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The right choice for the long term®
The Growth Fund of America
[photo - lady in a meadow holding a horse on a tether]
Semi-annual report for the six months ended February 28, 2007
The Growth Fund of America® invests in a wide range of companies that appear to offer superior opportunities for growth of capital.
This fund is one of the 30 American Funds. The organization ranks among the nation’s three largest mutual fund families. For 75 years, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.
Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity. For current information and month-end results, visit americanfunds.com. Fund results shown, unless otherwise indicated, are at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower.
Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended March 31, 2007 (the most recent calendar quarter):
Class A shares | 1 year | 5 years | 10years |
Reflecting 5.75% maximum sales charge | +1.57% | +7.31% | +12.37% |
The total annual fund operating expense ratio was 0.65% for Class A shares as of the most recent fiscal year-end. This figure does not reflect a fee waiver that currently is in effect and which causes the actual expense ratio to be lower.
The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased it to 10% on April 1, 2005. Fund results shown reflect actual expenses, with the waiver applied. Fund results would have been lower without the waiver. Please see the Financial Highlights table on pages 22 to 25 for details.
Results for other share classes can be found on page 28.
[photo - lady in a meadow holding a horse on a tether]
Fellow shareholders:
The U.S. economy and stock market advanced during the six months ended February 28, 2007, overcoming concerns about weakness in the housing market and the inverted yield curve, which in the past has preceded an economic slowdown. Corporate earnings and profit margins were strong, and the economy grew at a healthy pace. The Federal Reserve held the federal funds rate at 5.25% as inflation continued to moderate. In the final week of the period, world stock markets experienced a sharp dip because of investor concerns over risky assets and trading strategies in overseas markets.
The Growth Fund of America (GFA) posted a total return of 7.3% for the six-month period. As the table below shows, the unmanaged Standard & Poor’s 500 Composite Index, a broad measure of the U.S. stock market, had a total return of 8.9%. The fund trailed the total returns of four Lipper benchmark indexes, also shown below.
[Begin Sidebar]
Results at a glance (as of February 28, 2007)
| | | | 5-year | Lifetime |
| | | | average | average |
| | Six-month | 1-year | annual | annual |
| | total | total | total | total |
| | returns | returns | returns | returns* |
| | | | | |
The Growth Fund of America | +7.3% | +8.4% | +9.3% | +15.4% |
| | | | | |
Standard & Poor’s 500 Composite Index† | +8.9 | +12.0 | +6.8 | +12.0 |
| | | | | |
Lipper Capital Appreciation Funds Index | +8.6 | +8.3 | +7.4 | +11.8 |
| | | | | |
Lipper Growth Funds Index | +9.0 | +7.8 | +6.1 | +10.8 |
| | | | | |
Lipper Multi-Cap Core Funds Index | +10.6 | +11.4 | +8.4 | +11.6 |
| | | | | |
Lipper Multi-Cap Growth Funds Index | +10.5 | +6.3 | +6.8 | +11.7 |
*Since Capital Research and Management Company began managing the fund on
December 1, 1973.
† Unmanaged.
[End Sidebar]
Over longer periods, GFA has continued to outpace the general market and its comparable indexes by significant margins. For the 10 years ended February 28, 2007, GFA had an average annual total return of 12.5% compared with 7.6% by the S&P 500. Total returns for the four Lipper benchmark indexes ranged from 6.1% to 8.0%. For the fund’s lifetime of just over 33 years, GFA had an average annual total return of 15.4% compared with 12.0% by the S&P 500.
What helped results
Selected consumer discretionary, information technology, materials, gaming and international stocks were major contributors to the fund during the six-month period. Discount retailers Target (+27.2%) and Lowe’s (+20.3%) bounced back after these companies had a disappointing year in 2006. Google, the most frequently used website search engine and our second largest position, rose 18.7%, Microsoft, the fund’s largest position, posted a 9.7% total return. Another strong stock, from the materials sector, was fertilizer company Potash Corporation of Saskatchewan, Inc. (+61.1%). Oil and gasoline prices were lower during most of the past six months, aiding aerospace-related companies such as Boeing (+16.5%) and General Dynamics (+13.2%).
International stocks (those based outside of the United States and Canada) made up 13.6% of the GFA portfolio and generally had higher returns than U.S. stocks for the fourth calendar year in a row. Among the contributors were Syngenta (+20.5%), a world-leading agrochemical company, and Taiwan Semiconductor Manufacturing (+13.8%). At the end of the six-month period, the fund had 8.0% of its assets in Europe, 5.0% in Asia/Pacific and 0.6% in Brazil, Israel and Mexico.
