<PAGE>
DODGE & COX
- --------------------------------------------------------------------------------
Balanced Fund
Established 1931
Semi-Annual Report
June 30, 1995
1995
- --------------------------------------------------------------------------------
DODGE & COX
Balanced Fund
- --------------------------------------------------------------------------------
Dodge & Cox
Investment Managers
35th Floor
One Sansome Street
San Francisco
California 94104
(415) 981-1710
For Fund literature and
information, please call:
(800) 621-3979
- --------------------------------------------------------------------------------
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
<TABLE>
<CAPTION>
Financial Highlights
-------------------------------------------------------------------------------------------------------------------------
SELECTED DATA AND RATIOS (for a share outstanding throughout each period)
Six Months Ended
June 30, Year Ended December 31,
--------------- -----------------------------------------------
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..................... $45.21 $46.40 $42.44 $40.09 $35.03 $36.85
Income from investment operations:
Investment income........................................ 1.05 2.02 1.93 1.98 1.99 2.05
Expenses................................................. (.13) (.26) (.27) (.26) (.24) (.24)
------ ------ ------ ------ ------ ------
Net investment income.................................... .92 1.76 1.66 1.72 1.75 1.81
Net realized and unrealized gain (loss) on investments... 6.49 (.83) 5.03 2.43 5.36 (1.49)
------ ------ ------ ------ ------ ------
Total income from investment operations.................. 7.41 .93 6.69 4.15 7.11 .32
------ ------ ------ ------ ------ ------
Distributions:
Dividends from net investment income..................... (.93) (1.76) (1.66) (1.72) (1.76) (1.81)
Distribution from net realized gain on investments....... (.06) (.36) (1.07) (.08) (.29) (.33)
------ ------ ------ ------ ------ ------
Total distributions...................................... (.99) (2.12) (2.73) (1.80) (2.05) (2.14)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD........................... $51.63 $45.21 $46.40 $42.44 $40.09 $35.03
====== ====== ====== ====== ====== ======
TOTAL RETURN............................................. % 16.50 1.99 15.95 10.56 20.72 .94
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)..................... $1,210 $ 725 $ 487 $ 269 $ 179 $ 83
Ratio of expenses to average net assets.................. % .58* .58 .60 .63 .65 .70
Ratio of net investment income to average net assets..... % 4.01* 3.94 3.67 4.27 4.78 5.24
Portfolio turnover rate.................................. % 16 20 15 6 10 10
*Annualized
</TABLE>
<TABLE>
<CAPTION>
Average annual total return for periods ended June 30, 1995 1 Year 5 Years 10 Years 20 Years
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dodge & Cox Balanced Fund 20.46% 12.48% 13.97% 13.03%
S&P 500 Index 26.06 12.09 14.67 13.62
Lehman Bros. Aggregate Bond Index 12.55 9.41 10.01 10.01
</TABLE>
The Fund invests its assets in common stocks and bonds; the S&P 500 is
comprised solely of common stocks. The Fund's investment in common
stocks over the past 20 years has ranged from 54% to 74% of the total
portfolio.
The average annual total return figures include reinvestment of dividend
and capital gain distributions. These results represent past
performance; past performance is no guarantee of future results.
Investment return and share price will vary, and shares may be worth
more or less at redemption than at original purchase.
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1
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DODGE & COX
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Balanced Fund
<TABLE>
<CAPTION>
Portfolio of Investments June 30, 1995
---------------------------------------------------------------------------------------------------------------
SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON FINANCE: 11.8%
STOCKS: 470,000 American Express Co......................................................... $ 16,508,750
55.2% 77,000 American International Group, Inc........................................... 8,778,000
210,000 BankAmerica Corp............................................................ 11,051,250
170,000 Barnett Banks, Inc.......................................................... 8,712,500
150,000 Chubb Corp.................................................................. 12,018,750
83,000 CIGNA Corp.................................................................. 6,442,875
297,000 Citicorp.................................................................... 17,188,875
55,000 General Re Corp............................................................. 7,363,125
295,000 Golden West Financial Corp.................................................. 13,901,875
62,600 Lehman Brothers Holdings, Inc............................................... 1,369,375
169,000 Morgan (J.P.) & Co.......................................................... 11,851,125
323,000 Norwest Corp................................................................ 9,286,250
165,500 Republic New York Corp...................................................... 9,268,000
183,000 The St. Paul Cos., Inc...................................................... 9,012,750
--------------
142,753,500
CONSUMER: 11.4%
285,000 Dayton-Hudson Corp.......................................................... 20,448,750
