown prior to that date are for the Class I shares. |
| Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain Total Annual Fund Operating Expenses of Class X at 0.41% until April 30, 2026. This agreement cannot be terminated prior to April 30, 2026 other than by resolution of the Fund’s Board of Trustees. For purposes of the foregoing, ordinary expenses shall not include nonrecurring shareholder account fees, fees and expenses associated with Fund shareholder meetings, fees on portfolio transactions such as exchange fees, dividends and interest on short positions, fees and expenses of pooled investment vehicles that are held by the Fund, interest expenses and other fees and expenses related to any borrowings, taxes, brokerage fees and commissions and other costs and expenses relating to the acquisition and disposition of Fund investments, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other non-routine expenses or extraordinary expenses not incurred in the ordinary course of the Fund’s business, such as litigation expenses. The term of the agreement will automatically renew for subsequent three-year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term. The agreement does not permit Dodge & Cox to recoup any fees waived or payments made to the Fund for a prior year. |
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 800-621-3979 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 large-capitalization stocks commonly used to represent the U.S. equity market. The Russell 1000 Value Index is a broad-based, unmanaged equity market index composed of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
S&P 500® is a trademark of S&P Global Inc. Russell 1000® is a trademark of the London Stock Exchange Group plc.
For more information about these indices, visit:
www.dodgeandcox.com/stockfund
Dodge & Cox Stock Fund ◾ PAGE 4
Portfolio Information (unaudited) December 31, 2023
| Net Cash & Other includes cash, short-term investments, derivatives, receivables, and payables. |
Fund Expense Example (unaudited)
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 each share class in the table below provides information about actual account values and expenses based on the actual returns of the share class. 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 each share class in 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 share class and an assumed 5% annual rate of return before expenses (not the actual return of the share class). 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 other mutual funds.
Six Months Ended
December 31, 2023 | Beginning Account Value
7/1/2023 | Ending Account Value
12/31/2023 | Expenses Paid
During Period* | |
| | | | |
| | | | |
Based on hypothetical 5% yearly return | | | | |
| | | | |
| | | | |
Based on hypothetical 5% yearly return | | | | |
| Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (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).
PAGE 5 ◾ Dodge & Cox Stock Fund
Portfolio of Investments December 31, 2023
|
| | |
Communication Services: 11.2% |
Media & Entertainment: 10.1% |
Alphabet, Inc., Class A(a) | | |
Alphabet, Inc., Class C(a) | | |
Charter Communications, Inc., | | |
| | |
DISH Network Corp., Class A(a) | | |
| | |
| | |
Meta Platforms, Inc., Class A(a) | | |
| | |
| | |
Telecommunication Services: 1.1% |
| | |
| | |
Consumer Discretionary: 4.8% |
Automobiles & Components: 0.7% |
Honda Motor Co., Ltd. ADR (Japan) | | |
Consumer Discretionary Distribution & Retail: 2.3% |
| | |
| | |
| | |
Consumer Durables & Apparel: 0.4% |
| | |
|
Booking Holdings, Inc.(a) | | |
| | |
|
Food, Beverage & Tobacco: 2.2% |
Anheuser-Busch InBev SA/NV ADR (Belgium) | | |
Molson Coors Beverage Co., | | |
| | |
Household & Personal Products: 0.6% |
Haleon PLC ADR (United Kingdom) | | |
| | |
|
Baker Hughes Co., Class A | | |
| | |
Occidental Petroleum Corp.(b) | | |
Occidental Petroleum Corp., | | |
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|
|
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Financial Services: 15.9% |
Capital One Financial Corp.(b) | | |
Fidelity National Information Services, Inc. | | |
| | |
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|
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The Bank of New York Mellon Corp. | | |
| | |
The Goldman Sachs Group, Inc. | | |
UBS Group AG, NY Shs (Switzerland) | | |
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|
Aegon Ltd., NY Shs (Netherlands) | | |
Brighthouse Financial, Inc.(a)(b) | | |
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|
Health Care Equipment & Services: 8.3% |
Baxter International, Inc. | | |
| | |
GE HealthCare Technologies, Inc. | | |
| | |
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Zimmer Biomet Holdings, Inc. | | |
| | |
Pharmaceuticals, Biotechnology & Life Sciences: 14.1% |
Alnylam Pharmaceuticals, Inc.(a) | | |
| | |
BioMarin Pharmaceutical, Inc.(a) | | |
| | |
Elanco Animal Health, Inc.(a)(b) | | |
| | |
GSK PLC ADR (United Kingdom) | | |
| | |
Neurocrine Biosciences, Inc.(a) | | |
Novartis AG ADR (Switzerland) | | |
Regeneron Pharmaceuticals, Inc.(a) | | |
Roche Holding AG ADR (Switzerland) | | |
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Johnson Controls International PLC | | |
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Information Technology: 9.5% |
Semiconductors & Semiconductor Equipment: 1.0% |
Microchip Technology, Inc. | | |
Software & Services: 3.7% |
Cognizant Technology Solutions Corp., Class A | | |
| | |
| | |
See accompanying Notes to Financial StatementsDodge & Cox Stock Fund ◾ PAGE 6
Portfolio of Investments December 31, 2023
Common Stocks (continued) |
| | |
Technology, Hardware & Equipment: 4.8% |
| | |
| | |
Hewlett Packard Enterprise Co. | | |
| | |
Juniper Networks, Inc.(b) | | |
| | |
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|
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International Flavors & Fragrances, Inc. | | |
LyondellBasell Industries NV, Class A | | |
| | |
|
Equity Real Estate Investment Trusts (Reits): 0.2% |
Gaming & Leisure Properties, Inc. REIT | | |
|
| | |
Total Common Stocks
(Cost $65,006,168,882) | | |
Short-Term Investments: 3.4% |
| | |
Repurchase Agreements: 3.0% |
Fixed Income Clearing Corporation(c) 5.31%, dated 12/29/23, due 1/2/24, maturity value $1,690,997,100 | | |
Fixed Income Clearing Corporation(c) 2.70%, dated 12/29/23, due 1/2/24, maturity value $305,628,661 | | |
5.30%, dated 12/29/23, due 1/2/24, maturity value $500,294,444 | | |
5.32%, dated 12/29/23, due 1/2/24, maturity value $500,295,556 | | |
| | |
|
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|
State Street Institutional U.S. Government Money Market Fund - Premier Class | | |
Total Short-Term Investments
(Cost $3,401,170,932) | |
Total Investments In Securities
(Cost $68,407,339,814) | | |
Other Assets Less Liabilities | | |
| | |
| |
| See below regarding holdings of 5% voting securities |
| Repurchase agreements are collateralized by:
Fixed Income Clearing Corporation: U.S. Treasury Notes 1.875%-2.875%, 11/15/25- 8/15/32. U.S. Treasury Inflation Indexed Notes 0.625%-3.375%, 4/15/32-7/15/32. Total collateral value is $2,028,281,161.
Royal Bank of Canada: U.S. Treasury Notes 0.375%-4.375%, 11/15/24-8/15/33. Total collateral value is $510,300,383.
Standard Chartered: U.S. Treasury Bill 6/6/24. U.S. Treasury Notes 0.25%-5.00%, 12/31/23-5/15/33. U.S.Treasury Bonds 1.125%-5.00%, 5/15/37-11/15/51. U.S. Treasury Inflation Indexed Notes 0.125%, 10/15/25-2/15/51. U.S. Treasury Floating Rate Note 5.531%, 1/31/25. Total collateral value is $510,301,511. |
| The Fund usually classifies a company or issuer based on its country of risk, but may designate a different country in certain circumstances. |
| |
| |
ADR: American Depositary Receipt |
NY Shs: New York Registry Shares |
|
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 year ended December 31, 2023. Further detail on these holdings and related activity during the year appear below.
| Value at
Beginning of Period | | | | Net Change in
Unrealized
Appreciation/
Depreciation | | Dividend
Income
(net of foreign
taxes, if any) |
| | | | | | | |
Consumer Discretionary 1.0% | | | | | | | |
Qurate Retail, Inc., Series A | | | | | | | |
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PAGE 7 ◾ Dodge & Cox Stock FundSee accompanying Notes to Financial Statements
Portfolio of Investments December 31, 2023
Holdings of 5% Voting Securities (continued)
| Value at Beginning of Period | | | | Net Change in Unrealized Appreciation/ Depreciation | | Dividend Income (net of foreign taxes, if any) |
| | | | | | | |
Molson Coors Beverage Co., Class B | | | | | | | |
| | | | | | | |
Occidental Petroleum Corp. | | | | | | | |
Occidental Petroleum Corp., | | | | | | | |
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Brighthouse Financial, Inc.(b) | | | | | | | |
Capital One Financial Corp. | | | | | | | |
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Elanco Animal Health, Inc.(b) | | | | | | | |
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Information Technology 1.2% | | | | | | | |
| | | | | | | |
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Micro Focus International PLC ADR | | | | | | | |
| | | | | | | |
| | | | | | | |
| Company was not an affiliate at period end |
| |
See accompanying Notes to Financial StatementsDodge & Cox Stock Fund ◾ PAGE 8
Statement of Assets and Liabilities
| |
|
Investments in securities, at value | |
Unaffiliated issuers (cost $58,072,639,767) | |
Affiliated issuers (cost $10,334,700,047) | |
| |
Receivable for investments sold | |
Receivable for Fund shares sold | |
Dividends and interest receivable | |
Expense reimbursement receivable | |
Prepaid expenses and other assets | |
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Payable for investments purchased | |
Payable for Fund shares redeemed | |
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Shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
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Shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
Statement of Operations
| Year Ended
December 31, 2023 |
| |
Dividends (net of foreign taxes of $44,185,253) | |
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Administrative services fees | |
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Custody and fund accounting fees | |
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Expenses reimbursed by investment manager | |
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Realized and Unrealized Gain (Loss): | |
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Investments in securities of unaffiliated issuers (Note 6) | |
Investments in securities of affiliated issuers (Note 6) | |
| |
Foreign currency transactions | |
Net change in unrealized appreciation/depreciation | |
Investments in securities of unaffiliated issuers | |
Investments in securities of affiliated issuers | |
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Foreign currency translation | |
Net realized and unrealized gain | |
Net Change in Net Assets From Operations | |
PAGE 9 ◾ Dodge & Cox Stock FundSee accompanying Notes to Financial Statements
Statement of Changes in Net Assets
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Net change in unrealized appreciation/depreciation | | |
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Distributions to Shareholders: | | |
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Proceeds from sales of shares | | |
Reinvestment of distributions | | |
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Proceeds from sales of shares | | |
Reinvestment of distributions | | |
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Net change from Fund share transactions | | |
Total change in net assets | | |
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Net change in shares outstanding | | |
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Net change in shares outstanding | | |
See accompanying Notes to Financial StatementsDodge & Cox Stock Fund ◾ PAGE 10
Notes to Financial Statements
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, as an open-end management investment company. The Fund commenced operations on January 4, 1965, and seeks long-term growth of principal and income. Risk considerations and investment strategies of the Fund are discussed in the Fund's Prospectus.
On May 1, 2022, the then-outstanding shares of the Fund were redesignated as Class I Shares, and Class X shares of the Fund were established. The share classes have different eligibility requirements and expense structures due to differing shareholder servicing arrangements. The share classes have the same rights as to redemption, dividends and liquidation proceeds, and voting privileges, except that each class has the exclusive right to vote on matters affecting only its class.
The Fund is an investment company and follows the accounting and reporting guidance issued in Topic 946 by the Financial Accounting Standards Board. 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 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 Dodge & Cox. The Board of Trustees has appointed Dodge & Cox, the Fund’s investment manager, as its "valuation designee", as permitted by Rule 2a-5 under the Investment Company Act of 1940, 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 rel
evant 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 net asset value may differ from quoted or published prices 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. Non-cash dividends, 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 accrual basis.
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.
Share class accounting Investment income, realized and unrealized gains and losses and expenses, other than class-specific expenses, are allocated to each share class of the Fund based upon the proportion of net assets of each class.
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 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 ("EU 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 in the Statement of Assets and Liabilities. Expenses incurred related to filing EU reclaims
PAGE 11 ◾ Dodge & Cox Stock Fund
Notes to Financial Statements
are recorded on the accrual basis in professional services in the Statement of Operations. Expenses that are contingent upon successful EU reclaims are recorded in professional services in the Statement of Operations once the amount is known.
Repurchase agreements Repurchase agreements are transactions under which a Fund purchases a security from a 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 regular custodian or third party 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.
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 below.
◾ Level 1: Unadjusted 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 December 31, 2023:
| | LEVEL 2
(Other Significant
Observable Inputs) |
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| | LEVEL 2 (Other Significant Observable Inputs) |
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Note 3: Derivative Instruments
The Fund may use derivatives either to minimize the impact of certain risks to one or more of its investments (as a ‘‘hedging technique’’) or to implement its investment strategy. A derivative is a financial instrument whose value is derived from a security, currency, interest rate, index, or other financial instrument.
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. Futures contracts are exchange-traded. 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 the contract. 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 in the Statement of Assets and Liabilities. A receivable and/or payable to brokers for daily variation margin is also recorded in 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 used long S&P 500 Index futures contracts to provide equity exposure, approximately equal to some or all of the Fund's non-equity assets.
Additional derivative information The following summarizes the effect of derivative instruments on the Statement of Operations, categorized by primary underlying risk exposure.
| |
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Net change in unrealized appreciation/depreciation |
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Dodge & Cox Stock Fund ◾ PAGE 12
Notes to Financial Statements
The following summarizes the range of volume in the Fund's derivative instruments during the year ended December 31, 2023.
Note 4: Related Party Transactions
Investment advisory fee The Fund pays an investment advisory fee monthly at an annual rate of 0.40% 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.
Administrative services fee The Fund pays Dodge & Cox a fee for administrative and shareholder services. The fee is accrued daily and paid monthly equal to an annual rate of the average daily net assets of 0.10% for Class I shares and 0.05% for Class X shares. Under this agreement, Dodge & Cox also pays for the Fund's transfer agent fees.
Expense reimbursement Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain the ratio of total operating expenses of the Class X shares to average net assets of the Class X shares at 0.41% through April 30, 2026. The term of the agreement will automatically renew for subsequent three-year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term. For the year ended December 31, 2023, Dodge & Cox reimbursed expenses of $15,135,065.
Fund officers and trustees All officers and two of the trustees of the Trust are current or former senior executive officers of Dodge & Cox. The Trust pays a fee only to those trustees who are not affiliated with Dodge & Cox.
Note 5: 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. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Financial reporting records are adjusted for permanent book to tax differences at year end to reflect tax character. Book to tax differences are primarily due to differing treatments of redemptions in-kind, wash sales, certain corporate action transactions, derivatives, and distributions.
Distributions during the years noted below were characterized as follows for federal income tax purposes:
| Year Ended
December 31, 2023 | Year Ended
December 31, 2022 |
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At December 31, 2023, the tax basis components of distributable earnings were as follows:
Undistributed long-term capital gain | |
Net unrealized appreciation | |
Total distributable earnings | |
At December 31, 2023, unrealized appreciation and depreciation for investments based on cost for federal income tax purposes were as follows:
| |
| |
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Net unrealized appreciation | |
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 6: Redemptions In-Kind
During the year ended December 31, 2023, the Fund distributed securities and cash as payment for redemptions of Class I shares. For financial reporting purposes, the Fund realized a net gain of $584,705,807 attributable to the redemptions in-kind: $498,347,301 from unaffiliated issuers and $86,358,506 from affiliated issuers. For tax purposes, no capital gain on the redemptions in-kind was recognized.
Note 7: 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 year.
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
PAGE 13 ◾ Dodge & Cox Stock Fund
Notes to Financial Statements
Fund pays an annual commitment fee on its pro-rata portion of the Line of Credit. For the year ended December 31, 2023, the Fund’s commitment fee amounted to $516,272 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 year.
Note 8: Purchases and Sales of Investments
For the year ended December 31, 2023, purchases and sales of securities, other than short-term securities, aggregated $10,832,227,915 and $14,067,649,534, respectively.
Note 9: Subsequent Events
Fund management has determined that no material events or transactions occurred subsequent to December 31, 2023, and through the date of the Fund’s financial statements issuance, which require disclosure in the Fund’s financial statements.
Dodge & Cox Stock Fund ◾ PAGE 14
Selected data and ratios
(for a share outstanding throughout each period) | |
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Net asset value, beginning of year | | | | | |
Income from investment operations: | | | | | |
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Net realized and unrealized gain (loss) | | | | | |
Total from investment operations | | | | | |
Distributions to shareholders from: | | | | | |
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Net asset value, end of year | | | | | |
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Ratios/supplemental data: | | | | | |
Net assets, end of year (millions) | | | | | |
Ratio of expenses to average net assets | | | | | |
Ratio of net investment income to average net assets | | | | | |
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Net asset value, beginning of year | | | | | |
Income from investment operations: | | | | | |
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Net realized and unrealized gain (loss) | | | | | |
Total from investment operations | | | | | |
Distributions to shareholders from: | | | | | |
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Net asset value, end of year | | | | | |
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Ratios/supplemental data: | | | | | |
Net assets, end of period (millions) | | | | | |
Ratio of expenses to average net assets | | | | | |
Ratio of expenses to average net assets, before reimbursement by investment manager | | | | | |
Ratio of net investment income to average net assets | | | | | |
| | | | | |
| Net investment income per share includes significant amounts received for EU reclaims related to prior years, which amounted to approximately $0.20 per share. Excluding such amounts, the ratio of net investment income to average net assets would have been 1.87%. |
| For 2022, the period covers 5/2/2022 (commencement of operations) to 12/31/2022 |
| |
See accompanying Notes to Financial Statements
PAGE 15 ◾ Dodge & Cox Stock Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Dodge & Cox Funds and Shareholders of Dodge & Cox Stock Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Dodge & Cox Stock Fund (one of the funds constituting Dodge & Cox Funds, referred to hereafter as the "Fund") as of December 31, 2023, the related statement of operations for the year ended December 31, 2023, the statement of changes in net assets for each of the two years in the period ended December 31, 2023, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2023 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2023 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2024
We have served as the auditor of one or more investment companies in the Dodge & Cox Funds since 1931.
Dodge & Cox Stock Fund ◾ PAGE 16
Special 2023 Tax Information (unaudited)
The following information is provided pursuant to provisions of the Internal Revenue Code:
The Fund designates $2,320,962,508 as long-term capital gain distributions in 2023.
The Fund designates up to a maximum amount of $1,873,959,138 of its distributions paid to shareholders in 2023 as qualified dividends (treated for federal income tax purposes in the hands of shareholders as taxable at a maximum rate of 20%).
For shareholders that are corporations, the Fund designates 89% of its ordinary dividends paid to shareholders in 2023 as dividends from domestic corporations eligible for the corporate dividends received deduction, provided that the shareholder otherwise satisfies applicable requirements to claim that deduction.
Funds' Liquidity Risk Management Program
(unaudited)
The Funds have adopted and implemented a written liquidity risk management program (“Program”) as required by Rule 22e-4 under the Investment Company Act. The Program is reasonably designed to assess and manage each Fund’s liquidity risk, taking into consideration the Fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources including the Funds’ interfund lending facility and line of credit.
The Funds’ Board of Trustees has approved the appointment of a Liquidity Risk Management Committee, which includes representatives from Dodge & Cox’s Legal, Compliance, Treasury, Operations, Trading, and Portfolio Management departments, and is responsible for the Program’s administration and oversight and for reporting to the Board on at least an annual basis regarding the Program’s operation and effectiveness.
The Liquidity Risk Management Committee refreshed its assessment of the Funds’ liquidity risk profiles, and considered the adequacy and effectiveness of the Program’s operations for the 12 months ended September 30, 2023 (the “covered period”) in order to prepare a written report to the Board of Trustees for consideration at its meeting held on December 8, 2023. The report concluded that (i) the Funds had adequate liquidity to operate effectively throughout the covered period; (ii) each Fund’s investment strategy continues to be appropriate for an open end fund; and (iii) the Funds’ Program is reasonably designed to assess and manage its liquidity risk.
Fund Holdings
The Fund provides a complete list of its 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 Fund’s Forms N-CSR and Part F of N-PORT on the SEC’s website at sec.gov. A list of the Fund’s 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.
Proxy Voting
For a free copy of the Fund’s proxy voting policies and procedures, please call 800-621-3979, 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 ended June 30 is also available at dodgeandcox.com or shareholders may view the Fund's Form N-PX 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 share the 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 800-621-3979. Your request will be implemented within 30 days.
PAGE 17 ◾ Dodge & Cox Stock Fund
Dodge & Cox Funds — Executive Officer & Trustee Information
| Position with Trust
(Year of Election or
Appointment) | Principal Occupation During Past Five Years and Other Relevant Experience | Other Directorships of Public Companies Held
by Trustees |
Interested Trustees and Executive Officers |
| | Chairman and Director, Dodge & Cox (until 2022); Chief Investment Officer (until 2022) and member of U.S. Equity Investment Committee and Emerging Markets Equity Investment Committee (until 2022); Global Equity Investment Committee and International Equity Investment Committee (until 2021); U.S. Fixed Income Investment Committee (until 2019) | |
| Chair (since 2022)
President
(since 2014) and
Trustee (since 1993) | Chair, Chief Executive Officer, and Director, Dodge & Cox; President (until 2022); Co-Director of Fixed Income (until 2020); Director of Fixed Income (until 2019); member of U.S. Fixed Income Investment Committee and Global Fixed Income Investment Committee | |
| Chief Legal Officer
(since 2019) and Secretary (since 2017) | Vice President, General Counsel, and Secretary (since 2017), Dodge & Cox | |
| | Funds Treasurer (since 2021), Dodge & Cox; Vice President (since 2020); Financial Oversight and Control Analyst (until 2021) | |
| Chief Compliance
Officer (since 2010) | Vice President and Chief Compliance Officer, Dodge & Cox | |
|
| | CFO, athenahealth, Inc. (2019-2022) | Director, Synopsys Inc. (software company); Director, Carter's Inc. (children's apparel); Director, Eastern Bankshares, Inc. (financial services and banking services) |
| | Professor of Economics, Stanford University; Director of the Economics of Education Program, National Bureau of Economic Research; Senior Fellow, Hoover Institution and Stanford Institute for Economic Policy Research | |
| | Senior Counsel, Arnold & Porter (law firm) (2015-2018); Partner, Arnold & Porter (until 2015); Director, Howard, Rice, Nemerovski, Canady, Falk & Rabkin (1977-2011) | |
| | CFO, Pixar Animation Studios (1999-2004) | Director, Netflix, Inc. (internet television); Director, Blend (software company); Director, Bumble (online dating) |
Gabriela Franco
Parcella (55) | | President (since 2020) and Executive Managing Director, Merlone Geier Partners (2018-2019); Chairman, President, and CEO, Mellon Capital (2011 to 2017); COO, Mellon Capital (1997 to 2011) | |
| | President and CEO, QinetiQ US (since 2022); Corporate Vice President/President Enterprise Services, Northrop Grumman (2012-2022) | |
| | Robert and Marion Oster Distinguished Military Fellow, Hoover Institution (since 2012); Admiral, United States Navy (Ret.); U.S. Navy Chief of Naval Operations (2007-2011) | Director, Northrop Grumman Corp. (global security); Director, Maersk Line, Limited (shipping and transportation) |
| | Executive Vice President, Managing Director, Fixed Income at Loomis Sayles & Company, L.P. (2003-2011) | |
| The address for each Officer and Trustee is 555 California Street, 40th Floor, San Francisco, California 94104. Each Officer and Trustee oversees all seven series in the Dodge & Cox Funds complex and serves for an indefinite term. |
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 800-621-3979.
Dodge & Cox Stock Fund ◾ PAGE 18
dodgeandcox.com
For Fund literature, transactions, and account
information, please visit the Funds’ website.
or write or call:
Dodge & Cox Funds
P.O. Box 219502
Kansas City, Missouri 64121-9502
(800) 621-3979
Investment Manager
Dodge & Cox
555 California Street, 40th Floor
San Francisco, California 94104
(415) 981-1710
Principal Underwriter
Foreside Fund Services, LLC
3 Canal Plaza, Suite 100
Portland, Maine 04101
(866) 251-6920
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 December 31, 2023, 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.
Global Stock Fund | Class I (dodwx) | Class X (doxwx)
ESTABLISHED 2008
Important Notice:
The Securities and Exchange Commission has adopted new regulations that will impact the design and delivery of future Semi-Annual and Annual Reports. Beginning with the 2024 Semi-Annual Reports, paper copies will be mailed to you unless you have opted for electronic delivery of the reports.
12/23 GSF AR Printed on recycled paper 
To Our Shareholders (unaudited)
The Dodge & Cox Global Stock Fund—Class I had a total return of 20.26% for the year ended December 31, 2023, compared to a return of 22.20% for the MSCI ACWI Index.1
Market Commentary
In a reversal of 2022’s declines, global equity markets finished 2023 with strong returns, as markets reacted to easing inflation and the potential for lower interest rates. The S&P 500 Index2 returned 26.3%, MSCI EAFE Index3 appreciated 18.2%, and the MSCI Emerging Markets Index4 rose 9.8%. Emerging Markets were weighed down by China, which declined 11.2%.5 The MSCI Emerging Markets ex China Index6 returned 20.0%.
Strong global returns were in large part driven by the outsized performance of the “Magnificent Seven”7 and their respective sectors: Information Technology (Microsoft, Apple, and NVIDIA), Communication Services (Alphabet and Meta), and Consumer Discretionary (Amazon and Tesla). These seven stocks rose 75.8%,8 contributed 41.8% to the MSCI ACWI’s 2023 return, and increased from 11.6% to 16.9% of the MSCI ACWI’s market capitalization over the year.
Not surprisingly, growth stocks also outperformed value stocks9 in 2023 (the MSCI ACWI Growth Index10 and MSCI ACWI Value Index11 were up 33.2% and 11.8%, respectively). The MSCI ACWI Value now trades at 12.6 times forward earnings12 compared to 24.0 times for the MSCI ACWI Growth. The valuation gap between value and growth stocks remains wide at 1.6 standard deviations.13
Strong performance from these seven stocks in the United States also contributed to the wide valuation differential between international and U.S. equities. The MSCI EAFE trades at 13.2 times forward earnings, versus the MSCI USA Index14 at 20.1 times, a meaningful valuation gap that is 2.2 standard deviations outside historic averages.
Investment Strategy
At Dodge & Cox, we are active, value-oriented investors, focused on long-term results. We conduct independent research on individual companies, and look for opportunities that are not already well appreciated by the market. This disciplined, fundamentals-driven, long-term investment approach has helped the Fund outperform the MSCI ACWI over our longer measured time periods: 3-, 5-, 10-year, and since inception.
In 2023, we reduced exposures to holdings that outperformed and added to areas that underperformed. We trimmed selected holdings in Financials and Communication Services—two key overweight positions in the Fund that outperformed—as well as a significant holding in Information Technology. In Communication Services, trims included Meta and Alphabet.15 In Information Technology, we reduced the Fund’s exposure to Broadcom and VMware. In contrast, the Fund added exposure to Health Care, a more defensive part of the portfolio that underperformed. Below we discuss activity in Financials, as well as several new holdings.
Portfolio Changes in Financials
Financials—the largest area of overweight for the Fund—was the Fund’s top-contributing sector for the full year (up 23.8% compared to up 16.3% for the MSCI ACWI sector), and thus became the second-largest area of trims in the fourth quarter.
The Fund trimmed several holdings that performed strongly, including UBS Group, a leading global asset manager that appreciated 70.3% to become one of the Fund’s top contributors to performance. UBS has an attractive mix of market-leading, capital-efficient, and geographically diversified businesses. The company has created significant shareholder value in recent years through its high return on invested capital and strong capital allocation. Last year, returns were driven in large part by their acquisition of Credit Suisse, which helped restore confidence in the stability of the Swiss economy and banking system. Through this deal, UBS acquired nearly $58 billion in book value from Credit Suisse for $3 billion, a substantial discount. After strong performance, we trimmed UBS.
The Fund’s Financials holdings with exposure to Brazil were also top performers: XP and Itau Unibanco were up 79.6% and 53.6%, respectively, while Banco Santander was up 44.3%. Hence, we trimmed Banco Santander and XP during 2023.
Despite these trims, the Fund remains overweight Financials (30.6% versus 15.9% in the MSCI ACWI), an area that offers favorable risk/reward profiles due to attractive capital return, resilient balance sheets, improved profitability, and inexpensive valuations. Importantly, the Fund’s holdings are also widely diversified across business segments and geographies.
A New Holding in Financials: Truist Financial
In the first half of 2023, U.S. regional banks became widely discounted after the failures of three U.S. regional banks, which had significant concentrations of uninsured deposits and large unrealized losses on their balance sheets. Truist Financial was one of the U.S. regional banks that got caught in the ensuing downdraft. Our global Financials team carefully reviewed Truist, and we started a position based upon the company’s different deposit profile, compelling valuation, and downside protection in the form of potential asset sales.
A New Holding in Health Care: Baxter International
Investor enthusiasm for Information Technology, artificial intelligence, and the Magnificent Seven dampened interest in more stable, defensive areas like Health Care, which underperformed the major indices during 2023. In addition, regulatory concerns weighed on the sector, and the increased use of GLP-1 inhibitors,16 like Ozempic, created uncertainty regarding potential shifts in demand for certain health care procedures and services as well as certain consumer-related products.
During the third quarter, we initiated a position in Baxter International, a leading medical supply firm. Baxter holds a large market share in its major markets but has faced considerable headwinds recently. Issues include inflationary cost pressures, the
PAGE 1 ◾ Dodge & Cox Global Stock Fund
acquisition of hospital bed company Hillrom (and the increase in debt related to the purchase), and concerns about GLP-1’s potential to reduce demand for dialysis supplies. These factors contributed to a share price decline of more than 50% over the last two years.
We think the company has strong underlying businesses and will be able to maintain stable growth, increase margins, and pay down its debt. Moreover, dialysis demand from chronic kidney patients is unlikely to drastically change over our three- to five-year investment horizon, despite GLP-1’s potential to reduce obesity. Based on these factors, the company’s valuation at 13.0 times forward earnings and dividend yield of 3.0% presented an attractive opportunity to start a position.
International Flavors & Fragrances (IFF)
IFF is good example of a company with near-term challenges that provided us an opportunity to buy a strong franchise at depressed levels. As the names suggests, IFF sells flavors, scents, and other key ingredients to food, beverage, and consumer products companies. The company operates in an oligopolistic industry with high barriers to entry, low economic sensitivity, and provides mission-critical inputs that are a small percentage of product costs. The business is very defensive, with attractive growth and historically stable margins. 2022 and 2023, however, were challenging years for IFF.
The company’s margins and valuation fell to their lowest levels in over a decade due to merger integration challenges. But, management is cutting costs to boost margins, and activist investors are focused on keeping management disciplined and shareholders as a top priority. We think it presents an interesting long-term opportunity, so we started a position in the fourth quarter. IFF was a 0.9% position in the Fund at year end.
In Closing
We continue to be optimistic about the long-term outlook for the Fund, which is diversified across a broad range of sectors and investment themes. The Fund’s portfolio trades at an attractive 11.0 times forward earnings, which is a discount not only to the MSCI ACWI at 16.6 times, but also to the MSCI ACWI Value at 12.6 times. Markets can be volatile and overreact to near-term developments and headline news. However, volatility creates opportunities for investors with a long-term perspective and valuation discipline. We encourage our investors to focus on that longer-term opportunity.
Thank you for your continued confidence in our firm. As always, we welcome your comments and questions.
For the Board of Trustees, | |
| |
Dana M. Emery,
Chair and President | |
January 31, 2024
| All returns are stated in U.S. dollars, unless otherwise noted. The Funds’ 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 dividend and/or interest income but, unlike Fund returns, do not reflect fees or expenses. The MSCI ACWI (All Country World Index) Index is a broad-based, unmanaged equity market index aggregated from developed market and emerging market country indices. |
| The S&P 500 Index is a market capitalization-weighted index of 500 large- capitalization stocks commonly used to represent the U.S. equity market. |
| The MSCI EAFE (Europe, Australasia, Far East) Index is a broad-based, unmanaged equity market index aggregated from developed market country indices, excluding the United States and Canada. It covers approximately 85% of the free float-adjusted market capitalization in each country. |
| The MSCI Emerging Markets Index captures large- and mid-cap representation across emerging market countries. |
| As measured by the MSCI China Index, which captures large- and mid-cap representation across China A shares, H shares, B shares, Red chips, and P chips. |
| The MSCI Emerging Markets ex China Index captures large- and mid-cap representation across emerging market countries excluding China. |
| The top seven contributors to the MSCI ACWI’s absolute returns in 2023 were Apple, Microsoft, NVIDIA, Amazon, Alphabet, Meta Platforms, and Tesla. |
| Market capitalization-weighted average return. (Market capitalization is a measure of the security’s size. It is the market price of a security multiplied by the number of shares outstanding.) |
| Generally, stocks that have lower valuations are considered “value” stocks, while those with higher valuations are considered “growth” stocks. |
| The MSCI ACWI Growth Index captures large- and mid-cap securities exhibiting overall growth style characteristics across developed market and emerging market countries. The growth investment style characteristics for index construction are defined using five variables: long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate, long-term historical EPS growth trend, and long-term historical sales per share growth trend. |
| The MSCI ACWI Value Index captures large- and mid-cap securities exhibiting overall value style characteristics across developed market and emerging market countries. The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price, and dividend yield. |
| Price-to-earnings (forward) ratios are calculated using 12-month forward earnings estimates from third-party sources as of the reporting period. Estimates reflect a consensus of sell-side analyst estimates, which may lag as market conditions change. Unless otherwise specified, all weightings and characteristics are as of December 31, 2023. |
| Standard deviation measures the volatility of the Fund’s returns. Higher standard deviation represents higher volatility. |
| The MSCI USA Index measures the performance of large- and mid-cap companies in the United States and covers approximately 85% of the market capitalization in the United States. |
| The use of specific examples does not imply that they are more or less attractive investments than the portfolio’s other holdings. |
| GLP-1 inhibitors are a class of drugs used in patients with type-2 diabetes as glucose-lowering therapies. They also have additional benefits of weight loss and blood pressure reduction. |
Dodge & Cox Global Stock Fund ◾ PAGE 2
2023 Performance Review for the Fund's Class I Shares (unaudited)
The Fund underperformed the MSCI ACWI by 1.94 percentage points in 2023.
Key contributors to relative results included the Fund's:
◾ Financials holdings—including UBS Group and XP;
◾ Holdings and underweight position in Consumer Staples;* and
◾ Positions in VMware, General Electric, and FedEx.
Key detractors from relative results included the Fund's:
◾ Underweight position in Information Technology, the best-performing sector of the market, and selected holdings, such as Microsoft;
◾ Consumer Discretionary holdings, including JD.com; and
◾ Positions in Occidental Petroleum, Charles Schwab, Ovintiv, and Sanofi.
*The Fund’s performance and attribution results reflect a cash payment arising from an issuer tender offer that was accepted in the third quarter of 2023 to purchase shares of Magnit PJSC, a Russian Consumer Staples
company.
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 90 Years of Investment Experience
Dodge & Cox was founded in 1930. We have a stable and well- qualified team of investment professionals, most of whom have spent their entire careers at Dodge & Cox.
Experienced Investment Team
The Global Equity Investment Committee, which is the decision-making body for the Global Stock Fund, is a six-member committee with an average tenure of 25 years at Dodge & Cox.
One Business with a Single Decision-Making Office
Dodge & Cox manages equity (domestic, international, and global), fixed income (domestic and global), and balanced investments, all from one office in San Francisco.
Consistent Investment Approach
Our team decision-making process involves thorough, bottom-up 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. Investing in non-U.S. securities may entail risk due to foreign economic and political developments; this risk may be increased when investing in emerging markets. The Fund is also subject to currency risk. Please read the prospectus and summary prospectus for specific details regarding the Fund's risk profile.
Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security. Please see the Portfolio of Investments section in this report for a complete list of fund holdings.
PAGE 3 ◾ Dodge & Cox Global Stock Fund
Growth of $10,000 Over 10 Years (unaudited)
For an Investment Made on December 31, 2013 
Average Annual Total Return
For Periods Ended December 31, 2023
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Dodge & Cox Global Stock Fund | | | | |
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Expense Ratios
Per the Prospectus Dated May 1, 2023
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Dodge & Cox Global Stock Fund | | |
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| The Class X shares inception date is May 2, 2022. The returns shown prior to that date are for the Class I shares. |
| Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain Total Annual Fund Operating Expenses of the Fund’s Class X at 0.52% until April 30, 2026. This agreement cannot be terminated prior to April 30, 2026 other than by resolution of the Fund’s Board of Trustees. For purposes of the foregoing, ordinary expenses shall not include nonrecurring shareholder account fees, fees and expenses associated with Fund shareholder meetings, fees on portfolio transactions such as exchange fees, dividends and interest on short positions, fees and expenses of pooled investment vehicles that are held by the Fund, interest expenses and other fees and expenses related to any borrowings, taxes, brokerage fees and commissions and other costs and expenses relating to the acquisition and disposition of Fund investments, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other non-routine expenses or extraordinary expenses not incurred in the ordinary course of the Fund’s business, such as litigation expenses. The term of the agreement will automatically renew for subsequent three- year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term. The agreement does not permit Dodge & Cox to recoup any fees waived or payments made to the Fund for a prior year. |
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 800-621-3979 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 MSCI ACWI (All Country World Index) Index is a broad-based, unmanaged equity market index aggregated from developed market and emerging market country indices. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.
MSCI ACWI is a service mark of MSCI Barra. For more information about this index, visit:
www.dodgeandcox.com/globalstockfund
Dodge & Cox Global Stock Fund ◾ PAGE 4
Portfolio Information (unaudited) December 31, 2023
Sector Diversification(a) | |
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Region Diversification(a) | |
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Developed Europe (excluding United Kingdom) | |
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| Net Cash & Other includes cash, short-term investments, derivatives, receivables, and payables. |
Fund Expense Example (unaudited)
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 each share class in the table below provides information about actual account values and expenses based on the actual returns of the share class. 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 each share class in 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 share class and an assumed 5% annual rate of return before expenses (not the actual return of the share class). 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 other mutual funds.
Six Months Ended
December 31, 2023 | Beginning Account Value
7/1/2023 | Ending Account Value
12/31/2023 | Expenses Paid
During Period* | |
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Based on hypothetical 5% yearly return | | | | |
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Based on hypothetical 5% yearly return | | | | |
| Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (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).
