<PAGE>
D O D G E & C O X D O D G E & C O X
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Balanced Fund Balanced Fund
Established 1931
---------------------
Dodge & Cox ---------------------
Investment Managers
35th Floor
One Sansome Street
San Francisco
California 94104
(415) 981-1710
For Fund literature and
information, please call:
(800) 621-3979
- ---------------------
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 67th Annual Report
it is accompanied by an December 31, 1997
effective prospectus.
1997
---------------------
/o/Printed on recycled paper. ---------------------
12/97 BF AR ---------------------
<PAGE>
D o d g e & C o x
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Balanced Fund
To Our Shareholders
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The Dodge & Cox Balanced Fund achieved a total return of 21.2% for 1997. This
result compares with 1997 returns of 33.3% for the Standard & Poor's 500 Index
(S&P 500) of common stocks and 9.7% for the Lehman Brothers Aggregate Bond Index
(LBAG) for the same period. Average annual total returns for longer periods are
listed on page three of this report.
The net asset value per share of the Fund rose from $59.82 at the end of 1996 to
$66.78 on December 31, 1997. In addition, the Fund paid income dividends of
$2.22 per share and distributed net realized short and long-term capital gains
of $3.27 per share during the year.
At December 31, the Balanced Fund's total net assets were $5.1 billion. The
Fund was approximately 57% invested in common stocks, 39% in fixed income
securities and 4% in cash equivalents.
Strong Equity Performance Tempered by Concerns About Asia
The U.S. economy performed well in 1997. After expanding at a rate of 3.3% in
1996, U.S. gross domestic product (GDP) grew at a rate of 3.9% in 1997.
Inflation, as measured by the Consumer Price Index, rose only 1.7% in 1997, the
smallest increase in a decade. Prices at the producer level, as measured by the
Producer Price Index, actually fell by 1.2% in 1997. While events in Asia may
slow world economic growth in the short run, we believe that the U.S. and world
economies continue to have relatively good long-term prospects.
The equity portion of the Fund provided a strong total return during 1997, but
lagged the total return of the S&P 500. Holdings in the finance, retail and
media/entertainment sectors were among the Fund's best performers. Among the
individual stocks that contributed most were Norwest, Golden West, American
Express and Nordstrom. Investor concerns over financial turmoil in Asia
negatively impacted many of the Fund's holdings in companies whose profits are
thought to be more sensitive to economic activity ("cycle-sensitive"), during
the last few months of the year. Weak relative performers during the year
included a number of the Fund's holdings in basic industry, electronics/computer
and energy sectors. The Fund's weakest stocks included Union Pacific Resources,
Fleming, Sybase and Motorola.
Equity Strategy: Major Themes
Although our investment approach is focused on "bottom-up" individual stock
selection, several themes are apparent in the Fund's equity portfolio. First,
the Fund holds a significantly greater number of common stocks in the cycle-
sensitive area than represented in the S&P 500. This area includes basic
industry (e.g., paper/forest products and chemicals), consumer durables (e.g.,
autos and appliances) and transportation. General Motors, Union Pacific and Dow
Chemical are the largest holdings in this broadly diversified sector. Second,
the Fund's weightings are lower than those of the S&P 500 in the consumer
products, health care and telephone sectors. While these areas contain many
well-managed companies, their stock valuations are far above what we are willing
to pay, given our assessment of their future earnings prospects. The Fund also
has significant holdings in the finance and electronics/computer sectors, with
portfolio weightings similar to those of the S&P 500.
Falling Interest Rates Fuel Strong Fixed Income Returns
The strong performance of the bond market was largely attributable to a
combination of stable economic growth, lower inflation, and minimal changes in
Federal Reserve policy. This favorable economic environment led to lower
interest rates across the maturity spectrum. During 1997, 30-year U.S. Treasury
rates fell from 6.64% to 5.92%, while two-year U.S. Treasury rates fell from
5.87% to 5.64%. In addition to the overall decline, the differential between
yields on longer and shorter maturities narrowed. As a result of these factors,
prices of fixed income securities increased, with the largest increases recorded
by longer-maturity bonds.
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1
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D o d g e & C o x
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Balanced Fund
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The bond portion of the Fund outperformed the LBAG. Investment income comprised
about two-thirds of the Fund's fixed income return in 1997, while price
appreciation comprised nearly one-third of return. Underlying the price
appreciation of the bond portfolio were two key factors:
* Longer-than-market duration. Compared to the LBAG, a higher percentage
of the Fund's portfolio was in longer-maturity bonds. This led to a
longer portfolio duration (a measure of a portfolio's price sensitivity
to changes in interest rates) for the Fund. As a result, the decline in
interest rates meant a greater price appreciation for the Fund than for
the overall market.
* Security selection. Our attempt to select securities that will perform
well in a broad range of interest rate scenarios led us to prefer
corporate securities that are non-callable and mortgage-related
securities that exhibit relatively greater cash flow stability. By
focusing on well-structured securities, the Fund experienced greater
price appreciation than the LBAG.
Fixed Income Investment Philosophy
Our primary focus as bond managers has always been the utilization of two Dodge
& Cox hallmarks: independent fundamental research and individual security
selection. Through our efforts in these areas, we actively seek to build the
incremental yield of the Fund and its long-term total return potential. The
fixed income portion of the Fund is overweight in both the corporate and
mortgage-backed sectors, compared to the LBAG. At year end, holdings in these
sectors each represented roughly 38% of the Fund's bond portfolio, while
holdings in U.S. government securities represented 23%.
In the mortgage sector, our strategy has been to focus on securities that
exhibit relatively stable cash flows over a wide range of interest rate
scenarios. Therefore, even in periods of declining interest rates such as 1997,
our mortgage-backed securities have made positive contributions to the Fund's
overall return.
Corporate securities represented the Fund's best performing fixed income sector
in 1997, due largely to our emphasis on longer-duration issues. Our strategy
for the corporate sector is to utilize our in-house team of research analysts to
help identify issuers where we believe the market underestimates
creditworthiness or total return potential. Based on this approach, we added new
positions in Norfolk Southern and Raytheon to the portfolio during the year.