247,000 Dillard Department Stores, Inc. Class A..................................... 7,255,625
168,000 Fleming Cos., Inc........................................................... 4,452,000
354,000 Fruit of the Loom, Inc...................................................... 7,478,250
413,000 General Motors Corp......................................................... 19,359,375
720,000 Kmart Corp.................................................................. 10,530,000
530,000 Masco Corp.................................................................. 14,310,000
328,000 Melville Corp............................................................... 11,234,000
335,000 Nordstrom, Inc.............................................................. 13,839,855
191,000 Procter & Gamble Co......................................................... 13,728,125
180,078 Times Mirror Co. Series A................................................... 4,299,362
206,000 Whirlpool Corp.............................................................. 11,330,000
--------------
138,265,342
BASIC INDUSTRY: 5.7%
269,000 Aluminum Co. of America..................................................... 13,483,625
50,000 Boise Cascade Corp.......................................................... 2,025,000
171,000 Dow Chemical Co............................................................. 12,290,625
149,000 International Paper Co...................................................... 12,776,750
325,000 James River Corp. of Virginia............................................... 8,978,125
165,700 Nalco Chemical Co........................................................... 6,027,338
287,000 Weyerhaeuser Co............................................................. 13,524,875
--------------
69,106,338
ELECTRONICS AND COMPUTERS: 5.7%
383,000 Digital Equipment Corp...................................................... 15,607,250
148,000 Hewlett-Packard Co.......................................................... 11,026,000
191,000 International Business Machines Corp........................................ 18,336,000
92,800 Motorola, Inc............................................................... 6,229,200
100,000 Sun Microsystems, Inc....................................................... 4,856,300
299,200 Tandem Computers, Inc....................................................... 4,824,600
60,700 Texas Instruments, Inc...................................................... 8,126,213
--------------
69,005,563
</TABLE>
See accompanying Notes to Financial Statements
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2
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DODGE & COX
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Balanced Fund
<TABLE>
<CAPTION>
Portfolio of Investments June 30, 1995
---------------------------------------------------------------------------------------------------------------
SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON ENERGY: 4.8%
STOCKS 230,000 Amerada Hess Corp........................................................... $ 11,241,250
(Continued) 155,000 Amoco Corp.................................................................. 10,326,875
20,000 Exxon Corp.................................................................. 1,412,500
234,000 Halliburton Co.............................................................. 8,365,500
20,000 Mobil Corp.................................................................. 1,920,000
350,000 Phillips Petroleum Co....................................................... 11,681,250
87,000 Royal Dutch Petroleum Co.................................................... 10,603,125
50,000 Schlumberger Ltd............................................................ 3,106,250
--------------
58,656,750
CAPITAL EQUIPMENT: 3.9%
224,000 Caterpillar, Inc............................................................ 14,392,000
144,000 Deere & Co.................................................................. 12,330,000
182,000 General Electric Co......................................................... 10,260,250
32,000 Honeywell, Inc.............................................................. 1,380,000
135,000 Parker-Hannifin Corp........................................................ 4,893,750
68,000 Sundstrand Corp............................................................. 4,063,000
--------------
47,319,000
BUSINESS PRODUCTS AND SERVICES: 3.1%
330,000 Donnelley (R.R.) & Sons Co.................................................. 11,880,000
245,000 Federal Express Corp........................................................ 14,883,750
89,700 Xerox Corp.................................................................. 10,517,325
--------------
37,281,075
DIVERSIFIED TECHNOLOGY: 2.3%
240,000 Corning, Inc................................................................ 7,860,000
105,000 Grace (W.R.) & Co........................................................... 6,444,375
106,000 Minnesota Mining & Manufacturing Co......................................... 6,068,500
206,500 Raychem Corp................................................................ 7,924,438
--------------
28,297,313
TRANSPORTATION: 2.3%
605,000 Canadian Pacific Ltd........................................................ 10,511,875
117,700 Southern Pacific Rail Corp.................................................. 1,853,775