PAGE 5 ◾ Dodge & Cox Global Stock Fund
Consolidated Portfolio of Investments December 31, 2023
|
| | |
Communication Services: 10.8% |
Media & Entertainment: 9.7% |
Alphabet, Inc., Class C(a) (United States) | | |
Baidu, Inc. ADR(a) (China) | | |
Charter Communications, Inc., Class A(a) (United States) | | |
Comcast Corp., Class A (United States) | | |
DISH Network Corp., Class A(a) (United States) | | |
Grupo Televisa SAB ADR (Mexico) | | |
Meta Platforms, Inc., Class A(a) (United States) | | |
| | |
Telecommunication Services: 1.1% |
T-Mobile U.S., Inc. (United States) | | |
| | |
Consumer Discretionary: 8.4% |
Automobiles & Components: 0.7% |
Stellantis NV (Netherlands) | | |
Consumer Discretionary Distribution & Retail: 4.9% |
Alibaba Group Holding, Ltd. ADR (China) | | |
Amazon.com, Inc.(a) (United States) | | |
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Prosus NV, Class N (China) | | |
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Consumer Durables & Apparel: 0.9% |
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Booking Holdings, Inc.(a) (United States) | | |
Entain PLC (United Kingdom) | | |
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Food, Beverage & Tobacco: 1.9% |
Anheuser-Busch InBev SA/NV (Belgium) | | |
Household & Personal Products: 1.2% |
Haleon PLC (United Kingdom) | | |
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|
Occidental Petroleum Corp. (United States) | | |
Occidental Petroleum Corp., Warrant(a) (United States) | | |
Ovintiv, Inc. (United States) | | |
Suncor Energy, Inc. (Canada) | | |
TotalEnergies SE (France) | | |
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Banco Santander SA (Spain) | | |
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Barclays PLC (United Kingdom) | | |
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Standard Chartered PLC (United Kingdom) | | |
Truist Financial Corp. (United States) | | |
Wells Fargo & Co. (United States) | | |
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Financial Services: 11.8% |
Capital One Financial Corp. (United States) | | |
Fidelity National Information Services, Inc. (United States) | | |
Fiserv, Inc.(a) (United States) | | |
Jackson Financial, Inc., Class A (United States) | | |
The Bank of New York Mellon Corp. (United States) | | |
The Charles Schwab Corp. (United States) | | |
UBS Group AG (Switzerland) | | |
XP, Inc., Class A (Brazil) | | |
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Aegon, Ltd. (Netherlands) | | |
Aviva PLC (United Kingdom) | | |
MetLife, Inc. (United States) | | |
Prudential PLC (Hong Kong) | | |
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Health Care Equipment & Services: 6.3% |
Baxter International, Inc. (United States) | | |
CVS Health Corp. (United States) | | |
Fresenius Medical Care AG (Germany) | | |
GE HealthCare Technologies, Inc. (United States) | | |
The Cigna Group (United States) | | |
UnitedHealth Group, Inc. (United States) | | |
Zimmer Biomet Holdings, Inc. (United States) | | |
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Pharmaceuticals, Biotechnology & Life Sciences: 12.6% |
Alnylam Pharmaceuticals, Inc.(a) (United States) | | |
Avantor, Inc.(a) (United States) | | |
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BioMarin Pharmaceutical, Inc.(a) (United States) | | |
Elanco Animal Health, Inc.(a) (United States) | | |
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Incyte Corp.(a) (United States) | | |
Neurocrine Biosciences, Inc.(a) (United States) | | |
Novartis AG (Switzerland) | | |
See accompanying Notes to Consolidated Financial StatementsDodge & Cox Global Stock Fund ◾ PAGE 6
Consolidated Portfolio of Investments December 31, 2023
Common Stocks (continued) |
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Regeneron Pharmaceuticals, Inc.(a) (United States) | | |
Roche Holding AG (Switzerland) | | |
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General Electric Co. (United States) | | |
Johnson Controls International PLC (United States) | | |
Mitsubishi Electric Corp. (Japan) | | |
RTX Corp. (United States) | | |
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FedEx Corp. (United States) | | |
Norfolk Southern Corp. (United States) | | |
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Information Technology: 3.7% |
Semiconductors & Semiconductor Equipment: 0.9% |
Microchip Technology, Inc. (United States) | | |
Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan) | | |
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Software & Services: 1.5% |
Microsoft Corp. (United States) | | |
Technology, Hardware & Equipment: 1.3% |
Coherent Corp.(a) (United States) | | |
TE Connectivity, Ltd. (United States) | | |
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Akzo Nobel NV (Netherlands) | | |
Celanese Corp. (United States) | | |
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Holcim, Ltd. (Switzerland) | | |
International Flavors & Fragrances, Inc. (United States) | | |
LyondellBasell Industries NV, Class A (United States) | | |
Mitsubishi Chemical Group Corp. (Japan) | | |
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Teck Resources, Ltd., Class B (Canada) | | |
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Total Common Stocks
(Cost $7,990,569,940) | | |
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Itau Unibanco Holding SA, Pfd (Brazil) | | |
Information Technology: 0.5% |
Technology, Hardware & Equipment: 0.5% |
Samsung Electronics Co., Ltd., Pfd (South Korea) | | |
Total Preferred Stocks
(Cost $101,554,009) | | |
Short-Term Investments: 1.8% |
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Canadian Treasury Bill
0.000%, dated 12/28/23, due 1/4/24, maturity value $62,586,905 | | |
Repurchase Agreements: 0.8% |
Fixed Income Clearing Corporation(b) 5.31%, dated 12/29/23, due 1/2/24, maturity value $59,034,810 | | |
Fixed Income Clearing Corporation(b) 2.70%, dated 12/29/23, due 1/2/24, maturity value $32,387,713 | | |
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State Street Institutional U.S. Government Money Market Fund - Premier Class | | |
Total Short-Term Investments
(Cost $197,792,803) | |
Total Investments In Securities
(Cost $8,289,916,752) | | |
Other Assets Less Liabilities | | |
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| Repurchase agreement is collateralized by U.S. Treasury Notes 2.75%-3.00%, 10/31/25-8/15/32. Total collateral value is $92,951,064. |
| The Fund usually classifies a company or issuer based on its country of risk, but may designate a different country in certain circumstances. |
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ADR: American Depositary Receipt |
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PAGE 7 ◾ Dodge & Cox Global Stock FundSee accompanying Notes to Consolidated Financial Statements
Consolidated Portfolio of Investments December 31, 2023
Futures Contracts
| | | | Value /
Unrealized
Appreciation/
(Depreciation) |
MSCI EAFE Index— Long Position | | | | |
MSCI Emerging Markets Index— Long Position | | | | |
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Currency Forward Contracts
| | | | Unrealized Appreciation
(Depreciation) |
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CNH: Chinese Yuan Renminbi |
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See accompanying Notes to Consolidated Financial StatementsDodge & Cox Global Stock Fund ◾ PAGE 8
Consolidated Portfolio of Investments December 31, 2023
Currency Forward Contracts (continued)
| | | | Unrealized Appreciation (Depreciation) |
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Unrealized gain on currency forward contracts | | | |
Unrealized loss on currency forward contracts | | | |
Net unrealized gain on currency forward contracts | | | | |
The listed counterparty may be the parent company or one of its subsidiaries.
PAGE 9 ◾ Dodge & Cox Global Stock FundSee accompanying Notes to Consolidated Financial Statements
Consolidated
Statement of Assets and Liabilities
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Investments in securities, at value (cost $8,289,916,752) | |
Unrealized appreciation on currency forward contracts | |
Cash pledged as collateral for currency forward contracts | |
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Cash denominated in foreign currency (cost $8,740,560) | |
Deposits with broker for futures contracts | |
Receivable for variation margin for futures contracts | |
Receivable for investments sold | |
Receivable for Fund shares sold | |
Dividends and interest receivable | |
Expense reimbursement receivable | |
Prepaid expenses and other assets | |
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Unrealized depreciation on currency forward contracts | |
Cash received as collateral for currency forward contracts | |
Payable for investments purchased | |
Payable for Fund shares redeemed | |
Deferred foreign capital gains tax | |
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Shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
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Shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
Consolidated
Statement of Operations
| Year Ended
December 31, 2023 |
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Dividends (net of foreign taxes of $9,825,451) | |
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Administrative services fees | |
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Custody and fund accounting fees | |
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Expenses reimbursed by investment manager | |
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Realized and Unrealized Gain (Loss): | |
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Investments in securities (net of foreign capital gains tax of $3,039,062) | |
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Currency forward contracts | |
Foreign currency transactions | |
Net change in unrealized appreciation/depreciation | |
Investments in securities (net of change in deferred foreign capital gains tax of $1,698,643) | |
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Currency forward contracts | |
Foreign currency translation | |
Net realized and unrealized gain | |
Net Change in Net Assets From Operations | |
See accompanying Notes to Consolidated Financial StatementsDodge & Cox Global Stock Fund ◾ PAGE 10
Consolidated
Statement of Changes in Net Assets
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Net change in unrealized appreciation/depreciation | | |
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Distributions to Shareholders: | | |
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Proceeds from sales of shares | | |
Reinvestment of distributions | | |
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Proceeds from sales of shares | | |
Reinvestment of distributions | | |
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Net change from Fund share transactions | | |
Total change in net assets | | |
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Net change in shares outstanding | | |
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Net change in shares outstanding | | |
PAGE 11 ◾ Dodge & Cox Global Stock FundSee accompanying Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note 1: Organization and Significant Accounting Policies
Dodge & Cox Global 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, as an open-end management investment company. The Fund commenced operations on May 1, 2008, and seeks long-term growth of principal and income. The Fund invests primarily in a diversified portfolio of U.S. and foreign equity securities. Foreign investing, especially in developing countries, has special risks such as currency and market volatility and political and social instability. These and other risk considerations are discussed in the Fund’s Prospectus.
On May 1, 2022, the then-outstanding shares of the Fund were redesignated as Class I Shares, and Class X shares of the Fund were established. The share classes have different eligibility requirements and expense structures due to differing shareholder servicing arrangements. The share classes have the same rights as to redemption, dividends and liquidation proceeds, and voting privileges, except that each class has the exclusive right to vote on matters affecting only its class.
The Fund is an investment company and follows the accounting and reporting guidance issued in Topic 946 by the Financial Accounting Standards Board. 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 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 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.
Investments initially valued in currencies other than the U.S. dollar are converted to the U.S. dollar using prevailing exchange rates. Currency forward contracts are valued based on the prevailing forward exchange rates of the underlying currencies. As a result, the Fund’s net assets may be affected by changes in the value of currencies in relation to the U.S. dollar.
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 Dodge & Cox. The Board of Trustees has appointed Dodge & Cox, the Fund’s investment manager, as its "valuation designee", as permitted
by Rule 2a-5 under the Investment Company Act of 1940, 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 net asset value. 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 the Fund to calculate its net asset value may differ from quoted or published prices 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. Non-cash dividends, 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 accrual basis.
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.
Share class accounting Investment income, realized and unrealized gains and losses and expenses, other than class-specific
Dodge & Cox Global Stock Fund ◾ PAGE 12
Notes to Consolidated Financial Statements
expenses, are allocated to each share class of the Fund based upon the proportion of net assets of each class.
Foreign taxes The Fund is 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 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 ("EU 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 in the Consolidated Statement of Assets and Liabilities. Expenses incurred related to filing EU reclaims are recorded on the accrual basis in professional services in the Consolidated Statement of Operations. Expenses that are contingent upon successful EU reclaims are recorded in professional services in the Consolidated Statement of Operations once the amount is known.
Capital gains taxes are incurred upon disposition of certain foreign securities. Expected capital gains taxes on appreciated securities, if any, are accrued as unrealized losses and incurred capital gains taxes are reflected as realized losses upon the sale of the related security. Currency taxes may be incurred when the Fund purchases certain foreign currencies related to securities transactions
Foreign currency translation The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the prevailing exchange rates of such currencies against the U.S. dollar. The market value of investment securities and other assets and liabilities are translated at the exchange rate as of the valuation date. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the transaction date.
Reported realized and unrealized gain (loss) on investments include foreign currency gain (loss) related to investment transactions.
Reported realized and unrealized gain (loss) on foreign currency transactions and translation include the following: disposing/holding of foreign currency, the difference in exchange rate between the trade and settlement dates on securities transactions, the difference in exchange rate between the accrual and payment dates on dividends, and currency losses on the purchase of foreign currency in certain countries that impose taxes on such transactions.
Repurchase agreements Repurchase agreements are transactions under which a Fund purchases a security from a 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 regular custodian or third party 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.
Consolidation The Fund may invest in certain securities through its wholly owned subsidiary, Dodge & Cox Global Stock Fund Cayman, Ltd. (the “Subsidiary”). The Subsidiary is a Cayman Islands exempted company and invests in certain securities consistent with the investment objective of the Fund. The Fund’s Consolidated Financial Statements, including the Consolidated Portfolio of Investments, consist of the holdings and accounts of the Fund and the Subsidiary. All intercompany transactions and balances have been eliminated. At December 31, 2023, the Subsidiary had net assets of $100, which represented less than 0.01% of the Fund’s consolidated 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 below.
◾ Level 1: Unadjusted 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 December 31, 2023:
| | LEVEL 2
(Other Significant
Observable Inputs) |
|
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PAGE 13 ◾ Dodge & Cox Global Stock Fund
Notes to Consolidated Financial Statements
| | LEVEL 2 (Other Significant Observable Inputs) |
|
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|
| | |
| | |
| | |
| | |
|
|
| | |
Currency Forward Contracts |
| | |
| | |
The following is a reconciliation of the Fund's holdings for which Level 3 inputs were used in determining value.
| |
| |
| |
| |
Net change in unrealized depreciation | |
| |
Note 3: Derivative Instruments
The Fund may use derivatives either to minimize the impact of certain risks to one or more of its investments (as a ‘‘hedging technique’’) or to implement its investment strategy. A derivative is a financial instrument whose value is derived from a security, currency, interest rate, index, or other financial instrument.
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 the contract is purchased. Futures contracts are exchange-traded. 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 to secure the Fund's obligation to perform. Initial margin is returned to the Fund when the futures contract is closed. Subsequent payments (referred to as "variation margin") are made to or received from the clearing broker on a daily basis based on changes in the market value of the contract. Changes in the market value of open futures contracts are recorded as unrealized appreciation or depreciation in the Consolidated Statement of Operations. Realized gains and losses on futures contracts are recorded in the Consolidated Statement of Operations at the closing or expiration of the contracts. Cash deposited with a broker as initial margin is recorded in the Consolidated Statement of Assets and Liabilities. A receivable and/or payable to brokers for daily variation margin is also recorded in the Consolidated 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 used equity index futures contracts to create equity exposure, equal to some or all of its non-equity net assets.
Currency forward contracts Currency forward contracts are agreements to purchase or sell a specific currency at a specified future date and price. Currency forward contracts are traded over-the-counter. The values of currency forward contracts change daily based on the prevailing forward exchange rates of the underlying currencies. Changes in the value of open contracts are recorded as unrealized appreciation or depreciation in the Consolidated Statement of Operations. When a currency forward contract is closed, the Fund records a realized gain or loss in the Consolidated Statement of Operations equal to the difference between the value at the time the contract was opened and the value at the time it was closed.
Losses from these transactions may arise from unfavorable changes in currency values or if a counterparty does not perform under a contract’s terms.
The Fund used currency forward contracts to hedge direct and indirect foreign currency exposure.
Additional derivative information The following identifies the location on the Consolidated Statement of Assets and Liabilities and values of the Fund's derivative instruments categorized by primary underlying risk exposure.
| | Foreign
Exchange
Derivatives | |
| | | |
Unrealized appreciation on currency forward contracts | | | |
| | | |
| | | |
| | | |
Unrealized depreciation on currency forward contracts | | | |
| Includes cumulative appreciation (depreciation). Only the current day’s variation margin is reported in the Consolidated Statement of Assets and Liabilities. |
The following summarizes the effect of derivative instruments on the Consolidated Statement of Operations, categorized by primary underlying risk exposure.
| | Foreign
Exchange
Derivatives | |
| | | |
| | | |
Currency forward contracts | | | |
| | | |
Net change in unrealized appreciation/depreciation |
| | | |
Currency forward contracts | | | |
| | | |
Dodge & Cox Global Stock Fund ◾ PAGE 14
Notes to Consolidated Financial Statements
The following summarizes the range of volume in the Fund's derivative instruments during the year ended December 31, 2023.
| | |
| | |
Currency forward contracts | | |
The Fund may enter into various over-the-counter derivative contracts governed by International Swaps and Derivatives Association master agreements (“ISDA agreements”). The Fund’s ISDA agreements, which are separately negotiated with each dealer counterparty, specify (i) events of default and other events permitting a party to terminate some or all of the contracts thereunder and (ii) the process by which those contracts will be valued for purposes of determining termination payments. If some or all of the contracts under a master agreement are terminated because of an event of default or similar event, the values of all terminated contracts must be netted to determine a single payment owed by one party to the other. To the extent amounts owed to the Fund by its counterparties are not collateralized, the Fund is at risk of those counterparties’ non-performance. The Fund attempts to mitigate counterparty credit risk by entering into contracts only with counterparties it believes to be of good credit quality, by exchanging collateral, and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Fund does not offset assets and liabilities that are subject to a master netting arrangement in the Consolidated Statement of Assets and Liabilities.
The Fund’s ability to net assets and liabilities and to offset collateral pledged or received is based on contractual netting/offset provisions in the ISDA agreements. The following table presents the Fund’s net exposure to each counterparty for derivatives that are subject to enforceable master netting arrangements as of December 31, 2023.
| Gross
Amount of
Recognized
Assets | Gross
Amount of
Recognized
Liabilities | | |
| | | | |
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| Cash collateral pledged/(received) in excess of derivative assets/liabilities is not presented in this table. The total cash collateral is presented on the Fund's Consolidated Statement of Assets and Liabilities. |
| Represents the net amount receivable from (payable to) the counterparty in the event of a default. |
Note 4: Related Party Transactions
Investment advisory fee The Fund pays an investment advisory fee monthly at an annual rate of 0.50% of the Fund’s average daily net assets to Dodge & Cox, investment manager of the Fund.
Administrative services fee The Fund pays Dodge & Cox a fee for administrative and shareholder services. The fee is accrued daily and paid monthly equal to an annual rate of the average daily net assets of 0.10% for Class I shares and 0.05% for Class X shares. Under this agreement, Dodge & Cox also pays for the Fund's transfer agent fees.
Expense reimbursement Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain the ratio of total operating expenses of the Class X shares to average net assets of the Class X shares at 0.52% through April 30, 2026. The term of the agreement will automatically renew for subsequent three-year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term. For the year ended December 31, 2023, Dodge & Cox reimbursed expenses of $262,727.
Fund officers and trustees All officers and two of the trustees of the Trust are current or former senior executive officers of Dodge & Cox. The Trust pays a fee only to those trustees who are not affiliated with Dodge & Cox.
Note 5: Income Tax Information and Distributions to Shareholders
A provision for federal income taxes is not required since the Fund intends 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. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Financial reporting records are adjusted for permanent book to tax differences at year end to reflect tax character. Book to tax differences are primarily due to differing treatments of wash sales, foreign currency realized gain (loss), foreign capital gains tax, certain corporate action transactions, derivatives, and distributions.
Distributions during the years noted below were characterized as follows for federal income tax purposes:
| Year Ended
December 31, 2023 | Year Ended
December 31, 2022 |
| | |
| | |
| | |
| | |
| | |
| | |
At December 31, 2023, the tax basis components of distributable earnings were as follows:
Undistributed ordinary income | |
Undistributed long-term capital gain | |
Net unrealized appreciation | |
Total distributable earnings | |
PAGE 15 ◾ Dodge & Cox Global Stock Fund
Notes to Consolidated Financial Statements
At December 31, 2023, unrealized appreciation and depreciation for investments and derivatives based on cost for federal income tax purposes were as follows:
| |
| |
| |
Net unrealized appreciation | |
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 6: 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 year.
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 year ended December 31, 2023, the Fund’s commitment fee amounted to $59,582 and is reflected as a Miscellaneous Expense in the Consolidated Statement of Operations. Interest on borrowings is charged at the prevailing rate. There were no borrowings on the Line of Credit during the year.
Note 7: Purchases and Sales of Investments
For the year ended December 31, 2023, purchases and sales of securities, other than short-term securities, aggregated $2,047,449,381 and $2,985,963,708, respectively.
Note 8: Subsequent Events
Fund management has determined that no material events or transactions occurred subsequent to December 31, 2023, and through the date of the Fund’s financial statements issuance, which require disclosure in the Fund’s financial statements.
Dodge & Cox Global Stock Fund ◾ PAGE 16
Consolidated Financial Highlights
Selected data and ratios
(for a share outstanding throughout each period) | |
| | | | | |
| | | | | |
Net asset value, beginning of year | | | | | |
Income from investment operations: | | | | | |
| | | | | |
Net realized and unrealized gain (loss) | | | | | |
Total from investment operations | | | | | |
Distributions to shareholders from: | | | | | |
| | | | | |
| | | | | |
| | | | | |
Net asset value, end of year | | | | | |
| | | | | |
Ratios/supplemental data: | | | | | |
Net assets, end of year (millions) | | | | | |
Ratio of expenses to average net assets | | | | | |
Ratio of net investment income to average net assets | | | | | |
| | | | | |
| | | | | |
Net asset value, beginning of year | | | | | |
Income from investment operations: | | | | | |
| | | | | |
Net realized and unrealized gain (loss) | | | | | |
Total from investment operations | | | | | |
Distributions to shareholders from: | | | | | |
| | | | | |
| | | | | |
| | | | | |
Net asset value, end of year | | | | | |
| | | | | |
Ratios/supplemental data: | | | | | |
Net assets, end of period (millions) | | | | | |
Ratio of expenses to average net assets | | | | | |
Ratio of expenses to average net assets, before reimbursement by investment manager | | | | | |
Ratio of net investment income to average net assets | | | | | |
| | | | | |
| Net investment income per share includes significant amounts received for EU reclaims related to prior years, which amounted to approximately $0.01 per share. Excluding such amounts, the ratio of net investment income to average net assets would have been 1.47%. |
| For 2022, the period covers 5/2/2022 (commencement of operations) to 12/31/2022 |
| |
See accompanying Notes to Consolidated Financial Statements
PAGE 17 ◾ Dodge & Cox Global Stock Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Dodge & Cox Funds and Shareholders of Dodge & Cox Global Stock Fund
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated portfolio of investments, of Dodge & Cox Global Stock Fund (one of the funds constituting Dodge & Cox Funds, referred to hereafter as the "Fund") as of December 31, 2023, the related consolidated statement of operations for the year ended December 31, 2023, the consolidated statement of changes in net assets for each of the two years in the period ended December 31, 2023, including the related notes, and the consolidated financial highlights for each of the periods indicated therein (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2023 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 2023 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2024
We have served as the auditor of one or more investment companies in the Dodge & Cox Funds since 1931.
Dodge & Cox Global Stock Fund ◾ PAGE 18
Special 2023 Tax Information (unaudited)
The following information is provided pursuant to provisions of the Internal Revenue Code:
In 2023, the Fund elected to pass through to shareholders foreign source income of $185,607,885 and foreign taxes paid of $12,864,515.
The Fund designates up to a maximum of $249,729,633 of its distributions paid to shareholders in 2023 as qualified dividends (treated for federal income tax purposes in the hands of shareholders as taxable at a maximum rate of 20%).
For shareholders that are corporations, the Fund designates 31% of its ordinary dividends paid to shareholders in 2023 as dividends from domestic corporations eligible for the corporate dividends received deduction, provided that the shareholder otherwise satisfies applicable requirements to claim that deduction.
Funds' Liquidity Risk Management Program
(unaudited)
The Funds have adopted and implemented a written liquidity risk management program (“Program”) as required by Rule 22e-4 under the Investment Company Act. The Program is reasonably designed to assess and manage each Fund’s liquidity risk, taking into consideration the Fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources including the Funds’ interfund lending facility and line of credit.
The Funds’ Board of Trustees has approved the appointment of a Liquidity Risk Management Committee, which includes representatives from Dodge & Cox’s Legal, Compliance, Treasury, Operations, Trading, and Portfolio Management departments, and is responsible for the Program’s administration and oversight and for reporting to the Board on at least an annual basis regarding the Program’s operation and effectiveness.
The Liquidity Risk Management Committee refreshed its assessment of the Funds’ liquidity risk profiles, and considered the adequacy and effectiveness of the Program’s operations for the 12 months ended September 30, 2023 (the “covered period”) in order to prepare a written report to the Board of Trustees for consideration at its meeting held on December 8, 2023. The report concluded that (i) the Funds had adequate liquidity to operate effectively throughout the covered period; (ii) each Fund’s investment strategy continues to be appropriate for an open end fund; and (iii) the Funds’ Program is reasonably designed to assess and manage its liquidity risk.
Fund Holdings
The Fund provides a complete list of its 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 Fund’s Forms N-CSR and Part F of N-PORT on the SEC’s website at sec.gov. A list of the Fund’s 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.
Proxy Voting
For a free copy of the Fund’s proxy voting policies and procedures, please call 800-621-3979, 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 ended June 30 is also available at dodgeandcox.com or shareholders may view the Fund's Form N-PX 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 share the 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 800-621-3979. Your request will be implemented within 30 days.
PAGE 19 ◾ Dodge & Cox Global Stock Fund
Dodge & Cox Funds — Executive Officer & Trustee Information
| Position with Trust
(Year of Election or
Appointment) | Principal Occupation During Past Five Years and Other Relevant Experience | Other Directorships of Public Companies Held
by Trustees |
Interested Trustees and Executive Officers |
| | Chairman and Director, Dodge & Cox (until 2022); Chief Investment Officer (until 2022) and member of U.S. Equity Investment Committee and Emerging Markets Equity Investment Committee (until 2022); Global Equity Investment Committee and International Equity Investment Committee (until 2021); U.S. Fixed Income Investment Committee (until 2019) | |
| Chair (since 2022)
President
(since 2014) and
Trustee (since 1993) | Chair, Chief Executive Officer, and Director, Dodge & Cox; President (until 2022); Co-Director of Fixed Income (until 2020); Director of Fixed Income (until 2019); member of U.S. Fixed Income Investment Committee and Global Fixed Income Investment Committee | |
| Chief Legal Officer
(since 2019) and Secretary (since 2017) | Vice President, General Counsel, and Secretary (since 2017), Dodge & Cox | |
| | Funds Treasurer (since 2021), Dodge & Cox; Vice President (since 2020); Financial Oversight and Control Analyst (until 2021) | |
| Chief Compliance
Officer (since 2010) | Vice President and Chief Compliance Officer, Dodge & Cox | |
|
| | CFO, athenahealth, Inc. (2019-2022) | Director, Synopsys Inc. (software company); Director, Carter's Inc. (children's apparel); Director, Eastern Bankshares, Inc. (financial services and banking services) |
| | Professor of Economics, Stanford University; Director of the Economics of Education Program, National Bureau of Economic Research; Senior Fellow, Hoover Institution and Stanford Institute for Economic Policy Research | |
| | Senior Counsel, Arnold & Porter (law firm) (2015-2018); Partner, Arnold & Porter (until 2015); Director, Howard, Rice, Nemerovski, Canady, Falk & Rabkin (1977-2011) | |
| | CFO, Pixar Animation Studios (1999-2004) | Director, Netflix, Inc. (internet television); Director, Blend (software company); Director, Bumble (online dating) |
Gabriela Franco
Parcella (55) | | President (since 2020) and Executive Managing Director, Merlone Geier Partners (2018-2019); Chairman, President, and CEO, Mellon Capital (2011 to 2017); COO, Mellon Capital (1997 to 2011) | |
| | President and CEO, QinetiQ US (since 2022); Corporate Vice President/President Enterprise Services, Northrop Grumman (2012-2022) | |
| | Robert and Marion Oster Distinguished Military Fellow, Hoover Institution (since 2012); Admiral, United States Navy (Ret.); U.S. Navy Chief of Naval Operations (2007-2011) | Director, Northrop Grumman Corp. (global security); Director, Maersk Line, Limited (shipping and transportation) |
| | Executive Vice President, Managing Director, Fixed Income at Loomis Sayles & Company, L.P. (2003-2011) | |
| The address for each Officer and Trustee is 555 California Street, 40th Floor, San Francisco, California 94104. Each Officer and Trustee oversees all seven series in the Dodge & Cox Funds complex and serves for an indefinite term. |
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 800-621-3979.
Dodge & Cox Global Stock Fund ◾ PAGE 20
dodgeandcox.com
For Fund literature, transactions, and account
information, please visit the Funds’ website.
or write or call:
Dodge & Cox Funds
P.O. Box 219502
Kansas City, Missouri 64121-9502
(800) 621-3979
Investment Manager
Dodge & Cox
555 California Street, 40th Floor
San Francisco, California 94104
(415) 981-1710
Principal Underwriter
Foreside Fund Services, LLC
3 Canal Plaza, Suite 100
Portland, Maine 04101
(866) 251-6920
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 December 31, 2023, 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.
International Stock Fund | Class I (dodfx) | Class X (doxfx)
ESTABLISHED 2001
Important Notice:
The Securities and Exchange Commission has adopted new regulations that will impact the design and delivery of future Semi-Annual and Annual Reports. Beginning with the 2024 Semi-Annual Reports, paper copies will be mailed to you unless you have opted for electronic delivery of the reports.
12/23 ISF AR Printed on recycled paper 
To Our Shareholders (unaudited)
The Dodge & Cox International Stock Fund—Class I had a total return of 16.70% for the year ended December 31, 2023, compared to a return of 18.24% for the MSCI EAFE (Europe, Australasia, Far East) Index.1
Market Commentary
Global equity markets performed strongly in the first half of 2023, declined modestly in the third quarter, and surged in the fourth quarter. Investor sentiment improved as inflation decelerated and investors became increasingly convinced that interest rates have peaked. As a result, most developed and emerging markets posted strong returns for the full year: the MSCI EAFE appreciated 18.2%, and the MSCI Emerging Markets ex China Index2 returned 20.0%. However, the MSCI China Index3 declined 11.2% due to growing macroeconomic concerns and heightened geopolitical tensions. Therefore, the overall MSCI Emerging Markets Index4 (which includes China) rose only 9.8%.
International value stocks5 outperformed growth stocks by 1.4 percentage points during 2023.6 The valuation gap between value and growth stocks remains wide at 1.7 standard deviations7: the MSCI EAFE Value Index8 trades at 9.8 times forward earnings9 compared to 20.1 times for the MSCI EAFE Growth Index.10
We are also seeing divergence across geographies. The valuation differential between international and U.S. equities is substantial: the MSCI EAFE trades at 13.2 times forward earnings, a significant discount to the S&P 500 Index11 at 20.4 times. In addition, Chinese equities became more inexpensive in 2023, while Japanese equities became more expensive amid an improvement in corporate governance practices.
Investment Strategy
When macroeconomic concerns and geopolitical tensions dominate the headlines, as was the case in 2023, how do we navigate through the market noise? The answer is straightforward: we focus on finding individual companies with strong business fundamentals and attractive valuations. This combination provides a compelling foundation for long-term returns. Our experienced investment team’s deep institutional knowledge of companies and industry dynamics enables us to unearth new opportunities and adjust portfolio positioning.
During portions of 2023, market volatility created opportunities for the Fund. As discussed below, we trimmed the Fund’s Financials holdings as they outperformed and redeployed the proceeds into other areas of the portfolio. We found more opportunities in consumer-related companies, an area of the market where we had previously not found much value due to relatively expensive valuations. Furthermore, we added to select China-Internet holdings12 that were trading at depressed valuations.
Financials
Despite the U.S. regional banking crisis and concerns about global financial contagion in the first half of 2023, Financials was the Fund’s top-contributing sector for the full year (up 29.1% compared to up
19.2% for the MSCI EAFE sector). In the eye of the storm, our global Financials team carefully reviewed the Fund’s holdings, including stress-testing balance sheets, engaging with management teams, and closely monitoring regulatory developments. We concluded that the issues at a few U.S. regional banks were not representative of the broader global banking system. Our investment approach allowed us to take advantage of the volatility in the sector and add to several holdings—including BNP Paribas and Banco Santander—that later significantly outperformed as their balance sheets proved resilient, and their earnings benefited from a combination of rising interest rates and contained credit losses.13 Brazilian holdings XP and Itau Unibanco also performed strongly and were up 79.6% and 53.6%, respectively.
We trimmed several holdings that outperformed, including UBS Group (another standout contributor, which appreciated 70.3%). UBS Group, a leading global asset manager, acquired Credit Suisse, which restored confidence in the stability of the Swiss economy and banking system. This was a favorable deal for UBS, which acquired nearly $58 billion in book value from Credit Suisse for only $3 billion, a substantial discount for a transaction of this magnitude. UBS’s share price surged in the second half of the year, making it the Fund’s top-contributing holding for 2023. We trimmed UBS, but it remains one of the Fund’s larger holdings (3.3% position). The company has an attractive mix of market-leading, capital-efficient, and geographically diversified businesses. UBS has created significant shareholder value in recent years through its high return on invested capital and strong capital allocation. While the merger introduces new risks (e.g., increased complexity, integration challenges, litigation), we have considered them in our analysis and believe the benefits outweigh the risks.
Despite these reductions, the Fund remains overweight Financials (25.8% versus 18.9% in the MSCI EAFE). These holdings are widely diversified across business segments and geographies. We believe these developed and emerging market holdings have attractive risk/reward profiles due to their resilient balance sheets, improved profitability, attractive capital return, and inexpensive valuations.
Greater China
After a strong finish to 2022, macroeconomic and geopolitical uncertainty weighed on China’s equity market in 2023. We used this weakness as an opportunity to add to some of the Fund’s China-Internet holdings, an area where we continue to find attractive valuations, strong balance sheets, shareholder-aligned management teams, and exposure to secular growth markets. Alibaba and JD.com are two holdings that we added to during 2023.
Alibaba, one of the Fund’s largest China Internet holdings, experienced a number of headwinds throughout the year. The e-commerce giant battled increased competition and a slowing domestic economy. To address these challenges, Alibaba’s management announced a reorganization to split its business units into independently run companies, each with a standalone board, incentive programs, and self-financing opportunities. We believe the announced plan should lead to better execution and recognition of
PAGE 1 ◾ Dodge & Cox International Stock Fund
the tremendous discount the company trades at on a sum-of-the-parts basis. In addition, Alibaba’s core domestic e-commerce business has 51% market share and is asset-light, high-margin, and highly cash-generative. Alibaba also enhanced its share buyback program, which is well supported by its strong free cash flow14 generation. Alibaba accounted for 1.9% of the Fund on December 31.
In addition, we opportunistically added to JD.com, which has also faced increased competition in the e-commerce space. In response, management has announced its intention to add more product offerings by growing its third-party business to better complement its popular first-party franchise. While this is still in the early stages, it is a sign management acknowledges the increased competition in the e-commerce space and desires to remain a major market player. On top of its attractive valuation, JD.com has competitive advantages with high-quality products, logistics, and a strong consumer mindshare. JD.com (1.0% position) currently trades at 9.3 times forward earnings.
While Greater China15 detracted from the Fund’s results in 2023, we remain enthusiastic about the Fund’s holdings in this region. That said, given the heightened risk associated with the region, it’s important to note that 90% of the Fund is invested in other areas of the market.
Consumer-Related Opportunities
While we have been closely monitoring consumer-related sectors for several years, recently lower valuations offered attractive entry points for us to start new positions in Adidas, Danone, Yum China, and International Flavors & Fragrances (IFF). One particularly intriguing new holding, IFF, is an example of how we look beyond country and sector classifications and focus on a company’s underlying exposures. While domiciled in the United States and classified as a Materials company, we view IFF as a global leader (approximately 71% of its revenue is derived from outside the United States) with a consumer-related lens—selling flavors, scents, and other key ingredients to food, beverage, and consumer products companies.
2022 and 2023 were challenging years for IFF. The company’s margins and valuation fell to their lowest levels in over a decade due to merger integration challenges. Management is cutting costs to boost margins. Moreover, activist investors are focused on keeping management disciplined and shareholders as a top priority. We believe these near-term challenges provided us an opportunity to buy a strong franchise at depressed levels. IFF operates in an attractive oligopolistic industry with high barriers to entry, low economic sensitivity, mission-critical inputs that are a small percentage of product costs, attractive growth, and historically stable margins. On December 31, IFF was a 0.9% position in the Fund.
In Closing
In periods of uncertainty and heightened volatility, significant opportunities can be unearthed by bottom-up, active managers like Dodge & Cox. We believe our portfolio is well-positioned and remain confident in our ability to navigate challenging economic and market conditions. We remain enthusiastic about the long-term outlook for
the Fund. However, valuation changes can occur swiftly and without warning, so we encourage our shareholders to maintain a long-term perspective.
Thank you for your continued confidence in our firm. As always, we welcome your comments and questions.
For the Board of Trustees, | |
| |
Dana M. Emery,
Chair and President | |
January 31, 2024
| All returns are stated in U.S. dollars, unless otherwise noted. The Funds’ 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 dividend and/or interest income but, unlike Fund returns, do not reflect fees or expenses. The MSCI EAFE (Europe, Australasia, Far East) Index is a broad-based, unmanaged equity market index aggregated from developed market country indices, excluding the United States and Canada. It covers approximately 85% of the free float-adjusted market capitalization in each country. |
| The MSCI Emerging Markets ex China Index captures large- and mid-cap representation across emerging market countries excluding China. |
| The MSCI China Index captures large- and mid-cap representation across China A shares, H shares, B shared, Red chips, and P chips. |
| The MSCI Emerging Markets Index captures large- and mid-cap representation across emerging market countries. |
| Generally, stocks that have lower valuations are considered “value” stocks, while those with higher valuations are considered “growth” stocks. |
| For the year ended December 31, 2023, the MSCI EAFE Value Index had a total return of 18.95% and the MSCI EAFE Growth Index had a total return of 17.58%. |
| Unless otherwise specified, all weightings and characteristics are as of December 31, 2023. Standard deviation measures the volatility of the Fund’s returns. Higher standard deviation represents higher volatility. |
| The MSCI EAFE Value Index captures large- and mid-cap securities exhibiting overall value style characteristics across developed market countries around the world, excluding the United States and Canada. The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price, and dividend yield. |
| Price-to-earnings (forward) ratios are calculated using 12-month forward earnings estimates from third-party sources as of the reporting period. Estimates reflect a consensus of sell-side analyst estimates, which may lag as market conditions change. |
| The MSCI EAFE Growth Index captures large- and mid-cap securities exhibiting overall growth style characteristics across developed market countries around the world, excluding the United States and Canada. The growth investment style characteristics for index construction are defined using five variables: long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate, long-term historical EPS growth trend, and long-term historical sales per share growth trend. |
| The S&P 500 Index is a market capitalization-weighted index of 500 large- capitalization stocks commonly used to represent the U.S. equity market. |
| The Fund’s China-Internet holdings are Alibaba, Baidu, JD.com, and Prosus. |
| The use of specific examples does not imply that they are more or less attractive investments than the portfolio’s other holdings. |
| Free cash flow is the cash a company generates after paying all expenses and loans. |
| Greater China includes China, Hong Kong, Macao, and Taiwan. |
Dodge & Cox International Stock Fund ◾ PAGE 2
2023 Performance Review for the Fund's Class I Shares (unaudited)
The Fund underperformed the MSCI EAFE by 1.54 percentage points in 2023.
Key contributors to relative results included the Fund's:
◾ Financials holdings, notably UBS Group, Itau Unibanco, and Banco Santander;
◾ Underweight position in the Consumer Staples* sector and select holdings;
◾ Materials holdings, including Holcim; and
◾ Position in Booking Holdings.
Key detractors from relative results included the Fund's:
◾ China Internet** holdings, notably JD.com, Alibaba, and Prosus;
◾ Underweight position in the Industrials sector and select holdings, particularly Johnson Controls;
◾ Information Technology holdings; and
◾ Health Care holdings, notably Bayer.
*The Fund’s performance and attribution results reflect a cash payment arising from an issuer tender offer that was accepted in the third quarter of 2023 to purchase shares of Magnit PJSC, a Russian Consumer Staples company.
**China Internet comprises Alibaba, Baidu, JD.com, and Prosus.
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 90 Years of Investment Experience
Dodge & Cox was founded in 1930. We have a stable and well- qualified team of investment professionals, most of whom have spent their entire careers at Dodge & Cox.
Experienced Investment Team
The International Equity Investment Committee, which is the decision-making body for the International Stock Fund, is a six-member committee with average tenure of 22 years at Dodge & Cox.
One Business with a Single Decision-Making Office
Dodge & Cox manages equity (domestic, international, and global), fixed income (domestic and global), and balanced investments, all from one office in San Francisco.
Consistent Investment Approach
Our team decision-making process involves thorough, bottom-up 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. Investing in non-U.S. securities may entail risk due to foreign economic and political developments; this risk may be increased when investing in emerging markets. The Fund is also subject to currency risk. Please read the prospectus and summary prospectus for specific details regarding the Fund's risk profile.
Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security. Please see the Portfolio of Investments section in this report for a complete list of fund holdings.
PAGE 3 ◾ Dodge & Cox International Stock Fund
Growth of $10,000 Over 10 Years (unaudited)
For an Investment Made on December 31, 2013 
Average Annual Total Return
For Periods Ended December 31, 2023
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Dodge & Cox International Stock Fund | | | | |
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Expense Ratios
Per the Prospectus Dated May 1, 2023
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Dodge & Cox International Stock Fund | | |
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| The Class X shares inception date is May 2, 2022. The returns shown prior to that date are for the Class I shares. |
| Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain Total Annual Fund Operating Expenses of the Fund’s Class X shares at 0.52% until April 30, 2026. This agreement cannot be terminated prior to April 30, 2026 other than by resolution of the Fund’s Board of Trustees. For purposes of the foregoing, ordinary expenses shall not include nonrecurring shareholder account fees, fees and expenses associated with Fund shareholder meetings, fees on portfolio transactions such as exchange fees, dividends and interest on short positions, fees and expenses of pooled investment vehicles that are held by the Fund, interest expenses and other fees and expenses related to any borrowings, taxes, brokerage fees and commissions and other costs and expenses relating to the acquisition and disposition of Fund investments, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other non-routine expenses or extraordinary expenses not incurred in the ordinary course of the Fund’s business, such as litigation expenses. The term of the agreement will automatically renew for subsequent three- year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term. The agreement does not permit Dodge & Cox to recoup any fees waived or payments made to the Fund for a prior year. |
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 800-621-3979 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 MSCI EAFE (Europe, Australasia, Far East) Index is a broad-based, unmanaged equity market index aggregated from developed market country indices, excluding the United States and Canada. It covers approximately 85% of the free float-adjusted market capitalization in each country. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.
MSCI EAFE is a service mark of MSCI Barra. For more information about this index, visit:
www.dodgeandcox.com/internationalstockfund
Dodge & Cox International Stock Fund ◾ PAGE 4
Portfolio Information (unaudited) December 31, 2023
Sector Diversification(a) | |
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Region Diversification(a) | |
Developed Europe (excluding United Kingdom) | |
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| Net Cash & Other includes cash, short-term investments, derivatives, receivables, and payables. |
Fund Expense Example (unaudited)
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 each share class in the table below provides information about actual account values and expenses based on the actual returns of the share class. 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 each share class in 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 share class and an assumed 5% annual rate of return before expenses (not the actual return of the share class). 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 other mutual funds.
Six Months Ended
December 31, 2023 | Beginning Account Value
7/1/2023 | Ending Account Value
12/31/2023 | Expenses Paid
During Period* | |
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Based on hypothetical 5% yearly return | | | | |
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Based on hypothetical 5% yearly return | | | | |
| Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (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).