Conclusion
We enter 1998 with concerns regarding the relatively high valuation of the U.S.
equity market. As we have cautioned in the past, we do not anticipate the
recent high returns from equities to continue. However, with moderate economic
growth and the thirty-year U.S. Treasury bond yield currently at 5.8%, we
believe that equities can continue to be a relatively attractive area for
investment over the long-term. Our investment approach in this environment will
remain focused on a strong research effort and individual stock selection.
While we continue to believe that stocks will outperform bonds over the long-
term, we expect the gap between equity and fixed income returns will narrow
compared to the recent experience. Equity returns can be volatile and the use
of fixed income securities provides relative stability to a long-term balanced
investment program.
Thank you for your confidence in the Dodge & Cox Balanced Fund. As always, we
welcome your comments and questions.
For the Board of Trustees,
/s/ Harry R. Hagey
January 28, 1998 ----------------------------
Harry R. Hagey, Chairman
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2
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D o d g e & C o x
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Balanced Fund
Objective The Fund's objectives are to provide shareholders with regular
income, conservation of principal and an opportunity for long-term
growth of principal and income.
Strategy The Fund seeks to achieve these objectives by remaining fully
invested in a diversified portfolio of stocks and bonds.
Stocks: The Fund invests in well-established companies which, in
the view of Dodge & Cox, have positive earnings prospects not
reflected in the current price. Dodge & Cox makes a conscious
effort to maintain representation in major economic sectors and
areas with strong long-term profit potential. The Fund will hold no
more than 75% of its total assets in stocks.
Bonds: Dodge & Cox constructs a diversified portfolio of high-
quality bonds, while striving to maintain the fixed income yield
higher than that of the broad bond market. Fixed income securities
in the Fund will generally include U.S. Treasury, mortgage-related
and corporate issues.
<TABLE>
<CAPTION>
20 Years of Investment Performance through December 31, 1997
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[LINE GRAPH APPEARS HERE]
S & P 500 LBAG Combined Dodge & Cox
Index Index Index Balanced Fund
---------- -------- ----------- -------------
<S> <C> <C> <C> <C>
1/1/1978 10,000 10,000 10,000 10,000
12/31/1978 10,638 10,140 10,463 10,603
12/31/1979 12,622 10,335 11,696 12,036
12/31/1980 16,709 10,616 14,081 14,643
12/31/1981 15,831 11,280 13,981 14,269
12/31/1982 19,241 14,960 17,641 17,994
12/31/1983 23,585 16,211 20,599 21,033
12/31/1984 25,070 18,668 22,656 22,023
12/31/1985 33,036 22,797 28,994 29,178
12/31/1986 39,201 26,273 34,106 34,670
12/31/1987 41,261 26,999 36,038 37,158
12/31/1988 48,115 29,127 40,747 41,444
12/31/1989 63,354 33,360 50,828 50,991
12/31/1990 61,379 36,346 51,744 51,456
12/31/1991 80,082 42,162 64,563 62,125
12/31/1992 86,179 45,283 69,453 68,698
12/31/1993 94,865 49,699 76,392 79,673
12/31/1994 96,113 48,249 76,135 81,261
12/31/1995 132,227 57,164 98,698 104,034
12/31/1996 162,582 59,230 113,461 119,375
12/31/1997 216,786 64,968 140,264 144,698
</TABLE>
<TABLE>
<CAPTION>
Average annual total return for periods ended December 31, 1997 1 Year 5 Years 10 Years 20 Years
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<S> <C> <C> <C> <C>
Dodge & Cox Balanced Fund.......................................... 21.21% 16.06% 14.56% 14.29%
Combined Index..................................................... 23.63 15.10 14.57 14.12
S&P 500 Index...................................................... 33.34 20.26 18.05 16.63
Lehman Brothers Aggregate Bond Index............................... 9.68 7.49 9.18 9.81
</TABLE>
The chart covers the period from January 1, 1978 to December 31, 1997. It
compares a $10,000 investment made in the Dodge & Cox Balanced Fund to $10,000
investments made in the Standard & Poor's 500 Stock (S&P 500) Index, the Lehman
Brothers Aggregate Bond (LBAG) Index and a combined Index. The Fund's total
returns include the reinvestment of dividend and capital gain distributions. The
S&P 500 Index is a broad-based, unmanaged measure of common stocks. The LBAG
Index is a broad-based, unmanaged measure of investment grade-rated corporate
and U.S. Government fixed income securities. The Combined Index reflects an
unmanaged portfolio of 60% of the S&P 500 Index and 40% of the LBAG Index. The
Fund may, however, invest up to 75% of its total assets in stocks. Index returns
include dividends and/or interest income, and, unlike Fund returns, do not
reflect fees or expenses. Past performance does not guarantee future results.
Investment return and share price will fluctuate with market conditions, and
investors may have a gain or loss when shares are sold.
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3
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D o d g e & C o x
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Balanced Fund
Fund Information December 31, 1997
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General Information
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<TABLE>
<CAPTION>
<S> <C>
Net Asset Value Per Share $66.78
Total Net Assets (millions) $5,077
1997 Expense Ratio 0.55%
1997 Portfolio Turnover 32%
30 Day SEC Yield* 3.48%
Fund Inception Date 1931
Investment Manager: Dodge & Cox, San Francisco. Managed by
ten-member Bond Strategy Committee, with members' average
tenure at Dodge & Cox of 19 years.
