<PAGE>
March 12, 1996
File No. 2-11522
File No. 811-173
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. 60 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 19 [X]
DODGE & COX BALANCED FUND
- --------------------------------------------------------------------------------
(exact name of registrant as specified in charter)
ONE SANSOME STREET, 35TH FLOOR, SAN FRANCISCO, CA 94104
- ------------------------------------------------- --------------------
(Address of Principal Executive Offices) (Zip Code)
(415) 981-1710
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, including Area Code)
MITCHELL E. NICHTER, ESQ.,
HELLER, EHRMAN, WHITE AND MCAULIFFE,
333 BUSH STREET
SAN FRANCISCO, CA 94104
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate date of proposed public offering: March 13, 1996
--------------
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
x on March 13, 1996 pursuant to paragraph (b)
- --- --------------
___ 60 days after filing pursuant to paragraph (a)(1)
___ on ________ pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph(a)(2)
___ on _______________ pursuant to paragraph (a)(2) of Rule 485
CALCULATION OF REGISTRATION OF FEES UNDER THE SECURITIES ACT OF 1933
====================================================================
An indefinite number of shares are being registered by this registration
statement pursuant to Rule 24f-2 of the Investment Company Act of 1940.
The registrant filed its required 24f-2 Notice for the fiscal year ended
December 31, 1995 on February 27, 1996. A Rule 24f-2 Notice for the fiscal
year ending December 31, 1996 will be filed on or before February 28, 1997.
<PAGE>
DODGE & COX BALANCED FUND
CROSS REFERENCE SHEET
PART A
(Prepared as part of Form N-1A)
<TABLE>
<CAPTION>
Item Number in Form N-1A Prospectus
Registration Statement Caption in Prospectus Page
- --------------------------- ----------------------------------- ----------
<S> <C> <C>
1 (Cover Page) Cover
2 Expense Information 1
3 Financial Highlights 2
4 Beneficial Shares and
Organization 9
Investment Objectives and Policies 2
Investment Restrictions 3
Investment Risks 4
5 Management and Investment
Adviser 9
Custodian and Transfer
Agent 10
Expenses 9
6 Beneficial Shares and
Organization 9
Shareholder Inquiries 10
Income Dividends and
Capital Gains Distributions 4
Reinvestment Plan 8
Federal Income Taxes 10
7 How to Purchase Shares 4
Pricing of Shares 7
Shareholder Services 8
8 How to Redeem Shares 5
9 (None-Not Applicable)
</TABLE>
<PAGE>
DODGE & COX BALANCED FUND
CROSS REFERENCE SHEET
PART B
(Prepared as part of Form N-1A)
<TABLE>
<CAPTION>
Additional
Item Number in Form N-1A Caption in Statement of Information
Registration Statement Additional Information Page
- --------------------------- ---------------------------------- -----------
<S> <C> <C>
10 (Cover Page) Cover
11 Table of Contents Cover
12 (None-Not Applicable)
13 Investment Objectives and Policies 1
Investment Restrictions 1
14 Officers and Trustees 3
15 Officers and Trustees 4
16 Investment Adviser 4
Custodian (Page 10 of Prospectus)
Independent Accountants 5
17 Portfolio Transactions 4
18 (None-See Prospectus)
19 Purchase, Redemption and
Pricing of Shares 2
20 Additional Tax Considerations 5
21 (None-Not Applicable)
22 Performance Information 2
23 (See Cover Page)
(Annual Report incorporated by
reference. See Part C)
</TABLE>
<PAGE>
DODGE & COX BALANCED FUND
PART A
Prospectus
<PAGE>
DODGE & COX
=======================================---======================================
Balanced Fund
PROSPECTUS
MARCH 13, 1996
DODGE & COX BALANCED FUND
- --------------------------------------------------------------------------------
Dodge & Cox Balanced Fund is a no-load mutual fund with the objectives of
providing shareholders with regular income, conservation of principal and an
opportunity for long-term growth of principal and income. The Fund seeks to
achieve these objectives by investing in a diversified portfolio of common
stocks, preferred stocks and bonds.
Shares of the Fund are purchased and redeemed at net asset value. There are no
sales, redemption or Rule 12b-1 plan distribution charges.
This prospectus sets forth concisely the information a prospective investor
should know about the Fund before investing. It should be retained for future
reference. A Statement of Additional Information about the Fund, which is
incorporated by reference in this prospectus, has been filed with the Securities
and Exchange Commission. It is available, at no charge, by writing or calling
the Fund. The date of the Statement of Additional Information is the same as the
date of this prospectus.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- -----------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Introduction.............................. 1 Transfer of Shares......................... 7
Expense Information....................... 1 Pricing of Shares.......................... 7
Financial Highlights...................... 2 Shareholder Services....................... 8
Investment Objectives and Policies........ 2 Performance Information.................... 8
Investment Restrictions................... 3 Management and Investment Adviser.......... 9
Investment Risks.......................... 4 Expenses................................... 9
Income Dividends and Capital Beneficial Shares and Organization......... 9
Gains Distributions.................... 4 Federal Income Taxes....................... 10
How to Purchase Shares.................... 4 Custodian and Transfer Agent............... 10
How to Redeem Shares...................... 5 Reports to Shareholders.................... 10
Exchanging Shares......................... 6 Shareholder Inquiries...................... 10
Telephone Transactions.................... 7
</TABLE>
DODGE & COX BALANCED FUND
c/o Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone (800) 621-3979
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
=======================================---======================================
<PAGE>
DODGE & COX
=======================================---======================================
Balanced Fund
INTRODUCTION
- --------------------------------------------------------------------------------
Dodge & Cox Balanced Fund operates as an open-end diversified investment company
which continuously offers its shares to the public. A unique feature of the
Dodge & Cox Balanced Fund and other "no-load" funds is that shares are sold
without sales charge, while many investment companies sell their shares with a
varying sales charge. Shares may be redeemed at net asset value without any
charge.
Dodge & Cox Balanced Fund enables investors to obtain the benefits of
experienced and continuous investment supervision. In shares of the Fund,
investors acquire the kind of balanced portfolio ordinarily limited to large
investment accounts. Many individuals, trustees, retirement plans and
institutions have found that such a portfolio and the investment policies and
continuous investment supervision provided by the Fund make it suitable for
their entire long-term investment program.
In using the Fund, shareholders avoid the time-consuming details involved in
buying and selling individual securities. Use of the Fund also reduces the
amount of record keeping for tax purposes and simplifies the collection of
investment income and the safekeeping of individual securities.
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases..................................... None
Sales Load Imposed on Reinvested Distributions...................... None
Deferred Sales Load................................................. None
Redemption Fees..................................................... None
Exchange Fee........................................................ None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees..................................................... .50%
12b-1 Fees.......................................................... None
Other Expenses...................................................... .07%
-----
Total Fund Operating Expenses....................................... .57%
EXAMPLE: A shareholder would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the
end of each time period:
Time period 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses $6 $18 $32 $71
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the above expense information is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. Expense figures are based on amounts incurred
during the year 1995 (See "Expenses", page 9). Wire redemptions are subject to a
$10 charge which is not reflected in the above example.
=======================================---======================================
1
<PAGE>
DODGE & COX
=======================================---======================================
Balanced Fund
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA AND RATIOS (for a share outstanding throughout each year)
The following table of financial highlights, insofar as it relates to each of
the five years in the period ended December 31, 1995, has been audited by Price
Waterhouse LLP, independent accountants, whose report thereon appears in the
Fund's Annual Report to Shareholders for the year ended December 31, 1995.
<TABLE>
<CAPTION>
Year Ended December 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR....... $45.21 $46.40 $42.44 $40.09 $35.03 $36.85 $32.09 $30.72 $32.62 $31.93
Income from investment operations:
Net investment income.................... 1.90 1.76 1.66 1.72 1.75 1.81 1.76 1.68 1.67 1.62
Net realized and unrealized gain (loss)
on investments........................... 10.58 (.83) 5.03 2.43 5.36 (1.49) 5.47 1.83 .80 4.24
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income from investment
operations............................... 12.48 .93 6.69 4.15 7.11 .32 7.23 3.51 2.47 5.86
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions:
Dividends from net investment income..... (1.90) (1.76) (1.66) (1.72) (1.76) (1.81) (1.76) (1.68) (1.70) (1.62)
Distributions from net realized gain
on investments........................... (1.19) (.36) (1.07) (.08) (.29) (.33) (.71) (.46) (2.67) (3.55)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions...................... (3.09) (2.12) (2.73) (1.80) (2.05) (2.14) (2.47) (2.14) (4.37) (5.17)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR............. $54.60 $45.21 $46.40 $42.44 $40.09 $35.03 $36.85 $32.09 $30.72 $32.62
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN.............................% 28.02 1.99 15.95 10.56 20.72 .94 23.02 11.54 7.18 18.81
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)....... $1,800 $ 725 $ 487 $ 269 $ 179 $ 83 $ 51 $ 39 $ 34 $ 28
Ratio of expenses to average
net assets...............................% .57 .58 .60 .63 .65 .70 .72 .77 .72 .73
Ratio of net investment income to
average net assets.......................% 3.85 3.94 3.67 4.27 4.78 5.24 4.98 5.19 4.69 4.86
Portfolio turnover rate..................% 20 20 15 6 10 10 12 9 15 14
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- ----------------------------------
The objectives of the Fund are to provide shareholders with regular income,
conservation of principal and an opportunity for long-term growth of principal
and income. However, it should be recognized that the market risks inherent in
investment cannot be avoided nor is there any assurance that the investment
objectives of the Fund will be achieved. Reasonable appreciation in favorable
periods and conservation of principal in adverse times are objectives that
require flexibility in managing the assets of the Fund under constantly changing
investment conditions. Therefore the proportions held
=======================================---======================================
2
<PAGE>
DODGE & COX
=======================================---======================================
Balanced Fund
in common and preferred stocks and bonds are revised by the Fund's manager when
considered advisable in light of the manager's appraisal of business and
investment prospects. It is the policy of the Fund to maintain no more than
approximately 75% of its total assets in common stocks and that portion of the
value of convertible securities attributable to the conversion right. The Fund's
manager reserves the right to depart from a balanced position under abnormal
conditions if the Board of Trustees deems it necessary for the protection of
shareholders. As a general practice, bonds are held for stability of principal
and income as well as for a reserve which can be used to take advantage of
investment opportunities.
It is the policy to invest in investment grade bonds rated in the top four
rating categories by either Moody's Investors Service ("Moody's") (Aaa, Aa, A,
Baa) or Standard & Poor's Corporation ("S&P") (AAA, AA, A, BBB). It should be
noted that securities rated in the lowest of the top four rating categories (Baa
or BBB) may have speculative characteristics. Securities that are downgraded
below Baa or BBB subsequent to purchase may continue to be held by the Fund, if
the Fund's manager believes it advantageous to do so. Unrated bonds may be
purchased if such securities are, in the opinion of the manager, of equivalent
quality to bonds rated at least A by Moody's and S&P.
The Fund's policies as set forth above may be changed without shareholder
approval, however such policies will not be changed without notice to
shareholders. The following policies may not be changed without approval of a
majority of the outstanding shares of the Fund: A substantial position will be
maintained in common stocks which in the view of the Fund's manager have a
favorable outlook for long-term growth of principal and income. Prospective
earnings and dividends are major considerations in these stock selections. The
level of security prices and the trend of business activity are given weight in
determining the total investment position of the Fund in equities at any time.
Individual securities are selected with an emphasis on financial strength and a
sound economic background.
In an attempt to minimize unforeseen risks in single securities it has always
been the policy of Dodge & Cox Balanced Fund to provide adequate investment
diversification. Investments made in any one stock or bond issue, with the
exception of United States government securities, are seldom in excess of 2% of
the total assets of the Fund. Although there is no restriction on the number of
changes in security holdings, purchases are made with a view to long-term
holding and not for short-term trading purposes. During rapidly changing
economic and political conditions, there may necessarily be more portfolio
changes than in a more stable period. It is the general practice of the Fund to
invest in securities with ready markets, mainly issues listed on national
securities exchanges.