278,000 Union Pacific Corp.......................................................... 15,394,250
--------------
27,759,900
PUBLIC UTILITIES: 2.2%
260,000 Central & South West Corp................................................... 6,825,000
45,000 Consolidated Natural Gas Co................................................. 1,698,750
32,000 Duke Power Co............................................................... 1,328,000
64,000 FPL Group, Inc.............................................................. 2,472,000
205,000 Pacific Gas & Electric Co................................................... 5,945,000
186,000 Texas Utilities Co.......................................................... 6,393,750
80,000 Unicom Corp................................................................. 2,130,000
--------------
26,792,500
PHARMACEUTICAL AND HEALTH: 2.0%
70,000 Pfizer, Inc................................................................. 6,466,250
205,000 SmithKline Beecham plc ADR.................................................. 9,276,250
213,000 Upjohn Co................................................................... 8,067,375
--------------
23,809,875
--------------
TOTAL COMMON STOCKS (cost $522,265,856)............................... 669,047,156
--------------
</TABLE>
See accompanying Notes to Financial Statements
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3
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DODGE & COX
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Balanced Fund
<TABLE>
<CAPTION>
Portfolio of Investments June 30, 1995
---------------------------------------------------------------------------------------------------------------
SHARES MARKET VALUE
<C> <C> <S> <C>
PREFERRED CONSUMER: 0.2%
STOCKS: 76,922 Times Mirror Co. Conversion Preferred Series B.............................. $ 1,836,513
0.2% --------------
TOTAL PREFERRED STOCKS (cost $1,659,842).............................. 1,836,513
--------------
PAR VALUE
BONDS: U.S. GOVERNMENT: 8.9%
39.4% $ 9,100,000 U.S. Treasury Notes, 4 1/4%, 1995........................................... 9,090,081
10,350,000 U.S. Treasury Notes, 5 1/2%, 1996........................................... 10,327,334
48,000,000 U.S. Treasury Notes, 7 7/8%, 1996........................................... 49,027,680
20,000,000 U.S. Treasury Notes, 6%, 1997............................................... 20,040,600
20,000,000 U.S. Treasury Notes, 5 1/4%, 1998........................................... 19,621,800
--------------
108,107,495
FEDERAL AGENCY: 0.5%
5,000,000 Arkansas Dev. Fin. Auth. GNMA Guaranteed Bonds 9 3/4%, 2014................. 6,243,750
FEDERAL AGENCY MORTGAGE PASS-THROUGH: 15.6%
2,322,540 Federal Home Loan Mtge. Corp. Group 25-6637, 8%, 2002....................... 2,362,650
2,203,524 Federal Home Loan Mtge. Corp. Group D26241, 6 1/2%, 2006.................... 2,198,015
505,653 Federal Home Loan Mtge. Corp. Group 18-0233, 7%, 2006....................... 506,917
1,303,804 Federal Home Loan Mtge. Corp. Group 25-0921, 7 1/2%, 2006................... 1,321,731
431,529 Federal Home Loan Mtge. Corp. Group 18-5719, 7 1/4%, 2008................... 434,226
945,276 Federal Home Loan Mtge. Corp. Group 27-2784, 7 1/4%, 2008................... 953,547
485,978 Federal Home Loan Mtge. Corp. Group 25-3827, 7 1/2%, 2008................... 493,268
1,813,621 Federal Home Loan Mtge. Corp. Group 18-0468, 8%, 2008....................... 1,863,496
1,640,661 Federal Home Loan Mtge. Corp. Group D10211, 7 1/2%, 2009.................... 1,673,474
1,891,829 Federal Home Loan Mtge. Corp. Group 30-9878, 8 3/4%, 2010................... 1,956,303
622,721 Federal Home Loan Mtge. Corp. Group 27-3014, 8 1/4%, 2011................... 637,311
751,984 Federal Home Loan Mtge. Corp. Group 27-2785, 7 3/4%, 2012................... 763,264
2,129,264 Federal Home Loan Mtge. Corp. Group 55-5098, 8 1/4%, 2017................... 2,179,153
10,000,000 Federal Home Loan Mtge. Corp. Multi PC Series 1216-GA, 7%, 2006............. 9,978,100
5,934,000 Federal Home Loan Mtge. Corp. Multi PC Series 1203-H, 6%, 2007.............. 5,637,300
17,000,000 Federal Home Loan Mtge. Corp. Multi PC Series 1564-H, 6 1/2%, 2008.......... 16,617,500
10,000,000 Federal Home Loan Mtge. Corp. Multi PC Series 1628-PJ, 6 1/2%, 2022......... 9,500,000
1,254,411 Federal Natl. Mtge. Assn. MBS Pool 55690, 8 1/2%, 2002...................... 1,288,907
1,644,034 Federal Natl. Mtge. Assn. MBS Pool 22354, 6 1/2%, 2004...................... 1,637,869
6,174,393 Federal Natl. Mtge. Assn. MBS Pool 70992, 7 1/2%, 2006...................... 6,313,317
9,110,244 Federal Natl. Mtge. Assn. MBS Pool 70255, 7 1/2%, 2007...................... 9,315,224
6,420,471 Federal Natl. Mtge. Assn. MBS Pool 224484, 7 1/2%, 2011..................... 6,572,957
8,691,273 Federal Natl. Mtge. Assn. MBS Pool 124668, 7 1/2%, 2019..................... 8,846,065
5,479,018 Federal Natl. Mtge. Assn. PC 1993-234-PA, 5%, 2004.......................... 5,304,347
12,300,000 Federal Natl. Mtge. Assn. PC 1994-33-H, 6%, 2009............................ 11,577,375
13,730,000 Federal Natl. Mtge. Assn. PC G1994-13-J, 7%, 2022........................... 13,541,213
18,000,000 Federal Natl. Mtge. Assn. PC 1993-185-PE, 6 1/2%, 2023...................... 17,032,500
13,128,368 Federal Natl. Mtge. Assn. SMBS L-1, 5%, 2006................................ 12,389,897
1,823,776 Federal Natl. Mtge. Assn. SMBS I-1, 6 1/2%, 2009............................ 1,800,979