</TABLE>
<TABLE>
<CAPTION>
Asset Allocation
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[PIE CHART APPEARS HERE]
<C> <C>
Bonds: 39.1%
Stocks: 57.3%
Short-Term Investments: 3.6
Stock Portfolio (57.3% of Fund)
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<S> <C>
Number of Stocks 78
Median Market Capitalization $9.3 billion
Price to Earnings Ratio
(trailing 12 months) 19.9x
Price to Book Value
(trailing 12 months) 3.1x
Foreign Stocks**
(as percentage of Fund) 6%
</TABLE>
<TABLE>
<CAPTION>
Five Largest Sector Weightings % of Fund
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<S> <C>
Electronics & Computer 5.9
Banking 5.5
Energy 5.3
Insurance & Financial Services 4.8
Electric & Gas Utilities 4.6
</TABLE>
<TABLE>
<CAPTION>
Ten Largest Stock Holdings % of Fund
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<S> <C>
General Motors 1.6
American Express 1.6
Citicorp 1.4
Union Pacific 1.4
Dow Chemical 1.3
Pharmacia & Upjohn 1.3
Golden West Financial 1.3
International Business Machines 1.3
Digital Equipment 1.2
R.R. Donnelley & Sons 1.2
</TABLE>
<TABLE>
<CAPTION>
Bond Portfolio (39.1% of Fund)
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<S> <C>
Number of Bonds 120
Average Quality AA+
Average Maturity 10.4 years
Effective Duration 4.78 years
</TABLE>
<TABLE>
<CAPTION>
Moody's/Standard & Poor's Quality Ratings % of Fund
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<S> <C>
U.S. Government & Government
Agencies 24.1
Aaa/AAA 2.2
Aa/AA 1.7
A/A 6.4
Baa/BBB 4.6
Ba/BB 0.1
</TABLE>
<TABLE>
<CAPTION>
Sector Breakdown % of Fund
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<S> <C>
U.S. Treasury and Government Agency 9.0
Federal Agency CMO and REMIC+ 8.4
Federal Agency Mortgage Pass-Through 6.7
Asset-Backed 0.6
Corporate 12.9
Foreign (U.S. Dollar-denominated) 1.5
</TABLE>
+ Collateralized Mortgage Obligation and Real Estate Mortgage Investment
Conduit
* An annualization of the Fund's total net investment income per share for the
30-day period ended on the last day of the month.
** All U.S. Dollar-denominated.
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4
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<TABLE>
<CAPTION>
D o d g e & C o x
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Balanced Fund
Portfolio of Investments December 31, 1997
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SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON CONSUMER: 14.2%
STOCKS: CONSUMER DURABLES: 4.4%
56.3% 1,313,000 General Motors Corp..................................................... $ 79,600,625
1,133,000 Ford Motor Co........................................................... 55,162,938
866,000 Whirlpool Corp.......................................................... 47,630,000
779,300 Masco Corp.............................................................. 39,646,887
--------------
222,040,450
CONSUMER PRODUCTS: 4.0%
545,000 Sony Corp. ADR.......................................................... 49,458,750
627,000 Unilever NV............................................................. 39,148,312
202,700 Matsushita Electric Industrial Co., Ltd. ADR............................ 30,810,400
680,000 Fort James Corp......................................................... 26,010,000
540,100 Dole Food Co., Inc...................................................... 24,709,575
622,700 Bausch & Lomb, Inc...................................................... 24,674,488
238,500 VF Corp................................................................. 10,956,094
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205,767,619
RETAIL AND DISTRIBUTION: 3.5%
4,828,000 Kmart Corp+............................................................. 55,823,750
892,000 Nordstrom, Inc.......................................................... 53,743,000
1,020,000 Dillard's, Inc. Class A................................................. 35,955,000
851,000 Genuine Parts Co........................................................ 28,880,812
287,000 Fleming Cos., Inc....................................................... 3,856,563
--------------
178,259,125
MEDIA, PRINTING AND ENTERTAINMENT: 2.3%
1,587,000 R.R. Donnelley & Sons Co................................................ 59,115,750
600,650 Dow Jones & Co.......................................................... 32,247,397
395,000 Time Warner, Inc........................................................ 24,490,000
--------------
115,853,147
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721,920,341
FINANCE: 10.3%
BANKING: 5.5%
571,000 Citicorp................................................................ 72,195,812
660,000 Golden West Financial Corp.............................................. 64,556,250
674,000 BankAmerica Corp........................................................ 49,202,000
429,200 Republic New York Corp.................................................. 49,009,275
1,167,000 Norwest Corp............................................................ 45,075,375
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280,038,712
INSURANCE AND FINANCIAL SERVICES: 4.8%
888,000 American Express Co..................................................... 79,254,000
544,500 The St. Paul Cos., Inc.................................................. 44,683,031
579,000 Chubb Corp.............................................................. 43,786,875
393,600 Loews Corp.............................................................. 41,770,800
146,000 General Re Corp......................................................... 30,952,000
--------------
240,446,706
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520,485,418
See accompanying Notes to Financial Statements
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5
</TABLE>
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<TABLE>
<CAPTION>
D o d g e & C o x
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Balanced Fund
Portfolio of Investments December 31, 1997
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SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON BASIC INDUSTRY: 6.5%
STOCKS PAPER AND FOREST PRODUCTS: 2.9%
(Continued) 961,000 Weyerhaeuser Co................................................................. $ 47,149,062
900,600 Champion International Corp..................................................... 40,808,438
919,000 International Paper Co.......................................................... 39,631,875
566,000 Boise Cascade Corp.............................................................. 17,121,500
--------------
144,710,875
CHEMICALS: 2.5%
675,000 Dow Chemical Co................................................................. 68,512,500
470,400 Eastman Chemical Co............................................................. 28,018,200
477,700 Nalco Chemical Co............................................................... 18,899,006
274,000 Lubrizol Corp................................................................... 10,103,750
--------------
125,533,456
METALS AND MINING: 1.1%
817,000 Aluminum Co. of America......................................................... 57,496,375
--------------
327,740,706
ELECTRONICS AND COMPUTER: 5.9%