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- -----------------------
The Fund has adopted certain restrictions designed to ensure diversification of
investment and reduce investment risk, which may not be changed without
shareholder approval. The Fund may not: (a) Invest more than 5% of the value of
its total assets in the securities of any one issuer except the United States
Government, nor acquire more than 10% of the voting securities of any one
issuer; (b) Concentrate investments of more than 25% of the value of its total
assets in any one industry; (c) Borrow money except as a temporary measure for
extraordinary or emergency purposes; (d) Make loans to other persons except this
shall not exclude the purchase of publicly issued debt securities of a type
purchased by institutional investors.
=======================================---======================================
3
<PAGE>
DODGE & COX
=======================================---======================================
Balanced Fund
- --------------------------------------------------------------------------------
INVESTMENT RISKS
- ----------------
It should be recognized that there are market risks inherent in investment and
that there is no guarantee that the objectives of the Fund will be achieved. An
investment in the Fund may be more suitable for long-term investors who can bear
the risk of short and long-term fluctuations in net asset value.
Investments in common stock in general are subject to market risks that cause
their prices to fluctuate over time, i.e., the possibility that stock prices
will decline over short or even extended periods. Prices of bonds in the Fund
are sensitive to changes in the market level of interest rates. In general, as
interest rates rise, the prices of fixed-income securities fall and conversely,
as interest rates fall, the prices of these securities rise. Furthermore,
because yield levels on securities vary with changing interest rates, no
specific yield on shares of the Fund can be guaranteed. Since the bond portion
of the Fund's portfolio will be invested primarily in higher quality debt
securities, the Fund may not yield as high a level of current income as funds
that invest primarily in lower quality debt securities which generally have less
liquidity, greater market risk and greater price fluctuation. The value of
stocks and bonds may also be affected by changes in the financial condition of,
and other events affecting, specific issuers. Fluctuations in the value of the
securities in which the Fund invests will cause the Fund's net asset value to
fluctuate.
The Fund, with its mixture of investments in common stocks and bonds, may entail
less investment risk (and a potentially lower return) than a mutual fund
investing only in common stocks.
- --------------------------------------------------------------------------------
INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
- ------------------------------------------------
It is the practice to pay quarterly dividends from net income, when available,
on or about the 20th day of March, June, September and December. Any capital
gains distributions of net gain on sales of securities will be paid in
conjunction with the December and, if necessary, March quarterly payments. The
term "distribution" is hereinafter used to include both income dividends and
capital gains distributions. After the year-end each shareholder will be advised
for Federal income tax purposes of the amount of distributions to be reported as
ordinary dividends and as capital gains distributions.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
- ----------------------
BY MAIL: Subscriptions for shares should be addressed to the Fund c/o the Fund's
transfer agent:
REGULAR MAIL EXPRESS OR REGISTERED MAIL
Dodge & Cox Balanced Fund Dodge & Cox Balanced Fund
c/o Firstar Trust Company c/o Firstar Trust Company
P.O. Box 701 615 East Michigan Street, Third Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
BY WIRE: To purchase shares in the Fund by Federal wire transfer, investors
should request their bank to transmit funds to:
Firstar Bank, ABA#0750-00022
For Credit to: Mutual Fund Services, Account #112-952-137
For Further Credit: Dodge & Cox Balanced Fund,
[shareholder account number], [name of account]
Prior to having the funds wired, the shareholder should call Firstar Trust
Company at 1-800-621-3979 and advise the bank that the funds are being wired.
Investors making initial investments by wire must promptly complete an Account
Application Form and mail it to the Fund, c/o Firstar Trust
=======================================---======================================
4
<PAGE>
DODGE & COX
=======================================---======================================
Balanced Fund
Company, at either of the addresses listed above. No account services will be
established until the completed application has been received by the Fund. IRA
accounts cannot be opened by wire.
All subscriptions are subject to acceptance by the Fund, and the price of the
shares will be the net asset value per share which is next computed after
receipt by the Fund's transfer agent, or other authorized agent or sub-agent, of
the subscription in proper form (see "Pricing of Shares", page 7). Payment for
the subscription is to be made to Dodge & Cox Balanced Fund. The minimum initial
subscription is $2,500 ($1,000 for an IRA account) and must be accompanied by a
completed and signed Account Application Form (Adoption Agreement for an IRA).
The minimum for each subsequent subscription is $100. No cash or third-party
checks will be accepted and checks must be drawn on U.S. banks. If a check or
Automatic Investment Plan transaction does not clear, the purchase will be
canceled and the purchaser will be liable for any losses incurred and a $20 fee,
which is subject to change without notice. All subscriptions will be invested in
full and fractional shares and the shareholder will receive a confirmation of
all transactions. Certificates are not issued unless requested by the
shareholder or ordered by the Fund and will be issued for full shares only.
A Social Security or Taxpayer Identification Number must be supplied and
certified on the Account Application Form before an account can be established.
The Fund may be required to withhold Federal income tax at a rate of 31%
("backup withholding") from dividend payments and redemption proceeds if a
shareholder fails to furnish the Fund with the shareholder's correct Social
Security or Taxpayer Identification Number.
The purchase or redemption of shares through broker-dealers or other financial
institutions may be subject to a service fee by those entities. The Fund
reserves the right to reject any purchase order. It is the policy of the Fund
not to accept subscriptions under circumstances or in amounts believed to be
disadvantageous to existing shareholders. It is also the policy of the Fund not
to apply or continue to use any shareholder plan under conditions believed
disadvantageous to existing shareholders.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
- --------------------
BY MAIL: Written redemption requests should be submitted to the Fund:
REGULAR MAIL EXPRESS OR REGISTERED MAIL
Dodge & Cox Balanced Fund Dodge & Cox Balanced Fund
c/o Firstar Trust Company c/o Firstar Trust Company
P.O. Box 701 615 East Michigan Street, Third Floor
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
The request must specify the shareholder's name, account number, and dollar
amount or number of shares redeemed, and be properly signed. Requests for joint
accounts require signatures of all owners.
BY TELEPHONE: Telephone redemption requests can be initiated by calling Firstar
Trust Company at 1-800-621-3979. (See "Telephone Transactions", page 7.)
REDEMPTION PAYMENTS MAY BE MADE BY CHECK OR BY WIRE:
BY CHECK: Checks will be made payable to the shareholder and will be sent to the
address of record. If the proceeds of the redemption are requested to be sent to
other than the address of record or to an address that has been changed within
15 days of the redemption request, the request must be in writing with
signature(s) guaranteed.
=======================================---======================================
5
<PAGE>
DODGE & COX
=======================================---======================================
Balanced Fund
BY WIRE: The Fund will wire redemption proceeds only to the bank account
designated on the initial Account Application Form or in written instructions --
with signature guarantee -- received in advance of the redemption order. Wire
redemption requests are subject to a $10 charge, which is subject to change
without notice.
SIGNATURE GUARANTEES: Certain redemption requests must include a signature
guarantee for each person in whose name the account is registered to protect
shareholders and the Fund from fraud. Signature guarantees may be obtained from
a commercial bank or trust company, a member firm of the New York Stock Exchange
or by another eligible guarantor institution. A notary public is not an
acceptable guarantor.
IRA ACCOUNTS: Redemption requests for IRA accounts must be in writing and must
include instructions regarding income tax withholding. Such requests which do
not indicate an election not to have Federal income tax withheld will be subject
to withholding.
Under certain circumstances, the Fund's transfer agent may require additional
documents such as, but not restricted to, stock powers with signatures
guaranteed, trust instruments, death certificates, appointments as executor and
certificates of corporate authority. If certificates have been issued for any of
the shares to be redeemed, such certificates must be endorsed with signatures
guaranteed and delivered to the Fund's transfer agent. For any questions
regarding documentation or signature requirements for trusts, estates,
corporations, etc., please telephone Firstar Trust Company (1-800-621-3979).
The redemption price will be the net asset value per share which is next
computed after receipt in proper form of the redemption order by the Fund's
transfer agent, or other authorized agent or sub-agent (see "Pricing of Shares",
page 7). The redemption price may be more or less than the shareholder's cost,
depending upon the market value of the Fund's investments at the time of
redemption. Redemption payments are made as soon as practicable, generally
within two business days, but no later than the seventh day after the effective
date for redemption, or within such shorter period as may legally be required.
If shares are redeemed within two weeks of purchase, the Fund may delay payment
of the redemption proceeds until the purchase check has cleared, which may take
up to 12 days or more. There is no such delay when shares being redeemed were
purchased by wiring Federal Funds.
Under the Investment Company Act of 1940, the Fund may suspend the right of
redemption or postpone the date of payment when: (a) trading on the New York
Stock Exchange is restricted as determined by the Securities and Exchange
Commission or such Exchange is closed for other than weekends and holidays; (b)
the Securities and Exchange Commission has by order permitted such suspension;
or (c) an emergency, as defined by the rules of the Securities and Exchange
Commission, exists making disposal of portfolio securities or valuation of net
assets of the Fund not reasonably practicable.
- --------------------------------------------------------------------------------
EXCHANGING SHARES
- -----------------
Shareholders may exchange their shares for shares of another Dodge & Cox Fund,
provided that the registration and Taxpayer Identification Number of both
accounts are identical. An exchange may be initiated by contacting the Fund's
transfer agent in writing or by telephone. (See "Telephone Transactions", page
7.) An exchange is treated as a redemption and a purchase and, therefore, the
=======================================---======================================
6
<PAGE>
DODGE & COX
=======================================---======================================
Balanced Fund
shareholder may realize a taxable gain or loss. The shareholder should obtain
and read a current prospectus of the fund into which the exchange is being made.
There is a $1,000 minimum for all exchanges. If a new account is being opened by
exchange, the minimum investment requirements must be met. After the exchange,
the account from which the exchange is made must have a remaining balance of at
least $2,500 ($1,000 for an IRA account) in order to remain open. The Fund
reserves the right to terminate or materially modify the exchange privilege upon
60 days advance notice to shareholders.
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
- ----------------------
The ability to initiate redemptions and exchanges by telephone is automatically
established for the shareholder's account unless the option is specifically
declined on the account application or in writing by the shareholder. Neither
the Fund nor its transfer agent will be responsible for the authenticity of
transaction instructions received by telephone, provided that reasonable
security procedures have been followed. Security procedures currently include
recording conversations, requesting verification of account information,
restricting transmittal of proceeds to preauthorized designations, and supplying
transaction verification information. If the Fund fails to follow reasonable
procedures, it may be liable for any losses resulting from unauthorized or
fraudulent telephone transactions in the account. If an account has multiple
owners, the Fund may rely on the instructions of any one account owner. Any
shareholder wishing to remove telephone privileges should contact the Fund's
transfer agent.
Shareholders should note that purchase and sales orders will not be canceled or
modified once received in good form. If shareholders are unable to reach the
Fund by telephone (for example, during periods of unusual market activity), they
should consider sending written instructions. The Fund reserves the right to
modify or suspend telephone privileges upon reasonable notice. The Fund may also
temporarily suspend telephone options without notice when economic or market
changes make them impracticable to implement.
Purchases and sales should be made for long-term investment purposes only.
Because excessive trading may be disadvantageous to the Fund, the Fund reserves
the right to limit purchase and sale transactions, including exchanges, when a
pattern of frequent trading appears evident.
- --------------------------------------------------------------------------------
TRANSFER OF SHARES
- ------------------
Changes in account registrations -- such as changing the name(s) on an account,
or transferring shares to another person or legal entity -- must be submitted in
writing. Please telephone Firstar Trust Company (1-800-621-3979) for full
instructions.
- --------------------------------------------------------------------------------
PRICING OF SHARES
- -----------------
The price of the shares is the net asset value per share determined by dividing
the total net asset value of the Fund by the total number of shares then
outstanding. The price is computed only as of the close of the New York Stock
Exchange on each regular business day on which the New York Stock Exchange is
open and is in effect only for properly completed subscription and redemption
orders received by the transfer agent or other authorized agent or sub-agent
prior to the close of such Exchange, presently 4:00 P.M. Eastern Time. On orders
received after the close of the New York Stock Exchange, the price will be the
net asset value per share as of the close of the New York Stock Exchange on the
next succeeding regular business day on which such Exchange is open. The
Exchange is not open on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
=======================================---======================================
7
<PAGE>
DODGE & COX
=======================================---======================================
Balanced Fund
In determining total net asset value of the Fund, stocks are valued at market,
using as a price the last sale of the day at the close of the New York Stock
Exchange or, if no sale, then a representative price within the limits of the
bid and ask prices for the day. Bonds are priced at fair value based on dealer-
supplied valuations and a pricing service. Securities for which market
quotations are not readily available and all other assets are valued at fair
value as determined by or at the direction of the Board of Trustees.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- --------------------
The Fund provides the following services to shareholders. Please telephone or
write the Fund (1-800-621-3979) for applications and additional information.
