DODGE & XXX DODGE & XXX
Balanced Fund
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Balanced Fund
Established 1931
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Dodge & Xxx
Investment Managers
00xx Xxxxx
Xxx Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx
Xxxxxxxxxx 00000
(000) 000-0000
65th Annual Report
For Fund literature and December 31, 1995
information, please call:
(000) 000-0000 1995
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DODGE & XXX
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Balanced Fund
To Our Shareholders
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On the heels of lackluster returns from both stocks and bonds in 1994, the
Dodge & Xxx 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 Xxxxxx 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 XXX xxxxx 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 & Xxx'x "bottom up" investment approach, we
have identified a number of promising investments in various cycle sensitive
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DODGE & XXX
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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. Xxxxx
Xxxxxxx is a former Chairman of Dodge & Xxx and has served as a Trustee for
37 years. Xxxxxx X. Xxxxxx 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 & Xxx Balanced Fund. As
always, we welcome your comments and suggestions.
For the Trustees,
/s/ Xxxxx X. Xxxxx
January 23, 1996 Xxxxx X. Xxxxx, Chairman
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DODGE & XXX
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Balanced Fund
20 Years of Investment Performance
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Comparison of change in value of a $10,000 investment in the Dodge & Xxx
Balanced Fund, the Standard & Poor's 500 Composite Stock Price (S&P 500)
Index and the Xxxxxx Brothers Aggregate Bond (LBAG) Index
[GRAPH APPEARS HERE]
Dodge & Xxx S&P LBAG
Year Balanced Fund 500 Index Index
--------------------------------------------------------------
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
Average annual total return for periods ended December 31, 1995 1 Year 5 Years 10 Years 20 Years
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Dodge & Xxx 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
The chart covers the period from January 1, 1976 to December 31, 1995. It
compares a $10,000 investment made in the Dodge & Xxx Balanced Fund to
$10,000 investments made in the Standard & Poor's 500 Composite Stock Price
Index and the Xxxxxx 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.
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3
DODGE & XXX
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Balanced Fund
Financial Highlights Year Ended December 31,
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1995 1994 1993 1992 1991
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
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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
S.E.C. yield for the 30 day period ended December 31, 1995.............. 3.64%
THE FUND'S TEN LARGEST COMMON STOCK HOLDINGS
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% of Common
Stock Holdings
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Digital Equipment Corp.............................................. 3.2
General Motors Corp................................................. 3.1
Xxxxxx-Xxxxxx 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
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24.6%
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DODGE & XXX
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Balanced Fund
Portfolio of Investments December 31, 1995
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SHARES MARKET VALUE
COMMON CONSUMER: 12.0%
STOCKS: 405,000 Xxxxxx-Xxxxxx Corp......................................................... $ 30,375,000
56.4% 477,000 Xxxxxxx Department Stores, Inc. Class A.................................... 13,594,500
228,000 Xxxxxxx 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 & Xxxxxx Co........................................................ 20,999,000
205,000 VF Corp.................................................................... 10,813,750
326,700 Whirlpool Corp............................................................. 17,396,775
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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 Xxxxxxx Xxxxx, 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 Xxxxxx Brothers Holdings, Inc.............................................. 1,330,250
185,000 Xxxxxx (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. Xxxx Cos., Inc..................................................... 16,409,375
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191,344,563
ENERGY: 6.4%
368,000 Amerada Xxxx 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 Xxxxxxxx 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
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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
See accompanying Notes to Financial Statements
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DODGE & XXX
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Balanced Fund
Portfolio of Investments December 31, 1995
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SHARES MARKET VALUE
COMMON BASIC INDUSTRY (Continued)
STOCKS 355,000 Xxxxx River Corp. of Virginia.............................................. $ 8,564,375
(Continued) 370,700 Nalco Chemical Co.......................................................... 11,167,338
414,000 Weyerhaeuser Co............................................................ 17,905,500
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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 Xxxxxx-Xxxxxxxx Corp....................................................... 4,623,750
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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
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55,400,413
BUSINESS PRODUCTS AND SERVICES: 2.9%
410,000 Donnelley (R.R.) & Sons Co................................................. 16,143,750
68,850 Xxx Xxxxx & Co............................................................. 2,745,394
287,000 Federal Express Corp.+..................................................... 21,202,125
89,700 Xerox Corp................................................................. 12,288,900
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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
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48,178,438
TRANSPORTATION: 2.1%
960,000 Canadian Pacific Ltd....................................................... 17,400,000
309,000 Union Pacific Corp......................................................... 20,394,000
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37,794,000
See accompanying Notes to Financial Statements
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DODGE & XXX
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Balanced Fund
Portfolio of Investments December 31, 1995
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SHARES MARKET VALUE
COMMON PHARMACEUTICAL AND HEALTH: 2.0%