What hurt results
In general, this was a tough period for growth stocks. Stocks with higher yields tended to do better than stocks with little or no yield. There were pockets of weakness in our three largest industry groups — information technology, health care and energy. The fund’s information technology group has been volatile and often has a mixture of winners and losers. Stocks that detracted from results included Samsung Electronics (-11.0%) and Texas Instruments (-5.0%). As oil prices were lower for most of the six-month period, most oil companies didn’t do as well as the market. Baker Hughes (-8.5%), Suncor Energy (-8.5%) and Halliburton (-5.3%) detracted from results. Health care stocks such as pharmaceutical manufacturers AstraZeneca (-13.3%) and Amgen (-5.4%) were affected by concerns of new price controls imposed by the new political majority in Congress.
Industry sector diversification
As of February 28, 2007, GFA had 20.4% of its total assets in information technology, 13.2% in health care, 12.5% in energy, 11.7% in consumer discretionary, 8.3% in financials and 23.6% in other industries. The fund’s holding of 10.3% in cash and equivalents reflects the caution of some portfolio counselors.
Thoughts on volatility
The U.S. economy appears to be sound with the exception of the housing industry. Inflation and interest rates seem to be under control at the moment. Corporate earnings and profit margins are strong. Unless the problems of the subprime housing mortgage lenders spill over into the wider market, we still seem to be in a positive environment for stocks. We may experience more volatility, however.
On February 27, 2007, the Dow Jones industrials fell 3.3%, the biggest single-day loss for that index since March 2003. Such a sharp fall after a long period of relative calm could be a warning sign of a new era of rising volatility. However, volatility in itself is not necessarily negative. Big short-term movements in stock prices can create buying or selling opportunities for long-term investors. GFA’s group of portfolio counselors and investment analysts will continue to closely monitor market volatility in the coming months. We will maintain our approach of fundamental research, practiced globally with a long-term perspective.
We welcome our new shareholders and thank our long-term investors for their continued support.
Sincerely,
| /s/ James F. Rothenberg | /s/ Donald D. O’Neal |
| James F. Rothenberg | Donald D. O’Neal |
| Vice Chairman of the Board | President |
| and Principal Executive Officer | |
April 8, 2007
For current information about the fund, visit americanfunds.com.
| Notes to financial statements | unaudited |
| 1. | Organization and significant accounting policies |
Organization - The Growth Fund of America, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund invests in a wide range of companies that appear to offer superior opportunities for growth of capital.
The fund offers 14 share classes consisting of four retail share classes, five CollegeAmerica® savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund’s share classes are described below:
Share class | | Initial sales charge | | Contingent deferred sales charge upon redemption | | Conversion feature |
| Class A and 529-A | | Up to 5.75% | | None (except 1% for certain redemptions within one year of purchase without an initial sales charge) | | None |
| Class B and 529-B | | None | | Declines from 5% to 0% for redemptions within six years of purchase | | Class B and 529-B convert to Class A and 529-A, respectively, after eight years |
| Class C | | None | | 1% for redemptions within one year of purchase | | Class C converts to Class F after 10 years |
| Class 529-C | | None | | 1% for redemptions within one year of purchase | | None |
| Class 529-E | | None | | None | | None |
| Class F and 529-F | | None | | None | | None |
| Class R-1, R-2, R-3, R-4 and R-5 | | None | | None | | None |
Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.
Significant accounting policies - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:
Security valuation - Equity securities are valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region.
Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the investment adviser are fair valued as determined in good faith under procedures adopted by authority of the fund's board of directors. Market quotations may be considered unreliable if events occur that materially affect the value of securities (particularly non-U.S. securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions.
Security transactions and related investment income - Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.
Class allocations - Income, fees and expenses (other than class-specific fees and expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.
Dividends and distributions to shareholders - Dividends and distributions paid to shareholders are recorded on the ex-dividend date.
Non-U.S. currency translation - Assets and liabilities, including investment securities, denominated in non-U.S. currencies are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. In the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in non-U.S. currencies are disclosed separately.
Investment risk - The risks of investing in securities of non-U.S. issuers may include, but are not limited to, investment and repatriation restrictions; revaluation of currencies; adverse political, social and economic developments; government involvement in the private sector; limited and less reliable investor information; lack of liquidity; certain local tax law considerations; and limited regulation of the securities markets.