615,000 International Business Machines Corp............................................ 64,305,937
1,678,000 Digital Equipment Corp.+........................................................ 62,086,000
702,000 Hewlett-Packard Co.............................................................. 43,875,000
995,400 Electronic Data Systems......................................................... 43,735,388
738,900 Motorola, Inc................................................................... 42,163,481
1,182,900 NCR Corp.+...................................................................... 32,899,406
901,800 Sybase, Inc.+................................................................... 12,033,394
--------------
301,098,606
ENERGY: 5.3%
1,811,000 Occidental Petroleum Corp....................................................... 53,084,937
915,200 Amerada Hess Corp............................................................... 50,221,600
1,908,085 Union Pacific Resources Group, Inc.............................................. 46,271,061
910,200 Phillips Petroleum Co........................................................... 44,258,475
578,000 Royal Dutch Petroleum Co........................................................ 31,320,375
402,000 Chevron Corp.................................................................... 30,954,000
146,000 Amoco Corp...................................................................... 12,428,250
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268,538,698
UTILITIES: 5.2%
ELECTRIC AND GAS UTILITIES: 4.6%
1,772,200 Central & South West Corp....................................................... 47,960,163
827,000 Texas Utilities Co.............................................................. 34,372,187
502,800 FPL Group, Inc.................................................................. 29,759,475
1,208,100 TransCanada PipeLines Ltd....................................................... 27,031,238
953,000 Edison International............................................................ 25,909,688
663,400 Pacific Enterprises............................................................. 24,960,425
793,000 Wisconsin Energy Corp........................................................... 22,798,750
646,000 Pacific Gas & Electric Corp..................................................... 19,662,625
--------------
232,454,551
See accompanying Notes to Financial Statements
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6
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<TABLE>
<CAPTION>
D o d g e & C o x
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Balanced Fund
Portfolio of Investments December 31, 1997
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SHARES MARKET VALUE
<C> <C> <S> <C>
COMMON TELEPHONE: 0.6%
STOCKS 960,000 BCE, Inc................................................................. $ 31,980,000
(Continued) --------------
264,434,551
TRANSPORTATION: 3.2%
1,127,300 Union Pacific Corp....................................................... 70,385,794
907,800 Federal Express Corp+.................................................... 55,432,537
1,281,000 Canadian Pacific Ltd..................................................... 34,907,250
--------------
160,725,581
CAPITAL EQUIPMENT: 2.4%
854,000 Deere & Co............................................................... 49,798,875
779,000 Caterpillar, Inc......................................................... 37,830,188
806,000 Fluor Corp............................................................... 30,124,250
83,730 Raytheon Co. Class A..................................................... 4,128,936
--------------
121,882,249
HEALTHCARE AND PHARMACEUTICAL: 1.8%
1,794,200 Pharmacia & Upjohn, Inc.................................................. 65,712,575
307,000 HealthCare COMPARE Corp+................................................. 15,772,125
221,500 SmithKline Beecham plc ADR............................................... 11,393,406
--------------
92,878,106
DIVERSIFIED TECHNOLOGY: 1.3%
355,000 Xerox Corp............................................................... 26,203,437
543,000 Corning, Inc............................................................. 20,158,875
270,400 Raychem Corp............................................................. 11,644,100
632,100 Unova, Inc+.............................................................. 10,390,144
--------------
68,396,556
MISCELLANEOUS: 0.2%
REAL ESTATE INVESTMENT TRUST: 0.2%
231,451 Meditrust Corp........................................................... 8,476,893
--------------
Total Common Stocks (cost $2,097,595,182)......................................... 2,856,577,705
PREFERRED CONSUMER: 1.0%
STOCKS: 2,479,000 News Corp. Ltd., Limited Voting Ordinary Shares ADR...................... 49,270,125
1.0% 57,500 Kmart Financing I, 7 3/4% Trust Convertible Preferred.................... 2,968,438
--------------
Total Preferred Stocks (cost $46,934,177)......................................... 52,238,563
PAR VALUE
BONDS: U.S. TREASURY AND GOVERNMENT AGENCY: 9.0%
39.1% U.S. TREASURY: 8.1%
$ 26,925,000 U.S. Treasury Notes, 5 1/4%, 7/31/1998.................................. 26,878,689
83,500,000 U.S. Treasury Notes, 7 1/8%, 10/15/1998................................. 84,452,735
104,050,000 U.S. Treasury Notes, 5 1/8%, 11/30/1998................................. 103,594,261
See accompanying Notes to Financial Statements
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7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
D o d g e & C o x
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Balanced Fund
Portfolio of Investments December 31, 1997
----------------------------------------------------------------------------------------------------------------
PAR VALUE MARKET VALUE
<C> <C> <S> <C>
BONDS U.S. TREASURY (Continued)
(Continued) $47,225,000 U.S. Treasury Notes, 5 7/8%, 11/15/1999.......................................... $ 47,394,538
70,850,000 U.S. Treasury Notes, 7 1/8%, 2/29/2000........................................... 72,898,274
12,000,000 U.S. Treasury Notes, 6 3/4%, 4/30/2000........................................... 12,273,720
45,890,000 U.S. Treasury Notes, 5 5/8%, 11/30/2000.......................................... 45,803,727
18,200,000 U.S. Treasury Bonds, 6 1/4%, 2/15/2003........................................... 18,612,412
--------------
411,908,356
GOVERNMENT AGENCY: 0.9%
5,000,000 Arkansas Dev. Fin. Auth. GNMA Guaranteed Bonds 9 3/4%, 11/15/2014................ 6,274,450
16,477,545 Govt. Small Business Admin. 504 Series 97-20F, 7.20%, 6/1/2017................... 17,237,489
18,885,000 Govt. Small Business Admin. 504 Series 97-20I, 6.90%, 9/1/2017................... 19,427,188
--------------
42,939,127
--------------
454,847,483
FEDERAL AGENCY CMO* AND REMIC**: 8.4%
16,200,000 Federal Home Loan Mtge. Corp., 7%, 3/15/2005..................................... 16,443,000
15,000,000 Federal Home Loan Mtge. Corp., 7%, 1/15/2006..................................... 15,332,700
15,000,000 Federal Home Loan Mtge. Corp., 7%, 10/15/2006.................................... 15,262,500
34,828,483 Federal Home Loan Mtge. Corp., 6 3/4%, 11/15/2006................................ 35,078,551