PAGE 5 ◾ Dodge & Cox International Stock Fund
Consolidated Portfolio of Investments December 31, 2023
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Communication Services: 3.4% |
Media & Entertainment: 1.3% |
Baidu, Inc. ADR(a) (China) | | |
Grupo Televisa SAB ADR (Mexico) | | |
NetEase, Inc. ADR (China) | | |
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Telecommunication Services: 2.1% |
Deutsche Telekom AG (Germany) | | |
Liberty Global, Ltd., Class A(a) (Belgium) | | |
Liberty Global, Ltd., Class C(a) (Belgium) | | |
Millicom International Cellular SA SDR(a) (Guatemala) | | |
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Consumer Discretionary: 11.5% |
Automobiles & Components: 2.6% |
Honda Motor Co., Ltd. (Japan) | | |
Stellantis NV (Netherlands) | | |
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Consumer Discretionary Distribution & Retail: 5.2% |
Alibaba Group Holding, Ltd. ADR (China) | | |
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Prosus NV, Class N (China) | | |
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Consumer Durables & Apparel: 0.6% |
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Booking Holdings, Inc.(a) (United States) | | |
Entain PLC(b) (United Kingdom) | | |
Flutter Entertainment PLC(a) (Ireland) | | |
Yum China Holdings, Inc. (China) | | |
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Consumer Staples Distribution & Retail: 0.8% |
Seven & i Holdings Co., Ltd. (Japan) | | |
Food, Beverage & Tobacco: 4.5% |
Anheuser-Busch InBev SA/NV (Belgium) | | |
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Imperial Brands PLC (United Kingdom) | | |
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Household & Personal Products: 2.2% |
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Haleon PLC (United Kingdom) | | |
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Ovintiv, Inc.(b) (United States) | | |
Suncor Energy, Inc. (Canada) | | |
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TotalEnergies SE (France) | | |
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Banco Santander SA (Spain) | | |
Barclays PLC (United Kingdom) | | |
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Standard Chartered PLC (United Kingdom) | | |
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UBS Group AG (Switzerland) | | |
XP, Inc., Class A (Brazil) | | |
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Aegon, Ltd. (Netherlands) | | |
Aviva PLC (United Kingdom) | | |
Prudential PLC (Hong Kong) | | |
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Health Care Equipment & Services: 1.8% |
Fresenius Medical Care AG (Germany) | | |
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Pharmaceuticals, Biotechnology & Life Sciences: 12.4% |
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Novartis AG (Switzerland) | | |
Roche Holding AG (Switzerland) | | |
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Johnson Controls International PLC (United States) | | |
Mitsubishi Electric Corp. (Japan) | | |
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Schneider Electric SE (France) | | |
Smiths Group PLC(b) (United Kingdom) | | |
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Information Technology: 5.7% |
Semiconductors & Semiconductor Equipment: 1.9% |
Infineon Technologies AG (Germany) | | |
Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan) | | |
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Technology, Hardware & Equipment: 3.8% |
Brother Industries, Ltd. (Japan) | | |
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Murata Manufacturing Co., Ltd. (Japan) | | |
See accompanying Notes to Consolidated Financial StatementsDodge & Cox International Stock Fund ◾ PAGE 6
Consolidated Portfolio of Investments December 31, 2023
Common Stocks (continued) |
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Samsung Electronics Co., Ltd. (South Korea) | | |
TE Connectivity, Ltd. (United States) | | |
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Akzo Nobel NV(b) (Netherlands) | | |
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Holcim, Ltd. (Switzerland) | | |
International Flavors & Fragrances, Inc. (United States) | | |
Linde PLC (United States) | | |
Mitsubishi Chemical Group Corp.(b) (Japan) | | |
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Teck Resources, Ltd., Class B (Canada) | | |
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Real Estate Management & Development: 1.6% |
CK Asset Holdings, Ltd. (Hong Kong) | | |
Daito Trust Construction Co., Ltd. (Japan) | | |
Hang Lung Group, Ltd.(b) (Hong Kong) | | |
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Engie Prime de Fidelite Majore (France) | | |
Total Common Stocks
(Cost $37,200,802,633) | | |
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Itau Unibanco Holding SA, Pfd (Brazil) | | |
Information Technology: 0.7% |
Technology, Hardware & Equipment: 0.7% |
Samsung Electronics Co., Ltd., Pfd (South Korea) | | |
Total Preferred Stocks
(Cost $868,026,617) | | |
Short-Term Investments: 2.5% |
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Repurchase Agreements: 2.1% |
Fixed Income Clearing Corporation(c) 5.31%, dated 12/29/23, due 1/2/24, maturity value $905,533,950 | | |
Fixed Income Clearing Corporation(c) 2.70%, dated 12/29/23, due 1/2/24, maturity value $109,264,770 | | |
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State Street Institutional U.S. Government Money Market Fund - Premier Class | | |
Total Short-Term Investments
(Cost $1,203,640,449) | |
Total Investments In Securities
(Cost $39,272,469,699) | | |
Other Assets Less Liabilities | | |
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| See below regarding holdings of 5% voting securities |
| Repurchase agreement is collateralized by U.S. Treasury Notes 2.25%-4.875%, 11/15/25-8/15/53. U.S. Treasury Inflation Indexed Notes 0.625%-2.125%, 1/15/33- 2/15/43. Total collateral value is $1,034,271,604. |
| The Fund usually classifies a company or issuer based on its country of risk, but may designate a different country in certain circumstances. |
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ADR: American Depositary Receipt |
SDR: Swedish Depository Receipt |
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Futures Contracts
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Unrealized
Appreciation/
(Depreciation) |
Euro Stoxx 50 Index— Long Position | | | | |
MSCI EAFE Index— Long Position | | | | |
MSCI Emerging Markets Index— Long Position | | | | |
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Currency Forward Contracts
| | | | Unrealized Appreciation
(Depreciation) |
CNH: Chinese Yuan Renminbi |
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PAGE 7 ◾ Dodge & Cox International Stock FundSee accompanying Notes to Consolidated Financial Statements
Consolidated Portfolio of Investments December 31, 2023
Currency Forward Contracts (continued)
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Unrealized gain on currency forward contracts | | | |
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Net unrealized gain on currency forward contracts | | | | |
The listed counterparty may be the parent company or one of its subsidiaries.
See accompanying Notes to Consolidated Financial StatementsDodge & Cox International Stock Fund ◾ PAGE 8
Consolidated Portfolio of Investments December 31, 2023
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 year ended December 31, 2023. Further detail on these holdings and related activity during the year appear below.
| Value at
Beginning of Period | | | | Net Change in
Unrealized
Appreciation/
Depreciation | | Dividend
Income
(net of foreign
taxes, if any) |
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Communication Services 0.0% | | | | | | | |
Television Broadcasts, Ltd.(a) | | | | | | | |
Consumer Discretionary 1.3% | | | | | | | |
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| | | | | | | |
| | | | | | | |
Information Technology 0.0% | | | | | | | |
Micro Focus International PLC(a) | | | | | | | |
| | | | | | | |
| | | | | | | |
Mitsubishi Chemical Group Corp. | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| |
| Company was not an affiliate at period end |
PAGE 9 ◾ Dodge & Cox International Stock FundSee accompanying Notes to Consolidated Financial Statements
Consolidated
Statement of Assets and Liabilities
| |
|
Investments in securities, at value | |
Unaffiliated issuers (cost $35,822,625,056) | |
Affiliated issuers (cost $3,449,844,643) | |
| |
Unrealized appreciation on currency forward contracts | |
Cash pledged as collateral for currency forward contracts | |
| |
Cash denominated in foreign currency (cost $117,356,653) | |
Deposits with broker for futures contracts | |
Receivable for variation margin for futures contracts | |
Receivable for investments sold | |
Receivable for Fund shares sold | |
Dividends and interest receivable | |
Expense reimbursement receivable | |
Prepaid expenses and other assets | |
| |
|
Unrealized depreciation on currency forward contracts | |
Cash received as collateral for currency forward contracts | |
Payable for investments purchased | |
Payable for Fund shares redeemed | |
Deferred foreign capital gains tax | |
| |
| |
| |
| |
|
| |
| |
| |
|
| |
Shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
|
| |
Shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
Consolidated
Statement of Operations
| Year Ended
December 31, 2023 |
| |
Dividends (net of foreign taxes of $85,943,246) | |
| |
| |
| |
| |
| |
| |
Administrative services fees | |
| |
| |
Custody and fund accounting fees | |
| |
| |
| |
| |
| |
| |
Expenses reimbursed by investment manager | |
| |
| |
Realized and Unrealized Gain (Loss): | |
| |
Investments in securities of unaffiliated issuers (net of foreign capital gains taxes of $50,406,162) | |
Investments in securities of affiliated issuers | |
| |
Currency forward contracts | |
Foreign currency transactions | |
Net change in unrealized appreciation/depreciation | |
Investments in securities of unaffiliated issuers (net of change in deferred foreign capital gains tax of $(18,084,714)) | |
Investments in securities of affiliated issuers | |
| |
Currency forward contracts | |
Foreign currency translation | |
Net realized and unrealized gain | |
Net Change in Net Assets From Operations | |
See accompanying Notes to Consolidated Financial StatementsDodge & Cox International Stock Fund ◾ PAGE 10
Consolidated
Statement of Changes in Net Assets
| | |
| | |
| | |
| | |
| | |
Net change in unrealized appreciation/depreciation | | |
| | |
Distributions to Shareholders: | | |
| | |
| | |
| | |
| | |
| | |
Proceeds from sales of shares | | |
Reinvestment of distributions | | |
| | |
| | |
Proceeds from sales of shares | | |
Reinvestment of distributions | | |
| | |
Net change from Fund share transactions | | |
Total change in net assets | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Net change in shares outstanding | | |
| | |
| | |
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| | |
Net change in shares outstanding | | |
PAGE 11 ◾ Dodge & Cox International Stock FundSee accompanying Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note 1: Organization and Significant Accounting Policies
Dodge & Cox International 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, as an open-end management investment company. The Fund commenced operations on May 1, 2001, and seeks long-term growth of principal and income. The Fund invests primarily in a diversified portfolio of foreign equity securities. Foreign investing, especially in developing countries, has special risks such as currency and market volatility and political and social instability. These and other risk considerations are discussed in the Fund’s Prospectus.
On May 1, 2022, the then-outstanding shares of the Fund were redesignated as Class I Shares, and Class X shares of the Fund were established. The share classes have different eligibility requirements and expense structures due to differing shareholder servicing arrangements. The share classes have the same rights as to redemption, dividends and liquidation proceeds, and voting privileges, except that each class has the exclusive right to vote on matters affecting only its class.
The Fund is an investment company and follows the accounting and reporting guidance issued in Topic 946 by the Financial Accounting Standards Board. 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 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 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.
Investments initially valued in currencies other than the U.S. dollar are converted to the U.S. dollar using prevailing exchange rates. Currency forward contracts are valued based on the prevailing forward exchange rates of the underlying currencies. As a result, the Fund’s net assets may be affected by changes in the value of currencies in relation to the U.S. dollar.
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 Dodge & Cox. The Board of Trustees has appointed Dodge & Cox, the Fund’s investment manager, as its "valuation designee", as permitted
by Rule 2a-5 under the Investment Company Act of 1940, 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 net asset value. 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 the Fund to calculate its net asset value may differ from quoted or published prices 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. Non-cash dividends, 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 accrual basis.
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.
Share class accounting Investment income, realized and unrealized gains and losses and expenses, other than class-specific
Dodge & Cox International Stock Fund ◾ PAGE 12
Notes to Consolidated Financial Statements
expenses, are allocated to each share class of the Fund based upon the proportion of net assets of each class.
Foreign taxes The Fund is 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 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 ("EU 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 in the Consolidated Statement of Assets and Liabilities. Expenses incurred related to filing EU reclaims are recorded on the accrual basis in professional services in the Consolidated Statement of Operations. Expenses that are contingent upon successful EU reclaims are recorded in professional services in the Consolidated Statement of Operations once the amount is known.
Capital gains taxes are incurred upon disposition of certain foreign securities. Expected capital gains taxes on appreciated securities, if any, are accrued as unrealized losses and incurred capital gains taxes are reflected as realized losses upon the sale of the related security. Currency taxes may be incurred when the Fund purchases certain foreign currencies related to securities transactions and are recorded as realized losses on foreign currency transactions.
Foreign currency translation The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the prevailing exchange rates of such currencies against the U.S. dollar. The market value of investment securities and other assets and liabilities are translated at the exchange rate as of the valuation date. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the transaction date.
Reported realized and unrealized gain (loss) on investments include foreign currency gain (loss) related to investment transactions.
Reported realized and unrealized gain (loss) on foreign currency transactions and translation include the following: disposing/holding of foreign currency, the difference in exchange rate between the trade and settlement dates on securities transactions, the difference in exchange rate between the accrual and payment dates on dividends, and currency losses on the purchase of foreign currency in certain countries that impose taxes on such transactions.
Repurchase agreements Repurchase agreements are transactions under which a Fund purchases a security from a 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 regular custodian or third party 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.
Consolidation The Fund may invest in certain securities through its wholly owned subsidiary, Dodge & Cox International Stock Fund Cayman, Ltd. (the “Subsidiary”). The Subsidiary is a Cayman Islands exempted company and invests in certain securities consistent with the investment objective of the Fund. The Fund’s Consolidated Financial Statements, including the Consolidated Portfolio of Investments, consist of the holdings and accounts of the Fund and the Subsidiary. All intercompany transactions and balances have been eliminated. At December 31, 2023, the Subsidiary had net assets of $100, which represented less than 0.01% of the Fund’s consolidated 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 below.
◾ Level 1: Unadjusted 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 December 31, 2023:
| | LEVEL 2
(Other Significant
Observable Inputs) |
|
|
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
PAGE 13 ◾ Dodge & Cox International Stock Fund
Notes to Consolidated Financial Statements
| | LEVEL 2 (Other Significant Observable Inputs) |
| | |
| | |
|
| | |
| | |
|
| | |
| | |
| | |
|
|
| | |
| | |
Currency Forward Contracts |
| | |
| | |
The following is a reconciliation of the Fund's holdings for which Level 3 inputs were used in determining value.
| |
| |
| |
| |
Net change in unrealized depreciation | |
| |
Note 3: Derivative Instruments
The Fund may use derivatives either to minimize the impact of certain risks to one or more of its investments (as a ‘‘hedging technique’’) or to implement its investment strategy. A derivative is a financial instrument whose value is derived from a security, currency, interest rate, index, or other financial instrument.
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 the contract is purchased. Futures contracts are exchange-traded. 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 to secure the Fund's obligation to perform. Initial margin is returned to the Fund when the futures contract is closed. Subsequent payments (referred to as "variation margin") are made to or received from the clearing broker on a daily basis based on changes in the market value of the contract. Changes in the market value of open futures contracts are recorded as unrealized appreciation or depreciation in the Consolidated Statement of Operations. Realized gains and losses on futures contracts are recorded in the Consolidated Statement of Operations at the closing or expiration of the contracts. Cash deposited with a broker as initial margin is recorded in the Consolidated Statement of Assets and Liabilities. A receivable and/or payable to brokers for daily variation margin is also recorded in the Consolidated 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 used equity index futures contracts to create equity exposure equal to some or all of its non-equity net assets.
Currency forward contracts Currency forward contracts are agreements to purchase or sell a specific currency at a specified future date and price. Currency forward contracts are traded over-the-counter. The values of currency forward contracts change daily based on the prevailing forward exchange rates of the underlying currencies. Changes in the value of open contracts are recorded as unrealized appreciation or depreciation in the Consolidated Statement of Operations. When a currency forward contract is closed, the Fund records a realized gain or loss in the Consolidated Statement of Operations equal to the difference between the value at the time the contract was opened and the value at the time it was closed.
Losses from these transactions may arise from unfavorable changes in currency values or if a counterparty does not perform under a contract’s terms.
The Fund used currency forward contracts to hedge direct and indirect foreign currency exposure.
Additional derivative information The following identifies the location on the Consolidated Statement of Assets and Liabilities and values of the Fund's derivative instruments categorized by primary underlying risk exposure.
| | Foreign
Exchange
Derivatives | |
| | | |
Unrealized appreciation on currency forward contracts | | | |
| | | |
| | | |
| | | |
Unrealized depreciation on currency forward contracts | | | |
| | | |
| | | |
| Includes cumulative appreciation (depreciation). Only the current day’s variation margin is reported in the Consolidated Statement of Assets and Liabilities. |
Dodge & Cox International Stock Fund ◾ PAGE 14
Notes to Consolidated Financial Statements
The following summarizes the effect of derivative instruments on the Consolidated Statement of Operations, categorized by primary underlying risk exposure.
| | Foreign
Exchange
Derivatives | |
| | | |
| | | |
Currency forward contracts | | | |
| | | |
Net change in unrealized appreciation/depreciation |
| | | |
Currency forward contracts | | | |
| | | |
The following summarizes the range of volume in the Fund's derivative instruments during the year ended December 31, 2023.
| | |
| | |
Currency forward contracts | | |
The Fund may enter into various over-the-counter derivative contracts governed by International Swaps and Derivatives Association master agreements (“ISDA agreements”). The Fund’s ISDA agreements, which are separately negotiated with each dealer counterparty, specify (i) events of default and other events permitting a party to terminate some or all of the contracts thereunder and (ii) the process by which those contracts will be valued for purposes of determining termination payments. If some or all of the contracts under a master agreement are terminated because of an event of default or similar event, the values of all terminated contracts must be netted to determine a single payment owed by one party to the other. To the extent amounts owed to the Fund by its counterparties are not collateralized, the Fund is at risk of those counterparties’ non-performance. The Fund attempts to mitigate counterparty credit risk by entering into contracts only with counterparties it believes to be of good credit quality, by exchanging collateral, and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Fund does not offset assets and liabilities that are subject to a master netting arrangement in the Consolidated Statement of Assets and Liabilities.
The Fund’s ability to net assets and liabilities and to offset collateral pledged or received is based on contractual netting/offset provisions in the ISDA agreements. The following table presents the Fund’s net exposure to each counterparty for derivatives that are subject to enforceable master netting arrangements as of December 31, 2023.
| Gross
Amount of
Recognized
Assets | Gross
Amount of
Recognized
Liabilities | | |
| | | | |
| | | | |
| Gross Amount of Recognized Assets | Gross Amount of Recognized Liabilities | Cash Collateral Pledged / (Received)(a) | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Cash collateral pledged/(received) in excess of derivative assets/liabilities is not presented in this table. The total cash collateral is presented on the Fund's Consolidated Statement of Assets and Liabilities. |
| Represents the net amount receivable from (payable to) the counterparty in the event of a default. |
Note 4: Related Party Transactions
Investment advisory fee The Fund pays an investment advisory fee monthly at an annual rate of 0.50% of the Fund’s average daily net assets to Dodge & Cox, investment manager of the Fund.
Administrative services fee The Fund pays Dodge & Cox a fee for administrative and shareholder services. The fee is accrued daily and paid monthly equal to an annual rate of the average daily net assets of 0.10% for Class I shares and 0.05% for Class X shares. Under this agreement, Dodge & Cox also pays for the Fund's transfer agent fees.
Expense reimbursement Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain the ratio of total operating expenses of the Class X shares to average net assets of the Class X shares at 0.52% through April 30, 2026. The term of the agreement will automatically renew for subsequent three-year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term. For the year ended December 31, 2023, Dodge & Cox reimbursed expenses of $2,669,630.
Fund officers and trustees All officers and two of the trustees of the Trust are current or former senior executive officers of Dodge & Cox. The Trust pays a fee only to those trustees who are not affiliated with Dodge & Cox.
Note 5: 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. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Financial reporting records are adjusted for permanent book to tax differences at year end to reflect tax character. Book to tax differences are primarily due to differing treatments of wash sales,
PAGE 15 ◾ Dodge & Cox International Stock Fund
Notes to Consolidated Financial Statements
expenses, investments in passive foreign investment companies, foreign currency realized gain (loss), foreign capital gains tax, certain corporate action transactions, derivatives, and distributions.
Distributions during the years noted below were characterized as follows for federal income tax purposes.
| Year Ended
December 31, 2023 | Year Ended
December 31, 2022 |
| | |
| | |
| | |
| | |
| | |
| | |
At December 31, 2023, the tax basis components of distributable earnings were as follows:
Undistributed ordinary income | |
Capital loss carryforward1 | |
Net unrealized appreciation | |
Total distributable earnings | |
| Represents accumulated long-term capital loss as of December 31, 2023, which may be carried forward to offset future capital gains. |
At December 31, 2023, unrealized appreciation and depreciation for investments and derivatives based on cost for federal income tax purposes were as follows:
| |
| |
| |
Net unrealized appreciation | |
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.
For U.S. income tax purposes, EU reclaims received by the Fund reduce the amounts of foreign taxes that the Fund passes through to shareholders. In the event that EU reclaims received by the Fund
during the year exceed foreign withholding taxes paid, and the Fund previously passed foreign tax credit on to its shareholders, the Fund will enter into a closing agreement with the Internal Revenue Service (IRS) in order to pay the associated tax liability on behalf of the Fund's shareholders.
Note 6: 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 year.
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 year ended December 31, 2023, the Fund’s commitment fee amounted to $252,150 and is reflected as a Miscellaneous Expense in the Consolidated Statement of Operations. Interest on borrowings is charged at the prevailing rate. There were no borrowings on the Line of Credit during the year.
Note 7: Purchases and Sales of Investments
For the year ended December 31, 2023, purchases and sales of securities, other than short-term securities, aggregated $6,225,622,022 and $6,213,043,180, respectively.
Note 8: Subsequent Events
Fund management has determined that no material events or transactions occurred subsequent to December 31, 2023, and through the date of the Fund’s financial statements issuance, which require disclosure in the Fund’s financial statements.
Dodge & Cox International Stock Fund ◾ PAGE 16
Consolidated Financial Highlights
Selected data and ratios
(for a share outstanding throughout each period) | |
| | | | | |
| | | | | |
Net asset value, beginning of year | | | | | |
Income from investment operations: | | | | | |
| | | | | |
Net realized and unrealized gain (loss) | | | | | |
Total from investment operations | | | | | |
Distributions to shareholders from: | | | | | |
| | | | | |
| | | | | |
| | | | | |
Net asset value, end of year | | | | | |
| | | | | |
Ratios/supplemental data: | | | | | |
Net assets, end of year (millions) | | | | | |
Ratio of expenses to average net assets | | | | | |
Ratio of net investment income to average net assets | | | | | |
| | | | | |
| | | | | |
Net asset value, beginning of year | | | | | |
Income from investment operations: | | | | | |
| | | | | |
Net realized and unrealized gain (loss) | | | | | |
Total from investment operations | | | | | |
Distributions to shareholders from: | | | | | |
| | | | | |
| | | | | |
| | | | | |
Net asset value, end of year | | | | | |
| | | | | |
Ratios/supplemental data: | | | | | |
Net assets, end of period (millions) | | | | | |
Ratio of expenses to average net assets | | | | | |
Ratio of expenses to average net assets, before reimbursement by investment manager | | | | | |
Ratio of net investment income to average net assets | | | | | |
| | | | | |
| Net investment income per share includes significant amounts received for EU reclaims related to prior years, which amounted to approximately $0.13 per share. Excluding such amounts, the ratio of net investment income to average net assets would have been 1.87%. |
| Net investment income per share includes significant amounts received for EU reclaims related to prior years, which amounted to approximately $0.28 per share. Excluding such amounts, the ratio of net investment income to average net assets would have been 1.73% and total return would have been approximately 1.55%. |
| For 2022, the period covers 5/2/2022 (commencement of operations) to 12/31/2022 |
| |
See accompanying Notes to Consolidated Financial Statements
PAGE 17 ◾ Dodge & Cox International Stock Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Dodge & Cox Funds and Shareholders of Dodge & Cox International Stock Fund
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated portfolio of investments, of Dodge & Cox International Stock Fund (one of the funds constituting Dodge & Cox Funds, referred to hereafter as the "Fund") as of December 31, 2023, the related consolidated statement of operations for the year ended December 31, 2023, the consolidated statement of changes in net assets for each of the two years in the period ended December 31, 2023, including the related notes, and the consolidated financial highlights for each of the periods indicated therein (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2023 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 2023 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2024
We have served as the auditor of one or more investment companies in the Dodge & Cox Funds since 1931.
Dodge & Cox International Stock Fund ◾ PAGE 18
Special 2023 Tax Information (unaudited)
The following information is provided pursuant to provisions of the Internal Revenue Code:
In 2023, the Fund elected to pass through to shareholders foreign source income of $1,444,398,530 and foreign taxes paid of $136,349,434.
The Fund designates up to a maximum of $1,379,450,045 of its distributions paid to shareholders in 2023 as qualified dividends (treated for federal income tax purposes in the hands of shareholders as taxable at a maximum rate of 20%).
For shareholders that are corporations, the Fund designates 2% of its ordinary dividends paid to shareholders in 2023 as dividends from domestic corporations eligible for the corporate dividends received deduction, provided that the shareholder otherwise satisfies applicable requirements to claim that deduction.
Funds' Liquidity Risk Management Program
(unaudited)
The Funds have adopted and implemented a written liquidity risk management program (“Program”) as required by Rule 22e-4 under the Investment Company Act. The Program is reasonably designed to assess and manage each Fund’s liquidity risk, taking into consideration the Fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources including the Funds’ interfund lending facility and line of credit.
The Funds’ Board of Trustees has approved the appointment of a Liquidity Risk Management Committee, which includes representatives from Dodge & Cox’s Legal, Compliance, Treasury, Operations, Trading, and Portfolio Management departments, and is responsible for the Program’s administration and oversight and for reporting to the Board on at least an annual basis regarding the Program’s operation and effectiveness.
The Liquidity Risk Management Committee refreshed its assessment of the Funds’ liquidity risk profiles, and considered the adequacy and effectiveness of the Program’s operations for the 12 months ended September 30, 2023 (the “covered period”) in order to prepare a written report to the Board of Trustees for consideration at its meeting held on December 8, 2023. The report concluded that (i) the Funds had adequate liquidity to operate effectively throughout the covered period; (ii) each Fund’s investment strategy continues to be appropriate for an open end fund; and (iii) the Funds’ Program is reasonably designed to assess and manage its liquidity risk.
Fund Holdings
The Fund provides a complete list of its 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 Fund’s Forms N-CSR and Part F of N-PORT on the SEC’s website at sec.gov. A list of the Fund’s 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.
Proxy Voting
For a free copy of the Fund's proxy voting policies and procedures, please call 800-621-3979, or 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 ended June 30 is also available at dodgeandcox.com or shareholders may view the Fund's Form N-PX 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 share the 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 800-621-3979. Your request will be implemented within 30 days.
PAGE 19 ◾ Dodge & Cox International Stock Fund
Dodge & Cox Funds — Executive Officer & Trustee Information
| Position with Trust
(Year of Election or
Appointment) | Principal Occupation During Past Five Years and Other Relevant Experience | Other Directorships of Public Companies Held
by Trustees |
Interested Trustees and Executive Officers |
| | Chairman and Director, Dodge & Cox (until 2022); Chief Investment Officer (until 2022) and member of U.S. Equity Investment Committee and Emerging Markets Equity Investment Committee (until 2022); Global Equity Investment Committee and International Equity Investment Committee (until 2021); U.S. Fixed Income Investment Committee (until 2019) | |
| Chair (since 2022)
President
(since 2014) and
Trustee (since 1993) | Chair, Chief Executive Officer, and Director, Dodge & Cox; President (until 2022); Co-Director of Fixed Income (until 2020); Director of Fixed Income (until 2019); member of U.S. Fixed Income Investment Committee and Global Fixed Income Investment Committee | |
| Chief Legal Officer
(since 2019) and Secretary (since 2017) | Vice President, General Counsel, and Secretary (since 2017), Dodge & Cox | |
| | Funds Treasurer (since 2021), Dodge & Cox; Vice President (since 2020); Financial Oversight and Control Analyst (until 2021) | |
| Chief Compliance
Officer (since 2010) | Vice President and Chief Compliance Officer, Dodge & Cox | |
|
| | CFO, athenahealth, Inc. (2019-2022) | Director, Synopsys Inc. (software company); Director, Carter's Inc. (children's apparel); Director, Eastern Bankshares, Inc. (financial services and banking services) |
| | Professor of Economics, Stanford University; Director of the Economics of Education Program, National Bureau of Economic Research; Senior Fellow, Hoover Institution and Stanford Institute for Economic Policy Research | |
| | Senior Counsel, Arnold & Porter (law firm) (2015-2018); Partner, Arnold & Porter (until 2015); Director, Howard, Rice, Nemerovski, Canady, Falk & Rabkin (1977-2011) | |
| | CFO, Pixar Animation Studios (1999-2004) | Director, Netflix, Inc. (internet television); Director, Blend (software company); Director, Bumble (online dating) |
Gabriela Franco
Parcella (55) | | President (since 2020) and Executive Managing Director, Merlone Geier Partners (2018-2019); Chairman, President, and CEO, Mellon Capital (2011 to 2017); COO, Mellon Capital (1997 to 2011) | |
| | President and CEO, QinetiQ US (since 2022); Corporate Vice President/President Enterprise Services, Northrop Grumman (2012-2022) | |
| | Robert and Marion Oster Distinguished Military Fellow, Hoover Institution (since 2012); Admiral, United States Navy (Ret.); U.S. Navy Chief of Naval Operations (2007-2011) | Director, Northrop Grumman Corp. (global security); Director, Maersk Line, Limited (shipping and transportation) |
| | Executive Vice President, Managing Director, Fixed Income at Loomis Sayles & Company, L.P. (2003-2011) | |
| The address for each Officer and Trustee is 555 California Street, 40th Floor, San Francisco, California 94104. Each Officer and Trustee oversees all seven series in the Dodge & Cox Funds complex and serves for an indefinite term. |
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 800-621-3979.
Dodge & Cox International Stock Fund ◾ PAGE 20
dodgeandcox.com
For Fund literature, transactions, and account
information, please visit the Funds’ website.
or write or call:
Dodge & Cox Funds
P.O. Box 219502
Kansas City, Missouri 64121-9502
(800) 621-3979
Investment Manager
Dodge & Cox
555 California Street, 40th Floor
San Francisco, California 94104
(415) 981-1710
Principal Underwriter
Foreside Fund Services, LLC
3 Canal Plaza, Suite 100
Portland, Maine 04101
(866) 251-6920
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 December 31, 2023, 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.
Emerging Markets Stock Fund (dodex)
ESTABLISHED 2021
Important Notice:
The Securities and Exchange Commission has adopted new regulations that will impact the design and delivery of future Semi-Annual and Annual Reports. Beginning with the 2024 Semi-Annual Reports, paper copies will be mailed to you unless you have opted for electronic delivery of the reports.
12/23 EM AR Printed on recycled paper 
To Our Shareholders (unaudited)
The Dodge & Cox Emerging Markets Stock Fund had a total return of 13.37% for the year ended December 31, 2023, compared to a return of 9.83% for the MSCI Emerging Markets Index.1
Market Commentary
2023 was a strong year for global equity markets. Post-COVID economic growth, normalization of the global supply chain, surging enthusiasm about artificial intelligence, and gradual pausing of tightening monetary policies across central banks all helped boost stock prices worldwide. Though concerns remain about China’s economic slowdown, investor sentiment was upbeat in most of the other emerging regions, as oil prices dropped toward the end of the year, and inflation generally fell across markets. Overall, the MSCI Emerging Markets had a total return of 9.8% for 2023.
From a valuation perspective, emerging market equities continue to look compelling. The MSCI Emerging Markets ended the year at 11.7 times forward earnings,2 while the S&P 500 Index3 traded at 20.4 times forward earnings. The relative value of emerging market stocks compared to U.S. stocks is in the 5th percentile of all-time observations.4 Latin America, helped by currency strength, was the best-performing region, while China’s economic woes led to its languishing stock market performance.
Investment Strategy
Emerging markets comprise over 80% of the world’s population and contribute 75% of global GDP5 growth. Many of these countries benefit from structural drivers, such as favorable demographics, increasing urbanization, advances in education and technology, wealth accumulation, and developing capital markets. Overall, MSCI Emerging Markets is forecasted to deliver 8% revenue and 16% net income growth over the next two years, compared to 5% and 10% for S&P 500, respectively.6 While these relative growth prospects, coupled with much lower starting valuations, suggest emerging markets may offer very attractive investment opportunities, economic development doesn’t necessarily translate into equity returns. Many risk factors come into play in emerging markets, including weak social and economic institutions, greater political instability, higher regulatory uncertainty, and challenges in obtaining reliable public investment information. However, we believe our rigorous bottom-up research, long-time horizon, and price-disciplined approach give us the insights, temperament, and staying power needed to ride the volatility of emerging market investing, separate the wheat from the chaff, and find attractive investment opportunities looking out over the next three to five years.
The following examples highlight some of the attractive investment opportunities we found in 2023.
Private Sector Financial Institutions Gaining Ground in Underpenetrated Markets
Financials is not typically considered the most exciting part of investing in emerging markets. We beg to differ. Many developing markets are starting from low penetration rates of credit and financial services. In addition, private sector financial institutions have been
gaining share rapidly at the expense of their more bureaucratic public sector peers. We believe both factors, when coupled with a strong risk management culture and an owner-operator structure, can offer a long growth runway. The contagion fears that roiled global markets in March after some U.S. regional banks failed did not extend to emerging market Financials. In fact, Financials was the biggest contributor to the Fund’s outperformance in 2023.
Our investment theses have continued to play out in the Fund’s long-term Financials holdings, notably Itau Unibanco (largest bank in Brazil), XP Inc. (largest online broker-dealer in Brazil), Credicorp (largest financial services institution in Peru), and ICICI Bank and Axis Bank (two leading private banks in India).7 In 2023, we started a new position in HDFC Bank and added significantly to Shinhan Financial Group. HDFC Bank is the largest private bank in India with a solid track record of underwriting risk. It faces some near-term merger costs and integration uncertainty, which provided us an opportunity to buy this strong franchise at a deep discount to its historical average valuation. Shinhan, a diversified South Korean bank with an over-capitalized balance sheet, is well positioned to offer significant capital returns amid an improving regulatory environment. The Fund also owns less known but no less exciting companies, such as Sanlam (Africa’s largest insurance company) and Commercial International Bank (CIB), a leading private sector bank in Egypt.
Finding Opportunities in SMID-Cap8 Companies
The Fund has a much broader investment universe with about 4,000 companies in over 60 countries, compared to approximately 1,400 companies in 24 countries in the MSCI Emerging Markets. This has given us the ability to find attractive opportunities across the market cap spectrum, especially in small- and medium-capitalization (SMID-cap) companies where sell-side coverage is light and there appears to be higher potential to generate alpha.9
National Energy Services Reunited (NESR), an oil services company in the Middle East, is one example of the Fund capitalizing on an idiosyncratic SMID cap opportunity. NESR was delisted from the Nasdaq stock exchange in April 2023 as a result of its inability to restate prior financial reports and file annual reports on time. The stock price collapsed amid management change and fraud concerns. Our diligence, leveraging substantial governance checks, gave us confidence that it was not a fraudulent case, and that business fundamentals remain solid. We substantially increased the Fund’s position in NESR trading on the OTC10 Bulletin Board in June. On December 29, 2023, NESR announced the filing of its audited financials and is in progress to become relisted. The stock price has more than doubled since this significant add. In other cases, we are able to find attractively valued SMID-cap names in otherwise expensive regional equity markets. Two examples are Aurobindo Pharma, an Indian pharmaceutical company, and Leejam Sports, a fitness center chain in the Middle East and North Africa. Both stocks generated triple-digit stock returns in 2023.
At the end of 2023, the Fund had 36.3% of its net assets in SMID-cap stocks compared to 25.2% for the MSCI Emerging Markets. These holdings broaden the Fund’s exposure to sectors and regions where well-known large-cap stocks simply do not exist and also bring risk diversification benefits.
PAGE 1 ◾ Dodge & Cox Emerging Markets Stock Fund
China—Down but Not Out
Amid the positive results in many emerging markets, the Greater China11 market trailed the pack in 2023. The early hopes of post-COVID recovery quickly fizzled in China. Macroeconomic indicators were weak with deflation, declining property sales, record youth unemployment, and a slowdown in retail sales. Business and consumer sentiment were low. Foreign direct investment in China saw its first negative growth on record in the third quarter. The Fund’s Greater China holdings—the Fund’s biggest source of outperformance in 2022—became a performance drag in 2023.
Despite overwhelming market concern, we strongly push against the notion that China is “uninvestable.” This could very well be one of those moments when it is wise “to be greedy when others are fearful,” as Warren Buffett advises. We are proceeding with caution, incorporating our usual robust process, constantly monitoring the evolving situation, and reevaluating macro, geopolitical, and company-specific risks against valuations and potential returns. From a macro perspective, China is going through a painful, yet necessary transition away from high dependence on real estate and exports. The entrepreneurial spirits are still strong, particularly in areas like energy transition where China is leading on a global scale. In the second half of 2023, the government implemented a series of policy measures to stimulate the economy, while affirming the importance of private enterprises.
From a portfolio perspective, the Fund’s Greater China portfolio holdings are well diversified, with new or increased positions in Yum China (restaurant chain), Greentown Services (property management), Shandong Sinocera (materials), and Zhejiang NHU (pharmaceutical chemicals) in 2023. Within China Internet,12 one of the portfolio’s key areas of emphasis, the Fund owns a broad set of core businesses with strong profitability that are highly cash generative and trade at extraordinarily inexpensive valuations. During uncertain economic times, these management teams are focused on controlling costs and improving shareholder returns, while pursuing new growth runways in areas such as international gaming and artificial intelligence.
In Closing
2023 was a year of positive momentum for emerging markets and global equities in general. Individual emerging markets continue to generate divergent, heterogeneous results, and these disparities provide opportunities for our disciplined investment team to uncover
attractive investments. Thank you for your continued confidence in Dodge & Cox. As always, we welcome your comments and questions.
For the Board of Trustees, | |
| |
Dana M. Emery,
Chair and President | |
January 31, 2024
| All returns are stated in U.S. dollars, unless otherwise noted. The Funds’ 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 dividend and/or interest income but, unlike Fund returns, do not reflect fees or expenses. The MSCI Emerging Markets Index captures large- and mid-cap representation across emerging market countries. |
| Price-to-earnings (forward) ratios are calculated using 12-month forward earnings estimates from third-party sources as of the reporting period. Estimates reflect a consensus of sell-side analyst estimates, which may lag as market conditions change. Unless otherwise specified, all weightings and characteristics are as of December 31, 2023. |
| The S&P 500 Index is a market capitalization-weighted index of 500 large- capitalization stocks commonly used to represent the U.S. equity market. |
| Measured since January 31, 2004. |
| Gross domestic product (GDP) measures the monetary value of final goods and services—those that are bought by the final user—produced in a country in a given period of time. It counts all of the output generated within the borders of a country. GDP is composed of goods and services produced for sale in the market and also includes some non-market production, such as defense or education services provided by the government. |
| “Consensus” is based on calendar year 0 and calendar year 2 figures per FactSet consensus market-capitalization weight growth. |
| The use of specific examples does not imply that they are more or less attractive investments than the portfolio’s other holdings. |
| “SMID-cap” comprise small- and mid-capitalization companies. Market capitalization is a measure of the security’s size. It is the market price of a security multiplied by the number of shares outstanding. |
| Alpha is a measure of performance and indicates whether an investment has outperformed the market return or other benchmark over some period. Positive alpha means that the investment’s return was above that of the benchmark. |
| Over-the-counter (OTC) is trading securities via a broker-dealer network as opposed to on a centralized exchange like the New York Stock Exchange. |
| Greater China includes China, Hong Kong, and Macao. |
| China Internet for the Emerging Markets Stock Fund consists of Alibaba, Baidu, IGG, JD.com, JOYY, NetEase, Prosus, Vipshop, and XD. |
Dodge & Cox Emerging Markets Stock Fund ◾ PAGE 2
2023 Performance Review (unaudited)
The Fund outperformed the MSCI Emerging Markets Index by 3.54 percentage points in 2023.
Key contributors to relative results included the Fund’s:
◾ Overweight position in Latin America and select holdings, including Itau Unibanco, Cemex, and XP;
◾ Communication Services holdings;
◾ Consumer Staples* holdings, particularly the participation in a cash tender offer for Magnit;
◾ Industrials holdings; and
◾ Position in National Energy Services Reunited.
Key detractors from relative results included the Fund’s:
◾ Overweight position in the Consumer Discretionary sector and select holdings, notably JD.com, Prosus**, and Alibaba;
◾ Underweight position in the Information Technology sector, including Samsung Electronics; and
◾ Position in Greentown Service.
*The Fund’s performance and attribution results reflect a cash payment arising from an issuer tender offer that was accepted in the third quarter of 2023 to purchase shares of Magnit PJSC, a Russian Consumer Staples company.
**Prosus and Naspers derive significant portions of their value from their respective stakes in Tencent. During the attribution period shown, the Fund held Prosus but did not hold Tencent or Naspers. The combined total impact on return versus the Index for all three names was a positive contribution of 22
basis points. One basis point is equal to 1/100th of 1%.
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 90 Years of Investment Experience
Dodge & Cox was founded in 1930. We have a stable and well- qualified team of investment professionals, most of whom have spent their entire careers at Dodge & Cox.
Experienced Investment Team
The Emerging Markets Equity Investment Committee, which is the decision-making body for the Emerging Markets Stock Fund, is a five-member committee with an average tenure of 17 years at Dodge & Cox.
One Business with a Single Decision-Making Office
Dodge & Cox manages equity (domestic, international, and global), fixed income (domestic and global), and balanced investments, all from one office in San Francisco.