Taxation - Dividend and interest income is recorded net of non-U.S. taxes paid. Gains realized by the fund on the sale of securities in certain countries are subject to non-U.S. taxes. The fund records a liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities. For the six months ended February 28, 2007, there were no non-U.S. taxes paid on realized gains. As of February 28, 2007, non-U.S. taxes provided on unrealized gains were $4,708,000.
3. Federal income taxation and distributions
The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.
Distributions - Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses; short-term capital gains and losses; and capital losses related to sales of certain securities within 30 days of purchase. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes.
The components of distributable earnings on a tax basis are reported as of the fund’s most recent year-end. As of August 31, 2006, the fund had tax basis undistributed ordinary income of $769,408,000, non-U.S. currency loss deferrals (realized during the period November 1, 2005, through August 31, 2006) of $1,779,000 and undistributed long-term capital gain of $3,674,053,000.
As of February 28, 2007, the tax basis unrealized appreciation (depreciation) and cost of investments were as follows:
| | | | (dollars in thousands) |
| Gross unrealized appreciation on investment securities | | | $37,411,797 |
| Gross unrealized depreciation on investment securities | | | (1,570,150) |
| Net unrealized appreciation on investment securities | | | 35,841,647 |
| Cost of investment securities | | | 130,080,038 |
The tax character of distributions paid to shareholders was as follows (dollars in thousands):
| | | Six months ended February 28, 2007 | | Year ended August 31, 2006 | |
| | | Ordinary income | | Long-term capital gains | | Total distributions paid | | Ordinary income | | Long-term capital gains | | Total distributions paid | |
| Share class | | | | | | | | | | | | | |
| Class A | | $ | 671,777 | | $ | 2,697,898 | | $ | 3,369,675 | | $ | 445,843 | | $ | 527,973 | | $ | 973,816 | |
| Class B | | | 8,977 | | | 242,029 | | | 251,006 | | | - | | | 48,592 | | | 48,592 | |
| Class C | | | 12,202 | | | 331,421 | | | 343,623 | | | - | | | 58,820 | | | 58,820 | |
| Class F | | | 174,938 | | | 659,695 | | | 834,633 | | | 87,642 | | | 100,251 | | | 187,893 | |
| Class 529-A | | | 17,864 | | | 71,742 | | | 89,606 | | | 9,506 | | | 11,506 | | | 21,012 | |
| Class 529-B | | | 328 | | | 15,488 | | | 15,816 | | | - | | | 2,743 | | | 2,743 | |
| Class 529-C | | | 790 | | | 23,227 | | | 24,017 | | | - | | | 3,781 | | | 3,781 | |
| Class 529-E | | | 641 | | | 3,887 | | | 4,528 | | | 299 | | | 632 | | | 931 | |
| Class 529-F | | | 589 | | | 1,950 | | | 2,539 | | | 242 | | | 254 | | | 496 | |
| Class R-1 | | | 831 | | | 9,899 | | | 10,730 | | | 230 | | | 1,185 | | | 1,415 | |
| Class R-2 | | | 3,222 | | | 79,117 | | | 82,339 | | | - | | | 13,343 | | | 13,343 | |
| Class R-3 | | | 64,602 | | | 360,175 | | | 424,777 | | | 32,485 | | | 54,873 | | | 87,358 | |
| Class R-4 | | | 113,639 | | | 456,380 | | | 570,019 | | | 59,655 | | | 68,134 | | | 127,789 | |
| Class R-5 | | | 90,824 | | | 274,394 | | | 365,218 | | | 38,960 | | | 32,407 | | | 71,367 | |
| Total | | $ | 1,161,224 | | $ | 5,227,302 | | $ | 6,388,526 | | $ | 674,862 | | $ | 924,494 | | $ | 1,599,356 | |
4. Fees and transactions with related parties
Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Service Company SM ("AFS"), the fund’s transfer agent, and American Funds Distributors, SM Inc. ("AFD"), the principal underwriter of the fund’s shares.
Investment advisory services - The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.50% on the first $1 billion of daily net assets and decreasing to 0.239% on such assets in excess of $166 billion. CRMC is currently waiving 10% of investment advisory services fees. During the six months ended February 28, 2007, total investment advisory services fees waived by CRMC were $21,335,000. As a result, the fee shown on the accompanying financial statements of $213,354,000, which was equivalent to an annualized rate of 0.271%, was reduced to $192,019,000, or 0.244% of average daily net assets.
Class-specific fees and expenses - Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described on the following page:
Distribution services - The fund has adopted plans of distribution for all share classes, except Class R-5. Under the plans, the board of directors approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.25% to 1.00% as noted below. In some cases, the board of directors has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD to provide certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.