5,934,000 Federal Home Loan Mtge. Corp., 6%, 1/15/2007..................................... 5,850,509
21,500,000 Federal Home Loan Mtge. Corp., 6 1/2%, 10/15/2007................................ 21,587,290
12,609,000 Federal Home Loan Mtge. Corp., 7%, 1/15/2008..................................... 12,955,748
14,750,000 Federal Home Loan Mtge. Corp., 6 1/2%, 5/15/2008................................. 14,823,750
10,000,000 Federal Home Loan Mtge. Corp., 6 1/2%, 5/15/2008................................. 10,046,800
16,474,350 Federal Home Loan Mtge. Corp., 6 1/2%, 8/15/2008................................. 16,721,465
26,000,000 Federal Home Loan Mtge. Corp., 6%, 12/15/2008.................................... 25,593,620
21,129,089 Federal Home Loan Mtge. Corp., 7%, 5/17/2020..................................... 21,313,968
21,368,733 Federal Home Loan Mtge. Corp., 6 1/2%, 5/15/2021................................. 21,081,537
28,000,000 Federal Home Loan Mtge. Corp., 7%, 8/25/2023..................................... 28,980,000
6,293,731 Federal Natl. Mtge. Assn., 5%, 12/25/2004........................................ 6,215,060
39,181,926 Federal Natl. Mtge. Assn., 6%, 9/18/2005......................................... 39,083,971
8,696,622 Federal Natl. Mtge. Assn., 5%, 1/1/2006.......................................... 8,329,711
21,840,000 Federal Natl. Mtge. Assn., 7 1/2%, 2/25/2007..................................... 22,556,570
21,674,800 Federal Natl. Mtge. Assn., 6 1/2%, 8/25/2008..................................... 21,810,268
15,475,000 Federal Natl. Mtge. Assn., 6%, 3/25/2009........................................ 15,165,500
1,064,531 Federal Natl. Mtge. Assn., 6 1/2%, 4/1/2009...................................... 1,061,529
9,737,901 Federal Natl. Mtge. Assn., 5.70%, 8/25/2016..................................... 9,600,889
13,730,000 Federal Natl. Mtge. Assn., 7%, 6/17/2022......................................... 14,279,200
13,352,000 Veterans Affairs Vendee Mtge. Trust, 6 1/2%, 11/15/2009.......................... 13,372,829
15,929,940 Veterans Affairs Vendee Mtge. Trust, 6 3/4%, 8/15/2014........................... 16,004,492
--------------
428,551,457
FEDERAL AGENCY MORTGAGE PASS-THROUGH: 6.7%
967,112 Federal Home Loan Mtge. Corp., 6 1/2%, 2/1/2006.................................. 976,667
732,712 Federal Home Loan Mtge. Corp., 7 1/2%, 7/1/2006.................................. 748,817
227,604 Federal Home Loan Mtge. Corp., 7%, 9/1/2006...................................... 229,675
See accompanying Notes to Financial Statements
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D o d g e & C o x
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Balanced Fund
Portfolio of Investments December 31, 1997
----------------------------------------------------------------------------------------------------------------
PAR VALUE MARKET VALUE
<C> <C> <S> <C>
BONDS FEDERAL AGENCY MORTGAGE PASS-THROUGH (continued)
(Continued) $ 509,819 Federal Home Loan Mtge. Corp., 7 1/4%, 1/1/2008.................................... $ 518,430
281,996 Federal Home Loan Mtge. Corp., 7 1/2%, 2/1/2008.................................... 288,194
1,187,383 Federal Home Loan Mtge. Corp., 8%, 2/1/2008........................................ 1,227,825
245,170 Federal Home Loan Mtge. Corp., 7 1/4%, 4/1/2008.................................... 249,310
31,349,114 Federal Home Loan Mtge. Corp., 7%, 5/1/2008........................................ 31,954,779
45,345,541 Federal Home Loan Mtge. Corp., 7%, 12/1/2008....................................... 46,221,617
22,614,974 Federal Home Loan Mtge. Corp., 6%, 9/1/2009........................................ 22,456,217
1,156,113 Federal Home Loan Mtge. Corp., 8 3/4%, 5/1/2010.................................... 1,208,612
19,273,344 Federal Home Loan Mtge. Corp., 7 1/2%, 8/1/2010.................................... 19,828,609
7,319,654 Federal Home Loan Mtge. Corp., 8%, 11/1/2010....................................... 7,545,977
411,626 Federal Home Loan Mtge. Corp., 7 3/4%, 1/1/2012.................................... 422,551
1,318,416 Federal Home Loan Mtge. Corp., 8 1/4%, 2/1/2017.................................... 1,364,179
10,504,383 Federal Home Loan Mtge. Corp., 8 1/2%, 1/1/2023.................................... 11,052,817
796,088 Federal Natl. Mtge. Assn., 6 1/2%, 1/1/2004........................................ 793,262
3,727,629 Federal Natl. Mtge. Assn., 7 1/2%, 12/1/2006....................................... 3,820,409
5,894,953 Federal Natl. Mtge. Assn., 7 1/2%, 9/1/2007........................................ 6,114,893
10,422,816 Federal Natl. Mtge. Assn., 7%, 12/1/2007........................................... 10,666,397
22,192,057 Federal Natl. Mtge. Assn., 7%, 12/1/2007........................................... 22,601,722
11,213,184 Federal Natl. Mtge. Assn., 6 1/2%, 5/1/2008........................................ 11,271,829
21,681,938 Federal Natl. Mtge. Assn., 8%, 6/1/2008............................................ 22,379,663
27,808,045 Federal Natl. Mtge. Assn., 6 1/2%, 11/1/2008....................................... 27,953,481
11,723,700 Federal Natl. Mtge. Assn., 6%, 1/1/2009............................................ 11,604,939
6,143,676 Federal Natl. Mtge. Assn., 8%, 1/1/2009............................................ 6,322,641
1,698,591 Federal Natl. Mtge. Assn., 7 1/2%, 8/1/2010........................................ 1,764,735
5,219,415 Federal Natl. Mtge. Assn., 7 1/2%, 7/1/2019........................................ 5,376,206
20,008,415 Govt. Natl. Mtge. Assn., 7 1/2%, 7/15/2007......................................... 20,573,452
12,304,230 Govt. Natl. Mtge. Assn., 8%, 12/15/2008............................................ 12,728,480
9,870,136 Veterans Affairs Vendee Mtge. Trust, 5.63%, 2/15/2024.............................. 9,299,445
7,399,344 Veterans Affairs Vendee Mtge. Trust, 7.21%, 2/15/2025.............................. 7,600,458
9,999,858 Veterans Affairs Vendee Mtge. Trust, 8.79%, 6/15/2025.............................. 10,862,346
--------------
338,028,634
ASSET-BACKED SECURITIES: 0.6%
27,700,000 CA Infrastructure and Econ. Dev. Bank SP Trust PG&E-1 Rate Reduction
Ctf. 1997-1 A-5, 6 1/4%, 6/25/2004................................................. 27,851,519
CORPORATE: 12.9%
FINANCE: 6.6%
19,775,000 BankAmerica Capital II, 8%, 12/15/2026, Callable 2006++............................ 21,315,670
2,000,000 Barclays No. American Capital Notes 9 3/4%, 5/15/2021, Callable 2001............... 2,255,540
4,400,000 CIGNA Corp. Notes 8.30%, 1/15/2023................................................. 4,943,092
1,800,000 CIGNA Corp. Notes 7.65%, 3/1/2023.................................................. 1,887,624
18,680,000 Citicorp Capital Trust I, 7.93%, 2/15/2027, Callable 2007++........................ 19,916,803
5,000,000 First Nationwide Bank Subordinated Debentures 10%, 10/1/2006....................... 5,950,500
See accompanying Notes to Financial Statements
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D o d g e & C o x
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Balanced Fund