13,352,000 Veterans Affairs Vendee Mtge. Trust 1994-2-3C, 6 1/2%, 2009................. 13,097,377
8,422,942 Veterans Affairs Vendee Mtge. Trust 1995-1A1PT WAPT, 7.21%, 2025............ 8,312,349
12,093,000 Veterans Affairs Vendee Mtge. Trust 1995-2-3A, 8.79%, 2025.................. 12,606,953
--------------
188,713,584
COLLATERALIZED MORTGAGE OBLIGATION: 0.0%
96,217 FSF Finance Corp. 1985-1-D, 9 1/4%, 2016.................................... 98,141
</TABLE>
See accompanying Notes to Financial Statements
======================================---=======================================
4
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
<TABLE>
<CAPTION>
Portfolio of Investments June 30, 1995
---------------------------------------------------------------------------------------------------------------
PAR VALUE MARKET VALUE
<C> <C> <S> <C>
BONDS FINANCE: 5.3%
(Continued) $ 2,500,000 Bank of Boston Subordinated Notes 6 5/8%, 2004.............................. $ 2,430,850
2,000,000 Barclays North American Capital Corp. Notes 9 3/4%, 2021, Callable 2001..... 2,330,000
1,800,000 CIGNA Corp. Debentures 7.65%, 2023.......................................... 1,671,048
4,400,000 CIGNA Corp. Notes 8.30%, 2023............................................... 4,343,240
3,100,000 First Nationwide Bank Subordinated Debentures 10%, 2006..................... 3,503,000
10,000,000 General Electric Capital Put Notes 8 1/2%, 2008, Putable 1995............... 11,412,500
12,340,000 GMAC Put Bonds 8 7/8%, 2010, Putable 2000/2005.............................. 14,202,229
3,100,000 Golden West Financial Subordinated Notes 6.70%, 2002........................ 3,064,722
3,000,000 Golden West Financial Subordinated Notes 7 1/4%, 2002....................... 3,048,750
7,825,000 Golden West Financial Subordinated Notes 6%, 2003........................... 7,368,568
5,500,000 ITT Hartford Group Notes 8.30%, 2001........................................ 5,865,640
5,150,000 Norwest Corp. Subordinated Debentures 6.65%, 2023........................... 4,673,625
--------------
63,914,172
INDUSTRIAL: 4.5%
3,500,000 Caterpillar, Inc. Debentures 8%, 2023....................................... 3,760,785
3,025,000 Dayton-Hudson Corp. Debentures 9%, 2021..................................... 3,438,971
9,255,000 Dayton-Hudson Corp. MTN 9.35%, 2020, Putable 1997........................... 10,990,313
4,175,000 Ford Holdings, Inc. Debentures 9 3/8%, 2020................................. 4,986,829
7,000,000 Ford Motor Co. Debentures 9.95%, 2032....................................... 9,023,350
10,000,000 Time Warner Entertainment Senior Debentures 8 3/8%, 2033.................... 9,837,500
1,750,000 Union Camp Corp. Debentures 9 1/4%, 2011.................................... 2,079,875
10,000,000 Weyerhaeuser Co. Debentures 7.95%, 2025..................................... 10,695,400
--------------
54,813,023
INTERNATIONAL AGENCY: 1.8%
7,200,000 European Investment Bank Bonds 10 1/8%, 2000................................ 8,389,800
13,500,000 Inter-American Development Bank Debentures 7 1/8%, 2023, Callable 2003...... 13,118,895
--------------
21,508,695
TRANSPORTATION: 1.5%
3,900,000 AMR Corp. Debentures 9.88%, 2020............................................ 4,460,547
4,800,000 AMR Corp. Debentures 9 3/4%, 2021........................................... 5,442,240
8,500,000 Consolidated Rail Corp. 95-A Pass Through Trust 6.76%, 2015................. 8,361,875
1,000 Missouri Pacific Railroad Equipment Trust Certificate 10.35%, 1999.......... 1,002
--------------
18,265,664
CANADIAN: 1.2%
8,000,000 Canadian Pacific Ltd. Debentures 9.45%, 2021................................ 9,770,000
4,500,000 Hydro-Quebec Debentures 8.40%, 2022......................................... 4,837,500
--------------
14,607,500
PUBLIC UTILITIES: 0.1%
750,000 Idaho Power Co. 1st Mortgage Bonds 9 1/2%, 2021, Callable 2001.............. 846,075
--------------
TOTAL BONDS (cost $463,493,239)....................................... 477,118,099
--------------
SHORT-TERM 3,542,523 Eli Lilly & Co., Variable Demand Note 5.55%, 1995........................... 3,542,523
INVESTMENTS: 8,429,262 General Mills, Inc., Variable Demand Note 5.73%, 1995....................... 8,429,262
5.5% 12,800,000 Norwest Corp., Commercial Paper 6%, 1995.................................... 12,800,000
18,923,296 Pitney Bowes Credit Corp., Variable Demand Note 5.73%, 1995................. 18,923,296
15,000,000 Prudential Funding Corp., Commercial Paper 5.90%, 1995...................... 15,000,000
7,515,066 Wisconsin Electric Power Corp., Variable Demand Note 5.77%, 1995............ 7,515,066
--------------
TOTAL SHORT-TERM INVESTMENTS (cost $66,210,147)....................... 66,210,147
--------------
TOTAL INVESTMENTS (cost $1,053,629,084)....................... 100.3% 1,214,211,915
OTHER ASSETS LESS LIABILITIES................................. (0.3) (3,732,711)
----- --------------
TOTAL NET ASSETS.............................................. 100.0% $1,210,479,204
===== ==============
</TABLE>
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5
<PAGE>
DODGE & COX
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<TABLE>
<CAPTION>
Statement of Assets and Liabilities June 30, 1995
---------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ASSETS:
Investments (identified cost $1,053,629,084) at market quotations............................ $1,214,211,915