REINVESTMENT PLAN: Shareholders may direct that dividend and capital gains
distributions be reinvested in additional Fund shares.
AUTOMATIC INVESTMENT PLAN: Shareholders may make regular monthly or quarterly
investments of $100 or more through automatic deductions from the shareholder's
bank account.
WITHDRAWAL PLAN: A shareholder owning $10,000 or more of the Fund's shares may
receive regular monthly or quarterly payments of $50 or more. Shares will
automatically be redeemed at net asset value per share to make the withdrawal
payments.
INDIVIDUAL RETIREMENT ACCOUNT (IRA): Individuals who have earned income or who
are entitled to certain distributions from eligible retirement plans may make or
authorize contributions to their own Individual Retirement Accounts. The Fund
has an IRA Plan available for shareholders of the Fund.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- -----------------------
The Fund may, from time to time, include figures indicating its total return or
yield in advertisements or reports to shareholders or prospective investors.
Quotations of the Fund's average annual total rate of return will be expressed
in terms of the average annual compounded rate of return on a hypothetical
investment in the Fund over a specified period, will reflect the deduction of a
proportional share of Fund expenses (on an annual basis) and will assume that
all dividends and capital gains distributions are reinvested when paid. Total
return indicates the positive or negative rate of return that an investor would
have earned from reinvested dividends and distributions and changes in net asset
value per share during the period. Quotations of yield, as defined by the
Securities and Exchange Commission, will be based on net investment income per
share earned during a given thirty-day period and will be computed by dividing
this net investment income by the net asset value per share on the last day of
the period and annualizing the results. Yield does not directly reflect changes
in net asset value per share which occurred during the period.
Performance information for the Fund may be compared, in reports and promotional
literature to: (i) the Standard & Poor's 500 Stock Index, the Dow Jones
Industrial Average, the Lehman Brothers Aggregate Bond Index, or various other
unmanaged indices of the performance of various types of investments, so that
investors may compare the Fund's results with those of indices widely regarded
by investors as representative of the security markets in general, and (ii) the
performance of other mutual funds. Unmanaged indices may assume the
reinvestment of income distributions, but generally do not reflect deductions
for administrative and management costs and expenses.
=======================================---======================================
8
<PAGE>
DODGE & COX
=======================================---======================================
Balanced Fund
Performance information for the Fund reflects only the performance of
hypothetical investments in the Fund during the particular time periods on which
the calculations are based. Such information should not be considered as
representative of the performance of the Fund in the future because, unlike some
bank deposits or other investments which pay a fixed yield for a stated period
of time for a fixed principal amount, the performance of the Fund will vary
based not only on the current market value of the securities held in its
portfolio, but also on changes in the Fund's expenses and in the asset size of
the Fund. Performance information should be considered in light of the Fund's
investment objectives and policies, the types and quality of the Fund's
portfolio investments, market conditions during the particular time period and
operating expenses. For a description of the methods used to determine the
Fund's total return and yield, see "Performance Information" in the Statement of
Additional Information. Further information about the performance of the Fund is
contained in the Fund's Annual Report which may be obtained without charge from
the Fund.
- --------------------------------------------------------------------------------
MANAGEMENT AND INVESTMENT ADVISER
- ---------------------------------
The Board of Trustees has overall management responsibility for the Fund. Since
1931, Dodge & Cox, One Sansome St., San Francisco, California 94104, a
corporation, has been employed by the Balanced Fund as manager and investment
adviser, subject to the direction of the Board of Trustees. Dodge & Cox (herein
called the "Manager") is one of the oldest professional investment management
firms in the United States, having acted continuously as investment managers
since 1930. The Fund's investments are managed by Dodge & Cox's Investment
Policy Committee, and no one person is primarily responsible for making
investment recommendations to the Committee.
The revenues of the Manager are derived from fees for investment management
services. Its activities are devoted to investment research and the supervision
of investment accounts for individuals and institutions. In addition, the
Manager has managed two other registered mutual funds, the Dodge & Cox Stock
Fund since 1965 and the Dodge & Cox Income Fund since 1989. The Fund pays the
Manager a management fee which is payable quarterly at the annual rate of 1/2 of
1% of the average net asset value of the Fund at the end of each week.
- --------------------------------------------------------------------------------
EXPENSES
- --------
In addition to the Manager's fee, the Fund pays other direct expenses primarily
for bank custody of assets, stock transfer agent, printing of reports and
prospectuses, registration fees, and legal and auditing services. In 1995 the
ratio of total operating expenses to average net assets of the Fund was .57%.
The Manager furnishes personnel and other facilities necessary for the operation
of the Fund for which it receives no additional compensation.
- --------------------------------------------------------------------------------
BENEFICIAL SHARES AND ORGANIZATION
- ----------------------------------
The Fund is a common law trust organized under the laws of California in 1931
and is registered as an open-end diversified management investment company under
the Investment Company Act of 1940. Only one class of shares is authorized by
the trust indenture. These are known as beneficial shares and each share
evidences an equal beneficial ownership in the Fund and there is no limit to the
number that may be issued. All shares have the same rights as to redemption,
dividends, and in liquidation. All shares issued are fully paid and non-
assessable, are transferable, and are redeemable at net asset value upon demand
of the shareholder. Shares have no preemptive or conversion rights.
=======================================---======================================
9
<PAGE>
DODGE & COX
=======================================---======================================
Balanced Fund
A vote of at least two-thirds in interest of shareholders is required to amend
the Declaration of Trust in respect to the underlying rights of shareholders and
also as to any amendments which might otherwise substantially prejudice those
rights. It is not the practice to hold annual meetings of shareholders. The
trust indenture provides that the Trust shall continue until terminated by the
Trustees upon either (a) a majority vote of the Trustees to terminate the Trust,
or (b) a written request to terminate the Trust by the holders of two-thirds of
the beneficial shares outstanding at the date of such request.
Trustees of the Fund are appointed or removed by action taken by a majority of
the Trustees then in office. The Trustees may at any time, on written notice to
shareholders, redeem any or all of the shares of the Fund.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
- --------------------
The Fund intends to qualify each year as a regulated investment company under
the Internal Revenue Code of 1986, so long as in the opinion of the Trustees it
is advisable to do so. Under existing tax laws, a regulated investment company
that distributes for the year all of its ordinary income and capital gains pays
no tax on its ordinary income or capital gains. A regulated investment company
that fails to distribute all of its ordinary income and capital gains must pay
tax on the undistributed amounts at a maximum rate of 35%. If the company does
not distribute at least 98% of its ordinary income and capital gains, it must
pay an additional 4% excise tax on the amount by which the 98% requirements
exceed actual distributions.
Distributions designated as capital gains distributions are taxed to a
shareholder as though they were long-term capital gains realized by the
shareholder whether received in cash or shares of the Fund and regardless of the
period of time shares of the Fund have been held. All taxable distributions,
except for capital gains distributions, are taxed to a shareholder as ordinary
income dividends whether received in cash or shares of the Fund. Of the Fund's
1995 ordinary dividends, 28% qualified for the "70% deduction" for dividends
received by corporations in 1995. State taxation of distributions to
shareholders varies from state to state. Investors should consult their own tax
advisers about the Federal, state and local tax consequences of an investment in
the Fund.
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT
- ----------------------------
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701, (telephone
1-800-621-3979), acts as custodian of all cash and securities of the Fund and
receives and disburses cash and securities for the account of the Fund. The
Trust Company also acts as transfer and dividend disbursing agent for the Fund.
- --------------------------------------------------------------------------------
REPORTS TO SHAREHOLDERS
- -----------------------
A copy of the annual report is sent to each shareholder and is supplemented
throughout the year by quarterly reports prepared by the Fund. All reports
contain financial information and a schedule showing investments in marketable
securities.
- --------------------------------------------------------------------------------
SHAREHOLDER INQUIRIES
- ---------------------
For Fund literature and information, or if you have questions concerning your
account, please telephone Firstar Trust Company (1-800-621-3979).
=======================================---======================================
10
<PAGE>
Dodge & Cox
- --------------------------------------------------------------------------------
Balanced Fund
Established 1931
Prospectus
March 13, 1996
- --------------------------------------------------------------------------------
DODGE & COX
Balanced Fund
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
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
Max Gutierrez, Jr., Trustee
Partner, Brobeck, Phleger & Harrison, 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
MANAGERS
Dodge & Cox
One Sansome Street, 35th Floor
San Francisco, California
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
- --------------------------------------------------------------------------------
<PAGE>
DODGE & COX BALANCED FUND
PART B
Statement of Additional Information
<PAGE>
DODGE & COX BALANCED FUND
c/o Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
(800) 621-3979
STATEMENT OF ADDITIONAL INFORMATION
Dated March 13, 1996
This Statement of Additional Information is not the Fund's Prospectus, but
provides additional information which should be read in conjunction with the
Fund's Prospectus dated March 13, 1996. The Fund's Prospectus and most recent
annual financial statements may be obtained from the Fund at no charge by
writing or telephoning the Fund at the address or telephone number shown above.
____________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Objectives and Policies........... 1
Investment Restrictions...................... 1
Purchase, Redemption, and Pricing of Shares.. 2
Performance Information...................... 2
Officers and Trustees........................ 3
Investment Adviser........................... 4
Portfolio Transactions....................... 4
Additional Tax Considerations................ 5
Independent Accountants...................... 5
</TABLE>
____________________________
Please refer to the Fund's Financial Statements consisting of the financial
statements of the Fund and the notes thereto, and the report of independent
accountants contained in the Fund's 1995 Annual Report to Shareholders. The
Financial Statements and the report (but no other material from that Annual
Report) are incorporated herein by reference. Additional copies of the Annual
Report may be obtained from the Fund at no charge by writing or telephoning the
Fund at the address or telephone number shown above.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
- ----------------------------------
The objectives of the Fund are to provide shareholders with regular
income, conservation of principal and an opportunity for long-term growth of
principal and income. However, it should be recognized that the market risks
inherent in investment cannot be avoided nor is there any assurance that the
investment objectives of the Fund will be achieved. Reasonable appreciation in
favorable periods and conservation of principal in adverse times are objectives
that require flexibility in managing the assets of the Fund under constantly
changing investment conditions.
Therefore, the proportions held in common and preferred stocks and
bonds are revised by the Fund's manager when considered advisable in light of
the manager's appraisal of business and investment prospects. It is the policy
of the Fund to maintain no more than approximately 75% of its total assets in
common stocks and that portion of the value of convertible securities
attributable to the conversion right. The Fund's manager reserves the right to
depart from a balanced position under abnormal conditions if the Board of
Trustees deems it necessary for the protection of shareholders.
As a general practice, bonds are held for stability of principal and
income as well as for a reserve which can be used to take advantage of
investment opportunities.
It is the policy to invest in investment-grade bonds rated in the top
four rating categories by either Moody's Investors Service ("Moody's") (Aaa, Aa,
A, Baa) or Standard & Poor's Corporation ("S&P") (AAA, AA, A, BBB). It should be
noted that securities rated in the lowest of the top four rating categories (Baa
or BBB) may have speculative characteristics. Securities that are downgraded
below Baa or BBB subsequent to purchase may continue to be held by the Fund, if
the Fund's manager believes it advantageous to do so. Unrated bonds may be
purchased if such securities are, in the opinion of the manager, of equivalent
quality to bonds rated at least A by Moody's and S&P.