Portfolio of Investments December 31, 1997
----------------------------------------------------------------------------------------------------------------
PAR VALUE MARKET VALUE
<C> <C> <S> <C>
BONDS FINANCE (Continued)
(Continued) $40,700,000 Ford Motor Credit Co. Global Notes 7.20%, 6/15/2007................................ $ 42,909,196
7,500,000 General Electric Capital MTN 8.70%, 3/1/2007....................................... 8,740,275
23,000,000 General Electric Capital MTN 8.85%, 3/1/2007....................................... 27,040,640
7,000,000 General Electric Capital Notes 8 3/4%, 5/21/2007................................... 8,230,110
10,650,000 General Electric Capital Notes 8 1/2%, 7/24/2008................................... 12,396,387
20,590,000 GMAC Put Notes 8 7/8%, 6/1/2010, Putable 2000/2005................................. 24,583,842
5,000,000 Golden West Financial Subordinated Notes 7 7/8%, 1/15/2002......................... 5,256,800
10,000,000 Golden West Financial Subordinated Notes 6.70%, 7/1/2002........................... 10,110,900
24,100,000 Golden West Financial Subordinated Notes 6%, 10/1/2003............................. 23,593,177
6,000,000 Hartford Financial Services Group Notes 8.30%, 12/1/2001........................... 6,393,420
10,000,000 Hartford Financial Services Group Notes 6 3/8%, 11/1/2002.......................... 10,012,600
25,160,000 J.P. Morgan Capital Trust I, 7.54%, 1/15/2027, Callable 2007++..................... 25,559,038
14,400,000 Norwest Corp. MTN 6.20%, 12/1/2005................................................. 14,254,416
11,050,000 Norwest Corp. MTN 6 7/8%, 8/8/2006................................................. 11,396,528
19,000,000 Norwest Corp. MTN 6 3/4%, 10/1/2006................................................ 19,443,650
5,000,000 Norwest Corp. MTN 6.55%, 12/1/2006................................................. 5,058,850
10,000,000 Norwest Corp. MTN 6 3/4%, 6/15/2007................................................ 10,230,500
14,175,000 Safeco Corp. Notes, 6 7/8%, 7/15/2007.............................................. 14,503,718
--------------
335,983,276
INDUSTRIAL: 5.7%
7,500,000 Dayton Hudson Corp. Debentures 9 7/8%, 7/1/2020.................................... 9,949,575
8,450,000 Dayton Hudson Corp. Debentures 9.70%, 6/15/2021.................................... 11,159,662
12,750,000 Dayton Hudson Corp. Debentures 9%, 10/1/2021....................................... 15,720,113
9,000,000 Dayton Hudson Corp. Debentures 8.80%, 5/15/2022.................................... 10,908,900
13,800,000 Dayton Hudson Corp. MTN 9.35%, 6/16/2020........................................... 17,618,460
15,000,000 General Motors Corp. Debentures 7.70%, 4/15/2016................................... 16,437,750
5,000,000 General Motors Corp. Debentures 8.80%, 3/1/2021, Putable 1998...................... 6,105,750
16,500,000 Lockheed Martin Corp. Debentures 7.65%, 5/1/2016................................... 18,034,500
35,000,000 Lockheed Martin Corp. Debentures 7 3/4%, 5/1/2026.................................. 38,787,350
5,750,000 May Department Stores Debentures 7 5/8%, 8/15/2013................................. 6,320,630
14,000,000 May Department Stores 8 1/8%, 8/15/2035, Callable 2015............................. 15,619,240
10,700,000 May Department Stores 7 7/8%, 8/15/2036, Callable 2016............................. 11,672,416
28,325,000 Raytheon Co. Notes 6 3/4%, 8/15/2007............................................... 28,896,315
21,250,000 Raytheon Co. Debentures 7.20%, 8/15/2027........................................... 22,168,850
26,425,000 Time Warner Entertainment Senior Debentures 8 3/8%, 7/15/2033...................... 30,250,283
3,450,000 Union Camp Corp. Debentures 9 1/4%, 2/1/2011....................................... 4,227,078
24,650,000 Walt Disney Co. Debentures 7.55%, 7/15/2093, Callable 2023......................... 26,831,032
--------------
290,707,904
TRANSPORTATION: 0.6%
7,975,706 Consolidated Rail Corp. 95-A Pass Through Trust 6.76%, 5/25/2015................... 8,058,016
5,000,000 Consolidated Rail Corp. Debentures 9 3/4%, 6/15/2020............................... 6,561,050
12,700,000 Norfolk Southern Bonds 7.70%, 5/15/2017............................................ 13,991,336
--------------
28,610,402
See accompanying Notes to Financial Statements
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<CAPTION>
D o d g e & C o x
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Balanced Fund
Portfolio of Investments December 31, 1997
----------------------------------------------------------------------------------------------------------------
PAR VALUE MARKET VALUE
<C> <C> <S> <C>
BONDS UTILITIES: 0.0%
(Continued) $ 750,000 Idaho Power Co. 1st Mtge. Bonds 9 1/2%, 1/1/2021, Callable 2001.................... $ 830,775
--------------
656,132,357
FOREIGN (U.S. DOLLAR-DENOMINATED): 1.5%
CANADIAN CORPORATE: 1.0%
8,750,000 Canadian Pacific Ltd. Debentures 9.45%, 8/1/2021................................... 11,187,050
7,550,000 Hydro-Quebec Debentures 7 1/2%, 4/1/2016........................................... 8,116,175
27,750,000 Hydro-Quebec Debentures 8.40%, 1/15/2022........................................... 32,687,280
--------------
51,990,505
INTERNATIONAL AGENCY: 0.5%
7,200,000 European Investment Bank Notes 10 1/8%, 10/1/2000.................................. 7,919,784
17,765,000 Inter-American Dev. Bank Deb., 7 1/8%, 3/15/2023, Callable 2003.................... 17,926,662
--------------
25,846,446
--------------
77,836,951
--------------
Total Bonds (cost $1,917,838,821)................................................ 1,983,248,401
--------------
Short-Term 12,648,918 General Mills, Inc., Variable Demand Note 5.33%.................................... 12,648,918
Investments: 13,521,374 Pitney Bowes Credit Corp., Variable Demand Note 5.33%.............................. 13,521,374
3.5% 1,335,824 Portico Institutional Money Market Fund............................................ 1,335,824
12,946,156 Sara Lee Corp., Variable Demand Note 5.32%......................................... 12,946,156
32,000,000 U.S. Treasury Bills, 1/8/1998...................................................... 31,968,453
23,000,000 U.S. Treasury Bills, 2/5/1998...................................................... 22,883,499
37,000,000 U.S. Treasury Bills, 4/16/1998..................................................... 36,451,244
36,000,000 U.S. Treasury Bills, 6/25/1998..................................................... 35,073,375
10,115,545 Warner Lambert Co., Variable Demand Note 5.49%..................................... 10,115,545
4,450,933 Wisconsin Electric Power Corp., Variable Demand Note 5.49%......................... 4,450,933
--------------
Total Short-Term Investments (cost $181,395,321)................................. 181,395,321
--------------
TOTAL INVESTMENTS (cost $4,243,763,501).............................................. 99.9% 5,073,459,990
OTHER ASSETS LESS LIABILITIES........................................................ 0.1% 3,137,270
------ --------------
TOTAL NET ASSETS..................................................................... 100.0% $5,076,597,260
