DODGE & COX FUNDS

QUESTIONS AND ANSWERS REGARDING

MARKET TIMING, LATE TRADING, FAIR VALUATION
AND RELATED ISSUES*

May 10, 2004

Current Regulatory Investigations

Question 1: Are any of the Dodge & Cox Funds (including the Dodge & Cox Stock Fund,
Dodge & Cox International Stock Fund, Dodge & Cox Balanced Fund and
Dodge & Cox Income Fund) (the “Funds”) subject to any regulatory
investigation or have any of the Funds been subpoenaed?

Answer: None of the Funds is currently subject to any regulatory investigation. State and
federal regulators have initiated investigations of several other mutual fund
companies and broker-dealers. These investigations are for the most part
nonpublic and it is impossible to predict whether regulators will discover illegal
conduct at any particular firm under investigation. Regulators, however, have
alleged in public actions that certain other organizations knowingly allowed some
investors to illegally purchase fund shares after the 4 p.m. market close (known as
"late trading") at the same day's price and/or to engage in certain abusive market
timing practices in exchange for fund business. The Funds and Dodge & Cox
have not been named in any complaint by the New York Attorney General’s
Office, the Securities and Exchange Commission (“SEC”) or any other regulator
in connection with their recent investigations into mutual fund trading practices.
In response to events or trends or for its own investigatory purposes, from time to
time the SEC conducts a broad-based examination of the mutual fund industry
and its practices. In September 2003, the SEC requested information from about
90 of the largest fund groups in terms of assets under management, including the
Funds. As part of this industry-wide examination, the Funds received requests
from the SEC for information in connection with market timing procedures within
the organization as a whole and practices with respect to pricing and valuation of
portfolio securities that trade in non-U.S. markets. In addition, Dodge & Cox
received a subpoena from the United States Attorney’s Office for the Northern
District of California, which seeks documents relating to fund trading practices.
The United States Attorney’s Office stated that Dodge & Cox Funds, Dodge &
Cox and its employees are not targets or subjects of its investigation into mutual
fund trading practices. To be clear, a subpoena is simply a formal request for
information – it in no way implies any wrongdoing by Dodge & Cox Funds or
Dodge & Cox. Dodge & Cox Funds submitted responses to the SEC’s and the
United States Attorney’s Office’s requests and is supplementing its responses as
necessary. From time to time, Dodge & Cox receives subpoenas and other
requests for information from law enforcement and regulatory agencies
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investigating unaffiliated third parties. Dodge & Cox has provided appropriate
responses to these requests in the past and intends to continue to do so in the
future.

Market Timing and Late Trading Issues

Question 2: What are the Funds’ policies and procedures regarding market timing and
late trading?

Answer: The Funds are intended for long-term investment purposes only and not for
market timing or excessive trading. Market timing may be disadvantageous to a
Fund and its shareholders. The Funds or their agents may reject any purchase
order (including exchange transactions) by any investor or group of investors at
any time for any reason, including, in particular, purchase orders that may be
attributable to market timers or are otherwise excessive or potentially disruptive
to a Fund. Orders placed by investors in violation of the Funds’ excessive trading
policies or by investors that a Fund believes are market timers may be revoked or
cancelled by the Fund on the next business day after receipt of the order. For
transactions placed directly with a Fund, the Fund may consider the trading
history of accounts under common ownership or control for the purpose of
enforcing its excessive trading policies. Transactions placed through the same
financial intermediary on an omnibus basis may be deemed part of a group for the
purpose of these policies and may be rejected in whole or in part by the Funds.

If the Funds’ transfer agent, Boston Financial Data Services, Inc. (or another
authorized agent or sub-agent of the Funds), receives a request to purchase,
redeem or exchange shares before the close of trading on the New York Stock
Exchange (generally 4 p.m. Eastern time), such transactions will be priced at that
day’s net asset value (“NAV”). If the request is received after 4 p.m., it will be
priced at the next business day’s NAV.

A Fund cannot accept orders that request a particular day or price for the
transaction or any other special conditions. The time at which transactions and
shares are priced and the time until which orders are accepted may be changed
only in case of an emergency or if the New York Stock Exchange closes at a time
other than 4 p.m. Eastern time.

Market timers seek potential price differentials that may occur with securities that
trade in a different time zone. The potential for these price differentials is more
prevalent in international funds. For that reason, Dodge & Cox monitors the
Dodge & Cox International Stock Fund more extensively than the other Funds.

For additional details regarding the Funds’ market timing policies and procedures,
please refer to the “Excessive Trading Policy” section of the Funds’ current
prospectus.

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As discussed below, the Funds are diligent in enforcing these policies. Of

course, no monitoring system is perfect and the Funds cannot guarantee that
transactions contrary to these policies have never occurred. Neither the Funds nor
Dodge & Cox has authorized any waiver of these policies. The Funds and Dodge
& Cox will diligently investigate any possible or actual violations and consider
any appropriate remedies or corrective actions.

Question 3: Have the Funds made any exceptions to their market timing or late trading
policies and procedures?