Cash......................................................................................... 2,697,833
Dividends receivable and interest accrued.................................................... 8,834,391
Receivable for investments sold.............................................................. 456,059
Deferred charges............................................................................. 55,822
--------------
1,226,256,020
--------------
LIABILITIES:
Payable for Fund shares redeemed............................................................. 236,485
Payable for investments purchased............................................................ 15,421,385
Accounts payable............................................................................. 118,946
--------------
15,776,816
NET ASSET VALUE --------------
PER SHARE $51.63 NET ASSETS................................................................................... $1,210,479,204
==============
Beneficial
shares
outstanding NET ASSETS CONSIST OF:
23,443,881 Paid in capital.............................................................................. $1,033,968,180
(par value Accumulated undistributed net investment income.............................................. 277,664
$1.00 each) Accumulated undistributed net realized gain on investments................................... 15,650,529
Net unrealized appreciation on investments................................................... 160,582,831
--------------
$1,210,479,204
==============
</TABLE>
<TABLE>
<CAPTION>
THE FUND'S TEN LARGEST COMMON STOCK HOLDINGS
---------------------------------------------------------------------------------------------------------------
% of Common
Stock Holdings
--------------
<S> <C>
Dayton-Hudson Corp...................................................... 3.1
General Motors Corp..................................................... 2.9
International Business Machines Corp.................................... 2.7
Citicorp................................................................ 2.6
American Express Co..................................................... 2.5
Digital Equipment Corp.................................................. 2.3
Union Pacific Corp...................................................... 2.3
Federal Express Corp.................................................... 2.2
Caterpillar, Inc........................................................ 2.2
Masco Corp.............................................................. 2.1
-----
24.9%
</TABLE>
See accompanying Notes to Financial Statements
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<TABLE>
<CAPTION>
Statement of Operations Six Months Ended June 30, 1995
---------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends.................................................................................... $ 6,924,394
Interest..................................................................................... 15,559,596
------------
22,483,990
------------
EXPENSES:
Management fees (Note 2)..................................................................... 2,450,747
Custodian fees............................................................................... 76,220
Transfer agent fees.......................................................................... 130,029
Audit fees................................................................................... 14,650
Legal fees (Note 2).......................................................................... 2,620
Shareholder reports.......................................................................... 69,375
S.E.C. and state registration fees........................................................... 62,665
Trustees' fees............................................................................... 4,500
Miscellaneous................................................................................ 32,061
------------
2,842,867
------------
NET INVESTMENT INCOME........................................................................ 19,641,123
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gains on investments (excluding short-term investments)...................... 15,760,293
Change in unrealized appreciation of investments.......................................... 111,353,442
------------
Net realized and unrealized gain on investments...................................... 127,113,735
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS................................................................. $146,754,858
============
</TABLE>
<TABLE>
<CAPTION>
Condensed Financial Information
---------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share Distributions Per Share
------------------------- ---------------------------
Year Ended Capital
December 31 Net Assets Actual Adjusted* Income Gains
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1985 $ 24,516,464 $31.93 $32.38 $ 1.70 $ .37
1986 27,516,246 32.62 36.70 1.62 3.55
1987 34,376,651 30.72 37.54 1.70 2.67
1988 39,031,819 32.09 39.76 1.68 .46
1989 50,950,919 36.85 46.54 1.76 .71
1990 82,596,374 35.03 44.66 1.81 .33
1991 179,392,902 40.09 51.52 1.76 .29
1992 268,768,015 42.44 54.62 1.72 .08
1993 486,830,358 46.40 61.06 1.66 1.07
1994 725,271,607 45.21 59.95 1.76 .36
1995 (6/30) 1,210,479,204 51.63 68.56 .93** .06
------ -----
$18.10 $9.95
====== =====
</TABLE>
* Adjusted for assumed reinvestment of capital gains
distributions.