The Fund's policies as set forth above may be changed without
shareholder approval; however, such policy will not be changed without notice to
shareholders. The following policies may not be changed without approval of a
majority of the outstanding shares of the Fund:
A substantial position will be maintained in common stocks which in
the view of the Fund's manager have a favorable outlook for long-term growth of
principal and income. Prospective earnings and dividends are major
considerations in these stock selections. The level of security prices and the
trend of business activity are given weight in determining the total investment
position of the Fund in equities at any time. Individual securities are selected
with an emphasis on financial strength and a sound economic background.
In an attempt to minimize unforeseen risks in single securities, it
has always been the policy of Dodge & Cox Balanced Fund to provide adequate
investment diversification. Investments made in any one stock or bond issue,
with the exception of United States government securities, are seldom in excess
of 2% of the total assets of the Fund. It is not the policy to concentrate
investments in any particular industry or group of industries but to diversify
investments among different industries as well as among individual companies.
The amount invested in any particular industry will vary from time to time in
accordance with the judgment of management. Although there is no restriction on
the number of changes in security holdings, purchases are made with a view to
long-term holding and not for short-term trading purposes. During rapidly
changing economic and political conditions, there may necessarily be more
portfolio changes than in a more stable period. See "Financial Highlights" in
the Prospectus for portfolio turnover rates.
It is the general practice of the Fund to invest in securities with
ready markets, mainly issues listed on national securities exchanges. The Fund
does not own any securities which are restricted as to resale under federal
securities laws and has no present intention of making investments in such
securities. The Fund does not write put and call options and has no present
intention of writing such options.
INVESTMENT RESTRICTIONS
- -----------------------
The Fund has adopted the following restrictions, which may not be
changed without the approval of the lesser of (1) 67% or more of the voting
shares present at a meeting if the holders of more than 50% of the outstanding
voting shares are present or represented by proxy, or (2) more than 50% of the
outstanding voting shares of the Fund. The Fund may not:
1. Invest more than 5% of the value of its total assets in the securities of
any one issuer except the United States Government, nor acquire more than
10% of the voting securities of any one issuer.
2. Invest in other investment companies except in the open market at customary
brokers' commissions.
3. Invest in any company for the purpose of exercising control or management.
4. Issue senior securities.
5. Borrow money except as a temporary measure for extraordinary or emergency
purposes and not for the purchase of investment securities and then only
from banks. The amount borrowed shall not exceed 10% of the Fund's total
assets at cost or 5% of the value of total assets, whichever is less,
provided that such borrowings shall have an asset coverage of 300%.
- 1 -
<PAGE>
6. Underwrite securities of other issuers.
7. Purchase or sell commodities, commodity contracts or real estate
(investments in real estate trusts are not deemed purchases of real
estate).
8. Make loans to other persons except this shall not exclude the purchase of
publicly issued debt securities of a type purchased by institutional
investors.
9. Purchase securities on margin or sell short.
10. Concentrate investments of more than 25% of the value of its total assets
in any one industry.
11. Purchase any security if as a result the Fund would then have more than
15% of its total assets invested in securities which are illiquid,
including repurchase agreements not maturing in seven days or less and
securities restricted as to disposition under federal securities laws.
12. Purchase warrants if as a result the Fund would then have more than 5% of
its net assets invested in warrants (valued at the lower of cost or
market), or more than 2% of its net assets invested in warrants which are
not listed on the New York or American Stock Exchanges.
13. Purchase interests in oil, gas and mineral leases or other mineral
exploration or development programs, although the Fund may invest in
stocks or debt instruments of companies which invest in or sponsor such
programs.
14. Purchase securities of another investment company ("acquired company")
except in connection with a merger, consolidation, acquisition or
reorganization and except as otherwise permitted by Section 12(d) of the
Investment Company Act of 1940, if after such purchase more than 5% of the
value of the Fund's total assets would be invested in securities issued by
the acquired company, or the Fund would own more than 3% of the total
outstanding voting stock of the acquired company, or more than 10% of the
value of the Fund's total assets would be invested in securities of
investment companies.
15. Purchase securities of any issuer if, to the knowledge of the Fund, any
officer or trustee or director of the Fund or the Fund's manager, owns
more than 1/2 of 1% of the outstanding securities of such issuer, or if
such officers, trustees or directors in the aggregate own more than 5% of
the outstanding securities of such issuer.
PURCHASE, REDEMPTION, AND PRICING OF SHARES
- -------------------------------------------
The procedures for purchasing and redeeming shares of the Fund and how the
price of shares is determined are described in the Fund's Prospectus, which is
incorporated herein by reference.
PERFORMANCE INFORMATION
- -----------------------
The Fund may, from time to time, include figures indicating its total
return or yield in advertisements or reports to shareholders or prospective
investors. Quotations of the Fund's average annual total rate of return will be
expressed in terms of the average annual compounded rate of return on a
hypothetical investment in the Fund over periods of one, five and ten years,
will reflect the deduction of a proportional share of Fund expenses (on an
annual basis), will assume that all dividends and capital gains distributions
are reinvested when paid, and will be calculated pursuant to the following
formula:
n
P (1 + T) = ERV
where P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years,
ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period.
The average annual total return of the Fund for the one, five and ten-year
periods ended December 31, 1995 was 28.02%, 15.11%, and 13.55%, respectively.
Total return indicates the positive or negative rate of return that an investor
would have earned from reinvested dividends and distributions and changes in net
asset value per share during the period. Quotations of yield, as defined by the
Securities and Exchange Commission, will be based on net investment income per
share earned during a given thirty-day period and will be computed by dividing
this net investment income by the net asset value per share on the last day of
the period and annualizing the results according to the following formula:
(a-b) 6
YIELD = 2[ --- +1 -1]
cd
where a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements or
waivers),
- 2 -
<PAGE>
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the
period.
The Fund's current yield for the thirty days ended December 31, 1995
was 3.64%. Yield does not directly reflect changes in net asset value per share
which occurred during the period.
Performance information for the Fund may be compared in reports and
promotional literature to: (i) the Standard & Poor's 500 Stock Index, the Dow
Jones Industrial Average, the Lehman Brothers Aggregate Bond Index, or various
other unmanaged indices of the performance of various types of investments, so
that investors may compare the Fund's results with those of indices widely
regarded by investors as representative of the security markets in general, and
(ii) the performance of other mutual funds. Unmanaged indices may assume the
reinvestment of income distributions, but generally do not reflect deductions
for administrative and management costs and expenses.
Performance information for the Fund reflects only the performance of
hypothetical investments in the Fund during the particular time periods on which
the calculations are based. Such information should not be considered as
representative of the performance of the Fund in the future because, unlike some
bank deposits or other investments which pay a fixed yield for a stated period
of time for a fixed principal amount, the performance of the Fund will vary
based not only on the current market value of the securities held in its
portfolio, but also on changes in the Fund's expenses and in the asset size of
the Fund. Performance information should be considered in light of the Fund's
investment objectives and policies, the types and quality of the Fund's
portfolio investments, market conditions during the particular time period and
operating expenses. Further information about the performance of the Fund is
contained in the Fund's Annual Report which may be obtained without charge from
the Fund.
OFFICERS AND TRUSTEES
- ---------------------
<TABLE>
<CAPTION>
Aggregate 1995 Total Compensation
Position(s) Principal Occupation Compensation From Fund and Fund
Name and Address Age with Fund During Past 5 Years from Fund Complex **
- ---------------- --- ---------- -------------------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Harry R. Hagey* 54 Chairman and Chairman of Dodge & Cox; $ ---- $ ----
Trustee Assistant
Secretary-Treasurer and
Director, Dodge & Cox Stock
Fund
A. Horton Shapiro* 56 Vice-Chairman and Senior Vice-President of ---- ----
Trustee Dodge & Cox; President and
Director, Dodge & Cox Income
Fund
Kenneth E. Olivier* 43 Assistant Senior Vice-President of ---- ----
Secretary and Dodge & Cox
Trustee
Max Gutierrez, Jr. 65 Trustee Partner in Brobeck, Phleger 2,500 7,500
One Market Plaza & Harrison, Attorneys;
San Francisco, Director, Dodge & Cox Income
California Fund; Director, Dodge & Cox
Stock Fund
Frank H. Roberts 76 Trustee Retired Partner in 2,000 6,000
114 Sansome Street Pillsbury, Madison & Sutro,
San Francisco, Attorneys; Director, Dodge &
California Cox Income Fund; Director,
Dodge & Cox Stock Fund
John B. Taylor 49 Trustee Professor of Economics and 2,500 7,500
Department of Director of the Center for
Economics Economic Policy Research,
Stanford University Stanford University;
Stanford, California Director, Dodge & Cox Income
Fund; Director, Dodge & Cox
Stock Fund
Will C. Wood 56 Trustee Principal, Kentwood 2,500 7,500
3000 Sand Hill Road Associates, Financial
Menlo Park, California Advisers; prior to 1994,
Managing Director, IDI
Associates, Financial
Advisers; Director, Dodge &
Cox Income Fund; Director,
Dodge & Cox Stock Fund
</TABLE>
- 3 -
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
W. Timothy Ryan* 58 Secretary Senior Vice-President and ---- ----
Secretary-Treasurer of Dodge
& Cox; Secretary-Treasurer
and Director, Dodge & Cox
Income Fund;
Secretary-Treasurer and
Director, Dodge & Cox Stock
Fund
E. Morris Cox* 93 Honorary Honorary Chairman of the ---- ----
Trustee Board of Dodge & Cox
</TABLE>
- -----------------------
* Each has been an employee of Dodge & Cox, 35th Floor, One Sansome Street, San
Francisco, California for over ten years in an executive position and is an
"interested person" of the Fund as defined in the Investment Company Act of
1940. E. Morris Cox retired from Dodge & Cox as of January 1, 1984. He serves
as an honorary trustee of the Fund but is not responsible for and does not
participate in the management or administration of the Fund.
** Total 1995 Compensation From Fund and Fund Complex consists of compensation
and fees paid to directors and trustees by all Dodge & Cox Funds: Dodge & Cox
Balanced Fund, Dodge & Cox Stock Fund and Dodge & Cox Income Fund.
- ------------------------
Trustees and officers of the Fund affiliated with Dodge & Cox hold a
controlling interest in 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, and has no bonus,
profit-sharing, pension or retirement plan. On February 29, 1996 the officers
and trustees of the Fund and members of their families and relatives owned less
than 1% of the outstanding shares of the Fund.
On February 29, 1996, Charles Schwab & Co., 101 Montgomery Street, San
Francisco, California 94101 owned of record 3,501,408 shares (or 9.1% of the
outstanding shares of the Fund); and Monsanto Co. Savings Plan, 800 North
Lindbergh Blvd., St. Louis, Missouri 63167 owned beneficially and of record
2,011,758 shares (or 5.3% of the outstanding shares of the Fund). The Fund knows
of no other person who owns beneficially or of record more than 5% of the
outstanding shares of the Fund.
INVESTMENT ADVISER
- ------------------
Since 1931, Dodge & Cox, One Sansome Street, San Francisco, California
94104, a corporation, has been employed by the Balanced Fund as manager and
investment adviser, subject to the direction of the Board of Trustees. Dodge &
Cox (herein called the "Manager") is one of the oldest professional investment
management firms in the United States, having acted continuously as investment
managers since 1930. The Fund's investments are managed by Dodge & Cox's
Investment Policy Committee, and no one person is primarily responsible for
making investment recommendations to the Committee. The research work of the
firm is organized for comprehensive and continuous appraisal of the economy and
of various industries and companies. Supplemental research facilities are used
to obtain additional coverage of business and financial developments affecting
comparative security values.
The revenues of the Manager are derived from fees for investment management
services. The Manager is not engaged in the brokerage business nor in the
business of dealing in or selling securities. Its activities are devoted to
investment research and the supervision of investment accounts for individuals,
trustees, corporations, pension and profit-sharing funds, and charitable
institutions. In addition, the Manager has managed Dodge & Cox Stock Fund since
1965 and Dodge & Cox Income Fund since 1989. The investment advisory contract
between the Fund and the Manager was approved by a majority of the shares of the
Fund and provides for a management fee which is accrued daily and payable
quarterly to the Manager at the rate of 1/8 of 1% of the average net asset value
of the Fund at the end of each week, which is equivalent to an annual fee of 1/2
of 1%. The Manager was paid a fee of $6,321,900 for the year 1995, $3,188,284
for the year 1994, and $1,922,115 for the year 1993. The contract may be
terminated at any time without penalty upon 60 days written notice by action of
the trustees, shareholders or by Dodge & Cox. The contract will terminate
automatically should there be an assignment thereof. In addition to the
Manager's fee, the Fund pays other direct expenses primarily for bank custody of
assets, stock transfer agent, printing of reports and prospectuses (not for
promotional purposes), registration fees, and legal and auditing services. The
Manager furnishes personnel and other facilities necessary for the operation of
the Fund for which it receives no additional compensation. The Manager
supervises the operations of the Fund and directs the investment and
reinvestment of its assets and furnishes all executive personnel and office
space required.