Consistent Investment Approach
Our team decision-making process involves thorough, bottom-up 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. Investing in non-U.S. securities may entail risk due to foreign economic and political developments; this risk may be increased when investing in emerging markets. The Fund is also subject to currency risk. Please read the prospectus and summary prospectus for specific details regarding the Fund's risk profile.
Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security. Please see the Portfolio of Investments section in this report for a complete list of fund holdings.
PAGE 3 ◾ Dodge & Cox Emerging Markets Stock Fund
Growth of $10,000 Since Inception (unaudited)
For an Investment Made on May 11, 2021 
Average Annual Total Return
For Periods Ended December 31, 2023
| | Since Inception (5/11/21) |
Dodge & Cox Emerging Markets Stock Fund | | |
MSCI Emerging Markets Index | | |
Expense Ratios
Per the Prospectus Dated May 1, 2023
| | |
Dodge & Cox Emerging Markets Stock Fund | | |
| 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 0.70% until April 30, 2026. This agreement cannot be terminated prior to April 30, 2026 other than by resolution of the Fund’s Board of Trustees. For purposes of the foregoing, ordinary expenses shall not include nonrecurring shareholder account fees, fees and expenses associated with Fund shareholder meetings, fees on portfolio transactions such as exchange fees, dividends and interest on short positions, fees and expenses of pooled investment vehicles that are held by the Fund, interest expenses and other fees and expenses related to any borrowings, taxes, brokerage fees and commissions and other costs and expenses relating to the acquisition and disposition of Fund investments, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other non-routine expenses or extraordinary expenses not incurred in the ordinary course of the Fund’s business, such as litigation expenses. The term of the agreement will automatically renew for subsequent three-year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term. The agreement does not permit Dodge & Cox to recoup any fees waived or payments made to the Fund for a prior year. |
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 800-621-3979 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 MSCI Emerging Markets Index captures large- and mid-cap representation across emerging market countries. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.
MSCI Emerging Markets is a service mark of MSCI Barra. For more information about this index, visit:
www.dodgeandcox.com/emergingmarketsstockfund
Dodge & Cox Emerging Markets Stock Fund ◾ PAGE 4
Portfolio Information (unaudited) December 31, 2023
Sector Diversification(a) | |
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| Net Cash & Other includes cash, short-term investments, derivatives, receivables, and payables. |
Fund Expense Example (unaudited)
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 other mutual funds.
Six Months Ended
December 31, 2023 | Beginning Account Value
7/1/2023 | Ending Account Value
12/31/2023 | Expenses Paid
During Period* |
Based on Actual Fund Return | | | |
Based on Hypothetical 5% Yearly Return | | | |
| Expenses are equal to the Fund’s annualized expense ratio of 0.70%, multiplied by the average account value over the period, multiplied by 184/365 (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).
PAGE 5 ◾ Dodge & Cox Emerging Markets Stock Fund
Portfolio of Investments December 31, 2023
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Communication Services: 6.6% |
Media & Entertainment: 5.5% |
AfreecaTV Co., Ltd. (South Korea) | | |
Astro Malaysia Holdings BHD (Malaysia) | | |
Baidu, Inc. ADR(a) (China) | | |
Grupo Televisa SAB (Mexico) | | |
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Megacable Holdings SAB de CV (Mexico) | | |
MultiChoice Group(a) (South Africa) | | |
NetEase, Inc. ADR (China) | | |
Sun TV Network, Ltd. (India) | | |
| | |
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Telecommunication Services: 1.1% |
America Movil SAB de CV (Mexico) | | |
China Tower Corp., Ltd., Class H(b)(c) (China) | | |
Millicom International Cellular SA SDR(a) (Guatemala) | | |
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Sitios Latinoamerica SAB de CV(a) (Brazil) | | |
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Consumer Discretionary: 15.9% |
Automobiles & Components: 1.5% |
Fuyao Glass Industry Group Co., Ltd., Class H(b)(c) (China) | | |
Hankook Tire & Technology Co., Ltd. (South Korea) | | |
Hyundai Mobis Co., Ltd. (South Korea) | | |
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Consumer Discretionary Distribution & Retail: 10.3% |
Alibaba Group Holding, Ltd. ADR (China) | | |
China Tourism Group Duty Free Corp., Ltd., Class A (China) | | |
China Yongda Automobiles Services Holdings, Ltd. (China) | | |
Cuckoo Homesys Co., Ltd. (South Korea) | | |
Detsky Mir PJSC(a)(b)(c)(d) (Russia) | | |
JD.com, Inc., Class A (China) | | |
Motus Holdings, Ltd. (South Africa) | | |
Prosus NV, Class N (China) | | |
Vibra Energia SA (Brazil) | | |
Vipshop Holdings, Ltd. ADR(a) (China) | | |
Zhongsheng Group Holdings, Ltd. (China) | | |
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Consumer Durables & Apparel: 1.6% |
Feng Tay Enterprise Co., Ltd. (Taiwan) | | |
Gree Electric Appliances, Inc. of Zhuhai, Class A (China) | | |
Haier Smart Home Co., Ltd., Class H (China) | | |
Man Wah Holdings, Ltd. (Hong Kong) | | |
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Midea Group Co., Ltd., Class A (China) | | |
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Afya, Ltd., Class A(a) (Brazil) | | |
H World Group, Ltd. (China) | | |
Humansoft Holding Co. KSC (Kuwait) | | |
Las Vegas Sands Corp. (United States) | | |
Leejam Sports Co. JSC (Saudi Arabia) | | |
Sands China, Ltd.(a) (Macau) | | |
Ser Educacional SA(b)(c) (Brazil) | | |
Trip.com Group, Ltd. ADR (China) | | |
Yum China Holdings, Inc. (China) | | |
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Consumer Staples Distribution & Retail: 0.7% |
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BIM Birlesik Magazalar AS (Turkey) | | |
Grupo Comercial Chedraui SAB de CV (Mexico) | | |
Wal-Mart de Mexico SAB de CV (Mexico) | | |
X5 Retail Group NV GDR(a)(b)(d) (Russia) | | |
Yonghui Superstores Co., Ltd., Class A(a) (China) | | |
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Food, Beverage & Tobacco: 4.9% |
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Anadolu Efes Biracilik Ve Malt (Turkey) | | |
Anheuser-Busch InBev SA/NV (Belgium) | | |
Arca Continental SAB de CV (Mexico) | | |
Century Pacific Food, Inc. (Philippines) | | |
China Feihe, Ltd.(b)(c) (China) | | |
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Fomento Economico Mexicano SAB de CV (Mexico) | | |
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Kweichow Moutai Co., Ltd., Class A (China) | | |
PT Indofood CBP Sukses Makmur Tbk (Indonesia) | | |
Sanquan Food Co., Ltd., Class A (China) | | |
Saudia Dairy & Foodstuff Co. (Saudi Arabia) | | |
Thai Union Group PCL NVDR (Thailand) | | |
Tingyi (Cayman Islands) Holding Corp. (China) | | |
Vietnam Dairy Products JSC (Vietnam) | | |
WH Group, Ltd.(b)(c) (Hong Kong) | | |
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Household & Personal Products: 0.2% |
Grape King Bio, Ltd. (Taiwan) | | |
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See accompanying Notes to Financial StatementsDodge & Cox Emerging Markets Stock Fund ◾ PAGE 6
Portfolio of Investments December 31, 2023
Common Stocks (continued) |
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China Suntien Green Energy Corp., Ltd., Class H (China) | | |
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LUKOIL PJSC(a)(d) (Russia) | | |
Motor Oil (Hellas) Corinth Refineries SA (Greece) | | |
National Energy Services Reunited Corp.(a) (United States) | | |
Novatek PJSC(a)(d) (Russia) | | |
Petroleo Brasileiro SA (Brazil) | | |
PTT Exploration & Production PCL NVDR (Thailand) | | |
Saudi Arabian Oil Co.(b)(c) (Saudi Arabia) | | |
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|
| | |
Banca Transilvania SA (Romania) | | |
Bangkok Bank PCL NVDR (Thailand) | | |
Bank Polska Kasa Opieki SA (Poland) | | |
BDO Unibank, Inc. (Philippines) | | |
BRAC Bank PLC (Bangladesh) | | |
China Merchants Bank Co., Ltd., Class H (China) | | |
Commercial International Bank (Egypt) SAE (Egypt) | | |
| | |
Equity Group Holdings PLC (Kenya) | | |
Grupo Financiero Banorte SAB de CV, Class O (Mexico) | | |
| | |
Hong Leong Financial Group BHD (Malaysia) | | |
| | |
IndusInd Bank, Ltd. (India) | | |
Intercorp Financial Services, Inc. (Peru) | | |
JB Financial Group Co., Ltd. (South Korea) | | |
Kasikornbank PCL NVDR (Thailand) | | |
KB Financial Group, Inc. (South Korea) | | |
Metropolitan Bank & Trust Co. (Philippines) | | |
Military Commercial Joint Stock Bank (Vietnam) | | |
| | |
PT Bank Negara Indonesia Persero Tbk, Class B (Indonesia) | | |
PT Bank Rakyat Indonesia Persero Tbk, Class B (Indonesia) | | |
Saudi Awwal Bank (Saudi Arabia) | | |
Shinhan Financial Group Co., Ltd. (South Korea) | | |
TCS Group Holding PLC GDR, Class A(a)(b)(d) (Russia) | | |
The Commercial Bank PSQC (Qatar) | | |
Vietnam Technological & Commercial Joint Stock Bank(a) (Vietnam) | | |
| | |
|
| | |
|
AEON Credit Service (M) BHD (Malaysia) | | |
Chailease Holding Co., Ltd. (Taiwan) | | |
| | |
FirstRand, Ltd. (South Africa) | | |
Grupo de Inversiones Suramericana SA (Colombia) | | |
Kaspi.KZ JSC GDR(b) (Kazakhstan) | | |
Noah Holdings, Ltd. ADR, Class A (China) | | |
XP, Inc., Class A (Brazil) | | |
| | |
|
BB Seguridade Participacoes SA (Brazil) | | |
China Pacific Insurance Group Co., Ltd., Class H (China) | | |
DB Insurance Co., Ltd. (South Korea) | | |
Korean Reinsurance Co. (South Korea) | | |
Old Mutual, Ltd. (South Africa) | | |
Ping An Insurance Group Co. of China, Ltd., Class H (China) | | |
Prudential PLC (Hong Kong) | | |
Samsung Fire & Marine Insurance Co., Ltd. (South Korea) | | |
Sanlam, Ltd. (South Africa) | | |
| | |
| | |
|
Health Care Equipment & Services: 2.3% |
China Isotope & Radiation Corp. (China) | | |
Guangzhou Baiyunshan Pharmaceutical Holdings Co., Ltd., Class H (China) | | |
Shandong Pharmaceutical Glass Co., Ltd., Class A (China) | | |
Shandong Weigao Group Medical Polymer Co., Ltd., Class H (China) | | |
Sinocare, Inc., Class A (China) | | |
Sinopharm Group Co., Ltd. (China) | | |
Sonoscape Medical Corp., Class A (China) | | |
Tofflon Science & Technology Group Co., Ltd., Class A (China) | | |
| | |
Pharmaceuticals, Biotechnology & Life Sciences: 2.2% |
Adcock Ingram Holdings, Ltd. (South Africa) | | |
Aurobindo Pharma, Ltd. (India) | | |
Beijing Tong Ren Tang Chinese Medicine Co., Ltd. (China) | | |
Dr Reddy's Laboratories, Ltd. (India) | | |
Jiangsu Hengrui Pharmaceuticals Co., Ltd., Class A (China) | | |
Richter Gedeon Nyrt. (Hungary) | | |
Zhejiang NHU Co., Ltd., Class A (China) | | |
| | |
| | |
PAGE 7 ◾ Dodge & Cox Emerging Markets Stock FundSee accompanying Notes to Financial Statements
Portfolio of Investments December 31, 2023
Common Stocks (continued) |
| | |
|
|
BOC Aviation, Ltd.(b)(c) (China) | | |
Chicony Power Technology Co., Ltd. (Taiwan) | | |
Doosan Bobcat, Inc. (South Korea) | | |
| | |
Goldwind Science & Technology Co., Ltd., Class H (China) | | |
| | |
Larsen & Toubro, Ltd. (India) | | |
PT Astra International Tbk (Indonesia) | | |
SFA Engineering Corp. (South Korea) | | |
United Integrated Services Co., Ltd. (Taiwan) | | |
| | |
|
Air Arabia PJSC (United Arab Emirates) | | |
Aramex PJSC (United Arab Emirates) | | |
Cebu Air, Inc.(a) (Philippines) | | |
Copa Holdings SA, Class A (Panama) | | |
Globaltrans Investment PLC GDR(a)(b)(d) (Russia) | | |
Gulf Warehousing Co. (Qatar) | | |
Hyundai Glovis Co., Ltd. (South Korea) | | |
International Container Terminal Services, Inc. (Philippines) | | |
Movida Participacoes SA (Brazil) | | |
Promotora y Operadora de Infraestructura SAB de CV (Mexico) | | |
Westports Holdings BHD (Malaysia) | | |
| | |
| | |
Information Technology: 12.4% |
Semiconductors & Semiconductor Equipment: 9.5% |
Alpha & Omega Semiconductor, Ltd.(a) (United States) | | |
ASE Technology Holding Co., Ltd. (Taiwan) | | |
Elan Microelectronics Corp. (Taiwan) | | |
Nanya Technology Corp. (Taiwan) | | |
Novatek Microelectronics Corp. (Taiwan) | | |
Powertech Technology, Inc. (Taiwan) | | |
Realtek Semiconductor Corp. (Taiwan) | | |
Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan) | | |
| | |
Software & Services: 1.4% |
Asseco Poland SA (Poland) | | |
Chinasoft International, Ltd. (China) | | |
Hancom, Inc. (South Korea) | | |
Shanghai Baosight Software Co., Ltd., Class A (China) | | |
| | |
Technology, Hardware & Equipment: 1.5% |
Intelbras SA Industria de Telecomunicacao Eletronica Brasileira (Brazil) | | |
Lenovo Group, Ltd. (China) | | |
|
| | |
Wistron NeWeb Corp. (Taiwan) | | |
| | |
| | |
| | |
|
Alpek SAB de CV, Class A (Mexico) | | |
Alrosa PJSC(a)(d) (Russia) | | |
Anhui Conch Cement Co., Ltd., Class H (China) | | |
Cemex SAB de CV ADR(a) (Mexico) | | |
Duc Giang Chemicals JSC (Vietnam) | | |
| | |
Indorama Ventures PCL NVDR (Thailand) | | |
| | |
Loma Negra Cia Industrial Argentina SA ADR (Argentina) | | |
| | |
Nine Dragons Paper Holdings, Ltd.(a) (Hong Kong) | | |
Orbia Advance Corp. SAB de CV (Mexico) | | |
PTT Global Chemical PCL NVDR (Thailand) | | |
Sahara International Petrochemical Co. (Saudi Arabia) | | |
Severstal PAO(a)(d) (Russia) | | |
Shandong Sinocera Functional Material Co., Ltd., Class A (China) | | |
| | |
Teck Resources, Ltd., Class B (Canada) | | |
| | |
Wanhua Chemical Group Co., Ltd., Class A (China) | | |
| | |
|
Equity Real Estate Investment Trusts (Reits): 0.3% |
Macquarie Mexico Real Estate Management SAB de CV REIT(b)(c) (Mexico) | | |
Prologis Property Mexico SAB de CV REIT (Mexico) | | |
| | |
Real Estate Management & Development: 2.0% |
China Resources Land, Ltd. (China) | | |
Emaar Development PJSC (United Arab Emirates) | | |
Greentown Service Group Co., Ltd.(b) (China) | | |
Hang Lung Group, Ltd. (Hong Kong) | | |
KE Holdings, Inc. ADR, Class A (China) | | |
Megaworld Corp. (Philippines) | | |
| | |
| | |
|
China Gas Holdings, Ltd. (China) | | |
China Water Affairs Group, Ltd. (China) | | |
Engie Energia Chile SA(a) (Chile) | | |
GAIL (India), Ltd. (India) | | |
See accompanying Notes to Financial StatementsDodge & Cox Emerging Markets Stock Fund ◾ PAGE 8
Portfolio of Investments December 31, 2023
Common Stocks (continued) |
| | |
KunLun Energy Co., Ltd. (China) | | |
Mahanagar Gas, Ltd.(b) (India) | | |
| | |
Tenaga Nasional BHD (Malaysia) | | |
| | |
Total Common Stocks
(Cost $273,764,427) | | |
|
| | |
Consumer Discretionary: 0.4% |
Automobiles & Components: 0.4% |
Hyundai Motor Co., Pfd 2 (South Korea) | | |
|
Food, Beverage & Tobacco: 0.1% |
Embotelladora Andina SA, Pfd, Class B (Chile) | | |
Household & Personal Products: 0.3% |
Amorepacific Corp., Pfd (South Korea) | | |
LG H&H Co., Ltd., Pfd (South Korea) | | |
| | |
| | |
|
|
Itau Unibanco Holding SA, Pfd (Brazil) | | |
|
|
DL E&C Co., Ltd., Pfd(a) (South Korea) | | |
DL E&C Co., Ltd., Pfd 2(a) (South Korea) | | |
| | |
Information Technology: 2.7% |
Technology, Hardware & Equipment: 2.7% |
Samsung Electro-Mechanics Co., Ltd., Pfd (South Korea) | | |
Samsung Electronics Co., Ltd., Pfd (South Korea) | | |
| | |
| | |
Braskem SA, Pfd, Class A(a) (Brazil) | | |
| | |
Centrais Eletricas Brasileiras SA, Pfd, Class B (Brazil) | | |
Total Preferred Stocks
(Cost $21,078,678) | | |
Short-Term Investments: 7.6% |
| | |
Repurchase Agreements: 7.2% |
Fixed Income Clearing Corporation(e) 5.31%, dated 12/29/23, due 1/2/24, maturity value $18,010,620 | | |
Fixed Income Clearing Corporation(e) 2.70%, dated 12/29/23, due 1/2/24, maturity value $3,375,012 | | |
| | |
|
State Street Institutional U.S. Government Money Market Fund - Premier Class | | |
Total Short-Term Investments
(Cost $22,551,254) | |
Total Investments In Securities
(Cost $317,394,359) | | |
Other Assets Less Liabilities | | |
| | |
| |
| Security exempt from registration pursuant to Regulation S under the Securities Act of 1933, as amended. Regulation S securities are subject to restrictions on resale in the United States. |
| Security exempt from registration under Rule 144A of the Securities Act of 1933. The security may be resold in transactions exempt from registration, normally to qualified institutional buyers. |
| Valued using significant unobservable inputs. |
| Repurchase agreement is collateralized by U.S. Treasury Notes 2.25%-4.125%, 11/15/25-8/15/53. Total collateral value is $21,801,586. |
| The Fund usually classifies a company or issuer based on its country of risk, but may designate a different country in certain circumstances. |
| |
| |
ADR: American Depositary Receipt |
GDR: Global Depositary Receipt |
NVDR: Non-Voting Depository Receipt |
SDR: Swedish Depository Receipt |
|
Futures Contracts
| | | | Value /
Unrealized
Appreciation/
(Depreciation) |
MSCI Emerging Markets Index— Long Position | | | | |
Currency Forward Contracts
| | | | Unrealized Appreciation
(Depreciation) |
CNH: Chinese Yuan Renminbi |
| | | | | | |
PAGE 9 ◾ Dodge & Cox Emerging Markets Stock FundSee accompanying Notes to Financial Statements
Portfolio of Investments December 31, 2023
Currency Forward Contracts (continued)
| | | | Unrealized Appreciation (Depreciation) |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
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| | | | | | |
| | | | | | |
|
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Unrealized gain on currency forward contracts | | | |
Unrealized loss on currency forward contracts | | | |
Net unrealized gain on currency forward contracts | | | | |
The listed counterparty may be the parent company or one of its subsidiaries.
See accompanying Notes to Financial StatementsDodge & Cox Emerging Markets Stock Fund ◾ PAGE 10
Statement of Assets and Liabilities
| |
|
Investments in securities, at value (cost $317,394,359) | |
Unrealized appreciation on currency forward contracts | |
Cash denominated in foreign currency (cost $2,351,318) | |
Deposits with broker for futures contracts | |
Receivable for variation margin for futures contracts | |
Receivable for investments sold | |
Receivable for Fund shares sold | |
Dividends and interest receivable | |
Expense reimbursement receivable | |
Prepaid expenses and other assets | |
| |
|
Unrealized depreciation on currency forward contracts | |
Cash received as collateral for currency forward contracts | |
Payable for investments purchased | |
Payable for Fund shares redeemed | |
Deferred foreign capital gains tax | |
| |
| |
| |
| |
|
| |
| |
| |
Fund shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
Statement of Operations
| Year Ended
December 31, 2023 |
| |
Dividends (net of foreign taxes of $615,889) | |
| |
| |
| |
| |
Custody and fund accounting fees | |
Administrative services fees | |
| |
| |
| |
| |
| |
| |
Expenses reimbursed by investment manager | |
| |
| |
Realized and Unrealized Gain (Loss): | |
| |
Investments in securities (net of foreign capital gains tax of $218,197) | |
| |
Currency forward contracts | |
Foreign currency transactions | |
Net change in unrealized appreciation/depreciation | |
Investments in securities (net of change in deferred foreign capital gains tax of $554,087) | |
| |
Currency forward contracts | |
Foreign currency translation | |
Net realized and unrealized gain | |
Net Change in Net Assets From Operations | |
Statement of Changes in Net Assets
| | |
| | |
| | |
| | |
| | |
Net change in unrealized appreciation/depreciation | | |
| | |
Distributions to Shareholders: | | |
| | |
| | |
Proceeds from sale of shares | | |
Reinvestment of distributions | | |
| | |
Net change from Fund share transactions | | |
Total change in net assets | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Net change in shares outstanding | | |
PAGE 11 ◾ Dodge & Cox Emerging Markets Stock FundSee accompanying Notes to Financial Statements
Notes to Financial Statements
Note 1: Organization and Significant Accounting Policies
Dodge & Cox Emerging Markets 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, as an open-end management investment company. The Fund commenced operations on May 11, 2021, and seeks long-term growth of principal and income. The Fund invests primarily in a diversified portfolio of emerging markets equity securities issued by companies from at least three different countries. Foreign investing, especially in developing countries, has special risks such as currency and market volatility and political and social instability. These and other risk considerations are discussed in the Fund’s Prospectus.
The Fund is an investment company and follows the accounting and reporting guidance issued in Topic 946 by the Financial Accounting Standards Board. 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 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 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.
Investments initially valued in currencies other than the U.S. dollar are converted to the U.S. dollar using prevailing exchange rates. Currency forward contracts are valued based on the prevailing forward exchange rates of the underlying currencies. As a result, the Fund’s net assets may be affected by changes in the value of currencies in relation to the U.S. dollar.
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 Dodge & Cox. The Board of Trustees has appointed Dodge & Cox, the Fund’s investment manager, as its "valuation designee", as permitted by Rule 2a-5 under the Investment Company Act of 1940, 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 net asset value. 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 the Fund to calculate its net asset value may differ from quoted or published prices 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. Non-cash dividends, 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 accrual basis.
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.
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 legal obligation to pay reclaims as well as payment history and market convention.
Dodge & Cox Emerging Markets Stock Fund ◾ PAGE 12
Notes to Financial Statements
Foreign currency translation The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the prevailing exchange rates of such currencies against the U.S. dollar. The market value of investment securities and other assets and liabilities are translated at the exchange rate as of the valuation date. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the transaction date.
Reported realized and unrealized gain (loss) on investments include foreign currency gain (loss) related to investment transactions.
Reported realized and unrealized gain (loss) on foreign currency transactions and translation include the following: disposing/holding of foreign currency, the difference in exchange rate between the trade and settlement dates on securities transactions, the difference in exchange rate between the accrual and payment dates on dividends, and currency losses on the purchase of foreign currency in certain countries that impose taxes on such transactions.
Repurchase agreements Repurchase agreements are transactions under which a Fund purchases a security from a 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 regular custodian or third party 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.
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 below.
◾ Level 1: Unadjusted 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 December 31, 2023:
| | LEVEL 2
(Other Significant
Observable
Inputs) | LEVEL 3
(Signficant
Unobservable
Inputs) |
|
|
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| | | |
| | | |
| | | |
|
|
| | | |
Currency Forward Contracts |
| | | |
| | | |
The following is a reconciliation of the Fund's holdings for which Level 3 inputs were used in determining value.
| |
| |
| |
| |
Net change in unrealized depreciation | |
| |
Note 3: Derivative Instruments
The Fund may use derivatives either to minimize the impact of certain risks to one or more of its investments (as a ‘‘hedging technique’’) or to implement its investment strategy. A derivative is a financial instrument whose value is derived from a security, currency, interest rate, index, or other financial instrument.
Futures contracts Futures contracts involve an obligation to purchase or sell (depending on whether the Fund has entered a long
PAGE 13 ◾ Dodge & Cox Emerging Markets Stock Fund
Notes to Financial Statements
or short futures contract, respectively) an asset at a future date, at a price set at the time the contract is purchased. Futures contracts are exchange-traded. 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 to secure the Fund's obligation to perform. Initial margin is returned to the Fund when the futures contract is closed. Subsequent payments (referred to as "variation margin") are made to or received from the clearing broker on a daily basis based on changes in the market value of the contract. 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 in the Statement of Assets and Liabilities. A receivable and/or payable to brokers for daily variation margin is also recorded in 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 used equity index futures contracts to create equity exposure, equal to some or all of its non-equity net assets.
Currency forward contracts Currency forward contracts are agreements to purchase or sell a specific currency at a specified future date and price. Currency forward contracts are traded over-the-counter. The values of currency forward contracts change daily based on the prevailing forward exchange rates of the underlying currencies. Changes in the value of open contracts are recorded as unrealized appreciation or depreciation in the Statement of Operations. When a currency forward contract is closed, the Fund records a realized gain or loss in the Statement of Operations equal to the difference between the value at the time the contract was opened and the value at the time it was closed.
Losses from these transactions may arise from unfavorable changes in currency values or if a counterparty does not perform under a contract’s terms.
The Fund used currency forward contracts to hedge direct foreign currency exposure.
Additional derivative information The following identifies the location on the Statement of Assets and Liabilities and values of the Fund's derivative instruments categorized by primary underlying risk exposure.
| | Foreign
Exchange
Derivatives | |
| | | |
Unrealized appreciation on currency forward contracts | | | |
| | | |
| | | |
| | | |
Unrealized depreciation on currency forward contracts | | | |
| Includes cumulative appreciation (depreciation). Only the current day’s variation margin is reported in the Statement of Assets and Liabilities. |
The following summarizes the effect of derivative instruments on the Statement of Operations, categorized by primary underlying risk exposure.
| | Foreign
Exchange
Derivatives | |
| | | |
| | | |
Currency forward contracts | | | |
| | | |
Net change in unrealized appreciation/depreciation |
| | | |
Currency forward contracts | | | |
| | | |
The following summarizes the range of volume in the Fund's derivative instruments during the year ended December 31, 2023.
| | |
| | |
Currency forward contracts | | |
The Fund may enter into various over-the-counter derivative contracts governed by International Swaps and Derivatives Association master agreements (“ISDA agreements”). The Fund’s ISDA agreements, which are separately negotiated with each dealer counterparty, specify (i) events of default and other events permitting a party to terminate some or all of the contracts thereunder and (ii) the process by which those contracts will be valued for purposes of determining termination payments. If some or all of the contracts under a master agreement are terminated because of an event of default or similar event, the values of all terminated contracts must be netted to determine a single payment owed by one party to the other. To the extent amounts owed to the Fund by its counterparties are not collateralized, the Fund is at risk of those counterparties’ non-performance. The Fund attempts to mitigate counterparty credit risk by entering into contracts only with counterparties it believes to be of good credit quality, by exchanging collateral, and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Fund does not offset assets and liabilities that are subject to a master netting arrangement in the Statement of Assets and Liabilities.
The Fund’s ability to net assets and liabilities and to offset collateral pledged or received is based on contractual netting/offset provisions in the ISDA agreements. The Fund did not hold derivatives that are subject to enforceable master netting arrangements at December 31, 2023.
| Gross
Amount of
Recognized
Assets | Gross
Amount of
Recognized
Liabilities | | |
| | | | |
| | | | |
| | | | |
| | | | |
Dodge & Cox Emerging Markets Stock Fund ◾ PAGE 14
Notes to Financial Statements
| Gross Amount of Recognized Assets | Gross Amount of Recognized Liabilities | Cash Collateral Pledged / (Received)(a) | |
| | | | |
| | | | |
| | | | |
| Cash collateral pledged/(received) in excess of derivative assets/liabilities is not presented in this table. The total cash collateral is presented on the Fund's Statement of Assets and Liabilities. |
| Represents the net amount receivable from (payable to) the counterparty in the event of a default. |
Note 4: Related Party Transactions
Investment advisory fee The Fund pays an investment advisory fee monthly at an annual rate of 0.55% of the Fund’s average daily net assets to Dodge & Cox, investment manager of the Fund.
Administrative services fee The Fund pays Dodge & Cox a fee for administrative and shareholder services. The fee is accrued daily and paid monthly equal to an annual rate of 0.05% of the Fund’s average daily net assets. Under this agreement, Dodge & Cox also pays for the Fund's transfer agent fees.
Expense reimbursement Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain the ratio of total operating expenses to average net assets (“net expense ratio”) at 0.70% through April 30, 2026. The term of the agreement will automatically renew for subsequent three-year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term.
Fund officers and trustees All officers and two of the trustees of the Trust are current or former senior executive officers of Dodge & Cox. The Trust pays a fee only to those trustees who are not affiliated with Dodge & Cox.
Share ownership At December 31, 2023, Dodge & Cox, its executive officers and the Fund's interested trustees owned 24% of the Fund’s outstanding shares.
Note 5: Income Tax Information and Distributions to Shareholders
A provision for federal income taxes is not required since the Fund intends 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. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Financial reporting records are adjusted for permanent book to tax differences at year end to reflect tax character. Book to tax differences are primarily due to differing treatments of wash sales, foreign currency realized gain (loss), foreign capital gains tax, passive foreign investment companies, certain corporate action transactions, derivatives, and distributions.
Distributions during the years noted below were characterized as follows for federal income tax purposes:
| Year Ended
December 31, 2023 | Year Ended
December 31, 2022 |
| | |
| | |
At December 31, 2023, the tax basis components of distributable earnings were as follows:
Capital loss carryforward1 | |
Net unrealized depreciation | |
Total distributable earnings | |
| Represents accumulated long-term capital loss as of December 31, 2023, which may be carried forward to offset future capital gains. |
At December 31, 2023, unrealized appreciation and depreciation for investments and derivatives based on cost for federal income tax purposes were as follows:
| |
| |
| |
Net unrealized depreciation | |
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 6: 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 year.
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 year ended December 31, 2023, the Fund’s commitment fee amounted to $1,271 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 year.
Note 7: Purchases and Sales of Investments
For the year ended December 31, 2023, purchases and sales of securities, other than short-term securities, aggregated $139,427,367 and $47,178,750, respectively.
PAGE 15 ◾ Dodge & Cox Emerging Markets Stock Fund
Notes to Financial Statements
Note 8: Subsequent Events
Fund management has determined that no material events or transactions occurred subsequent to December 31, 2023, and through the
date of the Fund’s financial statements issuance, which require disclosure in the Fund’s financial statements.
Dodge & Cox Emerging Markets Stock Fund ◾ PAGE 16
Selected data and ratios
(for a share outstanding throughout each period) | | Period from
May 11, 2021
(Inception) to
December 31, |
| | | |
Net asset value, beginning of year | | | |
Income from investment operations: | | | |
| | | |
Net realized and unrealized gain (loss) | | | |
Total from investment operations | | | |
Distributions to shareholders from: | | | |
| | | |
| | | |
| | | |
Net asset value, end of year | | | |
| | | |
Ratios/supplemental data: | | | |
Net assets, end of year (millions) | | | |
Ratio of expenses to average net assets | | | |
Ratio of expenses to average net assets, before reimbursement by investment manager | | | |
Ratio of net investment income to average net assets | | | |
| | | |
See accompanying Notes to Financial Statements
PAGE 17 ◾ Dodge & Cox Emerging Markets Stock Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Dodge & Cox Funds and Shareholders of Dodge & Cox Emerging Markets Stock Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Dodge & Cox Emerging Markets Stock Fund (one of the funds constituting Dodge & Cox Funds, referred to hereafter as the “Fund”) as of December 31, 2023, the related statement of operations for the year ended December 31, 2023, the statement of changes in net assets for each of the two years in the period ended December 31, 2023, including the related notes, and the financial highlights for each of the two years ended December 31, 2023 and for the period May 11, 2021 (commencement of operations) to December 31, 2021 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2023 and the financial highlights for each of the two years ended December 31, 2023 and for the period May 11, 2021 (commencement of operations) to December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2023 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2024
We have served as the auditor of one or more investment companies in the Dodge & Cox Funds since 1931.
Dodge & Cox Emerging Markets Stock Fund ◾ PAGE 18
Special 2023 Tax Information (unaudited)
The following information is provided pursuant to provisions of the Internal Revenue Code:
In 2023, the Fund elected to pass through to shareholders foreign source income of $6,546,409 and foreign taxes paid of $834,086.
The Fund designates $3,504,962 of its distributions paid to shareholders in 2023 as qualified dividends (treated for federal income tax purposes in the hands of shareholders as taxable at a maximum rate of 20%).
For shareholders that are corporations, the Fund designates 0.3% of its ordinary dividends paid to shareholders in 2023 as dividends from domestic corporations eligible for the corporate dividends received deduction, provided that the shareholder otherwise satisfies applicable requirements to claim that deduction.
Funds' Liquidity Risk Management Program
(unaudited)
The Funds have adopted and implemented a written liquidity risk management program (“Program”) as required by Rule 22e-4 under the Investment Company Act. The Program is reasonably designed to assess and manage each Fund’s liquidity risk, taking into consideration the Fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources including the Funds’ interfund lending facility and line of credit.
The Funds’ Board of Trustees has approved the appointment of a Liquidity Risk Management Committee, which includes representatives from Dodge & Cox’s Legal, Compliance, Treasury, Operations, Trading, and Portfolio Management departments, and is responsible for the Program’s administration and oversight and for reporting to the Board on at least an annual basis regarding the Program’s operation and effectiveness.
The Liquidity Risk Management Committee refreshed its assessment of the Funds’ liquidity risk profiles, and considered the adequacy and effectiveness of the Program’s operations for the 12 months ended September 30, 2023 (the “covered period”) in order to prepare a written report to the Board of Trustees for consideration at its meeting held on December 8, 2023. The report concluded that (i) the Funds had adequate liquidity to operate effectively throughout the covered period; (ii) each Fund’s investment strategy continues to be appropriate for an open end fund; and (iii) the Funds’ Program is reasonably designed to assess and manage its liquidity risk.
Fund Holdings
The Fund provides a complete list of its 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 Fund’s Forms N-CSR and Part F of N-PORT on the SEC’s website at sec.gov. A list of the Fund’s 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.
Proxy Voting
For a free copy of the Fund’s proxy voting policies and procedures, please call 800-621-3979, 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 ended June 30 is also available at dodgeandcox.com or shareholders may view the Fund's Form N-PX 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 share the 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 800-621-3979. Your request will be implemented within 30 days.
PAGE 19 ◾ Dodge & Cox Emerging Markets Stock Fund
Dodge & Cox Funds — Executive Officer & Trustee Information
| Position with Trust
(Year of Election or
Appointment) | Principal Occupation During Past Five Years and Other Relevant Experience | Other Directorships of Public Companies Held
by Trustees |
Interested Trustees and Executive Officers |
| | Chairman and Director, Dodge & Cox (until 2022); Chief Investment Officer (until 2022) and member of U.S. Equity Investment Committee and Emerging Markets Equity Investment Committee (until 2022); Global Equity Investment Committee and International Equity Investment Committee (until 2021); U.S. Fixed Income Investment Committee (until 2019) | |
| Chair (since 2022)
President
(since 2014) and
Trustee (since 1993) | Chair, Chief Executive Officer, and Director, Dodge & Cox; President (until 2022); Co-Director of Fixed Income (until 2020); Director of Fixed Income (until 2019); member of U.S. Fixed Income Investment Committee and Global Fixed Income Investment Committee | |
| Chief Legal Officer
(since 2019) and Secretary (since 2017) | Vice President, General Counsel, and Secretary (since 2017), Dodge & Cox | |
| | Funds Treasurer (since 2021), Dodge & Cox; Vice President (since 2020); Financial Oversight and Control Analyst (until 2021) | |
| Chief Compliance
Officer (since 2010) | Vice President and Chief Compliance Officer, Dodge & Cox | |
|
| | CFO, athenahealth, Inc. (2019-2022) | Director, Synopsys Inc. (software company); Director, Carter's Inc. (children's apparel); Director, Eastern Bankshares, Inc. (financial services and banking services) |
| | Professor of Economics, Stanford University; Director of the Economics of Education Program, National Bureau of Economic Research; Senior Fellow, Hoover Institution and Stanford Institute for Economic Policy Research | |
| | Senior Counsel, Arnold & Porter (law firm) (2015-2018); Partner, Arnold & Porter (until 2015); Director, Howard, Rice, Nemerovski, Canady, Falk & Rabkin (1977-2011) | |
| | CFO, Pixar Animation Studios (1999-2004) | Director, Netflix, Inc. (internet television); Director, Blend (software company); Director, Bumble (online dating) |
Gabriela Franco
Parcella (55) | | President (since 2020) and Executive Managing Director, Merlone Geier Partners (2018-2019); Chairman, President, and CEO, Mellon Capital (2011 to 2017); COO, Mellon Capital (1997 to 2011) | |
| | President and CEO, QinetiQ US (since 2022); Corporate Vice President/President Enterprise Services, Northrop Grumman (2012-2022) | |
| | Robert and Marion Oster Distinguished Military Fellow, Hoover Institution (since 2012); Admiral, United States Navy (Ret.); U.S. Navy Chief of Naval Operations (2007-2011) | Director, Northrop Grumman Corp. (global security); Director, Maersk Line, Limited (shipping and transportation) |
| | Executive Vice President, Managing Director, Fixed Income at Loomis Sayles & Company, L.P. (2003-2011) | |
| The address for each Officer and Trustee is 555 California Street, 40th Floor, San Francisco, California 94104. Each Officer and Trustee oversees all seven series in the Dodge & Cox Funds complex and serves for an indefinite term. |
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 800-621-3979.
Dodge & Cox Emerging Markets Stock Fund ◾ PAGE 20
Emerging Markets Stock Fund
dodgeandcox.com
For Fund literature, transactions, and account
information, please visit the Funds’ website.
or write or call:
Dodge & Cox Funds
P.O. Box 219502
Kansas City, Missouri 64121-9502
(800) 621-3979
Investment Manager
Dodge & Cox
555 California Street, 40th Floor
San Francisco, California 94104
(415) 981-1710
Principal Underwriter
Foreside Fund Services, LLC
3 Canal Plaza, Suite 100
Portland, Maine 04101
(866) 251-6920
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 December 31, 2023, 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.
Balanced Fund | Class I (dodbx) | Class X (doxbx)
ESTABLISHED 1931
Important Notice:
The Securities and Exchange Commission has adopted new regulations that will impact the design and delivery of future Semi-Annual and Annual Reports. Beginning with the 2024 Semi-Annual Reports, paper copies will be mailed to you unless you have opted for electronic delivery of the reports.
12/23 BF AR Printed on recycled paper 
To Our Shareholders (unaudited)
The Dodge & Cox Balanced Fund—Class I had a total return of 13.76% for the year ended December 31, 2023, compared to a return of 17.67% for the Combined Index (a 60/40 blend of stocks and fixed income securities).1
Market Commentary
Despite market volatility driven by shifting investor expectations regarding inflation, economic growth, and Federal Reserve policy, both U.S. equity and fixed income markets posted strong returns for the year, bolstered by a strong fourth quarter.
The S&P 500 was up 11.7% during the fourth quarter and 26.3% for the year, led by the outsized returns of the “Magnificent Seven” stocks2 and their respective sectors: Information Technology (Microsoft, Apple, and NVIDIA), Communication Services (Alphabet and Meta), and Consumer Discretionary (Amazon and Tesla). These seven stocks rose 76.2%,3 increasing their share of the S&P 500’s market capitalization from 20% to 28% during the year. In a reversal of 2022 trends, U.S. growth stocks outperformed value stocks4 during the year, and the valuation disparity between value and growth stocks widened. The Russell 1000 Value Index5 ended the year trading at 16.0 times forward earnings6 versus 26.8 times for the Russell 1000 Growth Index.7
Within the bond market, while the 10-year U.S. Treasury yield ended the year unchanged at 3.9%, it traded in a range of 3.3% to 5.0%, reflecting the volatile environment. In the final months of the year, investors became increasingly convinced that the Fed could successfully engineer a soft landing with receding inflation and short-term interest rate cuts expected in 2024. This pivot in sentiment drove U.S. Treasury yields sharply lower and fueled the Bloomberg U.S. Agg’s impressive 6.8% fourth quarter return, the strongest quarterly return in over 30 years. For the year, the Bloomberg U.S. Agg returned 5.5%.