Answer: The Funds’ selling brokers-dealers and other intermediaries are contractually
obligated, and pursuant to applicable rules and regulations (including Rule 22c-1
under the Investment Company Act of 1940), required to comply with the Funds’
current prospectus disclosure, including the Funds’ policies and procedures
regarding market timing and late trading described in response to the previous
question. The Funds are in the process of seeking written assurances from such
intermediaries that they are in compliance with the Funds’ current prospectus
disclosure, policies and applicable rules and regulations regarding market timing
and late trading. The Funds have not authorized any exceptions to their market
timing or late trading policies and procedures. The Funds will diligently
investigate any possible or actual violations and consider any appropriate
remedies or corrective actions.

Question 4: Have the Funds or Dodge & Cox given permission to any third party to
engage in market timing or late trading in order to obtain business?

Answer: Neither the Funds nor Dodge & Cox has given permission to any third party to
engage in market timing or late trading.

Question 5: How do the Funds monitor market timing?

Answer: Dodge & Cox, as the Funds’ investment adviser, monitors market timing activity
on a daily basis. Monitoring efforts may include the following: monitoring daily
trading activity reports; contacting broker-dealers or intermediaries to investigate
an underlying client’s market timer status; maintaining a directory of known
market timers; blocking accounts on the transfer agent system; and blocking
broker-dealers or intermediaries who refuse to identify market timers or who have
a pattern of acting on behalf of clients who engage in market timing activity.
Market timers seek potential price differentials that may occur with securities that
trade in a different time zone. The potential for these price differentials is more
prevalent in international funds. For that reason, Dodge & Cox monitors the
Dodge & Cox International Stock Fund more extensively than the other Funds.

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Question 6: Have the Funds conducted an internal review of their policies, procedures
and practices related to market timing or late trading?

Answer: The Funds’ Compliance Officer and Treasurer have conducted an informal
internal review of the Funds’ policies, procedures and practices related to market
timing and late trading. Taking into account Dodge & Cox’s policy of not
compensating employees for distribution; the substantial monies that have been
blocked to date in accounts used by suspected market timers; internal control
procedures; and the separation of services between the Funds and their
unaffiliated transfer agent, Dodge & Cox and the Funds believe that they have
conducted a reasonable review. The internal review did not identify any
violations of the Funds’ policies or procedures related to market timing or late
trading or deficiencies in the scope and application of the Funds’ policies, or
incidents where the Fund’s policies or procedures related to market timing or late
trading were waived. The Funds have also received written assurances from the
Funds’ transfer agent that the transfer agent is in compliance with applicable rules
and regulations, the Funds’ current prospectus and statement of additional
information disclosure and internal policies and procedures regarding timely
handling of mutual fund orders and excessive trading. The Funds have sought
and are in the process of receiving and reviewing written assurances from their
selling broker-dealers and other intermediaries that such intermediaries are
complying with all applicable rules and regulations, the Funds’ current
registration statement disclosure and internal policies and procedures regarding
timely handling of mutual fund orders and excessive trading. Additionally, the
Funds have engaged outside legal counsel to review share transaction and fair
valuation policies and procedures of the Funds and report their findings and any
recommendations to the Funds' Board of Trustees.

Question 7: Do the Funds contemplate making any changes in how the Funds deter
market timing?

Answer: As previously stated above, Dodge & Cox, as the Funds’ investment adviser, has
been monitoring market timing activity and is continuing to work with the transfer
agent of the Funds, selling broker-dealers, and other intermediaries to improve the
Funds’ ability to identify and prevent market timing activity. Dodge & Cox has
also acquired additional reports from the transfer agent to assist in this monitoring
process. The Funds are continuing to evaluate their market timing policies and
procedures and additional changes may be implemented.

In addition, there are legislative and regulatory initiatives underway that may
require the Funds to take additional actions to deter market timing. As always,
the Funds intend to comply fully with all applicable regulations.

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Pricing and Fair Valuation Issues

Question 8: Do the Funds utilize “fair value” pricing?

Answer: The Funds’ Board of Trustees has adopted comprehensive securities pricing
procedures which apply to all of the Funds and include fair valuation pricing
procedures. These procedures recognize that closing prices of securities may not
reflect their market values at the times of a mutual fund’s NAV calculation if an
event that affects the value of those securities (a “significant event”) has occurred
since the closing prices were established on the market for the securities, but
before the mutual fund’s NAV calculation. In accordance with the Funds’ pricing
procedures, if a Fund determines that the closing market price of one or more of
its portfolio securities no longer represents current value because of an intervening
“significant event,” then that market quotation is no longer deemed to be “readily
available” and the Fund judgmentally values those securities using the Funds’ fair
valuation pricing procedures. For securities that trade overseas, the Funds use
computerized daily pricing models to calculate foreign securities prices based on
the latest market movements, and any adjustments are used in the calculation of a
Fund’s NAV when prescribed by the Fund's fair valuation pricing procedures. All
securities prices are monitored for circumstances that may warrant fair valuation.
This monitoring includes reviews of prices and fluctuations of related or similar
securities, market indices, trading volumes, exchange-traded funds, and market
news sources. The Funds’ Board of Trustees approves and/or ratifies all fair
valuations of portfolio securities. The Funds regularly review and evaluate their
securities pricing procedures, and changes to these procedures may be made if
warranted.