For Class A and 529-A, the board of directors has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of February 28, 2007, unreimbursed expenses subject to reimbursement totaled $2,173,000 for Class A. There were no unreimbursed expenses subject to reimbursement for Class 529-A.
Share class | Currently approved limits | Plan limits |
| Class A | 0.25% | 0.25% |
| Class 529-A | 0.25 | 0.50 |
| Class B and 529-B | 1.00 | 1.00 |
| Class C, 529-C and R-1 | 1.00 | 1.00 |
| Class R-2 | 0.75 | 1.00 |
| Class 529-E and R-3 | 0.50 | 0.75 |
| Class F, 529-F and R-4 | 0.25 | 0.50 |
Transfer agent services - The fund has a transfer agent agreement with AFS for Class A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below.
Administrative services - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Class A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the CollegeAmerica plan. Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.
Expenses under the agreements described above for the six months ended February 28, 2007, were as follows (dollars in thousands):
Share class | Distribution services | Transfer agent services | Administrative services |
CRMC administrative services | Transfer agent services | Commonwealth of Virginia administrative services |
| Class A | $102,405 | $44,316 | Not applicable | Not applicable | Not applicable |
| Class B | 35,439 | 3,727 | Not applicable | Not applicable | Not applicable |
| Class C | 48,175 | Included in administrative services | $6,859 | $853 | Not applicable |
| Class F | 24,605 | 9,030 | 782 | Not applicable |
| Class 529-A | 2,049 | 925 | 147 | $1,081 |
| Class 529-B | 2,268 | 194 | 58 | 227 |
| Class 529-C | 3,398 | 291 | 77 | 340 |
| Class 529-E | 290 | 50 | 8 | 58 |
| Class 529-F | - | 25 | 4 | 29 |
| Class R-1 | 1,438 | 162 | 38 | Not applicable |
| Class R-2 | 8,743 | 1,689 | 2,750 | Not applicable |
| Class R-3 | 26,743 | 7,344 | 1,661 | Not applicable |
| Class R-4 | 17,281 | 10,041 | 112 | Not applicable |
| Class R-5 | Not applicable | 3,980 | 52 | Not applicable |
| Total | $272,834 | $48,043 | $40,590 | $6,542 | $1,735 |
Deferred directors’ compensation - Since the adoption of the deferred compensation plan in 1993, directors who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors’ compensation of $407,000, shown on the accompanying financial statements, includes $186,000 in current fees (either paid in cash or deferred) and a net increase of $221,000 in the value of the deferred amounts.
Affiliated officers and directors - Officers and certain directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or directors received any compensation directly from the fund.
5. Capital share transactions
Capital share transactions in the fund were as follows (dollars and shares in thousands):
Share class | | Sales* | | Reinvestments of dividends and distributions | | Repurchases* | | Net increase | |
| | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | |
| Six months ended February 28, 2007 | | | | | | | | | | | | | | | | | |
| Class A | | $ | 6,113,921 | | | 184,859 | | $ | 3,248,249 | | | 98,313 | | $ | (6,648,162 | ) | | (201,279 | ) | $ | 2,714,008 | | | 81,893 | |
| Class B | | | 290,085 | | | 9,070 | | | 240,856 | | | 7,522 | | | (394,743 | ) | | (12,345 | ) | | 136,198 | | | 4,247 | |
| Class C | | | 1,050,388 | | | 32,951 | | | 328,002 | | | 10,282 | | | (634,794 | ) | | (19,900 | ) | | 743,596 | | | 23,333 | |
| Class F | | | 4,032,565 | | | 122,678 | | | 680,037 | | | 20,701 | | | (1,498,379 | ) | | (45,497 | ) | | 3,214,223 | | | 97,882 | |