PORTFOLIO TRANSACTIONS
- ----------------------
The decisions to purchase or to sell securities for the Fund's portfolio
are based on the Manager's appraisal of the investment merits of such
transactions. The Manager provides facilities and personnel for the placement of
purchase and sale orders with brokerage firms and the negotiation of commission
rates, where applicable. One or more of several broker-dealers who the Manager
believes can obtain the most favorable prices and executions will be given
orders for transactions in
- 4 -
<PAGE>
securities. Subject to this primary requirement, the Manager places some
purchase and sale transactions with broker-dealers who supply research and
quotation services to the Manager. These services, which are merely
supplementary to the Manager's own research effort, include reports on
companies, industries, securities, business conditions, portfolio strategy and
performance measurement and analysis. The Manager may pay a broker-dealer a
commission in excess of that which another broker-dealer might have charged for
effecting the same transaction for the Fund, in recognition of the value of
favorable price and execution or research services if the Manager determines in
good faith that the amount of the commission is reasonable in relation to the
value of those services in terms either of the particular transaction, or in
terms of the overall responsibility of the Manager to the Fund and to any other
accounts over which the Manager exercises investment discretion. No specific
formula is used in allocating such commission business.
Periodically the Manager reviews the current commission rates and discusses
the execution capabilities and the services provided by the various broker-
dealers the Manager is utilizing in the execution of orders. Research services
furnished by the brokers through whom the Manager effects security transactions
for the Fund may be used in servicing all of the Manager's accounts; however,
all such services may not be used by the Manager in connection with the Fund.
Aggregate brokerage commissions paid by the Fund during the last three years
were as follows: $763,087 in 1995, $251,196 in 1994 and $211,208 in 1993.
$212,956 was paid to broker-dealers in 1995 who supplied research and quotation
services to the Manager. Brokerage commissions increased from 1994 to 1995
commensurate with the growth in the Fund's assets. Except as indicated above,
the Manager does not intend to place portfolio transactions with any particular
broker-dealers.
Investment decisions for the Fund are made independently from those of
Dodge & Cox Stock Fund, Dodge & Cox Income Fund, and other accounts managed by
the Manager. It may frequently develop that the same investment decision is made
for more than one account. Simultaneous transactions may often occur when the
same security is suitable for the investment objective of more than one account.
When two or more accounts are simultaneously engaged in the purchase or sale of
the same security, the transactions are averaged as to price and allocated as to
amount in accordance with a formula equitable to each account. It is recognized
that in some cases this system could have a detrimental effect on the price or
availability of the security as far as the Fund is concerned. In other cases,
however, it is believed that the ability of the Fund to participate in volume
transactions will produce better executions for the Fund. It is the opinion of
the Board of Trustees that the possible advantages involved outweigh any
possible detrimental effects that may result from simultaneous transactions.
ADDITIONAL TAX CONSIDERATIONS
- -----------------------------
Any dividend or capital gains distribution reduces the net asset value per
share by the per share amount of such distribution. Distributions received
shortly after the purchase of shares are in effect a return of capital but are
subject to tax.
The discussion above and in the Fund's Prospectus regarding the Federal
income tax consequences of investing in the Fund have been prepared by the
Manager and do not purport to be complete descriptions of all tax implications
of an investment in the Fund. Shareholders are advised to consult with their own
tax advisers concerning the application of Federal, state and local taxes to an
investment in the Fund. The Fund's legal counsel has expressed no opinion in
respect thereof.
INDEPENDENT ACCOUNTANTS
- -----------------------
Price Waterhouse LLP, 555 California Street, San Francisco, California
94104, are independent accountants to the Fund, subject to annual appointment by
the Board of Trustees. The accountant conducts an annual audit of the accounts
and records of the Fund, reports on the Fund's annual financial statements and
performs tax and accounting advisory services.
- 5 -
<PAGE>
DODGE & COX BALANCED FUND
PART C - OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
- -------- ---------------------------------
(a) Financial Statements:
Statement of Assets and Liabilities*
Statement of Changes in Net Assets*
Statement of Operations*
Portfolio of Investments*
* Incorporated by reference to similarly named financial statement in
Registrant's 1995 Annual Report to Shareholders, including Notes to
Financial Statements and Report of Independent Accountants.
Registrant's 1995 Annual Report dated December 31, 1995, was filed
with the Commission on February 20, 1996 (File No. 811-173).
(b) Exhibits:
B10 - Consent of Counsel.
B11 - Consent of Independent Accountants.
B12 - 1995 Annual Report -- reference is made to (a) above.
B17 - Financial Data Schedule.
All other exhibits required under this section were filed with the
original registration statement or post-effective amendments and are
herein incorporated by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
- -------- -------------------------------------------------------------
It may be deemed that Dodge & Cox, the investment adviser of
Registrant, is under common control with Registrant in that three of
the seven trustees plus an officer of Registrant are controlling
stockholders of Dodge & Cox.
Dodge & Cox is a California corporation. As of December 31, 1995, the
persons who are trustees and officers of Registrant and also
controlling stockholders of Dodge & Cox are as follows:
<TABLE>
<CAPTION>
% of Stock Owned in
Name Dodge & Cox
---- -------------------
<S> <C>
Harry R. Hagey 17.88%
A. Horton Shapiro 10.01
Kenneth E. Olivier 8.46
W. Timothy Ryan 9.54
</TABLE>
Item 26. NUMBER OF HOLDERS OF SECURITIES
- -------- -------------------------------
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of 12/31/95
-------------- --------------
<S> <C>
Beneficial Shares (only class) 17,123
</TABLE>
<PAGE>
Item 27. INDEMNIFICATION
- -------- ---------------
Registrant and Dodge & Cox maintain officers' and directors' liability
insurance in the amount of $10,00,000 with a $5,000 deductible
provision. Dodge & Cox has agreed to indemnify officers and trustees
of Registrant in the amount of the deductible portion of such
insurance.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
- -------- ----------------------------------------------------
Dodge & Cox is also investment adviser to Dodge & Cox Stock Fund,
Dodge & Cox Income Fund and to numerous individuals and institutions.
Item 29. PRINCIPAL UNDERWRITERS
- -------- ----------------------
None.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
- -------- --------------------------------
Dodge & Cox
One Sansome Street, 35th Floor
San Francisco, CA 94104
Firstar Trust Company
615 East Michigan Street
Milwaukee, Wisconsin 53202
Item 31. MANAGEMENT SERVICES
- -------- -------------------
None.
Item 32. UNDERTAKINGS
- -------- ------------
(1) Registrant hereby undertakes to furnish to each person, to whom
Registrant's Prospectus is delivered, with a copy of Registrant's
most recent Annual Report to Shareholders upon request and without
charge.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for the effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of San Francisco and State of California on the
8th day of MARCH , 1996.
DODGE & COX BALANCED FUND
By:
/s/ HARRY R. HAGEY
-------------------------------------------
Harry R. Hagey, Chairman
Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons as
Trustees on the 8th day of MARCH , 1996.
SIGNATURES
----------
/s/ HARRY R. HAGEY /s/ A. HORTON SHAPIRO
- ------------------------------- -------------------------------
Harry R. Hagey A. Horton Shapiro
/s/ MAX GUTIERREZ, JR. /s/ JOHN B. TAYLOR
- ------------------------------- -------------------------------
Max Gutierrez, Jr. John B. Taylor
/s/ KENNETH E. OLIVIER /s/ WILL C. WOOD
- ------------------------------- -------------------------------
Kenneth E. Olivier Will C. Wood
/s/ FRANK H. ROBERTS
- -------------------------------
Frank H. Roberts
<PAGE>
DODGE & COX BALANCED FUND
INDEX TO EXHIBITS
<TABLE>
<C> <S> <C>
ITEM 24(b)10 Consent of Counsel................................... EX-23.B10
ITEM 24(b)11 Consent of Independent Accountants................... EX-23.B11
ITEM 24(b)12 1995 Annual Report - Dodge & Cox Balanced Fund....... EX-13.B12
ITEM 24(b)17 Financial Data Schedule.............................. EX-27.B17
</TABLE>
<PAGE>
HELLER EHRMAN WHITE & MCAULIFFE
333 BUSH STREET
SAN FRANCISCO, CALIFORNIA 94104-2878
FACSIMILE: (415) 772-6268
TELEPHONE: (415) 772-6000
March 1, 1996
CONSENT OF COUNSEL
We hereby consent to the reference to our firm in the Prospectus
contained in Post-Effective Amendment No. 60 to the Registration Statement on
Form N-1A (registration No. 2-11522) of the Dodge & Cox Balanced Fund.
Very truly yours,
/S/ HELLER, EHRMAN, WHITE & McAULIFFE
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 60 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
January 23, 1996, relating to the financial statements and financial highlights
of the Dodge & Cox Balanced Fund, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Independent Accountants" in
such Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
/S/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
San Francisco, California
March 4, 1996
<PAGE>
DODGE & COX DODGE & COX
Balanced Fund
- --------------------------------------- ---------------------------------------
Balanced Fund
Established 1931
---------------------------------------
---------------------------------------
Dodge & Cox
Investment Managers
35th Floor
One Sansome Street
San Francisco
California 94104
(415) 981-1710
65th Annual Report
For Fund literature and December 31, 1995
information, please call:
(800) 621-3979 1995
- --------------------------------------- ---------------------------------------
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
To Our Shareholders
----------------------------------------------------------------------------
On the heels of lackluster returns from both stocks and bonds in 1994, the
Dodge & Cox Balanced Fund's total return of 28.0% in 1995 was its strongest
annual performance during the past decade. This result compares with 1995
returns for the Standard & Poor's 500 Index (S&P 500) of common stocks of
37.6% and for the Lehman Brothers Aggregate Bond (LBAG) Index of 18.5%.
Comparative long-term annual returns for the Fund, S&P 500 and LBAG Index
are on page 3 of this report.
The net asset value of the Fund increased during the year from $45.21 to
$54.60. In addition, the Fund made distributions totaling $1.19 per share
from net realized short and long-term capital gains and $1.90 per share from
net investment income. Assuming reinvestment of capital gains distributions,
income dividends increased 9% versus the prior year.
At year-end 1995, the Balanced Fund's total net assets were $1.8 billion.
Approximately 57% of the Fund was invested in stocks, 38% in bonds and 5% in
cash equivalents, basically the same asset allocation as year-end 1994.
Banner Year for U.S. Equity Markets
1995 was an outstanding year for the U.S. equity markets, fueled by a
combination of modest growth in the gross domestic product and low inflation
that led to declining interest rates. At the same time, corporate earnings
for the S&P 500 companies grew an estimated 17%, paving the way for higher
stock valuations.
The Balanced Fund's equity portfolio produced solid returns in this
favorable environment, nearly matching the S&P 500 return. Strong
contributors to the portfolio were electronic/computer, finance, diversified
technology and pharmaceutical stocks. Throughout most of the year, we sold
or trimmed several technology stock holdings, as their prices appreciated
dramatically. Of the twelve equities held all year with total returns
greater than 50%, three were financial institutions, three were
pharmaceutical companies and two were electronic/computer stocks.
Areas of the Fund's equity portfolio which did not perform well in 1995 were
retail/distribution, industrial commodities and apparel stocks. As discussed
in prior letters, we have been slowly building positions in a number of
retailing companies over the past two years. Although the retail environment
is currently very tough, we believe that the long-term profitability of the
retailers held in the Fund will improve. With most of these stocks at
historically low valuations today, we believe they are attractive
investments.