Disclosure of Portfolio Holdings

Question 9: What are the Funds’ policies and procedures regarding disclosing portfolio
holdings?

Answer: Other than disclosure of the Funds’ portfolio holdings in the Funds’ shareholder
reports, the Funds only disclose portfolio holdings as of the end of each quarter
fifteen days after the end of the quarter.

Third-Party Relationships

Question 10: Do the Funds have any special relationships, which allowed some
shareholders to financially benefit at the expense of other shareholders
and/or any fee-earning relationships that provide special arrangements to
certain shareholders?

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Answer: The Funds are not presently aware of any such special relationships or
arrangements.

Question 11: As regards timely handling of mutual fund orders and excessive trading, are
the Funds seeking written assurances from their selling broker-dealers and
other intermediaries that such intermediaries are complying with all
applicable rules and regulations, and the Funds’ current registration
statement disclosure and internal policies and procedures?

Answer: The Funds have sought and are currently in the process of receiving and
reviewing written assurances from their selling broker-dealers and other
intermediaries that such intermediaries are complying with all applicable rules
and regulations regarding timely handling of mutual fund orders and excessive
trading, the Funds’ current registration statement disclosure and the
intermediaries’ internal policies and procedures regarding timely handling of
mutual fund orders and excessive trading. Neither the Funds nor Dodge & Cox
has authorized any waiver of these policies. The Funds and Dodge & Cox will
diligently investigate any possible or actual violations and consider any
appropriate remedies or corrective actions.

Personal Trading by Employees and Code of Ethics

Question 12: What are the Funds’ policies regarding personal trading by employees?

Answer: The Funds’ Code of Ethics (the “Code”), which has also been adopted by Dodge
& Cox, provides that Dodge & Cox employees are encouraged in their personal
accounts to choose investments in keeping with a long-term investment horizon.
The Code strongly discourages short-term trading and states that Dodge & Cox
does not wish to have employees distracted by trading activities and believes that
such activities invariably would detract from an employee’s value to Dodge &
Cox, the Funds, shareholders of the Funds and Dodge & Cox’s clients.
Additionally, the Code encourages employees to manage their personal
investments in such a manner that the performance of one particular investment
does not distract an employee from his or her responsibilities. Although the
Investment Company Act of 1940 currently does not require that mutual funds’
code of ethics provide restrictions on trading of mutual fund shares, Dodge & Cox
and the Funds are evaluating enhancing the Code to include trading restrictions
which would expressly prohibit all employees from short-term trading in Fund
shares without obtaining pre-approval from designated members of Dodge &
Cox’s senior management.

Question 13: Has any Dodge & Cox employee engaged in market timing or late trading
transactions with respect to shares of the Funds?

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Answer: Dodge & Cox has not found any evidence of any Dodge & Cox employee
engaging in market timing or late trading of Fund shares based on a review of all
account activity of employee-owned, non-omnibus accounts (e.g., direct accounts)
and employees’ account statements of omnibus accounts (e.g., brokerage
accounts) involving the Funds for the Dodge & Cox International Stock Fund
since its inception (April 30, 2001) through September 30, 2003 and for the other
Dodge & Cox Funds since January 1, 2002 through September 30, 2003. For
purposes of the review, market timing activity was deemed to be any unexplained
offsetting trading activity, with respect to a Fund, occurring within a 60-day
period.

*The answers provided herein reflect information known to Dodge & Cox and the Dodge &
Cox Funds as of May 10, 2004 after reasonable investigation and inquiry of Dodge & Cox,
its employees, and the Dodge & Cox Funds. Dodge & Cox and the Dodge & Cox Funds
undertake no obligation to correct or update any statements, whether as a result of new
information, future events or otherwise.

Materials in this Q&A concerning the current government investigations, Dodge & Cox Funds’
seeking assurances from third parties with regard to late trading and market timing, its methods
for monitoring and blocking market timing, its securities pricing procedures (including fair
valuation procedures), its portfolio disclosure policies, evaluation or enhancement of the Code
of Ethics, and future communications by the Dodge & Cox Funds are, or are based upon,
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements give the Dodge & Cox Funds’ expectations or forecasts of
future events.

Any or all of these forward-looking statements may turn out to be wrong. For example, they can
be affected by the progress or results of the investigations by the various government or
regulatory agencies into the mutual fund industry generally, and third parties’ cooperation in
responding to Dodge & Cox Funds’ assurances with regard to late trading and market timing, as
well as information necessary to fair valuation pricing. In addition, forward-looking statements
may be affected by legislation that is currently pending that would further regulate the mutual
fund industry, regulation which the SEC may promulgate with regard to late trading, market
timing, or other similar issues, and other known or unknown risks and uncertainties. Many such
factors will be important in determining the actual future results of Dodge & Cox Funds.
Consequently, no forward-looking statements can be guaranteed, and actual results may vary
materially.