** A distribution of $.48 per share from net investment
income was paid June 20, 1995 to shareholders of record
June 13, 1995.
See accompanying Notes to Financial Statements
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<TABLE>
<CAPTION>
Statement of Changes in Net Assets Six Months Ended June 30,
---------------------------------------------------------------------------------------------------------------
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income.................................................. $ 19,641,123 $ 10,854,036
Net realized gain on investments....................................... 15,760,293 3,780,032
Net change in unrealized appreciation.................................. 111,353,442 (24,394,365)
-------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.................. 146,754,858 (9,760,297)
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................................. (19,634,669) (11,002,093)
Net realized gain from investment transactions......................... (1,149,988) (1,056,530)
-------------- ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS.................................... (20,784,657) (12,058,623)
-------------- ------------
BENEFICIAL SHARE TRANSACTIONS:
Amounts received from sale of shares................................... 402,781,227 190,603,610
Net asset value of shares issued in connection with
reinvestment of dividends from net investment income
and from distribution of net realized gain on investments.............. 19,720,098 11,172,792
-------------- ------------
422,501,325 201,776,402
Amounts paid for shares redeemed....................................... (63,263,929) (29,297,564)
-------------- ------------
NET INCREASE FROM BENEFICIAL SHARE TRANSACTIONS........................ 359,237,396 172,478,838
-------------- ------------
TOTAL INCREASE IN NET ASSETS........................................... 485,207,597 150,659,918
NET ASSETS:
Beginning of period.................................................... 725,271,607 486,830,358
-------------- ------------
End of period (including undistributed net investment income
of $277,664 and $321,757, respectively)................................ $1,210,479,204 $637,490,276
============== ============
Shares sold............................................................ 8,292,927 4,115,779
Shares issued in connection with reinvestment
of dividends from net investment income and
from distribution of net realized gain on investments.................. 397,888 239,683
Shares redeemed........................................................ (1,287,673) (633,002)
-------------- ------------
Net increase in shares outstanding..................................... 7,403,142 3,722,460
============== ============
</TABLE>
See accompanying Notes to Financial Statements
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8
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Balanced Fund
Notes to Financial Statements
-----------------------------------------------------------------------
1 The Fund is registered under the Investment Company Act of 1940, as
amended, as a diversified open-end management company. The Fund
consistently follows accounting policies which are in conformity with
generally accepted accounting principles for investment companies.
Significant policies are: (a) Investments are stated at market value
based on latest quoted prices; (b) Security transactions are accounted
for on the trade date. Gains and losses on securities sold are
determined on the basis of identified cost. Dividend income is recorded
on the ex-dividend date and interest income is recorded on the accrual
basis; (c) Distributions to shareholders of income and capital gains
are reflected in the net asset value per share computation on the date
following the date of record; (d) No provision for Federal income taxes
has been included in the accompanying financial statements since the
Fund intends to distribute all of its taxable income and otherwise
continue to comply with requirements for regulated investment
companies.
2 Under a written agreement, the Fund pays an annual management fee of
1/2 of 1% of the Fund's average weekly net asset value to Dodge & Cox,
a corporation and manager of the Fund. All officers and three of the
trustees of the Fund are officers or employees of Dodge & Cox. Those
trustees who are not affiliated with Dodge & Cox receive from the Fund
an annual fee of $1,000 and an attendance fee of $500 for each meeting
of the Board of Trustees attended. The Fund does not pay any other
remuneration to its officers or trustees. Legal fees are paid to
Heller, Ehrman, White & McAuliffe, legal counsel for the Fund. Robert
C. Harris, an employee of that firm, is a trustee of the Fund.
3 For the six months ended June 30, 1995, purchases and sales of
securities, other than short-term securities, aggregated $475,567,262
and $148,781,576, respectively, of which U.S. government obligations
aggregated $200,609,342 and $91,948,575, respectively. At June 30,
1995, the cost of investments for Federal income tax purposes was equal
to the cost for financial reporting purposes.
The financial information has been taken from the records of the Fund and has
not been audited by our independent accountants who do not express an opinion
thereon. The financial statements of the Fund will be subject to audit by our
independent accountants as of the close of the calendar year.