Fixed Income Markets Recover Strongly
The U.S. fixed income markets staged one of their biggest turnarounds in
history in 1995. Following one of the bond market's worst years on record in
1994, the thirty year U.S. Treasury bond returned more than 30% during 1995.
Interest rates declined across the yield curve, with the long U.S. Treasury
bond rate falling almost two full percentage points to about 6% at year-end.
The Balanced Fund's fixed income portfolio outperformed the LBAG Index
during 1995; we attribute this strong performance to two key factors:
. Longer-than-market duration: Because a relatively high percentage of
the Fund's fixed income holdings are longer-maturity bonds -- which
had larger price appreciation than short-term issues -- the decline
in interest rates boosted the value of this portion of the Fund's
holdings more dramatically than the value of the broader bond market.
. Good security selection: The Fund benefited from our emphasis on non-
callable and call-protected corporate securities, whose returns
outpaced those of callable issues. For example, Time Warner
Entertainment and AMR bonds had particularly strong returns. Both
issues have long-maturity and non-callable structures, and benefited
from significant improvement in other investors' perception of their
creditworthiness.
Steady Investment Strategies
. Equity Portfolio: Value in Cycle Sensitive and Finance Stocks
Our focus is on individual companies, rather than "top-down" macroeconomic
or sector analysis. Using Dodge & Cox's "bottom up" investment approach, we
have identified a number of promising investments in various cycle sensitive
======================================---=======================================
1
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
industries. The lowest price-to-earnings (P/E) multiples are in this area,
as investors worrying about recession have fled these stocks. Holdings in
this sector include electronic/computer, capital equipment, industrial
commodities, transportation and consumer durable (e.g., automotive)
companies. In total, this well-diversified group of stocks represented just
over 40% of the Fund's equity portfolio at year-end 1995. While we trimmed
several of these holdings earlier in 1995 as their prices rose, we continue
to see long-term investment opportunity in many of these companies.
In particular, we see good potential for increased valuation in those
particular cycle-sensitive companies that have expanded their business
franchises into international markets and are aggressively cutting costs or
restructuring to boost profitability and shareholder value. One example of
such a company is Federal Express, as it builds on its commanding position
in overnight delivery to establish a leading worldwide capability. The stock
sells at 13 times 1995 earnings, well below the S&P 500's P/E multiple of
about 17. Others are Digital Equipment, General Motors, IBM and Deere -- the
four largest cycle sensitive holdings in the Fund at year-end.
We have also identified promising stocks in the broadly defined finance
sector. These financial stocks accounted for just under 20% of the Fund's
equities at year-end. Finance-related companies in the Fund have been strong
performers for several years now, but we view their valuations as still
reasonable in the context of the overall market. Many have strengthened
themselves to prosper in the ongoing industry consolidation. The largest
finance equity holdings in the Fund at year-end were American Express,
Golden West Financial and Citicorp.
. Fixed-Income Portfolio: Emphasis on Corporate and Mortgage Issues
The Balanced Fund's fixed-income portfolio continues to emphasize well-
structured corporate and mortgage-related bonds. At year-end 1995, the
Fund's bond portfolio had allocations between 35% and 40% in each of these
sectors. We rely upon in-house fundamental credit research to select
individual issues in these areas. Through this research effort we seek to
identify securities where we believe the market has underestimated
creditworthiness or total return potential. As a result, the Fund's fixed-
income portfolio yield is higher than the bond market as a whole.
U.S. Treasury and Government Agency issues accounted for approximately 25%
of the Fund's bond portfolio. We use Treasuries to maintain high average
credit quality (AA+) in the Fund and also to adjust the portfolio's
duration. While maintaining the duration of the fixed-income portfolio
longer than that of the LBAG Index throughout 1995, we did lower its price
sensitivity to interest rates as the year progressed. At year-end, the
portfolio's duration stood at approximately 5.2 years, which compared to 4.5
years for the LBAG Index. Although we have not abandoned the possibility of
lower interest rates, we considered it prudent to modestly reduce the
duration of the bond portfolio, given the current level of both real and
nominal interest rates.
Looking Forward
In closing, we would like to remind our shareholders that the Fund's returns
were unusually strong in 1995 in relation to long-term historical averages.
Overall, we expect U.S. financial markets to post "more normal" returns in
1996 and beyond. Despite these words of caution, the rationale for a
balanced fund investment approach remains valid: stocks provide the
opportunity for growth of principal and income over the long-term, while
bonds continue to offer a steady stream of current income.
We also want to recognize and thank two distinguished members of the
Balanced Fund's Board of Trustees who resigned at the end of 1995. Peter
Avenali is a former Chairman of Dodge & Cox and has served as a Trustee for
37 years. Robert C. Harris also resigned at year-end after 27 years of
service. We have valued their wise counsel over the years, and we wish them
well in the future.
Thank you for your continued confidence in the Dodge & Cox Balanced Fund. As
always, we welcome your comments and suggestions.
For the Trustees,
/s/ Harry R. Hagey
January 23, 1996 Harry R. Hagey, Chairman
======================================---=======================================
2
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
20 Years of Investment Performance
----------------------------------------------------------------------------
Comparison of change in value of a $10,000 investment in the Dodge & Cox
Balanced Fund, the Standard & Poor's 500 Composite Stock Price (S&P 500)
Index and the Lehman Brothers Aggregate Bond (LBAG) Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Dodge & Cox S&P LBAG
Year Balanced Fund 500 Index Index
- --------------------------------------------------------------
<S> <C> <C> <C>
75 $10,000 $ 10,000 $ 10,000
76 12,534 12,399 11,560
77 12,216 11,508 11,909
78 12,856 12,243 12,076
79 14,590 14,527 12,308
80 17,749 19,231 12,642
81 17,300 18,221 13,433
82 21,820 22,146 17,817
83 25,503 27,147 19,309
84 26,705 28,857 22,235
85 35,383 38,027 27,154
86 42,039 45,125 31,295
87 45,056 47,498 32,161
88 50,255 55,387 34,695
89 61,825 72,929 39,740
90 62,406 70,656 43,299
91 75,338 92,186 50,227
92 83,297 99,203 53,946
93 96,590 109,202 59,206
94 98,516 110,640 57,478
95 126,129 152,212 68,098
</TABLE>
<TABLE>
<CAPTION>
Average annual total return for periods ended December 31, 1995 1 Year 5 Years 10 Years 20 Years
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dodge & Cox Balanced Fund 28.02% 15.11% 13.55% 13.51%
S&P 500 Index 37.57 16.59 14.88 14.58
LBAG Index 18.48 9.48 9.63 10.07
</TABLE>
The chart covers the period from January 1, 1976 to December 31, 1995. It
compares a $10,000 investment made in the Dodge & Cox Balanced Fund to
$10,000 investments made in the Standard & Poor's 500 Composite Stock Price
Index and the Lehman Brothers Aggregate Bond Index (a broad based index
composed of investment grade bonds). 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 during this period has ranged from 54% to
74% of the total portfolio. The chart and average annual total return
figures include the 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.
======================================---=======================================
3
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
<TABLE>
<CAPTION>
Financial Highlights Year Ended December 31,
---------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
<C> <S> <C> <C> <C> <C> <C>
Selected data NET ASSET VALUE, BEGINNING OF YEAR........................... $45.21 $46.40 $42.44 $40.09 $35.03
and ratios for a Income from investment operations:
share outstanding Net investment income........................................ 1.90 1.76 1.66 1.72 1.75
throughout each Net realized and unrealized gain (loss) on investments....... 10.58 (.83) 5.03 2.43 5.36
year ------ ------ ------ ------ ------
Total income from investment operations...................... 12.48 .93 6.69 4.15 7.11
------ ------ ------ ------ ------
Distributions:
Dividends from net investment income......................... (1.90) (1.76) (1.66) (1.72) (1.76)
Distributions from net realized gain on investments.......... (1.19) (.36) (1.07) (.08) (.29)
------ ------ ------ ------ ------
Total distributions.......................................... (3.09) (2.12) (2.73) (1.80) (2.05)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR................................. $54.60 $45.21 $46.40 $42.44 $40.09
====== ====== ====== ====== ======
TOTAL RETURN.................................................% 28.02 1.99 15.95 10.56 20.72
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)........................... $1,800 $ 725 $ 487 $ 269 $ 179
Ratio of expenses to average net assets......................% .57 .58 .60 .63 .65
Ratio of net investment income to average net assets.........% 3.85 3.94 3.67 4.27 4.78
Portfolio turnover rate......................................% 20 20 15 6 10
</TABLE>
S.E.C. yield for the 30 day period ended December 31, 1995.............. 3.64%
<TABLE>
<CAPTION>
THE FUND'S TEN LARGEST COMMON STOCK HOLDINGS
---------------------------------------------------------------------------------------------------------------
% of Common
Stock Holdings
--------------
<S> <C>
Digital Equipment Corp.............................................. 3.2
General Motors Corp................................................. 3.1
Dayton-Hudson Corp.................................................. 3.0
International Business Machines Corp................................ 2.4
American Express Co................................................. 2.3
Golden West Financial Corp.......................................... 2.2
Deere & Co.......................................................... 2.1
Federal Express Corp................................................ 2.1
Masco Corp.......................................................... 2.1
Dow Chemical Co..................................................... 2.1
----
24.6%
</TABLE>
======================================---=======================================
4
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
<TABLE>
<CAPTION>
Portfolio of Investments December 31, 1995
--------------------------------------------------------------------------------------------------------------
SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON CONSUMER: 12.0%
STOCKS: 405,000 Dayton-Hudson Corp......................................................... $ 30,375,000
56.4% 477,000 Dillard Department Stores, Inc. Class A.................................... 13,594,500
228,000 Fleming Cos., Inc.......................................................... 4,702,500
536,700 Fruit of the Loom, Inc.+................................................... 13,082,063
596,000 General Motors Corp........................................................ 31,513,500
250,000 Genuine Parts Co........................................................... 10,250,000
1,070,000 Kmart Corp................................................................. 7,757,500
675,000 Masco Corp................................................................. 21,178,125
423,000 Melville Corp.............................................................. 13,007,250
518,500 Nordstrom, Inc............................................................. 20,934,438
253,000 Procter & Gamble Co........................................................ 20,999,000
205,000 VF Corp.................................................................... 10,813,750
326,700 Whirlpool Corp............................................................. 17,396,775
--------------
215,604,401
FINANCE: 10.6%
575,000 American Express Co........................................................ 23,790,625
127,500 American International Group, Inc.......................................... 11,793,750
245,000 BankAmerica Corp........................................................... 15,863,750
195,000 Barnett Banks, Inc......................................................... 11,505,000
160,000 Chubb Corp................................................................. 15,480,000
297,000 Citicorp................................................................... 19,973,250
72,000 General Re Corp............................................................ 11,160,000
404,000 Golden West Financial Corp................................................. 22,321,000
62,600 Lehman Brothers Holdings, Inc.............................................. 1,330,250
185,000 Morgan (J.P.) & Co......................................................... 14,846,250
418,000 Norwest Corp............................................................... 13,794,000
210,500 Republic New York Corp..................................................... 13,077,313
295,000 The St. Paul Cos., Inc..................................................... 16,409,375
--------------
191,344,563
ENERGY: 6.4%
368,000 Amerada Hess Corp.......................................................... 19,504,000
155,000 Amoco Corp................................................................. 11,140,625
186,000 Chevron Corp............................................................... 9,765,000