====== ==============
+ Non-income producing
++ Cumulative Preferred Securities
* CMO: Collateralized Mortgage Obligation
** REMIC: Real Estate Mortgage Investment Conduit
See accompanying Notes to Financial Statements
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Balanced Fund
Statement of Assets and Liabilities December 31, 1997
-----------------------------------------------------------------------------------------------------------
<C> <S> <C>
ASSETS:
Investments, at market value (identified cost $4,243,763,501).............................. $5,073,459,990
Cash....................................................................................... 8,947,707
Dividends and interest receivable.......................................................... 30,695,227
Receivable for investments sold............................................................ 18,858,063
Prepaid expenses........................................................................... 58,060
--------------
5,132,019,047
--------------
LIABILITIES:
Payable for investments purchased.......................................................... 16,967,122
Payable for Fund shares redeemed........................................................... 35,986,409
Management fees payable.................................................................... 2,076,250
Accounts payable........................................................................... 392,006
--------------
Net asset value 55,421,787
--------------
per share $66.78 NET ASSETS......................................................................... $5,076,597,260
==============
Beneficial NET ASSETS CONSIST OF:
shares outstanding Paid in capital............................................................................ $4,177,662,283
76,022,485 Accumulated undistributed net investment income............................................ 880,714
(par value $1.00 each, Accumulated undistributed net realized gain on investments................................. 68,357,774
unlimited shares Net unrealized appreciation on investments................................................. 829,696,489
authorized) --------------
$5,076,597,260
==============
See accompanying Notes to Financial Statements
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<CAPTION>
Dodge & Cox
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Balanced Fund
Statement of Operations Year Ended.December 31, 1997
----------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends................................................................................. $ 51,069,041
Interest.................................................................................. 133,003,027
--------------
184,072,068
--------------
EXPENSES:
Management fees (Note 2).................................................................. 23,306,993
Custodian fees............................................................................ 422,424
Transfer agent fees....................................................................... 880,134
Accounting and audit fees................................................................. 201,377
Legal fees................................................................................ 20,623
Shareholder reports....................................................................... 265,909
Registration fees......................................................................... 608,508
Trustees' fees............................................................................ 18,000
Miscellaneous............................................................................. 81,625
--------------
25,805,593
--------------
NET INVESTMENT INCOME..................................................................... 158,266,475
--------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments....................................................... 379,070,080
Change in unrealized appreciation of investments....................................... 339,758,917
--------------
Net realized and unrealized gain on investments..................................... 718,828,997
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................................... $ 877,095,472
==============
See accompanyng Notes to Financial Statements
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Balanced Fund
Statement of Changes in Net Assets Year Ended December 31,
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1997 1996
OPERATIONS:
Net investment income.................................................. $ 158,266,475 $ 94,891,104
Net realized gain...................................................... 379,070,080 46,644,856
Net change in unrealized appreciation.................................. 339,758,917 238,328,655
--------------- --------------
Net increase in net assets from operations............................. 877,095,472 379,864,615
--------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................................. (157,975,729) (94,929,171)
Net realized gain...................................................... (235,404,704) (36,143,876)
--------------- --------------
Total distributions.................................................... (393,380,433) (131,073,047)
--------------- --------------
BENEFICIAL SHARE TRANSACTIONS:
Amounts received from sale of shares................................... 1,861,495,378 1,888,815,434
Net asset value of shares issued in reinvestment of distributions...... 380,304,596 126,272,384
Amounts paid for shares redeemed....................................... (1,278,744,642) (434,353,361)
--------------- --------------
Net increase from beneficial share transactions........................ 963,055,332 1,580,734,457
--------------- --------------
Total increase in net assets........................................... 1,446,770,371 1,829,526,025
NET ASSETS:
Beginning of year...................................................... 3,629,826,889 1,800,300,864
--------------- --------------
End of year (including undistributed net investment income
of $880,714 and $589,968, respectively)................................ $ 5,076,597,260 $3,629,826,889
=============== ==============
Shares sold............................................................ 28,547,791 33,113,538
Shares issued in reinvestment of distributions......................... 5,794,316 2,190,482
Shares redeemed........................................................ (19,001,153) (7,595,736)
--------------- --------------
Net increase in shares outstanding..................................... 15,340,954 27,708,284
=============== ==============
See accompanying Notes to Financial Statements
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D o d g e & C o x
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Balanced Fund
Notes to Financial Statements
-----------------------------------------------------------------------
1 The Fund is registered under the Investment Company Act of 1940, as
amended, as a diversified open-end investment company. The Fund
consistently follows accounting policies which are in conformity with
generally accepted accounting principles for investment companies.