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9
<PAGE>
DODGE & COX
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Balanced Fund
Officers and Trustees
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Harry R. Hagey, Chairman and Trustee
Chairman & CEO, Dodge & Cox
A. Horton Shapiro, Vice-Chairman and Trustee
Senior Vice-President, Dodge & Cox
Kenneth E. Olivier, Assistant Secretary and Trustee
Senior Vice-President, Dodge & Cox
Peter Avenali, Trustee
Retired Officer, Dodge & Cox
Max Gutierrez, Jr., Trustee
Partner, Brobeck, Phleger & Harrison, Attorneys
Robert C. Harris, Trustee
Of Counsel to Heller, Ehrman, White & McAuliffe, Attorneys
Frank H. Roberts, Trustee
Retired Partner, Pillsbury, Madison & Sutro, Attorneys
John B. Taylor, Trustee
Professor of Economics, Stanford University
Will C. Wood, Trustee
Principal, Kentwood Associates, Financial Advisers
W. Timothy Ryan, Secretary
Senior Vice-President, Dodge & Cox
E. Morris Cox, Honorary Trustee
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MANAGERS
Dodge & Cox
One Sansome Street, 35th Floor
San Francisco, California 94104
Telephone (415) 981-1710
CUSTODIAN & TRANSFER AGENT
Firstar Trust Company
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone (800) 621-3979
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
San Francisco, California
LEGAL COUNSEL
Heller, Ehrman, White & McAuliffe
San Francisco, California
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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 an
effective prospectus.
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10
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
General Information
-------------------------------------------------------------
DODGE & COX The Fund enables investors to obtain the benefits of
BALANCED FUND experienced and continuous investment supervision. Shares
of the Fund represent a well-balanced, diversified investment
designed to provide a complete long-term investment program
in one convenient holding. The portfolio of the Fund is
balanced between common stocks, which provide an opportunity
for long-term growth of principal and income, and fixed-
income securities, which provide a higher level of income and
stability of principal.
INVESTMENT Since 1930, Dodge & Cox has been providing professional
COUNSEL investment management for individuals, trustees,
MANAGEMENT corporations, pension and profit-sharing funds, and
charitable institutions. In addition, Dodge & Cox manages the
Dodge & Cox Stock Fund and the Dodge & Cox Income Fund. Dodge
& Cox is not engaged in the brokerage business nor in the
business of dealing in or selling securities.
NO SALES CHARGE There are no commissions on the purchase or redemption of
shares of the Fund.
GIFTS Dodge & Cox Balanced Fund shares provide a convenient
method for making gifts to children and to other family
members. Fund shares may be held by an adult custodian for
the benefit of a minor under a Uniform Gifts/Transfers to
Minors Act. Trustees and guardians may also hold shares for a
minor's benefit.
REINVESTMENT Shareholders may direct that dividend and capital gains
PLAN distributions be reinvested in additional Fund shares.
AUTOMATIC Shareholders may make regular monthly or quarterly
INVESTMENT PLAN investments of $100 or more through automatic deductions
from their bank accounts.
WITHDRAWAL PLAN Shareholders owning $10,000 or more of the Fund's shares
may elect to receive periodic monthly or quarterly payments
of at least $50. Under the plan, all dividend distributions
are automatically reinvested at net asset value with the
periodic payments made from the proceeds of the redemption of
sufficient shares.
The above plans are completely voluntary and involve no
service charge of any kind.
IRA PLAN The Fund has available an Individual Retirement plan (IRA)
for shareholders of the Fund.
Fund literature and details on all of these plans are
available from the Fund upon request.
DODGE & COX BALANCED FUND
c/o Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone (800) 621-3979
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<PAGE>
DODGE & COX
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Balanced Fund
Dear Shareholder: July 1995
With this letter, the Dodge & Cox Balanced Fund is beginning a program of
more frequent updates to its shareholders. Our goal in this first mid-year
letter--as it will be in future reports--is to review recent activity in the
Fund, discuss changes in portfolio strategy, and explain how we are managing
your assets to achieve the Fund's stated investment objectives. We realize that
communication is a two-way street, and we encourage your comments and questions.
Such feedback will provide a guide for topics we may cover in future
correspondence. Please direct any inquiries by mail to our office in San
Francisco. We look forward to hearing from you.
- --------------------------------------------------------------------------------
Mutual Fund Management at
Dodge & Cox
Dodge & Cox began managing its first mutual fund in 1931,
decades before the explosive growth of the fund business
experienced during the past ten years. Our Balanced Fund has
one of the longest track records in the industry--over sixty
years. We introduced the Stock Fund in 1965 and more recently
the Income Fund in 1989.
Our business approach in mutual funds remains quite simple. We
maintain low operating expenses and focus on what we do best--
independent fundamental research and prudent investment of
equity and fixed income assets with a long term time horizon.
We purposely do not offer a multitude of services or niche
funds. We believe that our consistent investment philosophy
and proven results will appeal to a wide variety of investors.
- --------------------------------------------------------------------------------
Investment Performance
The Dodge & Cox Balanced Fund had a total return of 16.5% in the first six
months of 1995. This performance compares with returns for the Standard & Poor's
500 (S&P 500) Index of common stocks of 20.2%, and for the Lehman Brothers
Aggregate Bond (LBAG) Index of 11.4%, for the same period. For the past one and
five years, the Fund's annualized performance was 20.5% and 12.5% respectively.