20,000 Exxon Corp................................................................. 1,602,500
254,000 Halliburton Co............................................................. 12,858,750
20,000 Mobil Corp................................................................. 2,240,000
455,000 Phillips Petroleum Co...................................................... 15,526,875
95,000 Royal Dutch Petroleum Co................................................... 13,406,875
124,000 Schlumberger Ltd........................................................... 8,587,000
206,600 Sonat, Inc................................................................. 7,360,125
140,000 Union Pacific Resources Group, Inc......................................... 3,552,500
205,000 Western Atlas, Inc.+....................................................... 10,352,500
--------------
115,896,750
BASIC INDUSTRY: 5.7%
396,000 Aluminum Co. of America.................................................... 20,938,500
84,700 Boise Cascade Corp......................................................... 2,932,738
35,500 Crown Vantage, Inc.+....................................................... 497,000
300,000 Dow Chemical Co............................................................ 21,112,500
498,000 International Paper Co..................................................... 18,861,750
</TABLE>
See accompanying Notes to Financial Statements
======================================---=======================================
5
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
<TABLE>
<CAPTION>
Portfolio of Investments December 31, 1995
--------------------------------------------------------------------------------------------------------------
SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON BASIC INDUSTRY (Continued)
STOCKS 355,000 James River Corp. of Virginia.............................................. $ 8,564,375
(Continued) 370,700 Nalco Chemical Co.......................................................... 11,167,338
414,000 Weyerhaeuser Co............................................................ 17,905,500
--------------
101,979,701
ELECTRONICS AND COMPUTERS: 5.4%
499,600 Digital Equipment Corp.+................................................... 32,036,850
203,000 Hewlett-Packard Co......................................................... 17,001,250
268,000 International Business Machines Corp....................................... 24,589,000
180,800 Motorola, Inc.............................................................. 10,305,600
900,000 Tandem Computers, Inc.+.................................................... 9,562,500
60,000 Texas Instruments, Inc..................................................... 3,105,000
--------------
96,600,200
CAPITAL EQUIPMENT: 3.5%
337,000 Caterpillar, Inc........................................................... 19,798,750
609,000 Deere & Co................................................................. 21,467,250
236,000 General Electric Co........................................................ 16,992,000
135,000 Parker-Hannifin Corp....................................................... 4,623,750
--------------
62,881,750
PUBLIC UTILITIES: 3.1%
425,000 BCE, Inc................................................................... 14,662,500
385,000 Central & South West Corp.................................................. 10,731,875
172,500 Consolidated Natural Gas Co................................................ 7,827,188
32,000 Duke Power Co.............................................................. 1,516,000
64,000 FPL Group, Inc............................................................. 2,968,000
217,300 Pacific Enterprises........................................................ 6,138,725
281,000 Texas Utilities Co......................................................... 11,556,125
--------------
55,400,413
BUSINESS PRODUCTS AND SERVICES: 2.9%
410,000 Donnelley (R.R.) & Sons Co................................................. 16,143,750
68,850 Dow Jones & Co............................................................. 2,745,394
287,000 Federal Express Corp.+..................................................... 21,202,125
89,700 Xerox Corp................................................................. 12,288,900
--------------
52,380,169
DIVERSIFIED TECHNOLOGY: 2.7%
525,000 Corning, Inc............................................................... 16,800,000
130,000 Grace (W.R.) & Co.......................................................... 7,686,250
146,000 Minnesota Mining & Manufacturing Co........................................ 9,672,500
246,500 Raychem Corp............................................................... 14,019,688
--------------
48,178,438
TRANSPORTATION: 2.1%
960,000 Canadian Pacific Ltd....................................................... 17,400,000
309,000 Union Pacific Corp......................................................... 20,394,000
--------------
37,794,000
</TABLE>
See accompanying Notes to Financial Statements
======================================---=======================================
6
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
<TABLE>
<CAPTION>
Portfolio of Investments December 31, 1995
--------------------------------------------------------------------------------------------------------------
SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON PHARMACEUTICAL AND HEALTH: 2.0%
STOCKS 150,000 Pfizer, Inc................................................................ $ 9,450,000
(Continued) 410,350 Pharmacia & Upjohn, Inc.................................................... 15,901,063
205,000 SmithKline Beecham plc ADR................................................. 11,377,500
--------------
36,728,563
--------------
Total Common Stocks (cost $797,045,663)................................ 1,014,788,948
--------------
PREFERRED STOCKS: CONSUMER: 0.1%
0.1% 76,922 Times Mirror Co. Conversion Preferred Series B............................. 1,990,357
--------------
Total Preferred Stocks (cost $1,659,842)............................... 1,990,357
--------------
PAR VALUE
BONDS: U.S. TREASURY: 9.1%
38.2% $25,350,000 U.S. Treasury Notes, 5 1/2%, 1996.......................................... 25,369,773
48,000,000 U.S. Treasury Notes, 7 7/8%, 1996.......................................... 48,705,120
30,000,000 U.S. Treasury Notes, 6%, 1997.............................................. 30,440,700
28,500,000 U.S. Treasury Notes, 5 1/4%, 1998.......................................... 28,508,835
25,000,000 U.S. Treasury Notes, 7 7/8%, 1998.......................................... 26,269,500
3,400,000 U.S. Treasury Bonds, 14%, 2011, Callable 2006.............................. 5,639,206
--------------
164,933,134
FEDERAL AGENCY: 0.4%
5,000,000 Arkansas Dev. Fin. Auth. GNMA Guaranteed Bonds 9 3/4%, 2014................ 6,512,000
FEDERAL AGENCY MORTGAGE PASS-THROUGH, CMO* AND REMIC**: 15.2%
2,132,291 Federal Home Loan Mtge. Corp. Group 25-6637, 8%, 2002...................... 2,204,384
1,866,040 Federal Home Loan Mtge. Corp. Group D26241, 6 1/2%, 2006................... 1,881,136
447,193 Federal Home Loan Mtge. Corp. Group 18-0233, 7%, 2006...................... 455,551
1,199,087 Federal Home Loan Mtge. Corp. Group 25-0921, 7 1/2%, 2006.................. 1,235,048
389,758 Federal Home Loan Mtge. Corp. Group 18-5719, 7 1/4%, 2008.................. 399,097
858,792 Federal Home Loan Mtge. Corp. Group 27-2784, 7 1/4%, 2008.................. 879,549
444,874 Federal Home Loan Mtge. Corp. Group 25-3827, 7 1/2%, 2008.................. 459,719
1,589,372 Federal Home Loan Mtge. Corp. Group 18-0468, 8%, 2008...................... 1,653,837
1,480,252 Federal Home Loan Mtge. Corp. Group D10211, 7 1/2%, 2009................... 1,532,579
1,780,775 Federal Home Loan Mtge. Corp. Group 30-9878, 8 3/4%, 2010.................. 1,901,138
555,529 Federal Home Loan Mtge. Corp. Group 27-3014, 8 1/4%, 2011.................. 578,211
666,175 Federal Home Loan Mtge. Corp. Group 27-2785, 7 3/4%, 2012.................. 687,239
1,953,312 Federal Home Loan Mtge. Corp. Group 55-5098, 8 1/4%, 2017.................. 2,056,408
15,102,336 Federal Home Loan Mtge. Corp. Group D64097, 8 1/2%, 2023................... 15,913,482
10,000,000 Federal Home Loan Mtge. Corp. Multi PC Series 1216-GA, 7%, 2006............ 10,222,300
5,934,000 Federal Home Loan Mtge. Corp. Multi PC Series 1203-H, 6%, 2007............. 5,774,494
10,000,000 Federal Home Loan Mtge. Corp. Multi PC Series 1693-H, 6%, 2008............. 9,850,000
17,000,000 Federal Home Loan Mtge. Corp. Multi PC Series 1564-H, 6 1/2%, 2008......... 17,239,020
10,000,000 Federal Home Loan Mtge. Corp. Multi PC Series 1628-PJ, 6 1/2%, 2022........ 9,989,700
1,130,202 Federal Natl. Mtge. Assn. MBS Pool 55690, 8 1/2%, 2002..................... 1,179,287
1,436,529 Federal Natl. Mtge. Assn. MBS Pool 22354, 6 1/2%, 2004..................... 1,448,251
5,743,578 Federal Natl. Mtge. Assn. MBS Pool 70992, 7 1/2%, 2006..................... 5,991,011
8,406,691 Federal Natl. Mtge. Assn. MBS Pool 70255, 7 1/2%, 2007..................... 8,745,144
9,911,478 Federal Natl. Mtge. Assn. MBS Pool 107047, 8%, 2009........................ 10,380,093
2,373,570 Federal Natl. Mtge. Assn. MBS Pool 169231, 7 1/2%, 2010.................... 2,483,324
5,901,927 Federal Natl. Mtge. Assn. MBS Pool 224484, 7 1/2%, 2011.................... 6,168,812
7,842,284 Federal Natl. Mtge. Assn. MBS Pool 124668, 7 1/2%, 2019.................... 8,158,406
4,899,151 Federal Natl. Mtge. Assn. PC 1993-234-PA, 5%, 2004......................... 4,833,306
</TABLE>
See accompanying Notes to Financial Statements
======================================---=======================================
7
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
<TABLE>
<CAPTION>
Portfolio of Investments December 31, 1995
--------------------------------------------------------------------------------------------------------------
PAR VALUE MARKET VALUE
<C> <C> <S> <C>
BONDS FEDERAL AGENCY MORTGAGE PASS-THROUGH, CMO* AND REMIC** (Continued)
(Continued) $15,475,000 Federal Natl. Mtge. Assn. PC 1994-33-H, 6%, 2009........................... $ 15,146,775
12,813,611 Federal Natl. Mtge. Assn. PC G1993-39-A, 5.70%, 2016....................... 12,565,796
13,730,000 Federal Natl. Mtge. Assn. PC G1994-13-J, 7%, 2022.......................... 14,116,225
18,000,000 Federal Natl. Mtge. Assn. PC 1993-185-PE, 6 1/2%, 2023..................... 17,941,320
13,187,405 Federal Natl. Mtge. Assn. SMBS L-1, 5%, 2006............................... 12,697,625
1,686,150 Federal Natl. Mtge. Assn. SMBS T-1, 6 1/2%, 2009........................... 1,702,674
29,230,710 Govt. Natl. Mtge. Assn. Pool 780258, 7 1/2%, 2007.......................... 30,449,046
71,982 FSF Finance Corp. 1985-1-D, 9 1/4%, 2016................................... 73,242
13,352,000 Veterans Affairs Vendee Mtge. Trust 1994-2-3C, 6 1/2%, 2009................ 13,424,902
8,317,742 Veterans Affairs Vendee Mtge. Trust 1995-1A-1 PT, 7.20731%, 2025........... 8,470,705
11,856,121 Veterans Affairs Vendee Mtge. Trust 1995-2C-3A PT, 8.7925%, 2025........... 12,598,433
--------------
273,487,269
INDUSTRIAL: 5.0%
5,000,000 Dayton-Hudson Corp. Debentures 9%, 2021.................................... 5,948,450
2,500,000 Dayton-Hudson Corp. Debentures 9.70%, 2021................................. 3,172,525
10,525,000 Dayton-Hudson Corp. MTN 9.35%, 2020, Putable 1997.......................... 12,916,175
5,500,000 Ford Holdings, Inc. Debentures 9 3/8%, 2020................................ 7,075,585
9,500,000 Ford Motor Co. Debentures 9.95%, 2032...................................... 13,271,880
5,750,000 May Department Stores Notes 7 5/8%, 2013................................... 6,252,723
6,500,000 May Department Stores Notes 7.60%, 2025.................................... 7,027,670
6,375,000 Ralston Purina Debentures 7 3/4%, 2015..................................... 6,883,661
10,000,000 Time Warner Entertainment Senior Debentures 8 3/8%, 2033................... 10,672,200
3,450,000 Union Camp Corp. Debentures 9 1/4%, 2011................................... 4,372,668
11,650,000 Walt Disney Co. Debentures 7.55%, 2093..................................... 12,714,577
--------------
90,308,114
FINANCE: 4.6%
2,000,000 Barclays North American Capital Corp. Notes 9 3/4%, 2021, Callable 2001.... 2,377,840
1,800,000 CIGNA Corp. Debentures 7.65%, 2023......................................... 1,852,758
4,400,000 CIGNA Corp. Notes 8.30%, 2023.............................................. 4,861,076
3,100,000 First Nationwide Bank Subordinated Debentures 10%, 2006.................... 3,747,621
10,750,000 General Electric Capital Debentures 8 1/2%, 2008........................... 12,900,860
18,600,000 GMAC Put Bonds 8 7/8%, 2010, Putable 2000/2005............................. 22,760,634
3,100,000 Golden West Financial Subordinated Notes 6.70%, 2002....................... 3,185,126
3,000,000 Golden West Financial Subordinated Notes 7 1/4%, 2002...................... 3,178,230
8,075,000 Golden West Financial Subordinated Notes 6%, 2003.......................... 7,925,290
6,215,000 ITT Hartford Group Notes 8.30%, 2001....................................... 6,887,339
5,625,000 ITT Hartford Group Notes 6 3/8%, 2002...................................... 5,694,244
2,000,000 Norwest Corp. MTN 6 1/2%, 2005............................................. 2,045,480
5,500,000 Norwest Corp. Subordinated Debentures 6.65%, 2023.......................... 5,432,790
--------------
82,849,288
INTERNATIONAL AGENCY: 1.5%
7,200,000 European Investment Bank Bonds 10 1/8%, 2000............................... 8,487,072
18,000,000 Inter-American Development Bank Debentures 7 1/8%, 2023, Callable 2003..... 18,496,440
--------------
26,983,512
TRANSPORTATION: 1.3%
3,900,000 AMR Corp. Debentures 9.88%, 2020........................................... 4,781,049
7,925,000 AMR Corp. Debentures 9 3/4%, 2021.......................................... 9,629,113
8,479,638 Consolidated Rail Corp. 95-A Pass Through Trust 6.76%, 2015................ 8,782,107