Significant accounting policies are as follows: (a) Security valuation:
stocks are valued at the latest quoted sales prices as of 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; long-term debt
securities are priced on the basis of valuations furnished by pricing
services which utilize both dealer-supplied valuations and electronic
data processing techniques; a security which is listed or traded on
more than one exchange is valued at the quotation on the exchange
determined to be the primary market for such security; securities for
which market quotations are not readily available are valued at fair
value as determined in good faith by or at the direction of the Board
of Trustees; short-term securities are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value; all securities held by the Fund are denominated in U.S. Dollars.
(b) Security transactions are accounted for on the trade date in the
financial statements. (c) Gains and losses on securities sold are
determined on the basis of identified cost. (d) Dividend income is
recorded on the ex-dividend date and interest income is recorded on the
accrual basis. (e) Distributions to shareholders of income and capital
gains are reflected in the net asset value per share computation on the
ex-dividend date. (f) 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 daily net asset value to Dodge & Cox,
investment 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 Board or Committee
meeting attended. The Fund does not pay any other remuneration to its
officers or trustees.
3 For the year ended December 31, 1997, purchases and sales of
securities, other than short-term securities, aggregated $2,315,718,185
and $1,432,765,590, respectively, of which U.S. government obligations
aggregated $906,863,512 and $573,125,856, respectively. In 1997, the
Fund recognized net capital gain of $89,809,297 from the delivery of
appreciated securities in an in-kind redemption transaction. For
Federal income tax purposes, this gain is not recognized as taxable
income to the Fund and does not need to be distributed to shareholders.
At December 31, 1997, the cost of investments for Federal income tax
purposes was equal to the cost for financial reporting purposes. Net
unrealized appreciation aggregated $829,696,489, of which $855,852,547
represented appreciated securities and $26,156,058 represented
depreciated securities.
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Balanced Fund
Financial Highlights
-------------------------------------------------------------------------------------------------------------------------
Selected data and ratios (for a share outstanding throughout each year)
Year Ended December 31,
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
Net asset value, beginning of year.................................... $59.82 $54.60 $45.21 $46.40 $42.44
Income from investment operations:
Net investment income................................................. 2.21 1.98 1.90 1.76 1.66
Net realized and unrealized gain (loss)............................... 10.24 5.92 10.58 (.83) 5.03
------ ------ ------ ------ ------
Total from investment operations...................................... 12.45 7.90 12.48 .93 6.69
------ ------ ------ ------ ------
Distributions to shareholders from:
Net investment income................................................. (2.22) (1.99) (1.90) (1.76) (1.66)
Net realized gain..................................................... (3.27) (.69) (1.19) (.36) (1.07)
------ ------ ------ ------ ------
Total distributions................................................... (5.49) (2.68) (3.09) (2.12) (2.73)
------ ------ ------ ------ ------
Net asset value, end of year.......................................... $66.78 $59.82 $54.60 $45.21 $46.40
====== ====== ====== ====== ======
Total return.......................................................... 21.21% 14.75% 28.02% 1.99% 15.95%
Ratios/Supplemental data
Net assets, end of year (millions).................................... $5,077 $3,630 $1,800 $ 725 $ 487
Ratio of expenses to average net assets............................... .55% .56% .57% .58% .60%
Ratio of net investment income to average net assets.................. 3.39% 3.60% 3.85% 3.94% 3.67%
Portfolio turnover rate............................................... 32% 17% 20% 20% 15%
Average commission rate paid*......................................... $.0488 $.0500
* Represents average commission rate paid per share on securities transactions
for which commissions were charged. Disclosure is required by the S.E.C.
beginning in 1996.
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D o d g e & C o x
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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, 1997, 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, 1997 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 28, 1998
----------------------------------------------------------------------
Special 1997 Tax Information (unaudited)
Corporate shareholders should note that for the year ended December 31,
1997, a total of 25% of the Fund's ordinary dividends (as reported to
shareholders in Box 1b of Form 1099-DIV) qualified for the corporate
dividends received deduction.
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D o d g e & C o x
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Balanced Fund
Proxy Voting Results
-------------------------------------------------------------
A special meeting of shareholders was held on January 30,
1998 (adjourned from January 20, 1998), to vote on the
following proposals. All of the proposals received the
required number of votes and were adopted.
A summary of voting results is listed below each proposal.
Proposal To approve a reorganization of the Fund as a separate series
One of Dodge & Cox Funds, a newly formed Delaware business trust.
For: 54,163,004
Against: 359,777
Abstain: 574,086
Broker Non-Vote: 1,057,467
Proposal To approve the elimination or revision of certain fundamental
Two investment restrictions for the Fund.
For: 54,161,264
Against: 935,603
Abstain: 0
Broker Non-Vote: 1,057,467
Proposal To ratify the selection of Price Waterhouse LLP as the Fund's
Three independent certified public accountants.
For: 55,434,268
Against: 155,375
Abstain: 564,691
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D o d g e & C o x
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Balanced Fund
General Information
-------------------------------------------------------------
Investment Since 1930, Dodge & Cox has been providing professional
Manager investment management for individuals,trustees, corporations,
pension and profit-sharing funds, and charitable
institutions. Dodge & Cox manages the Dodge & Cox Balanced
Fund, the Dodge & Cox Stock Fund and the Dodge & Cox Income
Fund.
No-Load Fund Shares of the Fund are purchased and redeemed at net asset
value. There are no sales, redemption or Rule 12b-1 plan
distribution charges.
Gifts Fund shares provide a convenient method for making gifts to
children and to other family members. 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.
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 .
Reinvestment Shareholders may direct that dividend and capital gains
distributions be reinvested in additional Fund shares.
The above plans are completely voluntary and involve no
service charge of any kind.
IRA Plan The Fund has an Individual Retirement Plan (IRA) available
for shareholders of the Fund.
Shareholder Fund literature and details on all of these Plans are
Inquiries available from the Fund upon request.
Dodge & Cox Balanced Fund
c/o BFDS
P.O. Box 9051
Boston, MA 02205-9051
(800) 621-3979
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