Comparable returns for the S&P 500 Index were 26.1% and 12.1%, and for the LBAG
Index were 12.6% and 9.4%.
Many of the stocks in the Fund performed well, with particularly strong
results from our technology and bank stock holdings. Six of the Fund's top ten
stock performers were in these two industries. The bond portfolio benefited from
the general decline in interest rates and a higher average yield-to-maturity
than the LBAG Index.
Asset Allocation
As of June 30, 1995, the Fund was invested approximately 56% in common
stocks, 39% in fixed income securities and 5% in cash. This asset allocation was
not materially different from year-end 1994. Our investment philosophy
incorporates a long term time horizon. Changes in asset allocation are therefore
not dramatic from quarter to quarter, or even year to year, except in the rare
case when we believe that valuations of the equity and fixed income markets are
distinctly out of balance.
Over the long term, we believe that stocks will outperform bonds, and bonds
will outperform cash. It is therefore likely that the Fund's equity allocation
will remain above 50%. (The Balanced Fund prospectus sets an investment ceiling
of 75% in equities.) We hold fixed income securities in the Fund primarily to
provide a higher level of current income than equities. Our philosophy also
supports a fully invested Fund portfolio, with 10% cash being a likely upper
limit.
Individual Stock Selection
Dodge & Cox's stock selection process is known as "bottom up," meaning that
our research focuses on the analysis of individual companies, rather than "top
down" macroeconomic or sector analysis. Although stock prices have been setting
record highs in 1995, we remain optimistic about the long term potential for
equities. Corporate earnings have been strong, and we believe the valuations of
our equity holdings are still reasonable. A look at several of the banking
companies in the portfolio provides an example of our approach.
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Dodge & Cox One Sansome Street San Francisco, California 94104
<PAGE>
DODGE & COX
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Balanced Fund
Banks Remain A Good Value
Banks currently represent about 12% of the equity portfolio. The Fund's
bank stocks have price to earnings (P/E) multiples of 10 or lower--well beneath
the overall market P/E of about 16. We expect that bank earnings can continue to
grow and, as of June 30, the Fund held seven bank stocks with a diverse mix of
geographic and business line exposure. Citicorp is the Fund's largest single
finance position. After careful individual analysis, we added two banks in the
first half of 1995--Barnett Banks and Republic New York--and sold Bank of
Boston.
Barnett Banks, located in Florida, has one of the strongest consumer
franchises in the nation. Our bank research analyst has followed the company for
many years. At about 10 times expected 1995 earnings, with good growth prospects
in its region and a dividend yield of 3.7%, we believe it is now attractive in
relation to other banks. Republic New York also has a strong retail franchise
and offers other specialized banking services to institutions and wealthy
individuals. Its founder owns more than 25% of the company and has recently been
increasing his stake. We like to invest in businesses with management ownership,
because their economic interest is clearly aligned with shareholders'. Republic
has recently been trading at 9 times expected 1995 profits and 1.5 times book
value, also well under the S&P 500 Index price to book value of over 3 times.
Patience In Bonds Pays Off
In spite of widespread investor pessimism last year regarding bond
investments, we maintained the Fund's position in fixed income securities. Our
long term strategy, which was highlighted in the 1994 Annual Report, has been
rewarded in 1995. In anticipation of a slowing U.S. economy and a continuing
outlook for moderate inflation, intermediate and long term interest rates
declined, causing the principal value of the Fund's bond holdings to increase
during the period.
After increasing the portfolio's price sensitivity to changes in interest
rates--a measure known as duration--throughout 1994, we moderately shortened its
duration late in the second quarter of 1995. However, the Fund's 5.5 year
duration as of June 30 remained longer than the benchmark LBAG Index's 4.6
years, reflecting our continued belief that long term bond yields are
attractive relative to the expected rate of inflation.
Incremental Yield From Corporates
At June 30, 1995, 37% of the Fund's bond portfolio was invested in
corporate debt instruments. This portion of the portfolio contributes to the
higher average yield-to-maturity than the LBAG Index. During the first half of
1995, we added Weyerhaeuser as a new corporate issuer and also established new
positions in certain Golden West Financial, Ford Motor and Consolidated Rail
issues. Even with an emphasis on corporate debt in our fixed income portfolio,
the Fund's average credit quality remains high at AA+.
Closing Note
We would like to welcome a new Trustee to the Dodge & Cox Balanced Fund.
John B. Taylor, Professor of Economics at Stanford University, was elected in
early 1995. Professor Taylor was a member of the Council of Economic Advisors
in Washington, D.C. from 1989 to 1991. We are delighted to have the benefit of
his experience and insight.
As you follow the Fund, you will notice that our strategies do not change
rapidly. We are truly long term investors. We appreciate your interest and
confidence in the Dodge & Cox Balanced Fund.
Dodge & Cox
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