Investment Strategy
Asset Allocation
The Balanced Fund seeks to generate attractive returns by investing in a portfolio of equity and fixed income securities, where the current market valuations do not adequately reflect their fundamentals and outlook. We conduct our own bottom-up research, and our investment decisions are guided by a long-term focus and rigorous price discipline. Assessing the appropriate asset allocation between equities and fixed income securities for the Fund is an integral part of this active investment process.
We increased the Fund’s fixed income weight by nearly four percentage points during 2023, ending up at its highest level in recent years, as fixed income yields are broadly higher and the range of expected returns is attractive over the coming years. As of December 31, the Fund held 46.8% in U.S. equities, 15.0% in non-U.S. equities (which can provide diversification as they are generally less correlated with other equity holdings), and 35.4% in fixed income.
Equity
Throughout the year, we closely monitored global equity markets and implemented several portfolio adjustments in light of shifting
risk/reward dynamics. Most notably, we reduced exposure to various holdings that saw their valuations increase, such as Broadcom/VMware, and we invested in companies with lower valuations in more defensive and stable sectors, such as Health Care and Utilities.8 The Fund’s largest equity sector exposures (versus the S&P 500) continue to be in Financials and Health Care.
Where We Stand on Financials
In the first half of 2023, three U.S. regional banks, which had significant concentrations of uninsured deposits and large unrealized losses on their balance sheets, came under pressure and eventually failed. Although the Fund had no exposure to those banks, their failures weighed on the broader Financials sector. Despite rallying in the fourth quarter, the Financials sector detracted on a relative basis for the year.
We responded to the tumult in Financials by reexamining our investment theses for the Fund’s Financials holdings and believe they are resilient and will remain profitable under various stressed scenarios. Our well-diversified portfolio is invested in global, systemically important banks that are subject to high regulatory capital standards (e.g., Bank of America, Wells Fargo) and capital markets institutions with relatively little credit risk exposure (e.g., Bank of New York Mellon, Charles Schwab, Goldman Sachs). Recent credit quality concerns have been concentrated in commercial real estate, especially the office real estate market. The Fund’s exposure is limited, as office real estate is a small portion of the overall loan portfolios of these companies.
Although shares of many Financials companies were under pressure during 2023, we have a positive view on the long-term prospects for the Fund’s holdings. Valuations are relatively low and we believe their long-term earnings potential is underappreciated. As such, we maintained the Fund’s sizable exposure via our individually and carefully selected holdings.
Market Developments & Portfolio Actions in Health Care
The Health Care sector was another area that underperformed the major indices during 2023. Investor enthusiasm for Information Technology, artificial intelligence, and the Magnificent Seven dampened interest in more stable, defensive areas like Health Care. In addition, regulatory concerns weighed on the sector, and the increased use of GLP-1 inhibitors,9 like Ozempic, created uncertainty regarding potential demand for certain health care services and consumer-related products. We believe that the current environment presents challenges in the near term, but also has created attractive long-term opportunities, such as Baxter International, for us as value-oriented investors.
One new purchase was Baxter International, which is a leading medical supply company. Baxter holds a large position in its major markets, but the company has faced considerable headwinds recently. Issues include inflationary cost pressures, the questionable acquisition of hospital bed company Hillrom (and the increase in debt related to the purchase), and concerns about GLP-1’s potential to reduce demand for dialysis supplies. These contributed to a sharp
PAGE 1 ◾ Dodge & Cox Balanced Fund
share price decline of more than 50% over the last two years. Looking past these near-term headwinds, we believe the company has a strong underlying business and will be able to maintain stable growth, increase margins, and pay down its debt, thus presenting us with an attractive opportunity to start a position.
Fixed Income
We also capitalized on last year’s dynamic market environment by actively managing the Fund’s fixed income exposures. In conjunction with increasing the Fund’s fixed income weight, we shifted the composition of the fixed income allocation away from credit, which had performed well during the year, and leaned into Agency10 mortgage-backed securities (MBS), which we believe offer a compelling opportunity within the lower-risk segment of the market. Amid these changes, we maintained the portfolio’s below-benchmark duration11 position.
Opportunities in the Credit Sector
Credit was the strongest-performing segment of the fixed income market as corporate fundamentals remained strong and market sentiment regarding the economic outlook improved. Accordingly, we trimmed or sold a number of issuers where we no longer found the valuation to be compelling. The credit reductions were focused primarily on non-financial companies and some longer-duration securities in the portfolio, as we believe those are more vulnerable to future underperformance if spreads were to widen.
While we reduced many credit positions, intra-year market volatility also created idiosyncratic opportunities to add at attractive valuations. For example, the failure of several regional banks and takeover of Credit Suisse (none of which were owned in the Fund) created interesting opportunities to adjust our allocation to Financials during the year. In the fourth quarter, drawing on the work of our integrated equity / fixed income research team, we purchased a newly-issued UBS Additional Tier 112 (AT1) debt security and trimmed the Fund’s holding of UBS common stock. We believe UBS, which acquired Credit Suisse, is a highly creditworthy institution and that the 9.25% initial coupon on the AT1 security provides an attractive level of income and serves as a valuable complement to the Fund’s position in the stock.
Overall, we are optimistic about the long-term total return prospects for the Fund’s credit holdings even though broad credit market spreads are now narrower than long-term averages. The Fund’s credit portfolio differs significantly from the market, owing to our rigorous bottom-up research, which seeks to identify attractively priced securities from issuers with strong fundamentals and management teams capable of navigating various economic environments.
Agency MBS: Strong Fundamentals & Compelling Valuations
The proceeds of our credit trims were largely reinvested in Agency MBS, which increased the Fund’s weighting in the Securitized sector. We are enthusiastic about the Fund’s Agency MBS holdings as they continue to offer low valuations, negligible credit risk, minimal prepayment risk, and provide an attractive incremental yield versus U.S. Treasuries and other high-quality investment alternatives.
Interest Rate & Inflation Risk
Managing interest rate and inflation risk is an important focus as it can affect both the equity and fixed income portions of the Fund. In light of the Fed’s considerable progress in tempering inflation, we modestly increased the Fund’s duration position during the year. Nevertheless, the Fund’s duration remains below that of the benchmark, as we acknowledge the risk that long-term interest rates could potentially move higher over time due to inflationary, fiscal, or other pressures. During the year, we also initiated and subsequently added to a position in U.S. Treasury Inflation-Protected Securities, which serves as an additional inflation hedge.
In Closing
We are pleased with the Fund’s absolute performance and continue to be optimistic about its long-term outlook given its diversification across a broad range of sectors and investment themes.
As always, we thank you for your continued confidence in Dodge & Cox and welcome your comments and questions.
For the Board of Trustees, | |
| |
Dana M. Emery,
Chair and President | |
January 31, 2024
| All returns are stated in U.S. dollars, unless otherwise noted. The Funds’ 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 dividend and/or interest income but, unlike Fund returns, do not reflect fees or expenses. The Combined Index reflects an unmanaged portfolio (rebalanced monthly) of 60% of the S&P 500 Index, which is a market capitalization-weighted index of 500 large capitalization stocks commonly used to represent the U.S. equity market, and 40% of the Bloomberg U.S. Aggregate Bond Index (Bloomberg U.S. Agg), which is a widely recognized, unmanaged index of U.S. dollar-denominated, investment-grade, taxable fixed income securities. The Fund may, however, invest up to 75% of its total assets in equity securities. |
| The top seven contributors to the S&P 500’s absolute returns in 2023 were Microsoft, Apple, NVIDIA, Amazon, Alphabet, Meta Platforms, and Tesla. |
| Market capitalization-weighted average return. (Market capitalization is a measure of the security’s size. It is the market price of a security multiplied by the number of shares outstanding.) |
| Generally, stocks that have lower valuations are considered “value” stocks, while those with higher valuations are considered “growth” stocks. |
| The Russell 1000 Value Index is a broad-based, unmanaged equity market index composed of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. |
| Unless otherwise specified, all weightings and characteristics are as of December 31, 2023. Price-to-earnings (forward) ratios are calculated using 12-month forward earnings estimates from third-party sources as of the reporting period. Estimates reflect a consensus of sell-side analyst estimates, which may lag as market conditions change. |
| The Russell 1000 Growth Index is a broad-based, unmanaged equity market index composed of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. |
| The use of specific examples does not imply that they are more or less attractive investments than the portfolio’s other holdings. |
Dodge & Cox Balanced Fund ◾ PAGE 2
| GLP-1 inhibitors are a class of drugs used in patients with type-2 diabetes as glucose-lowering therapies. They also have additional benefits of weight loss and blood pressure reduction. |
| The U.S. Government does not guarantee the Fund’s shares, yield, or net asset value. The agency guarantee (by, for example, Ginnie Mae, Fannie Mae, or Freddie Mac) does not eliminate market risk. |
| Duration is a measure of a bond’s (or a bond portfolio’s) price sensitivity to changes in interest rates. |
| Additional Tier 1 Bonds, also called AT1 Bonds, are capital instruments banks issue to raise their core equity base. |
PAGE 3 ◾ Dodge & Cox Balanced Fund
2023 Performance Review for the Fund's Class I Shares (unaudited)
The Fund underperformed the Combined Index by 3.91 percentage points in 2023. Equity sector allocation was the main driver of the Fund's relative underperformance. This was partially offset by fixed income security selection and sector allocation, which benefited relative returns.
Equity Portfolio (vs. S&P 500)
Key contributors to relative results included the portfolio's:
◾ Industrials holdings, particularly General Electric and FedEx;
◾ Stock selection and underweight position in Consumer Staples; and
◾ Positions in VMware, UBS Group, and Honda Motor.
Key detractors from relative results included the portfolio's:
◾ Information Technology underweight and holdings, particularly an underweight position in Microsoft;
◾ Overweight position and selected holdings in Health Care, including Cigna and Sanofi;
◾ Energy overweight and holdings, largely Occidental Petroleum; and
◾ Position in Charles Schwab.
Fixed Income Portfolio (vs. Bloomberg U.S. Agg)
Key contributors to relative results included the portfolio's:
◾ Credit issuer selection, most notably British American Tobacco, Pemex, Citigroup, and Charter Communications;
◾ Underweight position in U.S. Treasuries and overweight position in corporate bonds; and
◾ Below-benchmark duration position.
There were no notable fixed income detractors during the
period.
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 90 Years of Investment Experience
Dodge & Cox was founded in 1930. We have a stable and well- qualified team of investment professionals, most of whom have spent their entire careers at Dodge & Cox.
Experienced Investment Team
The Balanced Fund Investment Committee, which is the decision-making body for the Balanced Fund, is a seven-member committee with an average tenure of 17 years at Dodge & Cox.
One Business with a Single Decision-Making Office
Dodge & Cox manages equity (domestic, international, and global), fixed income (domestic and global), and balanced investments, all from one office in San Francisco.
Consistent Investment Approach
Our team decision-making process involves thorough, bottom-up 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. The Fund also invests in individual bonds whose yields and market values fluctuate, so that an investment may be worth more or less than its original cost. Debt securities are subject to interest rate risk, credit risk, and prepayment and call risk, all of which could have adverse effects on the value of the Fund. A low interest rate environment creates an elevated risk of future negative returns. Financial intermediaries may restrict their market making activities for certain debt securities, which may reduce the liquidity and increase the volatility of such securities. Please read the prospectus and summary prospectus for specific details regarding the Fund's risk profile.
Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security. Please see the Portfolio of Investments section in this report for a complete list of fund holdings.
Dodge & Cox Balanced Fund ◾ PAGE 4
Growth of $10,000 Over 10 Years (unaudited)
For an Investment Made on December 31, 2013 
Average Annual Total Return
For Periods Ended December 31, 2023
| | | | |
Dodge & Cox Balanced Fund | | | | |
| | | | |
| | | | |
| | | | |
Bloomberg U.S. Aggregate Bond Index | | | | |
| | | | |
Expense Ratios
Per the Prospectus Dated May 1, 2023
| | |
Dodge & Cox Balanced Fund | | |
| | |
| | |
| The Class X shares inception date is May 2, 2022. The returns shown prior to that date are for the Class I shares. |
| The Combined Index reflects an unmanaged portfolio (rebalanced monthly) of 60% of the S&P 500 Index, which is a market capitalization-weighted index of 500 large capitalization stocks commonly used to represent the U.S. equity market, and 40% of the Bloomberg U.S. Aggregate Bond Index (Bloomberg U.S. Agg), which is a widely recognized, unmanaged index of U.S. dollar-denominated, investment-grade, taxable fixed income securities. The Fund may, however, invest up to 75% of its total assets in equity securities. |
| Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain Total Annual Fund Operating Expenses of the Fund’s Class X shares at 0.42% until April 30, 2026. This agreement cannot be terminated prior to April 30, 2026 other than by resolution of the Fund’s Board of Trustees. For purposes of the foregoing, ordinary expenses shall not include nonrecurring shareholder account fees, fees and expenses associated with Fund shareholder meetings, fees on portfolio transactions such as exchange fees, dividends and interest on short positions, fees and expenses of pooled investment vehicles that are held by the Fund, interest expenses and other fees and expenses related to any borrowings, taxes, brokerage fees and commissions and other costs and expenses relating to the acquisition and disposition of Fund investments, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other non-routine expenses or extraordinary expenses not incurred in the ordinary course of the Fund’s business, such as litigation expenses. The term of the agreement will automatically renew for subsequent three- year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term. The agreement does not permit Dodge & Cox to recoup any fees waived or payments made to the Fund for a prior year. |
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 800-621-3979 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 and/or interest income but, unlike Fund returns, do not reflect fees or expenses.
S&P 500®is a trademark of S&P Global Inc. Bloomberg is a registered trademark of Bloomberg Finance L.P. and its affiliates.
For more information about these indices, visit:
www.dodgeandcox.com/balancedfund
PAGE 5 ◾ Dodge & Cox Balanced Fund
Portfolio Information (unaudited) December 31, 2023
Equity Sector Diversification | |
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Fixed Income Sector Diversification | |
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| Net Cash & Other includes cash, short-term investments, derivatives, receivables, and payables. |
Fund Expense Example (unaudited)
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 each share class in the table below provides information about actual account values and expenses based on the actual returns of the share class. 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 each share class in 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 share class and an assumed 5% annual rate of return before expenses (not the actual return of the share class). 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 other mutual funds.
Six Months Ended
December 31, 2023 | Beginning Account Value
7/1/2023 | Ending Account Value
12/31/2023 | Expenses Paid
During Period* | |
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Based on hypothetical 5% yearly return | | | | |
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Based on hypothetical 5% yearly return | | | | |
| Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (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).
Dodge & Cox Balanced Fund ◾ PAGE 6
Portfolio of Investments December 31, 2023
|
| | |
Communication Services: 6.2% |
Media & Entertainment: 5.5% |
Alphabet, Inc., Class A(a) | | |
Alphabet, Inc., Class C(a) | | |
Charter Communications, Inc., | | |
| | |
DISH Network Corp., Class A(a) | | |
| | |
| | |
Meta Platforms, Inc., Class A(a) | | |
| | |
| | |
Telecommunication Services: 0.7% |
| | |
| | |
Consumer Discretionary: 4.2% |
Automobiles & Components: 0.7% |
Honda Motor Co., Ltd. ADR (Japan) | | |
Consumer Discretionary Distribution & Retail: 2.7% |
Alibaba Group Holding, Ltd. ADR (China) | | |
| | |
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| | |
| | |
Consumer Durables & Apparel: 0.2% |
| | |
|
Booking Holdings, Inc.(a) | | |
| | |
|
Food, Beverage & Tobacco: 2.8% |
Anheuser-Busch InBev SA/NV ADR (Belgium) | | |
Imperial Brands PLC ADR (United Kingdom) | | |
Molson Coors Beverage Co., Class B | | |
| | |
Household & Personal Products: 0.6% |
Haleon PLC ADR (United Kingdom) | | |
| | |
|
Baker Hughes Co., Class A | | |
| | |
Occidental Petroleum Corp. | | |
Occidental Petroleum Corp., Warrant(a) | | |
| | |
| | |
| | |
|
|
Banco Santander SA(b) (Spain) | | |
| | |
BNP Paribas SA ADR (France) | | |
| | |
HDFC Bank, Ltd. ADR (India) | | |
|
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| | |
| | |
Financial Services: 10.8% |
Capital One Financial Corp. | | |
Fidelity National Information Services, Inc. | | |
| | |
| | |
The Bank of New York Mellon Corp. | | |
| | |
The Goldman Sachs Group, Inc. | | |
UBS Group AG, NY Shs (Switzerland) | | |
XP, Inc., Class A (Brazil) | | |
| | |
|
Aegon Ltd., NY Shs (Netherlands) | | |
Brighthouse Financial, Inc.(a) | | |
| | |
| | |
| | |
|
Health Care Equipment & Services: 4.5% |
Baxter International, Inc. | | |
| | |
Fresenius Medical Care AG ADR (Germany) | | |
GE HealthCare Technologies, Inc. | | |
| | |
| | |
| | |
Zimmer Biomet Holdings, Inc. | | |
| | |
Pharmaceuticals, Biotechnology & Life Sciences: 9.3% |
Alnylam Pharmaceuticals, Inc.(a) | | |
| | |
| | |
BioMarin Pharmaceutical, Inc.(a) | | |
| | |
Elanco Animal Health, Inc.(a) | | |
| | |
GSK PLC ADR (United Kingdom) | | |
| | |
Neurocrine Biosciences, Inc.(a) | | |
Novartis AG ADR (Switzerland) | | |
Regeneron Pharmaceuticals, Inc.(a) | | |
Roche Holding AG ADR (Switzerland) | | |
| | |
| | |
| | |
|
|
| | |
Johnson Controls International PLC | | |
| | |
| | |
PAGE 7 ◾ Dodge & Cox Balanced FundSee accompanying Notes to Financial Statements
Portfolio of Investments December 31, 2023
Common Stocks (continued) |
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| | |
| | |
Information Technology: 3.4% |
Semiconductors & Semiconductor Equipment: 0.4% |
Microchip Technology, Inc. | | |
Software & Services: 1.6% |
Cognizant Technology Solutions Corp., Class A | | |
| | |
| | |
Technology, Hardware & Equipment: 1.4% |
| | |
| | |
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|
| | |
Glencore PLC(c) (Australia) | | |
International Flavors & Fragrances, Inc. | | |
LyondellBasell Industries NV, Class A | | |
| | |
| | |
|
Equity Real Estate Investment Trusts (Reits): 0.3% |
Gaming & Leisure Properties, Inc. REIT | | |
|
| | |
Total Common Stocks
(Cost $6,324,967,423) | | |
|
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U.S. Treasury Inflation Indexed | | |
| | |
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Petroleo Brasileiro SA (Brazil) | | |
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Petroleos Mexicanos (Mexico) | | |
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Colombia Government International (Colombia) | | |
| | |
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| | |
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Small Business Admin. - 504 Program | | |
Series 2007-20F 1, 5.71%, 6/1/27 | | |
| | |
|
Rio Oil Finance Trust (Brazil) | | |
| | |
| | |
| | |
|
Navient Student Loan Trust | | |
United States 30 Day Average SOFR | | |
+1.2640%, Series 2016-7A A, | | |
+1.4140%, Series 2016-6A A3, | | |
+0.9140%, Series 2017-5A A, | | |
+1.2640%, Series 2017-1A A3, | | |
+1.1640%, Series 2017-2A A, | | |
+0.8640%, Series 2018-2A A3, | | |
+1.1140%, Series 2019-2A A2, | | |
+0.8140%, Series 2016-1A A, | | |
+0.6640%, Series 2021-2A A1B, | | |
| | |
United States 30 Day Average SOFR | | |
+0.9140%, Series 2012-5 A3, 6.252%, 3/25/26 | | |
United States 90 Day Average SOFR | | |
+0.8610%, Series 2005-9 A7A, 6.196%, 1/25/41 | | |
+0.4310%, Series 2006-2 A6, 5.766%, 1/25/41 | | |
+0.4210%, Series 2006-8 A6, 5.756%, 1/25/41 | | |
See accompanying Notes to Financial StatementsDodge & Cox Balanced Fund ◾ PAGE 8
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
| | |
+0.8110%, Series 2004-3A A6B, | | |
SMB Private Education Loan Trust (Private Loans) | | |
Series 2018-B A2A, 3.60%, | | |
Series 2023-C A1A, 5.67%, | | |
Series 2023-A A1A, 5.38%, | | |
Series 2023-D A1A, 6.15%, | | |
| | |
| | |
|
|
Freddie Mac Multifamily Interest Only | | |
Series K055 X1, 1.336%, 3/25/26(f) | | |
Series K056 X1, 1.238%, 5/25/26(f) | | |
Series K064 X1, 0.596%, 3/25/27(f) | | |
Series K065 X1, 0.662%, 4/25/27(f) | | |
Series K066 X1, 0.745%, 6/25/27(f) | | |
Series K069 X1, 0.344%, 9/25/27(f) | | |
Series K090 X1, 0.708%, 2/25/29(f) | | |
| | |
| | |
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|
Dept. of Veterans Affairs | | |
Series 1995-1 1, 6.627%, 2/15/25(f) | | |
Series 1995-2C 3A, 8.793%, 6/15/25 | | |
Series 2002-1 2J, 6.50%, 8/15/31 | | |
| | |
Trust 2002-33 A1, 7.00%, 6/25/32 | | |
Trust 2009-30 AG, 6.50%, 5/25/39 | | |
Trust 2009-66 ET, 6.00%, 5/25/39 | | |
Trust 2020-45 HD, 3.50%, 7/25/40 | | |
Trust 2001-T7 A1, 7.50%, 2/25/41 | | |
Trust 2001-T5 A3, 7.50%, 6/19/41(f) | | |
Trust 2001-T4 A1, 7.50%, 7/25/41 | | |
Trust 2001-T8 A1, 7.50%, 7/25/41 | | |
Trust 2001-W3 A, 7.00%, 9/25/41(f) | | |
Trust 2001-T10 A2, 7.50%, 12/25/41 | | |
Trust 2013-106 MA, 4.00%, 2/25/42 | | |
Trust 2002-W6 2A1, 7.00%, | | |
Trust 2002-W8 A2, 7.00%, 6/25/42 | | |
Trust 2003-W2 1A2, 7.00%, 7/25/42 | | |
Trust 2003-W2 1A1, 6.50%, 7/25/42 | | |
Trust 2003-W4 4A, 5.546%, | | |
Trust 2012-121 NB, 7.00%, 11/25/42 | | |
Trust 2013-19 ZA, 3.50%, 3/25/43 | | |
Trust 2004-T1 1A2, 6.50%, 1/25/44 | | |
Trust 2004-W2 5A, 7.50%, 3/25/44 | | |
Trust 2004-W8 3A, 7.50%, 6/25/44 | | |
Trust 2005-W4 1A2, 6.50%, 8/25/45 | | |
Trust 2009-11 MP, 7.00%, 3/25/49 | | |
|
| | |
United States 30 Day Average SOFR | | |
+0.6640%, Trust 2013-98 FA, 6.002%, 9/25/43 | | |
| | |
Series T-48 1A4, 5.538%, 7/25/33 | | |
Series T-51 1A, 6.50%, 9/25/43(f) | | |
Series T-59 1A1, 6.50%, 10/25/43 | | |
Series 4281 BC, 4.50%, 12/15/43(f) | | |
Series 4384 DZ, 2.50%, 9/15/44 | | |
Series 4680 GZ, 3.50%, 3/15/47 | | |
United States 30 Day Average SOFR | | |
+0.7240%, Series 314 F2, 6.063%, 9/15/43 | | |
| | |
| | |
+0.7340%, Series 2014-H18 FA, 6.057%, 9/20/64 | | |
+0.8140%, Series 2020-H02 FA, 6.137%, 1/20/70 | | |
+0.7640%, Series 2020-H01 FV, 6.087%, 1/20/70 | | |
United States 30 Day Average SOFR | | |
+0.55%, Series 2022-H04 FG, 5.888%, 2/20/67 | | |
+0.80%, Series 2023-H05 FJ, 6.138%, 2/20/68 | | |
+0.41%, Series 2022-H06 FC, 5.748%, 8/20/68 | | |
+1.02%, Series 2023-H08 FE, 6.358%, 8/20/71 | | |
+1.00%, Series 2022-H20 FB, 6.338%, 8/20/71 | | |
+0.82%, Series 2022-H04 HF, 6.158%, 2/20/72 | | |
+0.67%, Series 2022-H09 FA, 6.008%, 4/20/72 | | |
+0.74%, Series 2022-H09 FC, 6.078%, 4/20/72 | | |
+0.97%, Series 2022-H11 EF, 6.308%, 5/20/72 | | |
| | |
+1.0150%, Series 2017-H03 F, 5.729%, 1/20/67 | | |
+0.9450%, Series 2017-H12 BF, 6.314%, 10/20/67 | | |
+0.9450%, Series 2017-H20 FG, 6.314%, 10/20/67 | | |
+0.7750%, Series 2018-H02 GF, 4.642%, 12/20/67 | | |
+0.7950%, Series 2018-H08 GF, 5.185%, 5/20/68 | | |
+0.9650%, Series 2018-H13 BF, 5.345%, 6/20/68 | | |
+0.9950%, Series 2019-H04 EF, 5.606%, 11/20/68 | | |
+0.9650%, Series 2019-H01 FV, 3.834%, 12/20/68 | | |
| | |
Federal Agency Mortgage Pass-Through: 11.3% |
| | |
| | |
PAGE 9 ◾ Dodge & Cox Balanced FundSee accompanying Notes to Financial Statements
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
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6.03%, 11/1/40 - 12/1/40(f) | | |
| | |
| | |
5.85%, 11/1/44 - 12/1/44(f) | | |
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Freddie Mac Gold, 15 Year | | |
| | |
Freddie Mac Gold, 20 Year | | |
| | |
| | |
Freddie Mac Gold, 30 Year | | |
| | |
| | |
| | |
| | |
| | |
Freddie Mac Pool, 20 Year | | |
| | |
Freddie Mac Pool, 30 Year | | |
| | |
| | |
| | |
| | |
| | |
7.50%, 11/15/24 - 10/15/25 | | |
| | |
| | |
| | |
|
|
| | |
| | |
| | |
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| | |
Barclays PLC (United Kingdom) | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
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| | |
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| | |
Capital One Financial Corp. | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
See accompanying Notes to Financial StatementsDodge & Cox Balanced Fund ◾ PAGE 10
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
| | |
| | |
United States 90 Day Average SOFR | | |
+6.63%, 12.022%, 10/30/40(g) | | |
HSBC Holdings PLC (United Kingdom) | | |
| | |
| | |
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Lloyds Banking Group PLC (United Kingdom) | | |
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| | |
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NatWest Group PLC (United Kingdom) | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
The Goldman Sachs Group, Inc. | | |
| | |
UBS Group AG (Switzerland) | | |
| | |
| | |
| | |
| | |
| | |
| | |
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British American Tobacco PLC (United Kingdom) | | |
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|
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| | |
| | |
Burlington Northern Santa Fe LLC(k) | | |
| | |
| | |
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| | |
Charter Communications, Inc. | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
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Elanco Animal Health, Inc. | | |
| | |
Ford Motor Credit Co. LLC(k) | | |
| | |
| | |
| | |
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| | |
| | |
| | |
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| | |
GE HealthCare Technologies, Inc. | | |
| | |
| | |
| | |
| | |
| | |
Imperial Brands PLC (United Kingdom) | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
PAGE 11 ◾ Dodge & Cox Balanced FundSee accompanying Notes to Financial Statements
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
| | |
| | |
| | |
Microchip Technology, Inc. | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Telecom Italia SPA (Italy) | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Ultrapar Participacoes SA (Brazil) | | |
| | |
| | |
| | |
| | |
Verizon Communications, Inc. | | |
| | |
| | |
| | |
| | |
Vodafone Group PLC (United Kingdom) | | |
| | |
| | |
|
American Electric Power Co., Inc. | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
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| | |
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| | |
Total Debt Securities
(Cost $5,121,696,867) | |
Short-Term Investments: 2.8% |
| | |
Repurchase Agreements: 2.4% |
Fixed Income Clearing Corporation(l) 5.31%, dated 12/29/23, due 1/2/24, maturity value $293,172,870 | | |
Fixed Income Clearing Corporation(l) 2.70%, dated 12/29/23, due 1/2/24, maturity value $44,305,288 | | |
| | |
|
State Street Institutional U.S. Government Money Market Fund - Premier Class | | |
Total Short-Term Investments
(Cost $393,871,273) | |
Total Investments In Securities
(Cost $11,840,535,563) | | |
Other Assets Less Liabilities | | |
| | |
| |
| The security is issued in Euros (EUR). |
| The security is issued in British Pounds (GBP). |
| |
| Security exempt from registration under Rule 144A of the Securities Act of 1933. The security may be resold in transactions exempt from registration, normally to qualified institutional buyers. |
| Variable rate security: interest rate is determined by the interest rates of underlying pool of assets that collateralize the security. The interest rate of the security may change due to a change in the interest rates or the composition of underlying pool of assets. The interest rate shown is the rate as of period end. |
| Hybrid security: characteristics of both a debt and equity security. |
| Perpetual security: no stated maturity date. |
| Variable rate security: fixed-to-float security pays an initial fixed interest rate and will pay a floating interest rate established at a predetermined time in the future. The interest rate shown is the rate as of period end. |
| Security exempt from registration pursuant to Regulation S under the Securities Act of 1933, as amended. Regulation S securities are subject to restrictions on resale in the United States. |
| Subsidiary. Security may be issued by parent company or one of its subsidiaries. (see below) |
| Repurchase agreement is collateralized by U.S. Treasury Notes 2.25%-2.75%, 11/15/25-8/15/32. U.S. Treasury Inflation Indexed Note 1.125%, 1/15/33. Total collateral value is $342,936,253. |
| |
| The Fund usually classifies a company or issuer based on its country of risk, but may designate a different country in certain circumstances. |
| Debt securities are grouped by parent company unless otherwise noted. Actual securities may be issued by the listed parent company or one of its subsidiaries. |
| Debt securities with floating interest rates are linked to the referenced benchmark; the interest rate shown is the rate as of period end. |
See accompanying Notes to Financial StatementsDodge & Cox Balanced Fund ◾ PAGE 12
Portfolio of Investments December 31, 2023
ADR: American Depositary Receipt |
ARM: Adjustable Rate Mortgage |
CMBS: Commercial Mortgage-Backed Security |
CMO: Collateralized Mortgage Obligation |
|
NY Shs: New York Registry Shares |
REMIC: Real Estate Mortgage Investment Conduit |
SOFR: Secured Overnight Financing Rate |
|
Futures Contracts
| | | | Value /
Unrealized
Appreciation/
(Depreciation) |
10 Year U.S. Treasury Note— Long Position | | | | |
E-Mini S&P 500 Index— Short Position | | | | |
Euro-Bund— Short Position | | | | |
Long-Term U.S. Treasury Bond— Long Position | | | | |
| | | | |
Currency Forward Contracts
| | | | Unrealized Appreciation
(Depreciation) |
|
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Unrealized gain on currency forward contracts | | | |
Unrealized loss on currency forward contracts | | | |
Net unrealized loss on currency forward contracts | | | | |
The listed counterparty may be the parent company or one of its subsidiaries.
PAGE 13 ◾ Dodge & Cox Balanced FundSee accompanying Notes to Financial Statements
Statement of Assets and Liabilities
| |
|
Investments in securities, at value (cost $11,840,535,563) | |
Cash pledged as collateral for currency forward contracts | |
Cash denominated in foreign currency (cost $5,811,930) | |
Deposits with broker for futures contracts | |
Receivable for variation margin for futures contracts | |
Receivable for investments sold | |
Receivable for Fund shares sold | |
Dividends and interest receivable | |
Expense reimbursement receivable | |
Prepaid expenses and other assets | |
| |
|
Unrealized depreciation on currency forward contracts | |
Payable for investments purchased | |
Payable for Fund shares redeemed | |
| |
| |
| |
| |
|
| |
| |
| |
|
| |
Shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
|
| |
Shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
Statement of Operations
| Year Ended
December 31, 2023 |
| |
Dividends (net of foreign taxes of $8,085,558) | |
| |
| |
| |
| |
Administrative services fees | |
| |
| |
Custody and fund accounting fees | |
| |
| |
| |
| |
| |
| |
Expenses reimbursed by investment manager | |
| |
| |
Realized and Unrealized Gain (Loss): | |
| |
Investments in securities (Note 6) | |
| |
| |
Currency forward contracts | |
Foreign currency transactions | |
Net change in unrealized appreciation/depreciation | |
Investments in securities | |
| |
| |
Currency forward contracts | |
Foreign currency translation | |
Net realized and unrealized gain | |
Net Change in Net Assets From Operations | |
See accompanying Notes to Financial StatementsDodge & Cox Balanced Fund ◾ PAGE 14
Statement of Changes in Net Assets
| | |
| | |
| | |
| | |
| | |
Net change in unrealized appreciation/depreciation | | |
| | |
Distributions to Shareholders: | | |
| | |
| | |
| | |
| | |
| | |
Proceeds from sales of shares | | |
Reinvestment of distributions | | |
| | |
| | |
Proceeds from sales of shares | | |
Reinvestment of distributions | | |
| | |
Net change from Fund share transactions | | |
Total change in net assets | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Net change in shares outstanding | | |
| | |
| | |
| | |
| | |
Net change in shares outstanding | | |
PAGE 15 ◾ Dodge & Cox Balanced FundSee accompanying Notes to Financial Statements
Notes to Financial Statements
Note 1: Organization and Significant Accounting Policies
Dodge & Cox Balanced 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, as an open-end management investment company. The Fund commenced operations on June 26, 1931, and seeks regular income, conservation of principal, and an opportunity for long-term growth of principal and income. Risk considerations and investment strategies of the Fund are discussed in the Fund’s Prospectus.
On May 1, 2022, the then-outstanding shares of the Fund were redesignated as Class I Shares, and Class X shares of the Fund were established. The share classes have different eligibility requirements and expense structures due to differing shareholder servicing arrangements. The share classes have the same rights as to redemption, dividends and liquidation proceeds, and voting privileges, except that each class has the exclusive right to vote on matters affecting only its class.
The Fund is an investment company and follows the accounting and reporting guidance issued in Topic 946 by the Financial Accounting Standards Board. 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 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.
Debt securities, 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 securities, interest rates, cash flows (including prepayment speeds), and credit risk. Exchange-traded derivatives are 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.
Investments initially valued in currencies other than the U.S. dollar are converted to the U.S. dollar using prevailing exchange rates. Currency forward contracts are valued based on the prevailing forward exchange rates of the underlying currencies. As a result, the Fund’s net assets may be affected by changes in the value of currencies in relation to the U.S. dollar.
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 Dodge & Cox. The Board of Trustees has appointed Dodge & Cox, the Fund’s investment manager, as its "valuation designee", as permitted by Rule 2a-5 under the Investment Company Act of 1940, 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 net asset value. 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 the Fund to calculate its net asset value may differ from quoted or published prices 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. Non-cash dividends, 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 accrual basis. Interest income includes coupon interest, amortization of premium and accretion of discount on debt securities, and gain/loss on paydowns. The ability of the issuers of the debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry, state, or region. Debt obligations may be placed on non-
Dodge & Cox Balanced Fund ◾ PAGE 16
Notes to Financial Statements
accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
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.
Share class accounting Investment income, realized and unrealized gains and losses and expenses, other than class-specific expenses, are allocated to each share class of the Fund based upon the proportion of net assets of each class.
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 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 ("EU 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 in the Statement of Assets and Liabilities. Expenses incurred related to filing EU reclaims are recorded on the accrual basis in professional services in the Statement of Operations. Expenses that are contingent upon successful EU reclaims are recorded in professional services in the Statement of Operations once the amount is known.
Foreign currency translation The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the prevailing exchange rates of such currencies against the U.S. dollar. The market value of investment securities and other assets and liabilities are translated at the exchange rate as of the valuation date. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the transaction date.
Reported realized and unrealized gain (loss) on investments include foreign currency gain (loss) related to investment transactions.
Reported realized and unrealized gain (loss) on foreign currency transactions and translation include the following: disposing/holding of foreign currency, the difference in exchange rate between the trade and settlement dates on securities transactions, the difference in exchange rate between the accrual and payment dates on dividends, and currency losses on the purchase of foreign currency in certain countries that impose taxes on such transactions.
Repurchase agreements Repurchase agreements are transactions under which a Fund purchases a security from a 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 regular custodian or third party 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.
To-Be-Announced securities The Fund may purchase mortgage-related securities on a to-be-announced (“TBA”) basis at a fixed price, with payment and delivery on a scheduled future date beyond the customary settlement period for such securities. The Fund may choose to extend the settlement through a “dollar roll” transaction in which it sells the mortgage-related securities to a dealer and simultaneously agrees to purchase similar securities for future delivery at a predetermined price. The Fund accounts for TBA dollar rolls as purchase and sale transactions.
The Fund may also enter into a Master Securities Forward Transaction Agreement ("MSFTA") with a counterparty to govern transactions of delayed delivery securities, including TBA securities. The MSFTA provides for collateralization requirements and the right to offset amounts due to or from counterparties under specified conditions.
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 below.
◾ Level 1: Unadjusted 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.
PAGE 17 ◾ Dodge & Cox Balanced Fund
Notes to Financial Statements
The following is a summary of the inputs used to value the Fund’s holdings at December 31, 2023:
| | LEVEL 2
(Other Significant
Observable Inputs) |
|
|
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| | |
| | |
| | |
| | |
|
| | |
| | |
| | |
|
|
| | |
| | |
Currency Forward Contracts |
| | |
Note 3: Derivative Instruments
The Fund may use derivatives either to minimize the impact of certain risks to one or more of its investments (as a ‘‘hedging technique’’) or to implement its investment strategy. A derivative is a financial instrument whose value is derived from a security, currency, interest rate, index, or other financial instrument.
Covered equity call options written In return for the payment of an upfront premium, the buyer of a an equity call option has the right (but not the obligation) to buy a referenced stock at a predetermined strike price or to receive a payment equal to the profit from buying at the strike price or selling at the market price. If the Fund writes an equity call option, it records the premium it receives as a liability in the Statement of Assets and Liabilities. The liability is adjusted daily to reflect the current market value of the option. If an option is exercised, the premium is added to the proceeds from the sale of the underlying reference stock in determining realized gain or loss. If an option expires unexercised, the premium received is treated as a realized gain. If an option is closed, the difference between the premium received and the cost of the closing transaction is treated as realized gain or loss. Changes in the value of an open equity call option written are recorded as unrealized appreciation or depreciation and any real
ized gains or losses are recorded at the closing or expiration of the option in the Statement of Operations.
If the Fund writes a covered equity call option, it foregoes the opportunity to gain from increases in the price of the underlying stock above the sum of the premium and the strike price, but retains the risk of loss should the price of the underlying stock decline.
The Fund wrote over-the-counter covered equity call options referencing single stocks in order to express its opinion about the future value of the stock.
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 the contract is purchased. Futures contracts are exchange-traded. 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 to secure the Fund's obligation to perform. Initial margin is returned to the Fund when the futures contract is closed. Subsequent payments (referred to as "variation margin") are made to or received from the clearing broker on a daily basis based on changes in the market value of the contract. 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 in the Statement of Assets and Liabilities. A receivable and/or payable to brokers for daily variation margin is also recorded in 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 used short equity index futures contracts to reduce the exposure of the Fund’s equity allocation to a general downturn in the equity markets. The Fund used government debt futures contracts to adjust the overall interest rate exposure and duration of the portfolio.
Currency forward contracts Currency forward contracts are agreements to purchase or sell a specific currency at a specified future date and price. Currency forward contracts are traded over-the-counter. The values of currency forward contracts change daily based on the prevailing forward exchange rates of the underlying currencies. Changes in the value of open contracts are recorded as unrealized appreciation or depreciation in the Statement of Operations. When a currency forward contract is closed, the Fund records a realized gain or loss in the Statement of Operations equal to the difference between the value at the time the contract was opened and the value at the time it was closed.
Losses from these transactions may arise from unfavorable changes in currency values or if a counterparty does not perform under a contract’s terms.
The Fund used currency forward contracts to hedge direct foreign currency exposure.
Dodge & Cox Balanced Fund ◾ PAGE 18
Notes to Financial Statements
Additional derivative information The following identifies the location on the Statement of Assets and Liabilities and values of the Fund's derivative instruments categorized by primary underlying risk exposure.
| | | Foreign
Exchange
Derivatives | |
| | | | |
| | | | |
| | | | |
Unrealized depreciation on currency forward contracts | | | | |
| | | | |
| | | | |
| Includes cumulative appreciation (depreciation). Only the current day’s variation margin is reported in the Statement of Assets and Liabilities. |
The following summarizes the effect of derivative instruments on the Statement of Operations, categorized by primary underlying risk exposure.
| | | Foreign
Exchange
Derivatives | |
|
| | | | |
| | | | |
| | | | |
| | | | |
Net change in unrealized appreciation/depreciation |
| | | | |
| | | | |
| | | | |
| | | | |
The following summarizes the range of volume in the Fund's derivative instruments during the year ended December 31, 2023.
| | |
| | |
Currency forward contracts | | |
The Fund may enter into various over-the-counter derivative contracts governed by International Swaps and Derivatives Association master agreements (“ISDA agreements”). The Fund’s ISDA agreements, which are separately negotiated with each dealer counterparty, specify (i) events of default and other events permitting
a party to terminate some or all of the contracts thereunder and (ii) the process by which those contracts will be valued for purposes of determining termination payments. If some or all of the contracts under a master agreement are terminated because of an event of default or similar event, the values of all terminated contracts must be netted to determine a single payment owed by one party to the other. To the extent amounts owed to the Fund by its counterparties are not collateralized, the Fund is at risk of those counterparties’ non-performance. The Fund attempts to mitigate counterparty credit risk by entering into contracts only with counterparties it believes to be of good credit quality, by exchanging collateral, and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Fund does not offset assets and liabilities that are subject to a master netting arrangement in the Statement of Assets and Liabilities.