STOCKS 150,000 Pfizer, Inc................................................................ $ 9,450,000
(Continued) 410,350 Pharmacia & Xxxxxx, Inc.................................................... 15,901,063
205,000 SmithKline Xxxxxxx plc ADR................................................. 11,377,500
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36,728,563
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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
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Total Preferred Stocks (cost $1,659,842)............................... 1,990,357
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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
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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
See accompanying Notes to Financial Statements
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DODGE & XXX
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Balanced Fund
Portfolio of Investments December 31, 1995
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PAR VALUE MARKET VALUE
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
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273,487,269
INDUSTRIAL: 5.0%
5,000,000 Xxxxxx-Xxxxxx Corp. Debentures 9%, 2021.................................... 5,948,450
2,500,000 Xxxxxx-Xxxxxx Corp. Debentures 9.70%, 2021................................. 3,172,525
10,525,000 Xxxxxx-Xxxxxx 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 Xxxxxxx 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 Xxxx 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
See accompanying Notes to Financial Statements
======================================---=======================================
8
DODGE & XXX
======================================---=======================================
Balanced Fund
Portfolio of Investments December 31, 1995
--------------------------------------------------------------------------------------------------------------
PAR VALUE MARKET VALUE
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 Xxx Xxxxx & Co., Variable Demand Note 5.32%, 1996.......................... 14,865,834
INVESTMENTS: 11,576,655 General Xxxxx, Inc., Variable Demand Note 5.58%, 1996...................... 11,576,655
5.7% 20,654,539 Pitney Xxxxx 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 Xxxx Xxx 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
===== ==============
+ Non-income producing
* CMO: Collateralized Mortgage Obligation
** REMIC: Real Estate Mortgage Investment Conduit
See accompanying Notes to Financial Statements
Condensed Financial Information
--------------------------------------------------------------------------------------------------
Net Asset Value Per Share Distributions Per Share
------------------------- -----------------------
Year Ended Capital
December 31 Net Assets Actual Adjusted* Income Gains
--------------------------------------------------------------------------------------------------
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
====== ======
* 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
DODGE & XXX
======================================---=======================================
Balanced Fund
Statement of Assets and Liabilities December 31, 1995
--------------------------------------------------------------------------------------------------
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) ==============
Statement of Operations Year Ended December 31, 1995
--------------------------------------------------------------------------------------------------
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
============
See accompanying Notes to Financial Statements
======================================---=======================================
10
DODGE & XXX
======================================---=======================================
Balanced Fund
Statement of Changes in Net Assets Year Ended December 31,
---------------------------------------------------------------------------------------------------------
1995 1994
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
============== ============
See accompanying Notes to Financial Statements
======================================---=======================================
11
DODGE & XXX
======================================---=======================================
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 & Xxx, a
corporation and manager of the Fund. All officers and three of the trustees
of the Fund are officers and employees of Xxxxx & Xxx. Those trustees who
are not affiliated with Dodge & Xxx 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 Xxxxxx, Xxxxxx,
White & XxXxxxxxx, legal counsel for the Fund. Xxxxxx X. Xxxxxx, 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
DODGE & XXX
======================================---=======================================
Balanced Fund
Report of Independent Accountants
----------------------------------------------------------------------------
To the Trustees and Shareholders of Dodge & Xxx 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 & Xxx
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
DODGE & XXX
======================================---=======================================
Balanced Fund
Officers and Trustees
----------------------------------------------------------------------------
Xxxxx X. Xxxxx, Chairman and Trustee
Chairman & CEO, Dodge & Xxx
X. Xxxxxx Xxxxxxx, Vice-Chairman and Trustee
Senior Vice-President, Dodge & Xxx
Xxxxxxx X. Xxxxxxx, Assistant Secretary and Trustee
Senior Vice-President, Dodge & Xxx
Xxx Xxxxxxxxx, Xx., Trustee
Partner, Xxxxxxx, Xxxxxxx & Xxxxxxxx, Attorneys
Xxxxx X. Xxxxxxx, Trustee
Retired Partner, Pillsbury, Madison & Sutro, Attorneys
Xxxx X. Xxxxxx, Trustee
Professor of Economics, Stanford University
Xxxx X. Xxxx, Trustee
Principal, Kentwood Associates, Financial Advisers
X. Xxxxxxx Xxxx, Secretary
Senior Vice-President, Dodge & Xxx
X. Xxxxxx Xxx, Honorary Trustee
----------------------------------------------------------------------------
MANAGERS
Dodge & Xxx
Xxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone (000) 000-0000
CUSTODIAN & TRANSFER AGENT
Firstar Trust Company
P. O. Box 701
Milwaukee, Wisconsin 00000-0000
Telephone (000) 000-0000
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
San Francisco, California
LEGAL COUNSEL
Xxxxxx, Xxxxxx, Xxxxx & XxXxxxxxx
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
DODGE & XXX
======================================---=======================================
Balanced Fund
General Information
-------------------------------------------------------------
DODGE & XXX 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 & Xxx has been providing professional
COUNSEL investment management for individuals, trustees,
MANAGEMENT corporations, pension and profit-sharing funds, and
charitable institutions. In addition, Dodge & Xxx manages the
Dodge & Xxx Stock Fund and the Dodge & Xxx Income Fund. Xxxxx
& Xxx 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 & Xxx 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 & XXX BALANCED FUND
c/o Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone (000) 000-0000
======================================---=======================================