--------------
23,192,269
</TABLE>
See accompanying Notes to Financial Statements
======================================---=======================================
8
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
<TABLE>
<CAPTION>
Portfolio of Investments December 31, 1995
--------------------------------------------------------------------------------------------------------------
PAR VALUE MARKET VALUE
<C> <C> <S> <C>
BONDS CANADIAN: 1.1%
(Continued) $ 8,000,000 Canadian Pacific Ltd. Debentures 9.45%, 2021............................... $ 10,206,080
7,900,000 Hydro-Quebec Debentures 8.40%, 2022........................................ 9,134,059
--------------
19,340,139
PUBLIC UTILITIES: 0.0%
750,000 Idaho Power Co. 1st Mortgage Bonds 9 1/2%, 2021, Callable 2001............. 889,598
--------------
Total Bonds (cost $654,960,206)....................................... 688,495,323
--------------
SHORT TERM 14,865,834 Eli Lilly & Co., Variable Demand Note 5.32%, 1996.......................... 14,865,834
INVESTMENTS: 11,576,655 General Mills, Inc., Variable Demand Note 5.58%, 1996...................... 11,576,655
5.7% 20,654,539 Pitney Bowes Credit Corp., Variable Demand Note 5.49%, 1996................ 20,654,539
13,000,000 Prudential Funding Corp., Commercial Paper 5.65%, 1996..................... 13,000,000
2,100,000 Prudential Funding Corp., Commercial Paper 5.92%, 1996..................... 2,100,000
22,318,803 Sara Lee Corp., Variable Demand Note 5.47%, 1996........................... 22,318,803
11,717,013 Southwestern Bell Telephone Co., Variable Demand Note 5.72%, 1996.......... 11,717,013
5,987,315 Wisconsin Electric Power Corp., Variable Demand Note 5.53%, 1996........... 5,987,315
--------------
Total Short-Term Investments (cost $102,220,159)...................... 102,220,159
--------------
TOTAL INVESTMENTS (cost $1,555,885,870).......................... 100.4% 1,807,494,787
OTHER ASSETS LESS LIABILITIES.................................... (0.4) (7,193,923)
----- --------------
TOTAL NET ASSETS................................................. 100.0% $1,800,300,864
===== ==============
</TABLE>
+ Non-income producing
* CMO: Collateralized Mortgage Obligation
** REMIC: Real Estate Mortgage Investment Conduit
See accompanying Notes to Financial Statements
<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>
1986 $ 27,516,246 $32.62 $36.18 $ 1.62 $ 3.55
1987 34,376,651 30.72 37.02 1.70 2.67
1988 39,031,819 32.09 39.21 1.68 .46
1989 50,950,919 36.85 45.92 1.76 .71
1990 82,596,374 35.03 44.07 1.81 .33
1991 179,392,902 40.09 50.79 1.76 .29
1992 268,768,015 42.44 53.86 1.72 .08
1993 486,830,358 46.40 60.23 1.66 1.07
1994 725,271,607 45.21 59.13 1.76 .36
1995 1,800,300,864 54.60 73.00 1.90 1.19**
------ ------
$17.37 $10.71
====== ======
</TABLE>
* Adjusted for assumed reinvestment of capital gains
distributions.
** The capital gains distribution of $1.19 per share includes
a net short-term capital gain of $.28 per share which was
distributed to shareholders as ordinary income.
======================================---=======================================
9
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities December 31, 1995
--------------------------------------------------------------------------------------------------
<C> <S> <C>
ASSETS:
Investments (identified cost $1,555,885,870) at market quotations............... $1,807,494,787
Cash............................................................................ 4,659,139
Dividends receivable and interest accrued....................................... 12,348,113
Receivable for investments sold................................................. 239,783
Deferred charges................................................................ 31,662
--------------
1,824,773,484
--------------
LIABILITIES:
Payable for Fund shares redeemed................................................ 1,228,966
Payable for investments purchased............................................... 23,124,467
Accounts payable................................................................ 119,187
--------------
24,472,620
--------------
Net asset value
per share $54.60 NET ASSETS.................................................................. $1,800,300,864
==============
NET ASSETS CONSIST OF:
Beneficial Paid in capital................................................................. $1,544,063,197
shares Accumulated undistributed net investment income................................. 628,035
outstanding Accumulated undistributed net realized gain on investments...................... 4,000,715
32,973,247 (par Net unrealized appreciation on investments...................................... 251,608,917
value $1.00 each, --------------
unlimited shares $1,800,300,864
authorized) ==============
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations Year Ended December 31, 1995
--------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends....................................................................... $ 17,146,034
Interest........................................................................ 38,760,653
------------
55,906,687
------------
EXPENSES:
Management fees (Note 2)........................................................ 6,321,900
Custodian fees.................................................................. 205,145
Transfer agent fees............................................................. 303,201
Audit fees...................................................................... 29,950
Legal fees (Note 2)............................................................. 1,588
Shareholder reports............................................................. 103,130
S.E.C. and state registration fees.............................................. 150,231
Trustees' fees.................................................................. 12,000
Miscellaneous................................................................... 51,085
------------
7,178,230
------------
NET INVESTMENT INCOME........................................................... 48,728,457
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments (excluding short-term investments).......... 40,099,262
Change in unrealized appreciation of investments............................. 202,379,528
------------
Net realized and unrealized gain on investments........................ 242,478,790
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.................................................... $291,207,247
============
</TABLE>
See accompanying Notes to Financial Statements
======================================---=======================================
10
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
<TABLE>
<CAPTION>
Statement of Changes in Net Assets Year Ended December 31,
---------------------------------------------------------------------------------------------------------
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income................................................. $ 48,728,457 $ 25,116,549
Net realized gain on investments...................................... 40,099,262 4,772,545
Net change in unrealized appreciation................................. 202,379,528 (17,796,042)
-------------- ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS............................ 291,207,247 12,093,052
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................................. (48,423,029) (25,279,377)
Net realized gain from investment transactions........................ (37,087,374) (4,824,628)
-------------- ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS................................... (85,510,403) (30,104,005)
-------------- ------------
BENEFICIAL SHARE TRANSACTIONS:
Amounts received from sale of shares.................................. 950,177,869 302,394,531
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............. 81,994,507 28,102,154
-------------- ------------
1,032,172,376 330,496,685
Amounts paid for shares redeemed...................................... (162,839,963) (74,044,483)
-------------- ------------
NET INCREASE FROM BENEFICIAL SHARE TRANSACTIONS....................... 869,332,413 256,452,202
-------------- ------------
TOTAL INCREASE IN NET ASSETS.......................................... 1,075,029,257 238,441,249
NET ASSETS:
Beginning of year..................................................... 725,271,607 486,830,358
-------------- ------------
End of year (including undistributed net investment income
of $628,035 and $322,607, respectively)............................... $1,800,300,864 $725,271,607
============== ============
Shares sold........................................................... 18,517,367 6,545,586
Shares issued in connection with reinvestment
of dividends from net investment income and
from distribution of net realized gain on investments................. 1,549,186 610,155
Shares redeemed....................................................... (3,134,045) (1,607,899)
-------------- ------------
Net increase in shares outstanding.................................... 16,932,508 5,547,842
============== ============
</TABLE>
See accompanying Notes to Financial Statements
======================================---=======================================
11
<PAGE>
DODGE & COX
======================================---=======================================
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.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements. Actual results could
differ from those estimates.
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 and 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 during 1995 were paid to Heller, Ehrman,
White & McAuliffe, legal counsel for the Fund. Robert C. Harris, an employee
of that firm, was a trustee of the Fund until December 31, 1995.
3 For the year ended December 31, 1995, purchases and sales of securities,
other than short-term securities, aggregated $1,000,524,708 and
$231,831,217, respectively, of which U.S. government obligations aggregated
$352,161,686 and $109,550,174, respectively. At December 31, 1995, the cost
of investments for Federal income tax purposes was equal to the cost for
financial reporting purposes. Net unrealized appreciation aggregated
$251,608,917, of which $267,253,765 represented appreciated securities and
$15,644,848 represented depreciated securities.
======================================---=======================================
12
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
Report of Independent Accountants
----------------------------------------------------------------------------
To the Trustees and Shareholders of Dodge & Cox Balanced Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Dodge & Cox
Balanced Fund (the "Fund") at December 31, 1995, 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 then ended and the financial highlights for
each of the five years in the period then ended, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
San Francisco, California
January 23, 1996
----------------------------------------------------------------------------
SPECIAL 1995 TAX INFORMATION (UNAUDITED)
Corporate shareholders should note that for the year ended December 31,
1995, a total of 28% of the Fund's ordinary income distributions qualified
for the corporate dividends received deduction.
======================================---=======================================
13
<PAGE>
DODGE & COX
======================================---=======================================
Balanced Fund
Officers and Trustees
----------------------------------------------------------------------------
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
Max Gutierrez, Jr., Trustee
Partner, Brobeck, Phleger & Harrison, 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
----------------------------------------------------------------------------
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
----------------------------------------------------------------------------
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.
======================================---=======================================
14
<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
======================================---=======================================
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Dodge &
Cox Balanced Fund Annual Report dated December 31, 1995, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,555,885,870
<INVESTMENTS-AT-VALUE> 1,807,494,787
<RECEIVABLES> 12,587,896
<ASSETS-OTHER> 31,662
<OTHER-ITEMS-ASSETS> 4,659,139
<TOTAL-ASSETS> 1,824,773,484
<PAYABLE-FOR-SECURITIES> 23,124,467
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,348,153
<TOTAL-LIABILITIES> 24,472,620
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,544,063,197
<SHARES-COMMON-STOCK> 32,973,247
<SHARES-COMMON-PRIOR> 16,040,739
<ACCUMULATED-NII-CURRENT> 628,035
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,000,715
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 251,608,917
<NET-ASSETS> 1,800,300,864
<DIVIDEND-INCOME> 17,146,034
<INTEREST-INCOME> 38,760,653
<OTHER-INCOME> 0
<EXPENSES-NET> 7,178,230
<NET-INVESTMENT-INCOME> 48,728,457
<REALIZED-GAINS-CURRENT> 40,099,262
<APPREC-INCREASE-CURRENT> 202,379,528
<NET-CHANGE-FROM-OPS> 291,207,247
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 48,423,029
<DISTRIBUTIONS-OF-GAINS> 37,087,374
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,517,367
<NUMBER-OF-SHARES-REDEEMED> 3,134,045
<SHARES-REINVESTED> 1,549,186
<NET-CHANGE-IN-ASSETS> 1,075,029,257
<ACCUMULATED-NII-PRIOR> 322,607
<ACCUMULATED-GAINS-PRIOR> 988,826
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,321,900
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,178,230
<AVERAGE-NET-ASSETS> 1,264,380,187
<PER-SHARE-NAV-BEGIN> 45.21
<PER-SHARE-NII> 1.90
<PER-SHARE-GAIN-APPREC> 10.58
<PER-SHARE-DIVIDEND> 1.90
<PER-SHARE-DISTRIBUTIONS> 1.19
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 54.60
<EXPENSE-RATIO> 0.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