The Fund’s ability to net assets and liabilities and to offset collateral pledged or received is based on contractual netting/offset provisions in the ISDA agreements. The following table presents the Fund’s net exposure to each counterparty for derivatives that are subject to enforceable master netting arrangements as of December 31, 2023.
| Gross
Amount of
Recognized
Assets | Gross
Amount of
Recognized
Liabilities | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Cash collateral pledged/(received) in excess of derivative assets/liabilities is not presented in this table. The total cash collateral is presented on the Fund's Statement of Assets and Liabilities. |
| Represents the net amount receivable from (payable to) the counterparty in the event of a default. |
Note 4: Related Party Transactions
Investment advisory fee The Fund pays an investment advisory fee monthly at an annual rate of 0.40% of the Fund’s average daily net assets to Dodge & Cox, investment manager of the Fund.
Administrative services fee The Fund pays Dodge & Cox a fee for administrative and shareholder services. The fee is accrued daily and paid monthly equal to an annual rate of the average daily net assets of 0.10% for Class I shares and 0.05% for Class X shares. Under this agreement, Dodge & Cox also pays for the Fund's transfer agent fees.
Expense reimbursement Through April 30, 2023, Dodge & Cox contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain the ratio of total operating expenses of the Class X shares to average net assets of the Class X shares at 0.41%. Effective May 1, 2023, Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain the ratio of total operating expenses of the Class X shares to average net assets of the Class X shares at 0.42% through April 30, 2026. The term of the agreement will automatically renew for subsequent three-year terms unless terminated
PAGE 19 ◾ Dodge & Cox Balanced Fund
Notes to Financial Statements
with at least 30 days’ written notice by either party prior to the end of the then-current term. For the year ended December 31, 2023, Dodge & Cox reimbursed expenses of $599,684.
Fund officers and trustees All officers and two of the trustees of the Trust are current or former senior executive officers of Dodge & Cox. The Trust pays a fee only to those trustees who are not affiliated with Dodge & Cox.
Note 5: 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. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Financial reporting records are adjusted for permanent book to tax differences at year end to reflect tax character. Book to tax differences are primarily due to differing treatments of wash sales, foreign currency realized gain (loss), redemptions in-kind, certain corporate action transactions, REITs, straddles, derivatives, and distributions.
Distributions during the years noted below were characterized as follows for federal income tax purposes:
| Year Ended
December 31, 2023 | Year Ended
December 31, 2022 |
| | |
| | |
| | |
| | |
| | |
| | |
At December 31, 2023, the tax basis components of distributable earnings were as follows:
Undistributed long-term capital gain | |
Net unrealized appreciation | |
Total distributable earnings | |
At December 31, 2023, unrealized appreciation and depreciation for investments and derivatives based on cost for federal income tax purposes were as follows:
| |
| |
| |
Net unrealized appreciation | |
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 6: Redemptions In-Kind
During the year ended December 31, 2023, the Fund distributed securities and cash as payment for redemptions of Class I shares. For financial reporting purposes, the Fund realized a net gain of $489,545,184 attributable to the redemptions in-kind. For tax purposes, no capital gain on the redemptions in-kind was recognized.
Note 7: 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 year.
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 year ended December 31, 2023, the Fund’s commitment fee amounted to $74,597 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 year.
Note 8: Purchases and Sales of Investments
For the year ended December 31, 2023, purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $2,394,213,238 and $3,010,308,537, respectively. For the year ended December 31, 2023, purchases and sales of U.S. government securities aggregated $2,021,202,819 and $1,457,384,674, respectively.
Note 9: New Accounting Guidance
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provide optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848, which extends the period through December 31, 2024. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial statements.
Dodge & Cox Balanced Fund ◾ PAGE 20
Notes to Financial Statements
Note 10: Subsequent Events
Fund management has determined that no material events or transactions occurred subsequent to December 31, 2023, and through the
date of the Fund’s financial statements issuance, which require disclosure in the Fund’s financial statements.
PAGE 21 ◾ Dodge & Cox Balanced Fund
Selected data and ratios
(for a share outstanding throughout each period) | |
| | | | | |
| | | | | |
Net asset value, beginning of year | | | | | |
Income from investment operations: | | | | | |
| | | | | |
Net realized and unrealized gain (loss) | | | | | |
Total from investment operations | | | | | |
Distributions to shareholders from: | | | | | |
| | | | | |
| | | | | |
| | | | | |
Net asset value, end of year | | | | | |
| | | | | |
Ratios/supplemental data: | | | | | |
Net assets, end of year (millions) | | | | | |
Ratio of expenses to average net assets | | | | | |
Ratio of net investment income to average net assets | | | | | |
| | | | | |
Portfolio turnover rate excluding TBA rolls(b) | | | | | |
| | | | | |
Net asset value, beginning of year | | | | | |
Income from investment operations: | | | | | |
| | | | | |
Net realized and unrealized gain (loss) | | | | | |
Total from investment operations | | | | | |
Distributions to shareholders from: | | | | | |
| | | | | |
| | | | | |
| | | | | |
Net asset value, end of year | | | | | |
| | | | | |
Ratios/supplemental data: | | | | | |
Net assets, end of period (millions) | | | | | |
Ratio of expenses to average net assets | | | | | |
Ratio of expenses to average net assets, before reimbursement by investment manager | | | | | |
Ratio of net investment income to average net assets | | | | | |
| | | | | |
Portfolio turnover rate excluding TBA rolls(b) | | | | | |
| Net investment income per share includes significant amounts received for EU reclaims related to prior years, which amounted to approximately $0.11 per share. Excluding such amounts, the ratio of net investment income to average net assets would have been 2.17%. |
| See Note 1 regarding To-Be-Announced securities |
| For 2022, the period covers 5/2/2022 (commencement of operations) to 12/31/2022 |
| |
See accompanying Notes to Financial Statements
Dodge & Cox Balanced Fund ◾ PAGE 22
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Dodge & Cox Funds and Shareholders of Dodge & Cox Balanced Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Dodge & Cox Balanced Fund (one of the funds constituting Dodge & Cox Funds, referred to hereafter as the "Fund") as of December 31, 2023, the related statement of operations for the year ended December 31, 2023, the statement of changes in net assets for each of the two years in the period ended December 31, 2023, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2023 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2023 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2024
We have served as the auditor of one or more investment companies in the Dodge & Cox Funds since 1931.
PAGE 23 ◾ Dodge & Cox Balanced Fund
Special 2023 Tax Information (unaudited)
The following information is provided pursuant to provisions of the Internal Revenue Code:
The Fund designates $280,876,982 as long-term capital gain distributions in 2023.
The Fund designates $200,051,477 of its distributions paid to shareholders in 2023 as qualified dividends (treated for federal income tax purposes in the hands of shareholders as taxable at a maximum rate of 20%).
The Fund designates 0.34% of its ordinary dividends paid to shareholders in 2023 as Section 199A dividends.
For shareholders that are corporations, the Fund designates 29% of its ordinary dividends paid to shareholders in 2023 as dividends from domestic corporations eligible for the corporate dividends received deduction, provided that the shareholder otherwise satisfies applicable requirements to claim that deduction.
For shareholders that are corporations, the Fund designates 56% of its ordinary dividends paid to shareholders in 2023 as Section 163(j) interest dividends.
Funds' Liquidity Risk Management Program
(unaudited)
The Funds have adopted and implemented a written liquidity risk management program (“Program”) as required by Rule 22e-4 under the Investment Company Act. The Program is reasonably designed to assess and manage each Fund’s liquidity risk, taking into consideration the Fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources including the Funds’ interfund lending facility and line of credit.
The Funds’ Board of Trustees has approved the appointment of a Liquidity Risk Management Committee, which includes representatives from Dodge & Cox’s Legal, Compliance, Treasury, Operations, Trading, and Portfolio Management departments, and is responsible for the Program’s administration and oversight and for reporting to the Board on at least an annual basis regarding the Program’s operation and effectiveness.
The Liquidity Risk Management Committee refreshed its assessment of the Funds’ liquidity risk profiles, and considered the adequacy and effectiveness of the Program’s operations for the 12 months ended September 30, 2023 (the “covered period”) in order to prepare a written report to the Board of Trustees for consideration at its meeting held on December 8, 2023. The report concluded that (i) the Funds had adequate liquidity to operate effectively throughout the covered period; (ii) each Fund’s investment strategy continues to
be appropriate for an open end fund; and (iii) the Funds’ Program is reasonably designed to assess and manage its liquidity risk.
Fund Holdings
The Fund provides a complete list of its 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 Fund’s Forms N-CSR and Part F of N-PORT on the SEC’s website at sec.gov. A list of the Fund’s 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.
Proxy Voting
For a free copy of the Fund’s proxy voting policies and procedures, please call 800-621-3979, 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 ended June 30 is also available at dodgeandcox.com or shareholders may view the Fund's Form N-PX 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 share the 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 800-621-3979. Your request will be implemented within 30 days.
Dodge & Cox Balanced Fund ◾ PAGE 24
Dodge & Cox Funds — Executive Officer & Trustee Information
| Position with Trust
(Year of Election or
Appointment) | Principal Occupation During Past Five Years and Other Relevant Experience | Other Directorships of Public Companies Held
by Trustees |
Interested Trustees and Executive Officers |
| | Chairman and Director, Dodge & Cox (until 2022); Chief Investment Officer (until 2022) and member of U.S. Equity Investment Committee and Emerging Markets Equity Investment Committee (until 2022); Global Equity Investment Committee and International Equity Investment Committee (until 2021); U.S. Fixed Income Investment Committee (until 2019) | |
| Chair (since 2022)
President
(since 2014) and
Trustee (since 1993) | Chair, Chief Executive Officer, and Director, Dodge & Cox; President (until 2022); Co-Director of Fixed Income (until 2020); Director of Fixed Income (until 2019); member of U.S. Fixed Income Investment Committee and Global Fixed Income Investment Committee | |
| Chief Legal Officer
(since 2019) and Secretary (since 2017) | Vice President, General Counsel, and Secretary (since 2017), Dodge & Cox | |
| | Funds Treasurer (since 2021), Dodge & Cox; Vice President (since 2020); Financial Oversight and Control Analyst (until 2021) | |
| Chief Compliance
Officer (since 2010) | Vice President and Chief Compliance Officer, Dodge & Cox | |
|
| | CFO, athenahealth, Inc. (2019-2022) | Director, Synopsys Inc. (software company); Director, Carter's Inc. (children's apparel); Director, Eastern Bankshares, Inc. (financial services and banking services) |
| | Professor of Economics, Stanford University; Director of the Economics of Education Program, National Bureau of Economic Research; Senior Fellow, Hoover Institution and Stanford Institute for Economic Policy Research | |
| | Senior Counsel, Arnold & Porter (law firm) (2015-2018); Partner, Arnold & Porter (until 2015); Director, Howard, Rice, Nemerovski, Canady, Falk & Rabkin (1977-2011) | |
| | CFO, Pixar Animation Studios (1999-2004) | Director, Netflix, Inc. (internet television); Director, Blend (software company); Director, Bumble (online dating) |
Gabriela Franco
Parcella (55) | | President (since 2020) and Executive Managing Director, Merlone Geier Partners (2018-2019); Chairman, President, and CEO, Mellon Capital (2011 to 2017); COO, Mellon Capital (1997 to 2011) | |
| | President and CEO, QinetiQ US (since 2022); Corporate Vice President/President Enterprise Services, Northrop Grumman (2012-2022) | |
| | Robert and Marion Oster Distinguished Military Fellow, Hoover Institution (since 2012); Admiral, United States Navy (Ret.); U.S. Navy Chief of Naval Operations (2007-2011) | Director, Northrop Grumman Corp. (global security); Director, Maersk Line, Limited (shipping and transportation) |
| | Executive Vice President, Managing Director, Fixed Income at Loomis Sayles & Company, L.P. (2003-2011) | |
| The address for each Officer and Trustee is 555 California Street, 40th Floor, San Francisco, California 94104. Each Officer and Trustee oversees all seven series in the Dodge & Cox Funds complex and serves for an indefinite term. |
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 800-621-3979.
PAGE 25 ◾ Dodge & Cox Balanced Fund
dodgeandcox.com
For Fund literature, transactions, and account
information, please visit the Funds’ website.
or write or call:
Dodge & Cox Funds
P.O. Box 219502
Kansas City, Missouri 64121-9502
(800) 621-3979
Investment Manager
Dodge & Cox
555 California Street, 40th Floor
San Francisco, California 94104
(415) 981-1710
Principal Underwriter
Foreside Fund Services, LLC
3 Canal Plaza, Suite 100
Portland, Maine 04101
(866) 251-6920
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 December 31, 2023, 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.
Income Fund | Class I (dodix) | Class X (doxix)
ESTABLISHED 1989
Important Notice:
The Securities and Exchange Commission has adopted new regulations that will impact the design and delivery of future Semi-Annual and Annual Reports. Beginning with the 2024 Semi-Annual Reports, paper copies will be mailed to you unless you have opted for electronic delivery of the reports.
12/23 IF AR Printed on recycled paper 
To Our Shareholders (unaudited)
The Dodge & Cox Income Fund—Class I had a total return of 7.69% for the year ended December 31, 2023, compared to a return of 5.53% for the Bloomberg U.S. Aggregate Bond (Bloomberg U.S. Agg) Index.1
Market Commentary
Despite market volatility driven by shifting investor expectations regarding inflation, economic growth, and Federal Reserve policy, bond markets performed well in 2023, bolstered by a strong fourth quarter.
In the final months of the year, investors became increasingly convinced that the Federal Reserve could successfully engineer a soft landing with receding inflation and short-term interest rate cuts expected in 2024. This pivot in sentiment drove U.S. Treasury yields sharply lower and fueled the Bloomberg U.S. Agg’s impressive 6.8% fourth quarter return, the strongest quarterly return in over 30 years.
Recent economic data point to a cooling, yet surprisingly resilient, U.S. economy:
◾ The labor market added 165,000 jobs per month in the fourth quarter (versus an average of 245,000 in the previous nine months with job openings statistics still high but declining);
◾ GDP2 grew 5.2% on an annualized basis in the third quarter, its fastest pace in nearly two years; and
◾ Inflation3 rose 2.9% on an annual basis through December, a far cry from the 4.9% increase a year earlier.
The investment-grade Corporate sector shined in 2023, returning 8.5% and outperforming comparable-duration4 Treasuries by 4.6 percentage points as credit spreads tightened to the lowest levels since early 2022. Agency5 mortgage-backed securities (MBS) returned 5.1%, modestly outperforming comparable-duration Treasuries despite the volatile interest rate backdrop.
Investment Strategy
We capitalized on last year’s dynamic market environment by actively managing the Fund’s duration, sector, and security exposures. As yields rose over the summer and early fall to levels more in line with our expectations, we lengthened the Fund’s duration by half a year to 6.0 years.6 This is modestly below the Bloomberg U.S. Agg’s 6.2 year duration but is the Fund’s highest duration in decades.
We also steadily reduced the Fund’s credit7 exposure throughout 2023 amid narrowing yield premiums and invested the proceeds primarily in Treasuries. We made other modest adjustments in the portfolio, although it retains the same general themes. The Fund features sizable exposures to credit securities (40%) and Agency MBS (41%), both of which represent meaningful overweights relative to the Bloomberg U.S. Agg. The Fund’s weighting in U.S. Treasuries (12%) and net cash (1%) provides flexibility and liquidity should interesting opportunities arise.
Duration: Extended Amid More Attractive Yields
For much of the last decade, the low level of bond yields did not sufficiently compensate investors for fiscal policy, inflation, and interest rate risks. As that dynamic changed with the sharp rise in yields last year, we lengthened the Fund’s duration, primarily by adding exposure to the long end of the curve, which has recently risen
more dramatically than the front end of the curve. As we look forward, our base case expectation is for economic growth to slow and headline inflation to gradually fall back towards target by later this year, resulting in a soft landing. In this scenario, the Fed will likely begin to ease later this year and both short- and long-term interest rates should fall over our multi-year investment horizon. Despite our positive outlook for the economy and interest rates, uncertainty remains elevated and a range of economic outcomes is possible. For example, if the economy slows considerably and enters a deep recession, rates are likely to plummet. In this scenario, the Fund’s longer duration should also be beneficial, helping offset potential weakness in the Corporate sector.
The Credit Sector: Opportunistically Trimmed at Tighter Valuations
Credit was the strongest-performing segment of the fixed income market as credit yield premiums continued to grind tighter. Accordingly, over the course of the year we trimmed or sold a number of issuers that had reached, in our view, full valuations. Thematically, we reduced longer maturity securities where spreads generally narrowed more than intermediate-term securities. Our reductions also favored Industrials, which have performed better than Financials. On a net basis, we reduced the Fund’s credit weighting by nine percentage points.
While we have generally been leaning away from credit, we opportunistically invested in select issuers at attractive valuations. One recent example is RTX,8 which was created via the 2020 merger between Raytheon and United Technologies. The company issued bonds to finance its accelerated share repurchase program, and we viewed the new issue pricing as attractive. RTX is a leading supplier in both commercial and defense markets, benefiting from superior scale and diversification relative to peers. The company generates significant free cash flow,9 underpinned by long-term contracts and low reinvestment needs. It also benefits from a non-cyclical business model and is positioned to take advantage of growing defense budgets as geopolitical tensions rise. We believe bondholders are sufficiently compensated for the company’s key risks, including customer concentration (~70% of defense sales are to the U.S. government) and the company’s history of relatively aggressive financial policy.
We are optimistic about the long-term total return prospects for the Fund’s credit holdings despite the fact that broad credit market spreads are now narrower than long-term averages. The Fund’s credit portfolio differs significantly from the market, owing to our research and evaluation process which seeks to identify attractively priced issuers with strong fundamentals and management teams capable of navigating various economic environments. We seek out credit holdings with strong liquidity, balance sheets, and cash flows. When compared to the Bloomberg U.S. Credit Index,10 the credit portfolio’s 66 issuers feature a higher average yield premium (183 basis points11 versus 93) and shorter average duration (5.2 years versus 6.9). Although future volatility is likely and wider credit spreads pose a risk due to the Fund’s overweight positioning, we believe that our selectivity combined with the credit portfolio’s yield cushion should help protect against potential price declines over time.
The Securitized Sector: Maintained Positioning Amid Strong Fundamentals and Compelling Valuations
We are enthusiastic about the Fund’s Agency MBS holdings due to the combination of low prepayment risk and attractive valuations. Over the past two years, rising interest rates have driven mortgage
PAGE 1 ◾ Dodge & Cox Income Fund
rates to near multi-decade highs. This has significantly reduced refinancing incentives for virtually all existing mortgage borrowers, resulting in a more stable cash flow outlook for the Agency MBS collateralized by these loans. This is advantageous from a fundamental standpoint because the primary risk for which Agency MBS investors are paid is the uncertain timing and variability of cash flows from the underlying loans. Meanwhile, technical challenges within the market have also depressed valuations. Most notably, the two largest MBS buyers in recent years—the Fed and U.S. commercial banks—have been on the sidelines since early 2023.
During the year, we added modestly to the Fund’s Agency MBS exposure and adjusted coupon and pool positioning based on relative valuations. For example, we recently purchased certain 30-year 3.5% coupon securities as their return profiles became more attractive, and we trimmed some 30-year 2.0% and 2.5% coupon securities at less compelling valuations.
In addition to pass-through securities, we continue to find value in select high-quality, floating rate structures with attractive valuations. The Fund holds 6% in Ginnie Mae-guaranteed Home Equity Conversion Mortgages (also known as reverse mortgages) and 4% in FFELP12 Student Loan ABS, which are backed by federally guaranteed student loans. The portfolio’s FFELP securities performed well in 2023 as the transition from LIBOR13 to SOFR14 was finalized and removed some uncertainty for the securities. Also, due to the government guarantee and terms of the program, FFELP bonds are not negatively impacted by student loan policy changes such as forbearance and updates to the income-based repayment program.
In Closing
We are pleased with the Fund’s results in 2023 and optimistic about the Fund’s absolute and relative return prospects. Broad market yields are high relative to the last decade, creating an attractive starting point for fixed income investors. We’re also excited about our ability to add value given the Fund’s current holdings and the opportunity for us to actively manage portfolio exposures as circumstances change.
Thank you for your continued confidence in Dodge & Cox. As always, we welcome your comments and questions.
For the Board of Trustees, | |
| |
Dana M. Emery,
Chair and President | |
January 31, 2024
| All returns are stated in U.S. dollars, unless otherwise noted. The Funds’ 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 dividend and/or interest income but, unlike Fund returns, do not reflect fees or expenses. The Bloomberg U.S. Aggregate Bond Index is a widely recognized, unmanaged index of U.S. dollar-denominated, investment-grade, taxable fixed income securities. |
| Gross domestic product (GDP) measures the monetary value of final goods and services—those that are bought by the final user—produced in a country in a given period of time. It counts all of the output generated within the borders of a country. GDP is composed of goods and services produced for sale in the market and also includes some non-market production, such as defense or education services provided by the government. |
| Personal consumption expenditures (PCE) measure how much consumers spend on durable and non-durable goods and services. PCE is the Federal Reserve’s preferred measure for inflation. Core PCE prices exclude food and energy prices. |
| Duration is a measure of a bond’s (or a bond portfolio’s) price sensitivity to changes in interest rates. |
| The U.S. Government does not guarantee the Fund’s shares, yield, or net asset value. The agency guarantee (by, for example, Ginnie Mae, Fannie Mae, or Freddie Mac) does not eliminate market risk. |
| Unless otherwise specified, all weightings and characteristics are as of December 31, 2023. |
| Credit refers to corporate bonds and government-related securities, as classified by Bloomberg, as well as Rio Oil Finance Trust, an asset-backed security that we group as a credit investment. |
| The use of specific examples does not imply that they are more or less attractive investments than the Fund’s other holdings. |
| Free cash flow is the cash a company generates after paying all expenses and loans. |
| The Bloomberg U.S. Credit Index measures the investment-grade, U.S. dollar- denominated, fixed-rate, taxable corporate, and government-related bond markets. It is composed of the U.S. Corporate Index and a non-corporate component that includes non-U.S. agencies, sovereigns, supranationals, and local authorities. |
| One basis point is equal to 1/100th of 1%. |
| FFELP is the Federal Family Education Loan Program. |
| The London Inter-Bank Offered Rate (LIBOR) is an interest rate average calculated from estimates submitted by the leading banks in London. |
| The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities. |
Dodge & Cox Income Fund ◾ PAGE 2
2023 Performance Review for the Fund's Class I Shares (unaudited)
The Fund outperformed the Bloomberg U.S. Agg by 2.16 percentage points in 2023.
Key contributors to relative results included the Fund’s:
◾ Credit issuer selection, particularly Pemex, Charter Communications, UniCredit, and Telecom Italia;
◾ Underweight position in U.S. Treasuries and overweight position in corporate bonds;
◾ Below-benchmark duration position; and
◾ Strong performance of FFELP* Student Loan ABS.
There were no notable detractors during the period.
*FFELP is the Federal Family Education Loan Program.
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 90 Years of Investment Experience
Dodge & Cox was founded in 1930. We have a stable and well-qualified team of investment professionals, most of whom have spent their entire careers at Dodge & Cox.
Experienced Investment Team
The U.S. Fixed Income Investment Committee, which is the decision-making body for the Income Fund, is an eight-member committee with an average tenure of 24 years at Dodge & Cox.
One Business with a Single Decision-Making Office
Dodge & Cox manages equity (domestic, international, and global), fixed income (domestic and global), and balanced investments, all from one office in San Francisco.
Consistent Investment Approach
Our team decision-making process involves thorough, bottom-up fundamental analysis of each investment.
Long-Term Focus and Low Expenses
We invest with a three- to five-year investment horizon. We manage Funds that maintain low expense ratios.
Risks: The Fund invests in individual bonds whose yields and market values fluctuate, so that an investment may be worth more or less than its original cost. Debt securities are subject to interest rate risk, credit risk, and prepayment and call risk, all of which could have adverse effects on the value of the Fund. A low interest rate environment creates an elevated risk of future negative returns. Financial intermediaries may restrict their market making activities for certain debt securities, which may reduce the liquidity and increase the volatility of such securities. Please read the prospectus and summary prospectus for specific details regarding the Fund’s risk profile.
Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security. Please see the Portfolio of Investments section in this report for a complete list of fund holdings.
PAGE 3 ◾ Dodge & Cox Income Fund
Growth of $10,000 Over 10 Years (unaudited)
For an Investment Made on December 31, 2013 
Average Annual Total Return
For Periods Ended December 31, 2023
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Bloomberg U.S. Aggregate Bond Index | | | | |
Expense Ratios
Per the Prospectus Dated May 1, 2023
| The Class X shares inception date is May 2, 2022. The returns shown prior to that date are for the Class I shares. |
| Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain Total Annual Fund Operating Expenses of the Fund’s Class X shares at 0.33% until April 30, 2026. This agreement cannot be terminated prior to April 30, 2026 other than by resolution of the Fund’s Board of Trustees. For purposes of the foregoing, ordinary expenses shall not include nonrecurring shareholder account fees, fees and expenses associated with Fund shareholder meetings, fees on portfolio transactions such as exchange fees, dividends and interest on short positions, fees and expenses of pooled investment vehicles that are held by the Fund, interest expenses and other fees and expenses related to any borrowings, taxes, brokerage fees and commissions and other costs and expenses relating to the acquisition and disposition of Fund investments, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other non-routine expenses or extraordinary expenses not incurred in the ordinary course of the Fund’s business, such as litigation expenses. The term of the agreement will automatically renew for subsequent three- year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term. The agreement does not permit Dodge & Cox to recoup any fees waived or payments made to the Fund for a prior year. |
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 800-621-3979 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 interest income but, unlike Fund returns, do not reflect fees or expenses. The Bloomberg U.S. Aggregate Bond Index (Bloomberg U.S. Agg) is a widely recognized, unmanaged index of U.S. dollar-denominated, investment-grade fixed income securities.
Bloomberg is a registered trademark of Bloomberg Finance L.P. and its affiliates. For more information about this index, visit:
www.dodgeandcox.com/incomefund
Dodge & Cox Income Fund ◾ PAGE 4
Portfolio Information (unaudited) December 31, 2023
| Net Cash & Other includes cash, short-term investments, derivatives, receivables, and payables. |
Fund Expense Example (unaudited)
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 each share class in the table below provides information about actual account values and expenses based on the actual returns of the share class. 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 each share class in 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 share class and an assumed 5% annual rate of return before expenses (not the actual return of the share class). 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 other mutual funds.
Six Months Ended
December 31, 2023 | Beginning Account Value
7/1/2023 | Ending Account Value
12/31/2023 | Expenses Paid
During Period* | |
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Based on hypothetical 5% yearly return | | | | |
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Based on hypothetical 5% yearly return | | | | |
| Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (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).
PAGE 5 ◾ Dodge & Cox Income Fund
Portfolio of Investments December 31, 2023
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U.S. Treasury Inflation Indexed | | |
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Petroleo Brasileiro SA (Brazil) | | |
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Petroleos Mexicanos (Mexico) | | |
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L.A. Unified School District GO | | |
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New Jersey Turnpike Authority RB | | |
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Regents of the UC Medical Center RB | | |
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Colombia Government International (Colombia) | | |
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Small Business Admin. - 504 Program | | |
Series 2004-20L 1, 4.87%, 12/1/24 | | |
Series 2005-20B 1, 4.625%, 2/1/25 | | |
Series 2005-20D 1, 5.11%, 4/1/25 | | |
Series 2005-20E 1, 4.84%, 5/1/25 | | |
Series 2005-20G 1, 4.75%, 7/1/25 | | |
Series 2005-20H 1, 5.11%, 8/1/25 | | |
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Series 2005-20I 1, 4.76%, 9/1/25 | | |
Series 2006-20A 1, 5.21%, 1/1/26 | | |
Series 2006-20B 1, 5.35%, 2/1/26 | | |
Series 2006-20C 1, 5.57%, 3/1/26 | | |
Series 2006-20G 1, 6.07%, 7/1/26 | | |
Series 2006-20H 1, 5.70%, 8/1/26 | | |
Series 2006-20I 1, 5.54%, 9/1/26 | | |
Series 2006-20J 1, 5.37%, 10/1/26 | | |
Series 2006-20L 1, 5.12%, 12/1/26 | | |
Series 2007-20A 1, 5.32%, 1/1/27 | | |
Series 2007-20C 1, 5.23%, 3/1/27 | | |
Series 2007-20D 1, 5.32%, 4/1/27 | | |
Series 2007-20G 1, 5.82%, 7/1/27 | | |
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Rio Oil Finance Trust (Brazil) | | |
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Navient Student Loan Trust | | |
United States 30 Day Average SOFR | | |
+0.7640%, Series 2015-3 A2, 6.102%, 6/26/56 | | |
+0.7140%, Series 2014-8 A3, 6.052%, 5/27/49 | | |
+1.3640%, Series 2016-5A A, | | |
+1.4640%, Series 2016-3A A3, | | |
+1.2640%, Series 2016-7A A, | | |
+1.4140%, Series 2016-6A A3, | | |
+0.9140%, Series 2017-5A A, | | |
+1.1640%, Series 2017-3A A3, | | |
+1.2640%, Series 2017-1A A3, | | |
+1.1140%, Series 2017-4A A3, | | |
+1.1640%, Series 2017-2A A, | | |
+0.8340%, Series 2018-1A A3, | | |
+0.9140%, Series 2018-3A A3, | | |
+0.7940%, Series 2018-4A A2, | | |
+1.1140%, Series 2019-2A A2, | | |
+0.9440%, Series 2019-3A A, | | |
+0.9240%, Series 2019-4A A2, | | |
+1.1640%, Series 2020-1A A1B, | | |
+1.0140%, Series 2020-2A A1B, | | |
+0.7140%, Series 2021-1A A1B, | | |
See accompanying Notes to Financial StatementsDodge & Cox Income Fund ◾ PAGE 6
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
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+0.8140%, Series 2016-1A A, | | |
+0.6640%, Series 2021-2A A1B, | | |
Navient Student Loan Trust (Private Loans) | | |
Series 2017-A A2A, 2.88%, | | |
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United States 30 Day Average SOFR | | |
+0.9140%, Series 2012-5 A3, 6.252%, 3/25/26 | | |
+1.3140%, Series 2011-2 A2, 6.652%, 10/25/34 | | |
United States 90 Day Average SOFR | | |
+0.8910%, Series 2004-8A A6, | | |
+0.4310%, Series 2005-4 A4, 5.766%, 7/25/40 | | |
+0.7510%, Series 2007-6 A5, 6.086%, 4/27/43 | | |
+0.8110%, Series 2004-3A A6A, | | |
+0.8110%, Series 2004-3A A6B, | | |
SMB Private Education Loan Trust (Private Loans) | | |
Series 2017-A A2A, 2.88%, | | |
Series 2017-B A2A, 2.82%, | | |
Series 2018-A A2A, 3.50%, | | |
Series 2018-B A2A, 3.60%, | | |
Series 2023-C A1A, 5.67%, | | |
Series 2021-A APT2, 1.07%, | | |
Series 2023-D A1A, 6.15%, | | |
Series 2023-B A1A, 4.99%, | | |
Series 2022-D A1A, 5.37%, | | |
| | |
| | |
|
|
Freddie Mac Multifamily Interest Only | | |
Series K055 X1, 1.336%, 3/25/26(c) | | |
Series K056 X1, 1.238%, 5/25/26(c) | | |
Series K062 X1, 0.285%, 12/25/26(c) | | |
Series K064 X1, 0.596%, 3/25/27(c) | | |
Series K065 X1, 0.662%, 4/25/27(c) | | |
Series K066 X1, 0.745%, 6/25/27(c) | | |
Series K067 X1, 0.57%, 7/25/27(c) | | |
Series K069 X1, 0.344%, 9/25/27(c) | | |
Series K070 X1, 0.324%, 11/25/27(c) | | |
Series K071 X1, 0.284%, 11/25/27(c) | | |
Series K089 X1, 0.541%, 1/25/29(c) | | |
|
| | |
Series K091 X1, 0.561%, 3/25/29(c) | | |
Series K092 X1, 0.712%, 4/25/29(c) | | |
Series K093 X1, 0.942%, 5/25/29(c) | | |
Series K094 X1, 0.878%, 6/25/29(c) | | |
Series K095 X1, 0.95%, 6/25/29(c) | | |
Series K096 X1, 1.126%, 7/25/29(c) | | |
Series K097 X1, 1.091%, 7/25/29(c) | | |
Series K098 X1, 1.142%, 8/25/29(c) | | |
Series K099 X1, 0.882%, 9/25/29(c) | | |
Series K101 X1, 0.834%, 10/25/29(c) | | |
Series K102 X1, 0.822%, 10/25/29(c) | | |
Series K152 X1, 0.954%, 1/25/31(c) | | |
Series K154 X1, 0.294%, 11/25/32(c) | | |
Series K-1511 X1, 0.776%, | | |
| | |
| | |
|
|
Dept. of Veterans Affairs | | |
Series 1995-2D 4A, 9.293%, 5/15/25 | | |
Series 1997-2 Z, 7.50%, 6/15/27 | | |
Series 1998-2 2A, 8.67%, 8/15/27(c) | | |
Series 1998-1 1A, 8.293%, | | |
| | |
Trust 1998-58 PX, 6.50%, 9/25/28 | | |
Trust 1998-58 PC, 6.50%, 10/25/28 | | |
Trust 2001-69 PQ, 6.00%, 12/25/31 | | |
Trust 2002-33 A1, 7.00%, 6/25/32 | | |
Trust 2002-69 Z, 5.50%, 10/25/32 | | |
Trust 2008-24 GD, 6.50%, 3/25/37 | | |
Trust 2007-47 PE, 5.00%, 5/25/37 | | |
Trust 2009-30 AG, 6.50%, 5/25/39 | | |
Trust 2009-40 TB, 6.00%, 6/25/39 | | |
Trust 2001-T3 A1, 7.50%, 11/25/40 | | |
Trust 2010-123 WT, 7.00%, 11/25/40 | | |
Trust 2001-T7 A1, 7.50%, 2/25/41 | | |
Trust 2001-T5 A2, 7.00%, 6/19/41(c) | | |
Trust 2001-T5 A3, 7.50%, 6/19/41(c) | | |
Trust 2001-T4 A1, 7.50%, 7/25/41 | | |
Trust 2011-58 AT, 4.00%, 7/25/41 | | |
Trust 2001-T10 A1, 7.00%, 12/25/41 | | |
Trust 2013-106 MA, 4.00%, 2/25/42 | | |
Trust 2012-47 VZ, 4.00%, 5/25/42 | | |
Trust 2002-W6 2A1, 7.00%, | | |
Trust 2002-W8 A2, 7.00%, 6/25/42 | | |
Trust 2002-90 A1, 6.50%, 6/25/42 | | |
Trust 2002-T16 A3, 7.50%, 7/25/42 | | |
Trust 2003-W2 1A2, 7.00%, 7/25/42 | | |
Trust 2003-W4 3A, 4.851%, | | |
Trust 2012-121 NB, 7.00%, 11/25/42 | | |
Trust 2003-W1 2A, 5.204%, | | |
Trust 2003-7 A1, 6.50%, 12/25/42 | | |
Trust 2012-131 MZ, 3.50%, 12/25/42 | | |
PAGE 7 ◾ Dodge & Cox Income FundSee accompanying Notes to Financial Statements
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
| | |
Trust 2012-134 ZA, 3.00%, 12/25/42 | | |
Trust 2013-19 ZA, 3.50%, 3/25/43 | | |
Trust 2013-72 Z, 3.00%, 7/25/43 | | |
Trust 2004-T1 1A2, 6.50%, 1/25/44 | | |
Trust 2004-W2 2A2, 7.00%, 2/25/44 | | |
Trust 2004-W2 5A, 7.50%, 3/25/44 | | |
Trust 2004-W8 3A, 7.50%, 6/25/44 | | |
Trust 2004-W15 1A2, 6.50%, 8/25/44 | | |
Trust 2014-58 MZ, 4.00%, 9/25/44 | | |
Trust 2005-W1 1A3, 7.00%, 10/25/44 | | |
Trust 2001-79 BA, 7.00%, 3/25/45 | | |
Trust 2006-W1 1A1, 6.50%, 12/25/45 | | |
Trust 2006-W1 1A2, 7.00%, 12/25/45 | | |
Trust 2006-W1 1A3, 7.50%, 12/25/45 | | |
Trust 2006-W1 1A4, 8.00%, 12/25/45 | | |
Trust 2007-W10 1A, 6.133%, | | |
Trust 2007-W10 2A, 6.28%, | | |
Trust 2018-28 PT, 3.50%, 5/25/48 | | |
United States 30 Day Average SOFR | | |
+0.6640%, Trust 2013-98 FA, 6.002%, 9/25/43 | | |
+0.5140%, Trust 2004-W14 1AF, 5.852%, 7/25/44 | | |
| | |
Series 2456 CJ, 6.50%, 6/15/32 | | |
Series 3312 AB, 6.50%, 6/15/32 | | |
Series T-41 2A, 4.635%, 7/25/32(c) | | |
Series 2587 ZU, 5.50%, 3/15/33 | | |
Series 2610 UA, 4.00%, 5/15/33 | | |
Series T-48 1A, 4.413%, 7/25/33(c) | | |
Series 2708 ZD, 5.50%, 11/15/33 | | |
Series 3204 ZM, 5.00%, 8/15/34 | | |
Series 3330 GZ, 5.50%, 6/15/37 | | |
Series 3427 Z, 5.00%, 3/15/38 | | |
Series 4197 LZ, 4.00%, 4/15/43 | | |
Series 4215 LZ, 3.50%, 6/15/43 | | |
Series T-51 1A, 6.50%, 9/25/43(c) | | |
Series 4283 DW, 4.50%, 12/15/43(c) | | |
Series 4283 EW, 4.50%, 12/15/43(c) | | |
Series 4281 BC, 4.50%, 12/15/43(c) | | |
Series 4319 MA, 4.50%, 3/15/44(c) | | |
Series 4438 ZP, 3.50%, 2/15/45 | | |
Series 4653 PZ, 3.50%, 2/15/47 | | |
Series 4680 GZ, 3.50%, 3/15/47 | | |
Series 4700 KZ, 3.50%, 7/15/47 | | |
Series 4722 CZ, 3.50%, 9/15/47 | | |
Series 5020 GT, 3.50%, 10/25/50 | | |
| | |
Series 2010-115 Z, 4.50%, 9/20/40 | | |
Series 2014-184 GZ, 3.50%, 12/20/44 | | |
Series 2015-24 Z, 3.50%, 2/20/45 | | |
Series 2015-69 DZ, 3.50%, 5/20/45 | | |
Series 2015-69 KZ, 3.50%, 5/20/45 | | |
|
| | |
| | |
+1.3640%, Series 2020-H21 FL, 6.687%, 12/20/70 | | |
+0.7640%, Series 2014-H21 FA, 6.087%, 10/20/64 | | |
+0.7440%, Series 2015-H10 FB, 6.067%, 4/20/65 | | |
+0.7140%, Series 2015-H18 FB, 6.037%, 7/20/65 | | |
+0.7140%, Series 2015-H19 FK, 6.037%, 8/20/65 | | |
+0.7340%, Series 2015-H23 FA, 6.057%, 9/20/65 | | |
+0.8640%, Series 2016-H02 FB, 6.187%, 11/20/65 | | |
+1.0140%, Series 2016-H09 FM, 6.337%, 3/20/66 | | |
+1.0140%, Series 2016-H09 FH, 6.337%, 4/20/66 | | |
+0.8940%, Series 2016-H19 FA, 6.217%, 9/20/66 | | |
+0.8640%, Series 2016-H23 F, 6.187%, 10/20/66 | | |
+0.9140%, Series 2016-H24 FB, 6.237%, 11/20/66 | | |
+0.9240%, Series 2017-H02 GF, 6.247%, 12/20/66 | | |
+0.6840%, Series 2017-H17 FB, 6.007%, 9/20/67 | | |
+0.6140%, Series 2018-H20 FB, 5.937%, 6/20/68 | | |
+0.6140%, Series 2018-H20 FE, 5.937%, 11/20/68 | | |
+0.7140%, Series 2019-H15 F, 6.037%, 9/20/69 | | |
+0.7140%, Series 2019-H18 LF, 6.037%, 11/20/69 | | |
+0.7640%, Series 2019-H18 F, 6.087%, 11/20/69 | | |
+0.7640%, Series 2019-H17 FB, 6.087%, 11/20/69 | | |
+0.7640%, Series 2019-H20 AF, 6.087%, 11/20/69 | | |
+0.6640%, Series 2020-H06 FA, 5.987%, 3/20/70 | | |
+0.9640%, Series 2021-H16 HF, 6.287%, 9/20/71 | | |
United States 30 Day Average SOFR | | |
+0.55%, Series 2022-H04 FG, 5.888%, 2/20/67 | | |
+0.50%, Series 2022-H04 GF, 5.838%, 2/20/67 | | |
+0.50%, Series 2022-H07 FB, 5.838%, 1/20/68 | | |
+0.30%, Series 2022-H06 FA, 5.638%, 2/20/68 | | |
+0.50%, Series 2022-H07 AF, 5.838%, 2/20/68 | | |
+0.50%, Series 2022-H07 BF, 5.838%, 2/20/68 | | |
+0.50%, Series 2022-H07 FH, 5.838%, 6/20/68 | | |
See accompanying Notes to Financial StatementsDodge & Cox Income Fund ◾ PAGE 8
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
| | |
+0.41%, Series 2022-H06 FC, 5.748%, 8/20/68 | | |
+1.30%, Series 2023-H08 EF, 6.638%, 7/20/71 | | |
+1.02%, Series 2023-H08 FE, 6.358%, 8/20/71 | | |
+1.00%, Series 2022-H20 FB, 6.338%, 8/20/71 | | |
+1.45%, Series 2021-H12 EF, 6.788%, 8/20/71 | | |
+0.70%, Series 2021-H17 FA, 6.038%, 11/20/71 | | |
+0.82%, Series 2021-H19 FM, 6.158%, 12/20/71 | | |
+0.80%, Series 2022-H08 FL, 5.327%, 12/20/71 | | |
+0.80%, Series 2022-H02 FC, 6.138%, 1/20/72 | | |
+0.35%, Series 2022-H01 FA, 5.688%, 1/20/72 | | |
+0.82%, Series 2022-H04 HF, 6.158%, 2/20/72 | | |
+0.75%, Series 2022-H07 F, 6.088%, 2/20/72 | | |
+0.75%, Series 2022-H08 FE, 6.075%, 3/20/72 | | |
+0.74%, Series 2022-H09 FC, 6.078%, 4/20/72 | | |
+1.00%, Series 2022-H11 FG, 6.338%, 4/20/72 | | |
+0.95%, Series 2022-H10 FA, 6.288%, 5/20/72 | | |
+0.95%, Series 2022-H11 AF, 6.288%, 5/20/72 | | |
+0.90%, Series 2022-H11 F, 6.238%, 5/20/72 | | |
+0.97%, Series 2022-H11 EF, 6.308%, 5/20/72 | | |
+0.95%, Series 2022-H12 FA, 6.288%, 6/20/72 | | |
+1.10%, Series 2022-H23 FA, 6.438%, 10/20/72 | | |
+1.63%, Series 2023-H08 FG, 6.968%, 2/20/73 | | |
+1.42%, Series 2023-H13 FJ, 6.758%, 2/20/73 | | |
+1.10%, Series 2023-H08 FD, 6.438%, 3/20/73 | | |
+1.35%, Series 2023-H23 FH, 6.688%, 9/20/73 | | |
+2.10%, Series 2023-H23 DF, 7.438%, 9/20/73 | | |
| | |
+1.0150%, Series 2016-H21 CF, 6.396%, 9/20/66 | | |
+0.9950%, Series 2016-H27 BF, 6.389%, 12/20/66 | | |
+1.0150%, Series 2017-H02 BF, 4.313%, 1/20/67 | | |
+1.0250%, Series 2017-H02 FP, 4.341%, 1/20/67 | | |
+1.0150%, Series 2017-H03 F, 5.729%, 1/20/67 | | |
|
| | |
+0.9650%, Series 2017-H08 FG, 5.576%, 2/20/67 | | |
+0.9150%, Series 2017-H07 FQ, 5.526%, 3/20/67 | | |
+1.0150%, Series 2017-H10 FA, 6.014%, 4/20/67 | | |
+0.9150%, Series 2017-H12 FQ, 5.023%, 5/20/67 | | |
+1.0150%, Series 2017-H11 FB, 4.941%, 5/20/67 | | |
+0.9150%, Series 2017-H13 FQ, 5.229%, 6/20/67 | | |
+1.0150%, Series 2017-H14 FA, 5.184%, 6/20/67 | | |
+0.9150%, Series 2017-H16 BF, 5.51%, 8/20/67 | | |
+0.9850%, Series 2017-H17 FQ, 6.366%, 9/20/67 | | |
+0.9650%, Series 2017-H18 GF, 5.576%, 9/20/67 | | |
+0.9650%, Series 2017-H20 FB, 6.135%, 10/20/67 | | |
+0.9450%, Series 2017-H12 BF, 6.314%, 10/20/67 | | |
+0.9450%, Series 2017-H20 FG, 6.314%, 10/20/67 | | |
+0.9350%, Series 2017-H21 FA, 5.83%, 10/20/67 | | |
+0.9150%, Series 2017-H22 FK, 6.349%, 11/20/67 | | |
+0.9350%, Series 2017-H22 FH, 6.369%, 11/20/67 | | |
+0.9350%, Series 2017-H22 FA, 6.369%, 11/20/67 | | |
+0.7750%, Series 2018-H02 GF, 4.642%, 12/20/67 | | |
+0.8950%, Series 2017-H25 CF, 6.289%, 12/20/67 | | |
+0.8750%, Series 2017-H25 FE, 6.269%, 12/20/67 | | |
+0.8650%, Series 2018-H01 FL, 4.707%, 12/20/67 | | |
+0.8650%, Series 2018-H01 FE, 4.435%, 1/20/68 | | |
+0.7950%, Series 2018-H02 FA, 5.562%, 1/20/68 | | |
+0.7750%, Series 2018-H02 HF, 5.542%, 1/20/68 | | |
+0.8150%, Series 2018-H03 FD, 5.582%, 2/20/68 | | |
+0.8650%, Series 2018-H02 PF, 3.016%, 2/20/68 | | |
+0.8150%, Series 2018-H02 FM, 5.582%, 2/20/68 | | |
+0.7550%, Series 2018-H05 BF, 5.366%, 2/20/68 | | |
+0.7850%, Series 2018-H05 FE, 5.396%, 2/20/68 | | |
+0.7650%, Series 2018-H11 FA, 4.853%, 2/20/68 | | |
+0.7650%, Series 2018-H04 FC, 5.376%, 2/20/68 | | |
+0.7750%, Series 2018-H05 CF, 5.386%, 3/20/68 | | |
PAGE 9 ◾ Dodge & Cox Income FundSee accompanying Notes to Financial Statements
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
| | |
+0.7650%, Series 2018-H06 AF, 4.809%, 3/20/68 | | |
+0.7450%, Series 2018-H06 MF, 4.872%, 3/20/68 | | |
+0.7550%, Series 2018-H04 FJ, 5.366%, 3/20/68 | | |
+0.7550%, Series 2018-H04 FK, 5.366%, 3/20/68 | | |
+0.7350%, Series 2018-H06 BF, 3.823%, 4/20/68 | | |
+0.7650%, Series 2018-H06 EF, 4.175%, 4/20/68 | | |
+0.7650%, Series 2018-H06 JF, 4.523%, 4/20/68 | | |
+0.7550%, Series 2018-H07 FA, 4.414%, 5/20/68 | | |
+0.8650%, Series 2018-H09 FC, 5.241%, 6/20/68 | | |
+0.9650%, Series 2018-H10 FV, 5.809%, 7/20/68 | | |
+0.8350%, Series 2018-H15 FK, 5.588%, 8/20/68 | | |
+0.8150%, Series 2018-H17 DF, 6.084%, 10/20/68 | | |
+0.9350%, Series 2018-H19 FG, 6.369%, 11/20/68 | | |
+1.0150%, Series 2018-H19 FE, 6.449%, 11/20/68 | | |
+1.1150%, Series 2019-H04 FE, 5.726%, 2/20/69 | | |
+1.1150%, Series 2019-H16 FC, 5.627%, 10/20/69 | | |
+1.1150%, Series 2019-H18 EF, 6.549%, 10/20/69 | | |
+1.2150%, Series 2019-H17 FA, 6.649%, 11/20/69 | | |
GSMPS Mortgage Loan Trust | | |
Series 2004-4 1A4, 8.50%, | | |
Seasoned Credit Risk Transfer Trust 2017-4 | | |
Series 2017-4 M45T, 4.50%, 6/25/57 | | |
| | |
Federal Agency Mortgage Pass-Through: 34.4% |
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See accompanying Notes to Financial StatementsDodge & Cox Income Fund ◾ PAGE 10
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
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| | |
5.773%, 11/1/43 - 8/1/44(c) | | |
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5.84%, 7/1/44 - 9/1/44(c) | | |
5.83%, 7/1/44 - 12/1/44(c) | | |
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5.85%, 10/1/44 - 11/1/44(c) | | |
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6.985%, 3/1/46 - 4/1/46(c) | | |
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3.146%, 7/1/47 - 8/1/47(c) | | |
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5.875%, 10/1/35 - 11/1/44(c) | | |
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PAGE 11 ◾ Dodge & Cox Income FundSee accompanying Notes to Financial Statements
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
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5.19%, 6/1/44 - 12/1/44(c) | | |
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5.88%, 7/1/44 - 12/1/44(c) | | |
5.87%, 8/1/44 - 12/1/44(c) | | |
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5.86%, 8/1/44 - 11/1/44(c) | | |
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5.85%, 11/1/44 - 11/1/44(c) | | |
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Freddie Mac Gold, 15 Year | | |
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Freddie Mac Gold, 20 Year | | |
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Freddie Mac Gold, 30 Year | | |
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Freddie Mac Pool, 20 Year | | |
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Freddie Mac Pool, 30 Year | | |
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7.50%, 11/15/24 - 5/15/25 | | |
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Barclays PLC (United Kingdom) | | |
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See accompanying Notes to Financial StatementsDodge & Cox Income Fund ◾ PAGE 12
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
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Capital One Financial Corp. | | |
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United States 90 Day Average SOFR | | |
+6.63%, 12.022%, 10/30/40(e) | | |
HSBC Holdings PLC (United Kingdom) | | |
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Lloyds Banking Group PLC (United Kingdom) | | |
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NatWest Group PLC (United Kingdom) | | |
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The Goldman Sachs Group, Inc. | | |
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UBS Group AG (Switzerland) | | |
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British American Tobacco PLC (United Kingdom) | | |
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Burlington Northern Santa Fe LLC(f) | | |
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| | |
PAGE 13 ◾ Dodge & Cox Income FundSee accompanying Notes to Financial Statements
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
| | |
| | |
Charter Communications, Inc. | | |
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Elanco Animal Health, Inc. | | |
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Ford Motor Credit Co. LLC(f) | | |
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GE HealthCare Technologies, Inc. | | |
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Imperial Brands PLC (United Kingdom) | | |
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Microchip Technology, Inc. | | |
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Occidental Petroleum Corp. | | |
| | |
Philip Morris International, Inc. | | |
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Telecom Italia SPA (Italy) | | |
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Ultrapar Participacoes SA (Brazil) | | |
| | |
| | |
| | |
| | |
See accompanying Notes to Financial StatementsDodge & Cox Income Fund ◾ PAGE 14
Portfolio of Investments December 31, 2023
Debt Securities (continued) |
| | |
| | |
| | |
Verizon Communications, Inc. | | |
| | |
| | |
| | |
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Vodafone Group PLC (United Kingdom) | | |
| | |
| | |
| | |
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|
American Electric Power Co., Inc. | | |
| | |
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| | |
| | |
Total Debt Securities
(Cost $71,750,362,607) | |
Short-Term Investments: 2.4% |
| | |
Repurchase Agreements: 2.0% |
Fixed Income Clearing Corporation(g) 5.31%, dated 12/29/23, due 1/2/24, maturity value $1,200,708,000 | | |
Fixed Income Clearing Corporation(g) 2.70%, dated 12/29/23, due 1/2/24, maturity value $226,891,047 | | |
| | |
|
| | |
|
State Street Institutional U.S. Government Money Market Fund - Premier Class | | |
Total Short-Term Investments
(Cost $1,708,175,149) | |
Total Investments In Securities
(Cost $73,458,537,756) | | |
Other Assets Less Liabilities | | |
| | |
| |
| Security exempt from registration under Rule 144A of the Securities Act of 1933. The security may be resold in transactions exempt from registration, normally to qualified institutional buyers. |
| Variable rate security: interest rate is determined by the interest rates of underlying pool of assets that collateralize the security. The interest rate of the security may change due to a change in the interest rates or the composition of underlying pool of assets. The interest rate shown is the rate as of period end. |
| Variable rate security: fixed-to-float security pays an initial fixed interest rate and will pay a floating interest rate established at a predetermined time in the future. The interest rate shown is the rate as of period end. |
| Hybrid security: characteristics of both a debt and equity security. |
| Subsidiary. Security may be issued by parent company or one of its subsidiaries. (see below) |
| Repurchase agreement is collateralized by U.S. Treasury Notes 1.375%-5.00%, 10/31/25-2/15/32. U.S. Treasury Inflation Indexed Notes 0.125%, 11/15/32. Total collateral value is $1,451,024,919. |
| |
| Debt securities are grouped by parent company unless otherwise noted. Actual securities may be issued by the listed parent company or one of its subsidiaries.
The Fund usually classifies a company or issuer based on its country of risk, but may designate a different country in certain circumstances. |
| Debt securities with floating interest rates are linked to the referenced benchmark; the interest rate shown is the rate as of period end. |
| |
ARM: Adjustable Rate Mortgage |
CMBS: Commercial Mortgage-Backed Security |
CMO: Collateralized Mortgage Obligation |
|
|
REMIC: Real Estate Mortgage Investment Conduit |
SOFR: Secured Overnight Financing Rate |
|
PAGE 15 ◾ Dodge & Cox Income FundSee accompanying Notes to Financial Statements
Portfolio of Investments December 31, 2023
Futures Contracts
| | | | Value /
Unrealized
Appreciation/
(Depreciation) |
10 Year U.S. Treasury Note— Long Position | | | | |
Ultra Long-Term U.S. Treasury Bond— Long Position | | | | |
| | | | |
See accompanying Notes to Financial StatementsDodge & Cox Income Fund ◾ PAGE 16
Statement of Assets and Liabilities
| |
|
Investments in securities, at value (cost $73,458,537,756) | |
Deposits with broker for futures contracts | |
Receivable for investments sold | |
Receivable for Fund shares sold | |
Dividends and interest receivable | |
Expense reimbursement receivable | |
Prepaid expenses and other assets | |
| |
|
Cash received as collateral for delayed delivery securities | |
Payable for variation margin for futures contracts | |
Payable for investments purchased | |
Payable for Fund shares redeemed | |
| |
| |
| |
| |
|
| |
| |
| |
|
| |
Shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
|
| |
Shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
Statement of Operations
| Year Ended
December 31, 2023 |
| |
| |
| |
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| |
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Administrative services fees | |
| |
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Custody and fund accounting fees | |
| |
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| |
| |
| |
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Expenses reimbursed by investment manager | |
| |
| |
Realized and Unrealized Gain (Loss): | |
| |
Investments in securities (Note 6) | |
| |
Net change in unrealized appreciation/depreciation | |
Investments in securities | |
| |
Net realized and unrealized gain | |
Net Change in Net Assets From Operations | |
Statement of Changes in Net Assets
| | |
| | |
| | |
| | |
| | |
Net change in unrealized appreciation/depreciation | | |
| | |
Distributions to Shareholders: | | |
| | |
| | |
| | |
| | |
| | |
Proceeds from sales of shares | | |
Reinvestment of distributions | | |
| | |
| | |
Proceeds from sales of shares | | |
Reinvestment of distributions | | |
| | |
Net change from Fund share transactions | | |
Total change in net assets | | |
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| | |
| | |
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Net change in shares outstanding | | |
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Net change in shares outstanding | | |
PAGE 17 ◾ Dodge & Cox Income FundSee accompanying Notes to Financial Statements
Notes to Financial Statements
Note 1: Organization and Significant Accounting Policies
Dodge & Cox Income 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, as an open-end management investment company. The Fund commenced operations on January 3, 1989, and seeks high and stable current income consistent with long-term preservation of capital. Risk considerations and investment strategies of the Fund are discussed in the Fund’s Prospectus.
On May 1, 2022, the then-outstanding shares of the Fund were redesignated as Class I Shares, and Class X shares of the Fund were established. The share classes have different eligibility requirements and expense structures due to differing shareholder servicing arrangements. The share classes have the same rights as to redemption, dividends and liquidation proceeds, and voting privileges, except that each class has the exclusive right to vote on matters affecting only its class.
The Fund is an investment company and follows the accounting and reporting guidance issued in Topic 946 by the Financial Accounting Standards Board. 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 p.m. Eastern Time, each day that the NYSE is open for business.
Debt securities 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 securities, interest rates, cash flows (including prepayment speeds), and credit risk. 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 Dodge & Cox. The Board of Trustees has appointed Dodge & Cox, the Fund’s investment manager, as its "valuation designee", as permitted by Rule 2a-5 under the Investment Company Act of 1940, 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 rel
evant 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 net asset value may differ from quoted or published prices 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.
Interest income is recorded on the accrual basis. Interest income includes coupon interest, amortization of premium and accretion of discount on debt securities, and gain/loss on paydowns. The ability of the issuers of the debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry, state, or region. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured. Dividend income is recorded on the ex-dividend date.
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.
Share class accounting Investment income, realized and unrealized gains and losses and expenses, other than class-specific expenses, are allocated to each share class of the Fund based upon the proportion of net assets of each class.
Repurchase agreements Repurchase agreements are transactions under which a Fund purchases a security from a 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 regular custodian or third party 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
Dodge & Cox Income Fund ◾ PAGE 18
Notes to Financial Statements
right to liquidate the collateral securities and to apply the proceeds in satisfaction of the obligation.
To-Be-Announced securities The Fund may purchase mortgage-related securities on a to-be-announced (“TBA”) basis at a fixed price, with payment and delivery on a scheduled future date beyond the customary settlement period for such securities. The Fund may choose to extend the settlement through a “dollar roll” transaction in which it sells the mortgage-related securities to a dealer and simultaneously agrees to purchase similar securities for future delivery at a predetermined price. The Fund accounts for TBA dollar rolls as purchase and sale transactions.
The Fund may also enter into a Master Securities Forward Transaction Agreement ("MSFTA") with a counterparty to govern transactions of delayed delivery securities, including TBA securities. The MSFTA provides for collateralization requirements and the right to offset amounts due to or from counterparties under specified conditions.
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 below.
◾ Level 1: Unadjusted 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 December 31, 2023:
| | LEVEL 2
(Other Significant
Observable Inputs) |
|
|
| | |
| | |
| | |
| | |
|
| | |
| | |
| | |
| | LEVEL 2 (Other Significant Observable Inputs) |
|
|
| | |
Note 3: Derivative Instruments
The Fund may use derivatives either to minimize the impact of certain risks to one or more of its investments (as a ‘‘hedging technique’’) or to implement its investment strategy. A derivative is a financial instrument whose value is derived from a security, currency, interest rate, index, or other financial instrument.
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. Futures contracts are exchange-traded. 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 the contract. 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 in the Statement of Assets and Liabilities. A receivable and/or payable to brokers for daily variation margin is also recorded in 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 used government debt futures contracts to adjust the overall interest rate exposure and duration of the portfolio.
Additional derivative information The following identifies the location on the Statement of Assets and Liabilities and values of the Fund's derivative instruments categorized by primary underlying risk exposure.
| Includes cumulative appreciation (depreciation). Only the current day’s variation margin is reported in the Statement of Assets and Liabilities. |
PAGE 19 ◾ Dodge & Cox Income Fund
Notes to Financial Statements
The following summarizes the effect of derivative instruments on the Statement of Operations, categorized by primary underlying risk exposure.
| |
| |
| |
Net change in unrealized appreciation/depreciation |
| |
The following summarizes the range of volume in the Fund's derivative instruments during the year ended December 31, 2023.
Note 4: Related Party Transactions
Investment advisory fee The Fund pays an investment advisory fee monthly at an annual rate of 0.30% 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 1% of the average daily net assets for the year.
Administrative services fee The Fund pays Dodge & Cox a fee for administrative and shareholder services. The fee is accrued daily and paid monthly equal to an annual rate of the average daily net assets of 0.10% for Class I shares and 0.05% for Class X shares. Under this agreement, Dodge & Cox also pays for the Fund's transfer agent fees.
Expense reimbursement Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain the ratio of total operating expenses of the Class X shares to average net assets of the Class X shares at 0.33% through April 30, 2026. The term of the agreement will automatically renew for subsequent three-year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term. For the year ended December 31, 2023, Dodge & Cox reimbursed expenses of $2,108,221.
Fund officers and trustees All officers and two of the trustees of the Trust are current or former senior executive officers of Dodge & Cox. The Trust pays a fee only to those trustees who are not affiliated with Dodge & Cox.
Note 5: 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. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Financial reporting records are adjusted for permanent book to tax
differences at year end to reflect tax character. Book to tax differences are primarily due to differing treatments of redemptions in-kind and distributions.
Distributions during the years noted below were characterized as follows for federal income tax purposes:
| Year Ended
December 31, 2023 | Year Ended
December 31, 2022 |
| | |
| | |
| | |
| | |
| | |
| | |
At December 31, 2023, the tax basis components of distributable earnings were as follows:
Capital loss carryforward1 | |
Net unrealized depreciation | |
Total distributable earnings | |
| Represents accumulated long-term capital loss as of December 31, 2023, which may be carried forward to offset future capital gains. |
At December 31, 2023, unrealized appreciation and depreciation for investments based on cost for federal income tax purposes were as follows:
| |
| |
| |
Net unrealized depreciation | |
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 6: Redemptions In-Kind
During the year ended December 31, 2023, the Fund distributed securities and cash as payment for redemptions of Class I shares. For financial reporting purposes, the Fund realized a net loss of $9,978,510 attributable to the redemptions in-kind. For tax purposes, no capital loss on the redemptions in-kind was recognized.
Note 7: 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 year.
All Funds in the Trust participate in a $500 million committed credit facility (Line of Credit) with State Street Bank and Trust Com
Dodge & Cox Income Fund ◾ PAGE 20
Notes to Financial Statements
pany, 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 year ended December 31, 2023, the Fund’s commitment fee amounted to $352,205 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 year.
Note 8: Purchases and Sales of Investments
For the year ended December 31, 2023, purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $4,635,506,196 and $5,886,799,409, respectively. For the year ended December 31, 2023, purchases and sales of U.S. government securities aggregated $37,511,371,251 and $29,451,876,705, respectively.
Note 9: New Accounting Guidance
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference
Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provide optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848, which extends the period through December 31, 2024. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial statements.
Note 10: Subsequent Events
Fund management has determined that no material events or transactions occurred subsequent to December 31, 2023, and through the date of the Fund’s financial statements issuance, which require disclosure in the Fund’s financial statements.
PAGE 21 ◾ Dodge & Cox Income Fund
Selected data and ratios
(for a share outstanding throughout each period) | |
| | | | | |
| | | | | |
Net asset value, beginning of year | | | | | |
Income from investment operations: | | | | | |
| | | | | |
Net realized and unrealized gain (loss) | | | | | |
Total from investment operations | | | | | |
Distributions to shareholders from: | | | | | |
| | | | | |
| | | | | |
| | | | | |
Net asset value, end of year | | | | | |
| | | | | |
Ratios/supplemental data: | | | | | |
Net assets, end of year (millions) | | | | | |
Ratio of expenses to average net assets | | | | | |
Ratio of net investment income to average net assets | | | | | |
| | | | | |
Portfolio turnover rate excluding TBA rolls(a) | | | | | |
| | | | | |
Net asset value, beginning of year | | | | | |
Income from investment operations: | | | | | |
| | | | | |
Net realized and unrealized gain (loss) | | | | | |
Total from investment operations | | | | | |
Distributions to shareholders from: | | | | | |
| | | | | |
| | | | | |
| | | | | |
Net asset value, end of year | | | | | |
| | | | | |
Ratios/supplemental data: | | | | | |
Net assets, end of period (millions) | | | | | |
Ratio of expenses to average net assets | | | | | |
Ratio of expenses to average net assets, before reimbursement by investment manager | | | | | |
Ratio of net investment income to average net assets | | | | | |
| | | | | |
Portfolio turnover rate excluding TBA rolls(a) | | | | | |
| See Note 1 regarding To-Be-Announced securities |
| For 2022, the period covers 5/2/2022 (commencement of operations) to 12/31/2022 |
| |
See accompanying Notes to Financial Statements
Dodge & Cox Income Fund ◾ PAGE 22
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Dodge & Cox Funds and Shareholders of Dodge & Cox Income Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Dodge & Cox Income Fund (one of the funds constituting Dodge & Cox Funds, referred to hereafter as the "Fund") as of December 31, 2023, the related statement of operations for the year ended December 31, 2023, the statement of changes in net assets for each of the two years in the period ended December 31, 2023, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2023 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2023 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2024
We have served as the auditor of one or more investment companies in the Dodge & Cox Funds since 1931.
PAGE 23 ◾ Dodge & Cox Income Fund
Special 2023 Tax Information (unaudited)
The following information is provided pursuant to provisions of the Internal Revenue Code:
For shareholders that are corporations, the Fund designates 98% of its ordinary dividends paid to shareholders in 2023 as Section 163(j) interest dividends.
Funds' Liquidity Risk Management Program
(unaudited)
The Funds have adopted and implemented a written liquidity risk management program (“Program”) as required by Rule 22e-4 under the Investment Company Act. The Program is reasonably designed to assess and manage each Fund’s liquidity risk, taking into consideration the Fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources including the Funds’ interfund lending facility and line of credit.
The Funds’ Board of Trustees has approved the appointment of a Liquidity Risk Management Committee, which includes representatives from Dodge & Cox’s Legal, Compliance, Treasury, Operations, Trading, and Portfolio Management departments, and is responsible for the Program’s administration and oversight and for reporting to the Board on at least an annual basis regarding the Program’s operation and effectiveness.
The Liquidity Risk Management Committee refreshed its assessment of the Funds’ liquidity risk profiles, and considered the adequacy and effectiveness of the Program’s operations for the 12 months ended September 30, 2023 (the “covered period”) in order to prepare a written report to the Board of Trustees for consideration at its meeting held on December 8, 2023. The report concluded that (i) the Funds had adequate liquidity to operate effectively throughout the covered period; (ii) each Fund’s investment strategy continues to be appropriate for an open end fund; and (iii) the Funds’ Program is reasonably designed to assess and manage its liquidity risk.
Fund Holdings
The Fund provides a complete list of its 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 Fund’s Forms N-CSR and Part F of N-PORT on the SEC’s website at sec.gov. A list of the Fund’s 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.
Proxy Voting
For a free copy of the Fund's proxy voting policies and procedures, please call 800-621-3979, 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 ended June 30 is also available at dodgeandcox.com or shareholders may view the Fund's Form N-PX 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 share the 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 800-621-3979. Your request will be implemented within 30 days.
Dodge & Cox Income Fund ◾ PAGE 24
Dodge & Cox Funds — Executive Officer & Trustee Information
| Position with Trust
(Year of Election or
Appointment) | Principal Occupation During Past Five Years and Other Relevant Experience | Other Directorships of Public Companies Held
by Trustees |
Interested Trustees and Executive Officers |
| | Chairman and Director, Dodge & Cox (until 2022); Chief Investment Officer (until 2022) and member of U.S. Equity Investment Committee and Emerging Markets Equity Investment Committee (until 2022); Global Equity Investment Committee and International Equity Investment Committee (until 2021); U.S. Fixed Income Investment Committee (until 2019) | |
| Chair (since 2022)
President
(since 2014) and
Trustee (since 1993) | Chair, Chief Executive Officer, and Director, Dodge & Cox; President (until 2022); Co-Director of Fixed Income (until 2020); Director of Fixed Income (until 2019); member of U.S. Fixed Income Investment Committee and Global Fixed Income Investment Committee | |
| Chief Legal Officer
(since 2019) and Secretary (since 2017) | Vice President, General Counsel, and Secretary (since 2017), Dodge & Cox | |
| | Funds Treasurer (since 2021), Dodge & Cox; Vice President (since 2020); Financial Oversight and Control Analyst (until 2021) | |
| Chief Compliance
Officer (since 2010) | Vice President and Chief Compliance Officer, Dodge & Cox | |
|
| | CFO, athenahealth, Inc. (2019-2022) | Director, Synopsys Inc. (software company); Director, Carter's Inc. (children's apparel); Director, Eastern Bankshares, Inc. (financial services and banking services) |
| | Professor of Economics, Stanford University; Director of the Economics of Education Program, National Bureau of Economic Research; Senior Fellow, Hoover Institution and Stanford Institute for Economic Policy Research | |
| | Senior Counsel, Arnold & Porter (law firm) (2015-2018); Partner, Arnold & Porter (until 2015); Director, Howard, Rice, Nemerovski, Canady, Falk & Rabkin (1977-2011) | |
| | CFO, Pixar Animation Studios (1999-2004) | Director, Netflix, Inc. (internet television); Director, Blend (software company); Director, Bumble (online dating) |
Gabriela Franco
Parcella (55) | | President (since 2020) and Executive Managing Director, Merlone Geier Partners (2018-2019); Chairman, President, and CEO, Mellon Capital (2011 to 2017); COO, Mellon Capital (1997 to 2011) | |
| | President and CEO, QinetiQ US (since 2022); Corporate Vice President/President Enterprise Services, Northrop Grumman (2012-2022) | |
| | Robert and Marion Oster Distinguished Military Fellow, Hoover Institution (since 2012); Admiral, United States Navy (Ret.); U.S. Navy Chief of Naval Operations (2007-2011) | Director, Northrop Grumman Corp. (global security); Director, Maersk Line, Limited (shipping and transportation) |
| | Executive Vice President, Managing Director, Fixed Income at Loomis Sayles & Company, L.P. (2003-2011) | |
| The address for each Officer and Trustee is 555 California Street, 40th Floor, San Francisco, California 94104. Each Officer and Trustee oversees all seven series in the Dodge & Cox Funds complex and serves for an indefinite term. |
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 800-621-3979.
PAGE 25 ◾ Dodge & Cox Income Fund
dodgeandcox.com
For Fund literature, transactions, and account
information, please visit the Funds’ website.
or write or call:
Dodge & Cox Funds
P.O. Box 219502
Kansas City, Missouri 64121-9502
(800) 621-3979
Investment Manager
Dodge & Cox
555 California Street, 40th Floor
San Francisco, California 94104
(415) 981-1710
Principal Underwriter
Foreside Fund Services, LLC
3 Canal Plaza, Suite 100
Portland, Maine 04101
(866) 251-6920
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 December 31, 2023, 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.
Global Bond Fund | Class I (dodlx) | Class X (doxlx)
ESTABLISHED 2014
Important Notice:
The Securities and Exchange Commission has adopted new regulations that will impact the design and delivery of future Semi-Annual and Annual Reports. Beginning with the 2024 Semi-Annual Reports, paper copies will be mailed to you unless you have opted for electronic delivery of the reports.
12/23 GBF AR Printed on recycled paper 
To Our Shareholders (unaudited)
The Dodge & Cox Global Bond Fund—Class I had a total return of 12.31% for the year ended December 31, 2023, compared to a return of 7.15% for the Bloomberg Global Aggregate Bond Index USD Hedged (Bloomberg Global Agg).1
Market Commentary
Global fixed income markets performed strongly across all sectors in 2023 as the economic environment improved. At the beginning of 2023, inflation remained elevated despite significant interest rate hikes by central banks, and market participants expected a challenging year ahead for growth. Since then, inflation has decelerated, growth has been better than expected, and many central banks are either discussing or implementing reductions in interest rates. The journey to this point has been far from smooth, as several financial institutions failed, interest rate expectations swung widely, and geopolitical stresses emerged. Our Investment Committee was able to capitalize on this volatile environment—relying on our rigorous bottom-up fundamental research and valuation discipline to identify attractive long-term investment opportunities and generate significant outperformance.
Globally, disinflation2 was the dominant market theme of the year. Global inflation reached a peak of 10.3% in October 2022, but fell to 5.5% by the end of 2023, although there continues to be divergence across countries. The United States made steady progress toward the Fed’s inflation target with core PCE3 inflation falling from a peak of 5.6% in February 2022 to 2.9% by the end of 2023. This has prompted the Fed and market participants to forecast monetary easing in 2024. Some countries are already further along easing interest rates than the United States. In Brazil, for example, where inflation returned to the target band in the spring of 2023, the central bank has already cut the policy rate by a cumulative 200 basis points4 (bp) to 11.65%. At the other end of the spectrum, the Bank of Japan continues to follow an exceptional monetary policy. In an effort to consolidate gains from government stimulus, it has remained largely accommodative through a combination of negative rates and yield curve control.
The U.S. dollar’s modest decline, about 2%5 versus other currencies, occurred amid high intra-year volatility and cross-currency dispersion. Strong performers included Fund holdings such as the Colombian peso, the Mexican peso, and the Brazilian real, which appreciated by 26%, 15%, and 9%, respectively. These currencies benefited from their inexpensive starting valuations, high real yields, credible central bank policies, and various country-specific factors. On the other hand, the Japanese yen and, to a lesser extent, several other currency holdings depreciated.
Returns for the Corporate sector were excellent in 2023. Global corporate spreads tightened from 149 bp to 115 bp in 2023, to end the year below their long-term average. As with rates and currencies, spreads followed a winding path as they rose sharply in March due to the onset of U.S. regional bank stress and the takeover of Credit Suisse. Overall, longer-duration6 and lower-rated securities performed the best and Industrials outperformed Financials. Generally, the volatile environment in 2023 was an excellent environment for active managers like ourselves.
Investment Strategy
The Global Bond Fund seeks to generate attractive risk-adjusted total returns by investing across global credit, currency, and interest rate markets. We evaluate each investment with a three- to five-year investment horizon in mind, but regularly adjust our positioning in response to changes in fundamentals and market pricing. During 2023, our active bottom-up investment process led us to trim 12 percentage points from the Fund’s credit7 weighting, lengthen the Fund’s duration by 0.9 years, and make numerous adjustments to the Fund’s currency holdings.
Rates: A Roller Coaster Year
The elevated level of yields, significant intra-year rate volatility, and improvements in the macro environment provided opportunities to lengthen the Fund’s duration by 0.9 years from 4.6 years to 5.4 years. While the United States remains the Fund’s primary source of duration exposure, we implemented the majority of our duration extensions outside of the United States, including via some markets where the Fund’s duration exposure had been negligible for many years. For example, we had previously viewed Germany’s low, and sometimes negative, yields as offering inadequate compensation for duration risk. However, with German yields rising from negative levels at the start of 2022 to nearly 3% in October 2023, we established a small duration position during the fourth quarter. We expect disinflation and weak growth to lead to declining rates in Germany over our investment horizon. Similarly, we added duration in other highly rated markets, such as New Zealand and South Korea. We believe these positions can be a source of return enhancement and diversification within the Fund’s carefully selected set of interest rate exposures.
With respect to the United States, we modestly increased duration exposure in response to the intra-year rise in yields and our expectation that GDP8 growth and core inflation will slow, creating room for the Fed to ease monetary policy and for long-term interest rates to decline.
Meanwhile, we modestly reduced duration in some emerging markets, including Indonesia and Malaysia. In the case of Indonesia, we fully exited our remaining position, which we first initiated in 2017. Over this time, improvements in inflation control, trade balances, and macroeconomic stability drove strong performance, and we concluded that the valuation was no longer compelling. In Malaysia, we swapped our longer-dated bonds into shorter-term bonds, which we believe provide more attractive compensation for potential political and fiscal risks.
Credit: A Stellar, but Sometimes Bumpy, Year
Drawing on the deep fundamental research performed by our integrated research team, we have successfully added value through security selection and dynamically sizing the Fund’s credit exposure over time. In response to credit spreads significantly tightening in 2023, we reduced the Fund’s credit exposure by 12 percentage points, nearly reversing the 13 percentage point increase in 2022. We fully sold eight credit issuers and trimmed many others, with each
PAGE 1 ◾ Dodge & Cox Global Bond Fund
decision driven by a bottom-up assessment of issuer fundamentals and valuation. The credit reductions were focused primarily on non-financial companies and some longer-duration credit securities in the portfolio, as we believe those are more vulnerable to future underperformance if spreads were to widen. While some of these holdings had been in the portfolio for many years, others had been purchased within the past year at significantly lower valuations. For example, our recent trims included Virginia Electric & Power Company 30-year debt that we had purchased in March and Colombia U.S. dollar-denominated 20-year government bonds that we had added to in May.
Intra-year credit market volatility also created opportunities to initiate new positions or add to existing holdings at attractive valuations. The failures of several regional banks and the takeover of Credit Suisse (none of which were held in the Fund) created interesting opportunities during the year to adjust our allocation to Financials. Of the 12 percentage point reduction in the Fund’s credit weight, almost none came from Financials, which underperformed Industrials during the year. In May, we started a position in Charles Schwab and added to Boston Properties and Citigroup. During the fourth quarter, we purchased a newly issued UBS Group Additional Tier 1 (AT1) security.9 We believe UBS is a highly creditworthy institution and that the 9.25% initial coupon on the AT1 security provides an attractive level of income relative to the risk of permanent loss of capital.
At year end, 48% of the Fund was invested in credit securities across a carefully selected set of issuers. We believe these holdings serve as an important source of durable yield in the portfolio and should perform well across a range of scenarios.
The proceeds from our credit trims were largely reinvested into Agency10 mortgage-backed securities (MBS), with the Fund’s securitized products weight rising nine percentage points to 19%. While they performed well during the year, we believe Agency MBS continue to offer low valuations, negligible credit risk, minimal prepayment risk, and provide an attractive incremental yield versus U.S. Treasuries and other high-quality investment alternatives.
Currency: A Continued Shift Toward Developed Markets
The Fund’s foreign currency weight of 24% remains near its highest level since 2015. While 2022 was characterized by a sizable and broad-based U.S.-dollar rally, which led us to increase the Fund’s currency exposure, the overarching theme for 2023 was moderate trade-weighted U.S. dollar weakness with heightened cross-currency dispersion. This environment provided ample opportunities to adjust the Fund’s positioning. Although the portfolio’s overall foreign currency exposure was fairly stable, over the course of the year we reduced the Fund’s exposure to emerging markets currencies by 3.3 percentage points and increased its exposure to non-U.S. developed market currencies by 2.9 percentage points, bringing this exposure to a multi-year high of 10.9%.
During the first half of 2023, we exited the Fund’s Indonesia and Poland currency exposures, as we no longer believed these currencies were as attractively valued as other alternatives, and reduced its Mexican peso position on the basis of price discipline.
Conversely, we increased the Fund’s exposure to several undervalued developed market currencies, including the Australian dollar, the Japanese yen, and the Norwegian krone. During the fourth quarter, we initiated a position in the Chilean peso, which had depreciated significantly, presenting an attractive entry point for a currency that we believe is undervalued, has a single-A country credit rating, and a credible central bank.
In Closing
We are pleased with the Fund’s strong performance, which benefited from the portfolio’s interest rate, credit, and currency positioning. Looking forward, we remain optimistic about the outlook for the Fund and its set of carefully selected positions. As always, we thank you for your continued confidence in Dodge & Cox.
For the Board of Trustees, | |
| |
Dana M. Emery,
Chair and President | |
January 31, 2024
| All returns are stated in U.S. dollars, unless otherwise noted. The Funds’ 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 dividend and/or interest income but, unlike Fund returns, do not reflect fees or expenses. The Bloomberg Global Aggregate Bond Index is a widely recognized, unmanaged index of multi-currency, investment-grade fixed income securities. Bloomberg calculates a USD hedged return by applying one-month forward rates to seek to eliminate the effect of non- USD exposures. |
| Disinflation is a temporary slowing of the pace of price inflation. The term is used to describe occasions when the inflation rate has reduced marginally over the short term. |
| Personal consumption expenditures (PCE) measure how much consumers spend on durable and non-durable goods and services. PCE is the Federal Reserve’s preferred measure for inflation. Core PCE prices exclude food and energy prices. |
| One basis point is equal to 1/100th of 1%. |
| As measured by the Trade-Weighted U.S. Dollar Index, which measures the value of the United States dollar relative to other world currencies. |
| Duration is a measure of a bond’s (or a bond portfolio’s) price sensitivity to changes in interest rates. |
| Credit refers to corporate bonds and government-related securities, as classified by Bloomberg. |
| Gross domestic product (GDP) measures the monetary value of final goods and services—those that are bought by the final user—produced in a country in a given period of time. It counts all of the output generated within the borders of a country. GDP is composed of goods and services produced for sale in the market and also includes some non-market production, such as defense or education services provided by the government. |
| Additional Tier 1 Bonds, also called AT1 Bonds, are capital instruments banks issue to raise their core equity base. |
| The U.S. Government does not guarantee the Fund’s shares, yield, or net asset value. The agency guarantee (by, for example, Ginnie Mae, Fannie Mae, or Freddie Mac) does not eliminate market risk. |
Dodge & Cox Global Bond Fund ◾ PAGE 2
2023 Performance Review for the Fund's Class I Shares (unaudited)
The Fund returned 12.31% in 2023.
Key contributors included the Fund's:
◾ Starting yield and exposure to declining interest rates in the United States and other global markets;
◾ Exposure to Corporate bonds (54%*), with British American Tobacco, Telecom Italia, and Charter Communications among the strongest-performing holdings; and
◾ Exposure to local currency government bonds and government-related credits of several Latin American countries, including Brazil, Mexico, and Colombia.
Key detractors included the Fund's:
◾ Exposure to several currencies, including the Japanese yen and Malaysian ringgit.
*Figures in this section denote Fund positioning at the beginning of the period.
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 90 Years of Investment Experience
Dodge & Cox was founded in 1930. We have a stable and well-qualified team of investment professionals, most of whom have spent their entire careers at Dodge & Cox.
Experienced Investment Team
The Global Fixed Income Investment Committee, which is the decision-making body for the Global Bond Fund, is a seven-member committee with an average tenure of 20 years at Dodge & Cox.
One Business with a Single Decision-Making Office
Dodge & Cox manages equity (domestic, international, and global), fixed income (domestic and global), and balanced investments, all from one office in San Francisco.
Consistent Investment Approach
Our team decision-making process involves thorough, bottom-up fundamental analysis of each investment.
Long-Term Focus and Low Expenses
We invest with a three- to five-year investment horizon. We manage Funds that maintain low expense ratios.
Risks: The yields and market values of the instruments in which the Fund invests may fluctuate. Accordingly, an investment may be worth more or less than its original cost. Debt securities are subject to interest rate risk, credit risk, and prepayment and call risk, all of which could have adverse effects on the value of the Fund. A low interest rate environment creates an elevated risk of future negative returns. Financial intermediaries may restrict their market making activities for certain debt securities, which may reduce the liquidity and increase the volatility of such securities. Investing in non-U.S. securities may entail risk due to foreign economic and political developments; this risk may be increased when investing in emerging markets. The Fund is also subject to currency risk. Please read the prospectus and summary prospectus for specific details regarding the Fund's risk profile.
Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security. Please see the Portfolio of Investments section in this report for a complete list of fund holdings.
PAGE 3 ◾ Dodge & Cox Global Bond Fund
Growth of $10,000 Over 10 Years (unaudited)
For an Investment Made on December 31, 2013 
Average Annual Total Return
For Periods Ended December 31, 2023
| | | | |
Dodge & Cox Global Bond Fund | | | | |
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Bloomberg Global Aggregate Bond Index (USD Hedged) | | | | |
Expense Ratios
Per the Prospectus Dated May 1, 2023
| | |
Dodge & Cox Global Bond Fund | | |
| | |
| | |
| The Class X shares inception date is May 2, 2022. The returns shown prior to that date are for the Class I shares. |
| Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain Total Annual Fund Operating Expenses of the Class I shares at 0.45% and the Class X shares at 0.37% until April 30, 2026. These agreements cannot be terminated prior to April 30, 2026 other than by resolution of the Fund’s Board of Trustees. For purposes of the foregoing, ordinary expenses shall not include nonrecurring shareholder account fees, fees and expenses associated with Fund shareholder meetings, fees on portfolio transactions such as exchange fees, dividends and interest on short positions, fees and expenses of pooled investment vehicles that are held by the Fund, interest expenses and other fees and expenses related to any borrowings, taxes, brokerage fees and commissions and other costs and expenses relating to the acquisition and disposition of Fund investments, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other nonroutine expenses or extraordinary expenses not incurred in the ordinary course of the Fund’s business, such as litigation expenses. The term of the agreement will automatically renew for subsequent three-year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term. The agreement does not permit Dodge & Cox to recoup any fees waived or payments made to the Fund for a prior year. |
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 800-621-3979 for current performance figures.
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 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 Internal Revenue Code, which, if applicable, may have adversely affected its performance.
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 interest income but, unlike Fund returns, do not reflect fees or expenses. The Bloomberg Global Aggregate Bond Index (Bloomberg Global Agg) is a widely recognized, unmanaged index of multi-currency, investment-grade fixed income securities. Bloomberg calculates a USD hedged return by applying one-month forward rates to seek to eliminate the effect of non-USD exposures.
Bloomberg is a registered trademark of Bloomberg Finance L.P. and its affiliates. For more information about this index, visit: www.dodgeandcox.com/globalbondfund
Dodge & Cox Global Bond Fund ◾ PAGE 4
Portfolio Information (unaudited) December 31, 2023
Five Largest Countries(b)(c) | |
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Developed Europe (excluding United Kingdom) | |
| |
Asia Pacific (excluding Japan) | |
| Net Cash & Other includes cash, short-term investments, unrealized gain (loss) on derivatives, receivables, and payables. |
| The Fund usually classifies a company or issuer based on its country of risk, but may designate a different country in certain circumstances. |
| Excludes currency and interest rate derivatives. |
Fund Expense Example (unaudited)
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 each share class in the table below provides information about actual account values and expenses based on the actual returns of the share class. 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 each share class in 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 share class and an assumed 5% annual rate of return before expenses (not the actual return of the share class). 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 other mutual funds.
Six Months Ended
December 31, 2023 | Beginning Account Value
7/1/2023 | Ending Account Value
12/31/2023 | Expenses Paid
During Period* | |
| | | | |
| | | | |
Based on hypothetical 5% yearly return | | | | |
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Based on hypothetical 5% yearly return | | | | |
| Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (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).
PAGE 5 ◾ Dodge & Cox Global Bond Fund
Consolidated Portfolio of Investments December 31, 2023
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Brazil Government (Brazil) | | |
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Colombia Government (Colombia) | | |
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Hungary Government (Hungary) | | |
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Malaysia Government (Malaysia) | | |
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Mexico Government (Mexico) | | |
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New Zealand Government (New Zealand) | | |
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Norway Government (Norway) | | |
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South Africa Government (South Africa) | | |
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South Korea Government (South Korea) | | |
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U.S. Treasury Note/Bond (United States) | | |
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Chicago Transit Authority RB (United States) | | |
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Colombia Government International (Colombia) | | |
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Indonesia Government International (Indonesia) | | |
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Kommuninvest Cooperative Society (Sweden) | | |
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New South Wales Treasury Corp (Australia) | | |
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Petroleo Brasileiro SA (Brazil) | | |
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Petroleos Mexicanos (Mexico) | | |
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State of Illinois GO (United States) | | |
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Rio Oil Finance Trust (Brazil) | | |
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Navient Student Loan Trust (United States) | | |
United States 30 Day Average SOFR | |
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Navient Student Loan Trust (Private Loans) (United States) | | |
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SLM Student Loan Trust (United States) | | |
United States 30 Day Average SOFR | |
+1.0640% Series 2012-1 A3, 6.402%, 9/25/28 | | | |
United States 90 Day Average SOFR | |
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+0.7510% Series 2007-6 A5, 6.086%, 4/27/43 | | | |
SMB Private Education Loan Trust (Private Loans) (United States) | | |
Series 2017-B A2A, 2.82%, | | | |
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Series 2021-A APT2, 1.07%, | | | |
See accompanying Notes to Consolidated Financial StatementsDodge & Cox Global Bond Fund ◾ PAGE 6
Consolidated Portfolio of Investments December 31, 2023
Debt Securities (continued) |
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Freddie Mac Military Housing Trust Multifamily (United States) | | |
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Fannie Mae (United States) | | |
Trust 2004-W9 1A3, 6.05%, 2/25/44 | | | |
Freddie Mac (United States) | | |
Series 4183 Z, 3.00%, 3/15/43 | | | |
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Ginnie Mae (United States) | | |
Series 2010-169 JZ, 4.00%, 12/20/40 | | | |
Series 2014-184 GZ, 3.50%, 12/20/44 | | | |
United States 30 Day Average SOFR | |
+0.85% Series 2023-H04 FC, 6.188%, 1/20/73 | | | |
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Federal Agency Mortgage Pass-Through: 14.3% |
Fannie Mae, 15 Year (United States) |
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Fannie Mae, 30 Year (United States) |
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Fannie Mae, 40 Year (United States) |
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Fannie Mae, Hybrid ARM (United States) |
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Freddie Mac, Hybrid ARM (United States) |
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Freddie Mac Gold, 30 Year (United States) |
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Freddie Mac Pool, 30 Year (United States) |
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Bank of America Corp. (United States) | | |
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| | | |
| | | |
| | | |
Barclays PLC (United Kingdom) | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
Boston Properties, Inc. (United States) | | |
| | | |
| | | |
| | | |
| | | |
Capital One Financial Corp. (United States) | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Citigroup, Inc. (United States) | | |
| | | |
| | | |
| | | |
United States 90 Day Average SOFR | |
| | | |
HSBC Holdings PLC (United Kingdom) | | |
| | | |
| | | |
| | | |
| | | |
| | | |
JPMorgan Chase & Co. (United States) | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Lloyds Banking Group PLC (United Kingdom) | | |
| | | |
| | | |
| | | |
| | | |
PAGE 7 ◾ Dodge & Cox Global Bond FundSee accompanying Notes to Consolidated Financial Statements
Consolidated Portfolio of Investments December 31, 2023
Debt Securities (continued) |
| | | |
NatWest Group PLC (United Kingdom) | | |
| | | |
| | | |
| | | |
| | | |
The Charles Schwab Corp. (United States) | | |
| | | |
| | | |
| | | |
| | | |
The Goldman Sachs Group, Inc. (United States) | | |
| | | |
UBS Group AG (Switzerland) | | |
| | | |
| | | |
| | | |
| | |
| | | |
Wells Fargo & Co. (United States) | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
Altria Group, Inc. (United States) | | |
| | | |
| | | |
AT&T, Inc. (United States) | | |
| | | |
| | | |
| | |
3.125%, 11/12/79(b)(e)(f) | | | |
| | | |
British American Tobacco PLC (United Kingdom) | | |
| | | |
| | |
| | | |
| | | |
Charter Communications, Inc. (United States) | | |
| | | |
| | | |
| | | |
| | | |
Elanco Animal Health, Inc. (United States) | | |
| | | |
Ford Motor Credit Co. LLC(h) (United States) | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Holcim, Ltd. (Switzerland) | | |
|
| | | |
| | | |
| | | |
| | | |
Imperial Brands PLC (United Kingdom) | | |
| | | |
Kinder Morgan, Inc. (United States) | | |
| | | |
| | | |
| | | |
| | | |
Millicom International Cellular SA (Guatemala) | | |
| | | |
News Corp. (United States) | | |
| | | |
Occidental Petroleum Corp. (United States) | | |
| | | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
QVC, Inc.(h) (United States) | | |
| | | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
Telecom Italia SPA (Italy) | | |
| | | |
| | | |
| | | |
T-Mobile U.S., Inc. (United States) | | |
| | | |
| | | |
Ultrapar Participacoes SA (Brazil) | | |
| | | |
| | | |
VMware, Inc. (United States) | | |
| | | |
Vodafone Group PLC (United Kingdom) | | |
| | | |
| | | |
| | | |
| | | |
| |
American Electric Power Co., Inc. (United States) | | |
| | | |
Dominion Energy (United States) | | |
| | | |
| | |
| | | |
NextEra Energy, Inc. (United States) | | |
| | | |
| | | |
| | | |
| | | |
See accompanying Notes to Consolidated Financial StatementsDodge & Cox Global Bond Fund ◾ PAGE 8
Consolidated Portfolio of Investments December 31, 2023
Debt Securities (continued) |
| | | |
The Southern Co. (United States) | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Total Debt Securities
(Cost $2,523,800,288) | | | |
Short-Term Investments: 2.7% |
| | | |
Repurchase Agreements: 2.3% |
Fixed Income Clearing 2.70%, dated 12/29/23,
due 1/2/24, maturity value $17,731,318 | | | |
Fixed Income Clearing 5.31%, dated 12/29/23,
due 1/2/24, maturity value $42,024,780 | | | |
| | | |
|
State Street Institutional U.S. Government Money Market Fund - Premier Class
| | | |
Total Short-Term Investments
(Cost $69,965,629) | |
Total Investments in Securities
(Cost $2,593,765,917) | | | |
Other Assets Less Liabilities | | | |
| | | |
| |
| Security exempt from registration pursuant to Regulation S under the Securities Act of 1933, as amended. Regulation S securities are subject to restrictions on resale in the United States. |
| Security exempt from registration under Rule 144A of the Securities Act of 1933. The security may be resold in transactions exempt from registration, normally to qualified institutional buyers. |
| Variable rate security: interest rate is determined by the interest rates of underlying pool of assets that collateralize the security. The interest rate of the security may change due to a change in the interest rates or the composition of underlying pool of assets. The interest rate shown is the rate as of period end. |
| Variable rate security: fixed-to-float security pays an initial fixed interest rate and will pay a floating interest rate established at a predetermined time in the future. The interest rate shown is the rate as of period end. |
| Hybrid security: characteristics of both a debt and equity security. |
| Perpetual security: no stated maturity date. |
| Subsidiary. Security may be issued by parent company or one of its subsidiaries. (see below) |
| Repurchase agreement is collateralized by U.S. Treasury Note 3.00%, 10/31/25. U.S. Treasury Inflation Indexed Note 1.125%, 1/15/33. Total collateral value is $60,920,660. |
| Debt securities are grouped by parent company unless otherwise noted. Actual securities may be issued by the listed parent company or one of its subsidiaries.
The Fund usually classifies a company or issuer based on its country of risk, but may designate a different country in certain circumstances. |
| Debt securities with floating interest rates are linked to the referenced benchmark; the interest rate shown is the rate as of period end. |
| |
ARM: Adjustable Rate Mortgage |
CMBS: Commercial Mortgage-Backed Security |
CMO: Collateralized Mortgage Obligation |
|
|
REMIC: Real Estate Mortgage Investment Conduit |
SOFR: Secured Overnight Financing Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD: United States Dollar |
|
PAGE 9 ◾ Dodge & Cox Global Bond FundSee accompanying Notes to Consolidated Financial Statements
Consolidated Portfolio of Investments December 31, 2023
Futures Contracts
| | | | Value /
Unrealized
Appreciation/
(Depreciation) |
Euro-Bobl— Short Position | | | | |
Ultra 10 Year U.S. Treasury Note— Long Position | | | | |
| | | | |
Currency Forward Contracts
| | | | Unrealized Appreciation
(Depreciation) |
|
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
|
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
|
| | | | | | |
| | | | | | |
| | | | | | |
|
| | | | | | |
| | | | | | |
|
| | | | | | |
| | | | | | |
| | | | | | |
|
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Unrealized gain on currency forward contracts | | | |
Unrealized loss on currency forward contracts | | | |
Net unrealized loss on currency forward contracts | | | | |
The listed counterparty may be the parent company or one of its subsidiaries.
See accompanying Notes to Consolidated Financial StatementsDodge & Cox Global Bond Fund ◾ PAGE 10
Consolidated
Statement of Assets and Liabilities
| |
|
Investments in securities, at value (cost $2,593,765,917) | |
Unrealized appreciation on currency forward contracts | |
Cash pledged as collateral for currency forward contracts | |
| |
Cash denominated in foreign currency (cost $4,730) | |
Deposits with broker for futures contracts | |
Receivable for variation margin for futures contracts | |
Receivable for Fund shares sold | |
Dividends and interest receivable | |
Expense reimbursement receivable | |
Prepaid expenses and other assets | |
| |
|
Unrealized depreciation on currency forward contracts | |
Cash received as collateral for currency forward contracts | |
Payable for investments purchased | |
Payable for Fund shares redeemed | |
| |
| |
| |
| |
|
| |
| |
| |
|
| |
Shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
|
| |
Shares outstanding (par value $0.01 each, unlimited shares authorized) | |
Net asset value per share | |
Consolidated
Statement of Operations
| Year Ended
December 31, 2023 |
| |
| |
Interest (net of foreign taxes of $9,569) | |
| |
| |
| |
Administrative services fees | |
| |
| |
Custody and fund accounting fees | |
| |
| |
| |
| |
| |
| |
Expenses reimbursed by investment manager | |
| |
| |
Realized and Unrealized Gain (Loss): | |
| |
Investments in securities (net of foreign capital gains tax of $27,727) | |
| |
Currency forward contracts | |
Foreign currency transactions | |
Net change in unrealized appreciation/depreciation | |
Investments in securities (net of change in deferred foreign capital gains tax of $(4,334)) | |
| |
Currency forward contracts | |
Foreign currency translation | |
Net realized and unrealized gain | |
Net Change in Net Assets From Operations | |
PAGE 11 ◾ Dodge & Cox Global Bond FundSee accompanying Notes to Consolidated Financial Statements
Consolidated
Statement of Changes in Net Assets
| | |
| | |
| | |
| | |
| | |
Net change in unrealized appreciation/depreciation | | |
| | |
Distributions to Shareholders: | | |
| | |
| | |
| | |
| | |
| | |
Proceeds from sales of shares | | |
Reinvestment of distributions | | |
| | |
| | |
Proceeds from sales of shares | | |
Reinvestment of distributions | | |
| | |
Net change from Fund share transactions | | |
Total change in net assets | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Net change in shares outstanding | | |
| | |
| | |
| | |
| | |
Net change in shares outstanding | | |
See accompanying Notes to Consolidated Financial StatementsDodge & Cox Global Bond Fund ◾ PAGE 12
Notes to Consolidated Financial Statements
Note 1: Organization and Significant Accounting Policies
Dodge & Cox Global Bond 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, as an open-end management investment company. The Fund commenced operations on May 1, 2014, and seeks a high rate of total return consistent with long-term preservation of capital. Foreign investing, especially in developing countries, has special risks such as currency and market volatility and political and social instability. These and other risk considerations are discussed in the Fund’s Prospectus.
On May 1, 2022, the then-outstanding shares of the Fund were redesignated as Class I Shares, and Class X shares of the Fund were established. The share classes have different eligibility requirements and expense structures due to differing shareholder servicing arrangements. The share classes have the same rights as to redemption, dividends and liquidation proceeds, and voting privileges, except that each class has the exclusive right to vote on matters affecting only its class.
The Fund is an investment company and follows the accounting and reporting guidance issued in Topic 946 by the Financial Accounting Standards Board. 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 p.m. Eastern Time, each day that the NYSE is open for business.
Debt securities 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 securities, interest rates, cash flows (including prepayment speeds), and credit risk. Exchange-traded derivatives are 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.
Investments initially valued in currencies other than the U.S. dollar are converted to the U.S. dollar using prevailing exchange rates. Currency forward contracts are valued based on the prevailing forward exchange rates of the underlying currencies. As a result, the Fund’s net assets may be affected by changes in the value of currencies in relation to the U.S. dollar.
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 Dodge & Cox. The Board of Trustees has appointed Dodge & Cox, the Fund’s investment manager, as its "valuation designee", as permitted
by Rule 2a-5 under the Investment Company Act of 1940, 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 net asset value may differ from quoted or published prices 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.
Interest income is recorded on the accrual basis. Interest income includes coupon interest, amortization of premium and accretion of discount on debt securities, gain/loss on paydowns, and inflation adjustments to the principal amount of inflation-indexed securities. The ability of the issuers of the debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry, state, region, or country. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured. Dividend income is recorded on the ex-dividend date.
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.
Share class accounting Investment income, realized and unrealized gains and losses and expenses, other than class-specific expenses, are allocated to each share class of the Fund based upon the proportion of net assets of each class.
PAGE 13 ◾ Dodge & Cox Global Bond Fund
Notes to Consolidated Financial Statements
Foreign taxes The Fund is 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 receipts and are accrued at the time the associated interest income is recorded.
Capital gains taxes are incurred upon disposition of certain foreign securities. Expected capital gains taxes on appreciated securities, if any, are accrued as unrealized losses and incurred capital gains taxes are reflected as realized losses upon the sale of the related security. Currency taxes may be incurred when the Fund purchases certain foreign currencies related to securities transactions and are recorded as realized losses on foreign currency transactions.
Foreign currency translation The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the prevailing exchange rates of such currencies against the U.S. dollar. The market value of investment securities and other assets and liabilities are translated at the exchange rate as of the valuation date. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the transaction date.
Reported realized and unrealized gain (loss) on investments include foreign currency gain (loss) related to investment transactions.
Reported realized and unrealized gain (loss) on foreign currency transactions and translation include the following: holding/disposing of foreign currency, the difference in exchange rate between the trade and settlement dates on securities transactions, the difference in exchange rate between the accrual and payment dates on interest, and currency losses on the purchase of foreign currency in certain countries that impose taxes on such transactions.
Repurchase agreements Repurchase agreements are transactions under which a Fund purchases a security from a 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 regular custodian or third party 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.
To-Be-Announced securities The Fund may purchase mortgage-related securities on a to-be-announced (“TBA”) basis at a fixed price, with payment and delivery on a scheduled future date beyond the customary settlement period for such securities. The Fund may choose to extend the settlement through a “dollar roll” transaction in which it sells the mortgage-related securities to a dealer and simultaneously agrees to purchase similar securities for future delivery at a predetermined price. The Fund accounts for TBA dollar rolls as purchase and sale transactions.
The Fund may also enter into a Master Securities Forward Transaction Agreement ("MSFTA") with a counterparty to govern transactions of delayed delivery securities, including TBA securities. The
MSFTA provides for collateralization requirements and the right to offset amounts due to or from counterparties under specified conditions.
Consolidation The Fund may invest in certain securities through its wholly owned subsidiary, Dodge & Cox Global Bond Fund Cayman, Ltd. (the “Subsidiary”). The Subsidiary is a Cayman Islands exempted company and invests in certain securities consistent with the investment objective of the Fund. The Fund’s Consolidated Financial Statements, including the Consolidated Portfolio of Investments, consist of the holdings and accounts of the Fund and the Subsidiary. All intercompany transactions and balances have been eliminated. At December 31, 2023, the Subsidiary had net assets of $100, which represented less than 0.01% of the Fund’s consolidated 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 below.
◾ Level 1: Unadjusted 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 December 31, 2023:
| | LEVEL 2
(Other Significant
Observable Inputs) |
|
|
| | |
| | |
| | |
| | |
|
| | |
| | |
| | |
|
|
| | |
| | |
Dodge & Cox Global Bond Fund ◾ PAGE 14
Notes to Consolidated Financial Statements
| | LEVEL 2 (Other Significant Observable Inputs) |
Currency Forward Contracts |
| | |
| | |
Note 3: Derivative Instruments
The Fund may use derivatives either to minimize the impact of certain risks to one or more of its investments (as a ‘‘hedging technique’’) or to implement its investment strategy. A derivative is a financial instrument whose value is derived from a security, currency, interest rate, index, or other financial instrument.
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 the contract is purchased. Futures contracts are exchange-traded. 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 to secure the Fund's obligation to perform. Initial margin is returned to the Fund when the futures contract is closed. Subsequent payments (referred to as "variation margin") are made to or received from the clearing broker on a daily basis based on changes in the market value of the contract. Changes in the market value of open futures contracts are recorded as unrealized appreciation or depreciation in the Consolidated Statement of Operations. Realized gains and losses on futures contracts are recorded in the Consolidated Statement of Operations at the closing or expiration of the contracts. Cash deposited with a broker as initial margin is recorded in the Consolidated Statement of Assets and Liabilities. A receivable and/or payable to brokers for daily variation margin is also recorded in the Consolidated 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 used government debt futures contracts to adjust the overall interest rate exposure and duration of the portfolio.
Currency forward contracts Currency forward contracts are agreements to purchase or sell a specific currency at a specified future date and price. Currency forward contracts are traded over-the-counter. The values of currency forward contracts change daily based on the prevailing forward exchange rates of the underlying currencies. Changes in the value of open contracts are recorded as unrealized appreciation or depreciation in the Consolidated Statement of Operations. When a currency forward contract is closed, the Fund records a realized gain or loss in the Consolidated Statement of Operations equal to the difference between the value at the time the contract was opened and the value at the time it was closed.
Losses from these transactions may arise from unfavorable changes in currency values or if a counterparty does not perform under a contract’s terms.
The Fund used short currency forward contracts to hedge direct and/or indirect foreign currency exposure. The Fund used long currency forward contracts to create exposure to the Hungarian Forint and Colombian Peso.
Additional derivative information The following identifies the location on the Consolidated Statement of Assets and Liabilities and values of the Fund's derivative instruments categorized by primary underlying risk exposure.
| | Foreign
Exchange
Derivatives | |
| | | |
Unrealized appreciation on currency forward contracts | | | |
| | | |
| | | |
| | | |
Unrealized depreciation on currency forward contracts | | | |
| | | |
| | | |
| Includes cumulative appreciation (depreciation). Only the current day’s variation margin is reported in the Consolidated Statement of Assets and Liabilities. |
The following summarizes the effect of derivative instruments on the Consolidated Statement of Operations, categorized by primary underlying risk exposure.
| | Foreign
Exchange
Derivatives | |
| | | |
| | | |
Currency forward contracts | | | |
| | | |
Net change in unrealized appreciation/depreciation |
| | | |
Currency forward contracts | | | |
| | | |
The following summarizes the range of volume in the Fund's derivative instruments during the year ended December 31, 2023.
| | |
| | |
Currency forward contracts | | |
The Fund may enter into various over-the-counter derivative contracts governed by International Swaps and Derivatives Association master agreements (“ISDA agreements”). The Fund’s ISDA agreements, which are separately negotiated with each dealer counterparty, specify (i) events of default and other events permitting a party to terminate some or all of the contracts thereunder and (ii) the process by which those contracts will be valued for purposes of determining termination payments. If some or all of the contracts under a master agreement are terminated because of an event of default or similar event, the values of all terminated contracts must be
PAGE 15 ◾ Dodge & Cox Global Bond Fund
Notes to Consolidated Financial Statements
netted to determine a single payment owed by one party to the other. To the extent amounts owed to the Fund by its counterparties are not collateralized, the Fund is at risk of those counterparties’ non-performance. The Fund attempts to mitigate counterparty credit risk by entering into contracts only with counterparties it believes to be of good credit quality, by exchanging collateral, and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Fund does not offset assets and liabilities that are subject to a master netting arrangement in the Consolidated Statement of Assets and Liabilities.
The Fund’s ability to net assets and liabilities and to offset collateral pledged or received is based on contractual netting/offset provisions in the ISDA agreements. The following table presents the Fund’s net exposure to each counterparty for derivatives that are subject to enforceable master netting arrangements as of December 31, 2023.
| Gross
Amount of
Recognized
Assets | Gross
Amount of
Recognized
Liabilities | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Cash collateral pledged/(received) in excess of derivative assets/liabilities is not presented in this table. The total cash collateral is presented on the Fund's Consolidated Statement of Assets and Liabilities. |
| Represents the net amount receivable from (payable to) the counterparty in the event of a default. |
Note 4: Related Party Transactions
Investment advisory fee The Fund pays an investment advisory fee monthly at an annual rate of 0.35% of the Fund’s average daily net assets to Dodge & Cox, investment manager of the Fund.
Administrative services fee The Fund pays Dodge & Cox a fee for administrative and shareholder services. The fee is accrued daily and paid monthly equal to an annual rate of the average daily net assets of 0.10% for Class I shares and 0.05% for Class X shares. Under this agreement, Dodge & Cox also pays for the Fund's transfer agent fees.
Expense reimbursement Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain the ratio of total operating expenses of the Class I shares to average net assets of the Class I shares at 0.45% through April 30, 2026. Dodge & Cox has contractually agreed to reimburse the Fund for all ordinary expenses to the extent necessary to maintain the ratio of total operating expenses of the Class X shares to average net assets of the Class X shares at 0.37% through April 30, 2026. The term of the agreement will automatically renew for subsequent three-year terms unless terminated with at least 30 days’ written notice by either party prior to the end of the then-current term. For
the year ended December 31, 2023, Dodge & Cox reimbursed expenses of $1,362,131 and $116,437 to Class I and Class X, respectively.
Fund officers and trustees All officers and two of the trustees of the Trust are current or former senior executive officers of Dodge & Cox. The Trust pays a fee only to those trustees who are not affiliated with Dodge & Cox.
Note 5: 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. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. Financial reporting records are adjusted for permanent book to tax differences at year end to reflect tax character. Book to tax differences are primarily due to differing treatments of wash sales, foreign currency realized gain (loss), foreign capital gains tax, straddles, derivatives, and distributions.
Distributions during the years noted below were characterized as follows for federal income tax purposes:
| Year Ended
December 31, 2023 | Year Ended
December 31, 2022 |
| | |
| | |
| | |
| | |
| | |
| | |
At December 31, 2023, the tax basis components of distributable earnings were as follows:
Capital loss carryforward1 | |
| |
Net unrealized depreciation | |
Total distributable earnings | |
| Represents accumulated long-term capital loss as of December 31, 2023, which may be carried forward to offset future capital gains. |
| Represents capital loss incurred between November 1, 2023 and December 31, 2023. As permitted by tax regulation, the Fund has elected to treat this loss as arising in 2024. |
At December 31, 2023, unrealized appreciation and depreciation for investments and derivatives based on cost for federal income tax purposes were as follows:
| |
| |
| |
Net unrealized depreciation | |
Dodge & Cox Global Bond Fund ◾ PAGE 16
Notes to Consolidated 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 6: 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 year.
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 year ended December 31, 2023, the Fund’s commitment fee amounted to $11,283 and is reflected as a Miscellaneous Expense in the Consolidated Statement of Operations. Interest on borrowings is charged at the prevailing rate. There were no borrowings on the Line of Credit during the year.
Note 7: Purchases and Sales of Investments
For the year ended December 31, 2023, purchases and sales of securities, other than short-term securities and U.S. government securi
ties, aggregated $802,208,951 and $435,141,105, respectively. For the year ended December 31, 2023, purchases and sales of U.S. government securities aggregated $1,018,392,950 and $560,549,180, respectively.
Note 8: New Accounting Guidance
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provide optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848, which extends the period through December 31, 2024. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial statements.
Note 9: Subsequent Events
Fund management has determined that no material events or transactions occurred subsequent to December 31, 2023, and through the date of the Fund’s financial statements issuance, which require disclosure in the Fund’s financial statements.
PAGE 17 ◾ Dodge & Cox Global Bond Fund
Consolidated Financial Highlights
Selected data and ratios
(for a share outstanding throughout each period) | |
| | | | | |
| | | | | |
Net asset value, beginning of year | | | | | |
Income from investment operations: | | | | | |
| | | | | |
Net realized and unrealized gain (loss) | | | | | |
Total from investment operations | | | | | |
Distributions to shareholders from: | | | | | |
| | | | | |
| | | | | |
| | | | | |
Net asset value, end of year | | | | | |
| | | | | |
Ratios/supplemental data: | | | | | |
Net assets, end of year (millions) | | | | | |
Ratio of expenses to average net assets | | | | | |
Ratio of expenses to average net assets, before reimbursement by investment manager | | | | | |
Ratio of net investment income to average net assets | | | | | |
| | | | | |
Portfolio turnover rate excluding TBA rolls(a) | | | | | |
| | | | | |
Net asset value, beginning of year | | | | | |
Income from investment operations: | | | | | |
| | | | | |
Net realized and unrealized gain (loss) | | | | | |
Total from investment operations | | | | | |
Distributions to shareholders from: | | | | | |
| | | | | |
| | | | | |
| | | | | |
Net asset value, end of year | | | | | |
| | | | | |
Ratios/supplemental data: | | | | | |
Net assets, end of period (millions) | | | | | |
Ratio of expenses to average net assets | | | | | |
Ratio of expenses to average net assets, before reimbursement by investment manager | | | | | |
Ratio of net investment income to average net assets | | | | | |
| | | | | |
Portfolio turnover rate excluding TBA rolls(a) | | | | | |
| See Note 1 regarding To-Be-Announced securities |
| For 2022, the period covers 5/2/2022 (commencement of operations) to 12/31/2022 |
| |
See accompanying Notes to Consolidated Financial Statements
Dodge & Cox Global Bond Fund ◾ PAGE 18
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Dodge & Cox Funds and Shareholders of Dodge & Cox Global Bond Fund
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated portfolio of investments, of Dodge & Cox Global Bond Fund (one of the funds constituting Dodge & Cox Funds, referred to hereafter as the "Fund") as of December 31, 2023, the related consolidated statement of operations for the year ended December 31, 2023, the consolidated statement of changes in net assets for each of the two years in the period ended December 31, 2023, including the related notes, and the consolidated financial highlights for each of the periods indicated therein (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2023 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 2023 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2024
We have served as the auditor of one or more investment companies in the Dodge & Cox Funds since 1931.
PAGE 19 ◾ Dodge & Cox Global Bond Fund
Special 2023 Tax Information (unaudited)
The following information is provided pursuant to provisions of the Internal Revenue Code:
For shareholders that are corporations, the Fund designates 100% of its ordinary dividends paid to shareholders in 2023 as Section 163(j) interest dividends.
Funds' Liquidity Risk Management Program
(unaudited)
The Funds have adopted and implemented a written liquidity risk management program (“Program”) as required by Rule 22e-4 under the Investment Company Act. The Program is reasonably designed to assess and manage each Fund’s liquidity risk, taking into consideration the Fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources including the Funds’ interfund lending facility and line of credit.
The Funds’ Board of Trustees has approved the appointment of a Liquidity Risk Management Committee, which includes representatives from Dodge & Cox’s Legal, Compliance, Treasury, Operations, Trading, and Portfolio Management departments, and is responsible for the Program’s administration and oversight and for reporting to the Board on at least an annual basis regarding the Program’s operation and effectiveness.
The Liquidity Risk Management Committee refreshed its assessment of the Funds’ liquidity risk profiles, and considered the adequacy and effectiveness of the Program’s operations for the 12 months ended September 30, 2023 (the “covered period”) in order to prepare a written report to the Board of Trustees for consideration at its meeting held on December 8, 2023. The report concluded that (i) the Funds had adequate liquidity to operate effectively throughout the covered period; (ii) each Fund’s investment strategy continues to be appropriate for an open end fund; and (iii) the Funds’ Program is reasonably designed to assess and manage its liquidity risk.
Fund Holdings
The Fund provides a complete list of its 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 Fund’s Forms N-CSR and Part F of N-PORT on the SEC’s website at sec.gov. A list of the Fund’s 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.
Proxy Voting
For a free copy of the Fund’s proxy voting policies and procedures, please call 800-621-3979, visit the Fund’s website at www.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 ended June 30 is also available at dodgeandcox.com or shareholders may view the Fund's Form N-PX 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 share the 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 800-621-3979. Your request will be implemented within 30 days.
Dodge & Cox Global Bond Fund ◾ PAGE 20
Dodge & Cox Funds — Executive Officer & Trustee Information
| Position with Trust
(Year of Election or
Appointment) | Principal Occupation During Past Five Years and Other Relevant Experience | Other Directorships of Public Companies Held
by Trustees |
Interested Trustees and Executive Officers |
| | Chairman and Director, Dodge & Cox (until 2022); Chief Investment Officer (until 2022) and member of U.S. Equity Investment Committee and Emerging Markets Equity Investment Committee (until 2022); Global Equity Investment Committee and International Equity Investment Committee (until 2021); U.S. Fixed Income Investment Committee (until 2019) | |
| Chair (since 2022)
President
(since 2014) and
Trustee (since 1993) | Chair, Chief Executive Officer, and Director, Dodge & Cox; President (until 2022); Co-Director of Fixed Income (until 2020); Director of Fixed Income (until 2019); member of U.S. Fixed Income Investment Committee and Global Fixed Income Investment Committee | |
| Chief Legal Officer
(since 2019) and Secretary (since 2017) | Vice President, General Counsel, and Secretary (since 2017), Dodge & Cox | |
| | Funds Treasurer (since 2021), Dodge & Cox; Vice President (since 2020); Financial Oversight and Control Analyst (until 2021) | |
| Chief Compliance
Officer (since 2010) | Vice President and Chief Compliance Officer, Dodge & Cox | |
|
| | CFO, athenahealth, Inc. (2019-2022) | Director, Synopsys Inc. (software company); Director, Carter's Inc. (children's apparel); Director, Eastern Bankshares, Inc. (financial services and banking services) |
| | Professor of Economics, Stanford University; Director of the Economics of Education Program, National Bureau of Economic Research; Senior Fellow, Hoover Institution and Stanford Institute for Economic Policy Research | |
| | Senior Counsel, Arnold & Porter (law firm) (2015-2018); Partner, Arnold & Porter (until 2015); Director, Howard, Rice, Nemerovski, Canady, Falk & Rabkin (1977-2011) | |
| | CFO, Pixar Animation Studios (1999-2004) | Director, Netflix, Inc. (internet television); Director, Blend (software company); Director, Bumble (online dating) |
Gabriela Franco
Parcella (55) | | President (since 2020) and Executive Managing Director, Merlone Geier Partners (2018-2019); Chairman, President, and CEO, Mellon Capital (2011 to 2017); COO, Mellon Capital (1997 to 2011) | |
| | President and CEO, QinetiQ US (since 2022); Corporate Vice President/President Enterprise Services, Northrop Grumman (2012-2022) | |
| | Robert and Marion Oster Distinguished Military Fellow, Hoover Institution (since 2012); Admiral, United States Navy (Ret.); U.S. Navy Chief of Naval Operations (2007-2011) | Director, Northrop Grumman Corp. (global security); Director, Maersk Line, Limited (shipping and transportation) |
| | Executive Vice President, Managing Director, Fixed Income at Loomis Sayles & Company, L.P. (2003-2011) | |
| The address for each Officer and Trustee is 555 California Street, 40th Floor, San Francisco, California 94104. Each Officer and Trustee oversees all seven series in the Dodge & Cox Funds complex and serves for an indefinite term. |
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 800-621-3979.
PAGE 21 ◾ Dodge & Cox Global Bond Fund
dodgeandcox.com
For Fund literature, transactions, and account
information, please visit the Funds’ website.
or write or call:
Dodge & Cox Funds
P.O. Box 219502
Kansas City, Missouri 64121-9502
(800) 621-3979
Investment Manager
Dodge & Cox
555 California Street, 40th Floor
San Francisco, California 94104
(415) 981-1710
Principal Underwriter
Foreside Fund Services, LLC
3 Canal Plaza, Suite 100
Portland, Maine 04101
(866) 251-6920
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 December 31, 2023, 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.
(b) Not applicable.
ITEM 2. CODE OF ETHICS.
A code of ethics, as defined in Item 2 of Form N-CSR, adopted by the registrant and applicable to the registrant’s principal executive officer and principal financial officer was in effect during the entire period covered by this report. A copy of the code of ethics as revised January 1, 2021 is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that Ann Mather, Gabriela Franco Parcella and Mark E. Smith, members of the registrant’s Audit and Compliance Committee, are each an “audit committee financial expert” and are “independent”, as defined in Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)– (d) Aggregate fees billed to the registrant for the fiscal years ended December 31, 2023 and December 31, 2022 for professional services rendered by the registrant’s principal accountant were as follows:
| | | | | | | | |
| | | 2023 | | | 2022 | |
(a) Audit Fees | | $ | 518,430 | | | $ | 493,740 | |
(b) Audit-Related Fees | | | — | | | | — | |
(c) Tax Fees | | | 289,408 | | | | 352,310 | |
(d) All Other Fees | | | — | | | | — | |
Audit fees include amounts related to the audit of the registrant’s annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. Tax fees include amounts related to tax advice and tax return preparation, compliance, and reviews.
(e)(1) The registrant’s Audit and Compliance Committee has adopted policies and procedures (“Policies”) which require the registrant’s Audit and Compliance Committee to pre-approve all audit and non-audit services provided by the principal accountant to the registrant. The policies also require the Audit and Compliance Committee to pre-approve any engagement of the principal accountant to provide non-audit services to the registrant’s investment adviser, if the services directly impact the registrant’s operations and financial reporting. The Policies do not apply in the case of audit services that the principal accountant provides to the registrant’s adviser. If a service (other than the engagement of the principal accountant to audit the registrant’s financial statements) is required to be pre-approved under the Policies between regularly scheduled Audit and Compliance Committee meetings, pre-approval may be authorized by a designated Audit and Compliance Committee member with ratification at the next scheduled Audit and Compliance Committee meeting.
(e)(2) No services included in (b) - (d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Less than 50% of the hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.
(g) For the fiscal years ended December 31, 2023 and December 31, 2022, the aggregate fees billed by the registrant’s principal accountant for non-audit services rendered to the registrant, for non-audit services rendered to the registrant’s investment adviser, and for non-audit services rendered to entities controlled by the adviser were $815,104 and $932,426 respectively.
(h) All non-audit services described under (g) above that were not pre-approved by the registrant’s Audit and Compliance Committee were considered by the registrant’s Audit and Compliance Committee and found to be compatible with maintaining the principal accountant’s independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) The complete schedule of investments is included in Item 1(a) of this Form N-CSR.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s Board of Trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) An evaluation was performed within 90 days of the filing of this report, under the supervision and with the participation of the registrant’s management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures. Based on that evaluation, the principal executive officer and principal financial officer concluded that the registrant’s disclosure controls and procedures were effective.
(b) The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 13. EXHIBITS.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | |
| Dodge & Cox Funds |
| |
| By | | /s/ Dana M. Emery |
| | Dana M. Emery |
| | Chair and President - Principal Executive Officer |
|
| Date: February 23, 2024 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | |
| Dodge & Cox Funds |
| |
| By | | /s/ Dana M. Emery |
| | Dana M. Emery |
| | Chair and President - Principal Executive Officer |
| |
| By | | /s/ Shelly Chu |
| | Shelly Chu |
| | Treasurer - Principal Financial Officer |
Date: February 23, 2024