| Class 529-A | | | 288,165 | | | 8,725 | | | 89,593 | | | 2,722 | | | (67,172 | ) | | (2,034 | ) | | 310,586 | | | 9,413 | |
| Class 529-B | | | 33,873 | | | 1,053 | | | 15,815 | | | 492 | | | (11,608 | ) | | (361 | ) | | 38,080 | | | 1,184 | |
| Class 529-C | | | 97,354 | | | 3,026 | | | 24,010 | | | 746 | | | (27,716 | ) | | (860 | ) | | 93,648 | | | 2,912 | |
| Class 529-E | | | 15,126 | | | 461 | | | 4,528 | | | 138 | | | (5,117 | ) | | (157 | ) | | 14,537 | | | 442 | |
| Class 529-F | | | 12,551 | | | 381 | | | 2,539 | | | 77 | | | (3,062 | ) | | (93 | ) | | 12,028 | | | 365 | |
| Class R-1 | | | 94,687 | | | 2,935 | | | 10,675 | | | 331 | | | (24,319 | ) | | (754 | ) | | 81,043 | | | 2,512 | |
| Class R-2 | | | 450,851 | | | 13,929 | | | 82,231 | | | 2,541 | | | (287,586 | ) | | (8,889 | ) | | 245,496 | | | 7,581 | |
| Class R-3 | | | 2,592,156 | | | 79,439 | | | 424,134 | | | 13,002 | | | (1,463,024 | ) | | (44,812 | ) | | 1,553,266 | | | 47,629 | |
| Class R-4 | | | 3,320,492 | | | 100,961 | | | 569,783 | | | 17,361 | | | (1,519,179 | ) | | (46,207 | ) | | 2,371,096 | | | 72,115 | |
| Class R-5 | | | 3,061,265 | | | 92,752 | | | 360,876 | | | 10,926 | | | (648,392 | ) | | (19,555 | ) | | 2,773,749 | | | 84,123 | |
| Total net increase | | | | | | | | | | | | | | | | | | | | | | | | | |
| (decrease) | | $ | 21,453,479 | | | 653,220 | | $ | 6,081,328 | | | 185,154 | | $ | (13,233,253 | ) | | (402,743 | ) | $ | 14,301,554 | | | 435,631 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended August 31,2006 | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A | | $ | 14,458,668 | | | 463,064 | | $ | 936,264 | | | 30,378 | | $ | (10,006,575 | ) | | (320,708 | ) | $ | 5,388,357 | | | 172,734 | |
| Class B | | | 823,189 | | | 27,187 | | | 46,761 | | | 1,563 | | | (620,386 | ) | | (20,541 | ) | | 249,564 | | | 8,209 | |
| Class C | | | 2,377,709 | | | 78,847 | | | 56,267 | | | 1,886 | | | (1,037,829 | ) | | (34,430 | ) | | 1,396,147 | | | 46,303 | |
| Class F | | | 6,741,333 | | | 216,406 | | | 156,176 | | | 5,094 | | | (2,480,307 | ) | | (79,812 | ) | | 4,417,202 | | | 141,688 | |
| Class 529-A | | | 522,834 | | | 16,805 | | | 21,012 | | | 684 | | | (85,598 | ) | | (2,746 | ) | | 458,248 | | | 14,743 | |
| Class 529-B | | | 73,313 | | | 2,412 | | | 2,743 | | | 91 | | | (14,256 | ) | | (469 | ) | | 61,800 | | | 2,034 | |
| Class 529-C | | | 168,188 | | | 5,528 | | | 3,781 | | | 126 | | | (38,240 | ) | | (1,255 | ) | | 133,729 | | | 4,399 | |
| Class 529-E | | | 28,956 | | | 936 | | | 931 | | | 30 | | | (5,552 | ) | | (179 | ) | | 24,335 | | | 787 | |
| Class 529-F | | | 21,303 | | | 681 | | | 496 | | | 17 | | | (2,664 | ) | | (85 | ) | | 19,135 | | | 613 | |
| Class R-1 | | | 153,153 | | | 5,004 | | | 1,406 | | | 46 | | | (42,793 | ) | | (1,394 | ) | | 111,766 | | | 3,656 | |
| Class R-2 | | | 906,870 | | | 29,689 | | | 13,338 | | | 441 | | | (458,510 | ) | | (14,959 | ) | | 461,698 | | | 15,171 | |
| Class R-3 | | | 4,432,439 | | | 143,562 | | | 87,347 | | | 2,868 | | | (1,757,738 | ) | | (56,800 | ) | | 2,762,048 | | | 89,630 | |
| Class R-4 | | | 5,699,587 | | | 182,999 | | | 127,670 | | | 4,167 | | | (2,020,474 | ) | | (65,033 | ) | | 3,806,783 | | | 122,133 | |
| Class R-5 | | | 4,050,715 | | | 130,036 | | | 70,624 | | | 2,291 | | | (816,961 | ) | | (26,081 | ) | | 3,304,378 | | | 106,246 | |
| Total net increase | | | | | | | | | | | | | | | | | | | | | | | | | |
| (decrease) | | $ | 40,458,257 | | | 1,303,156 | | $ | 1,524,816 | | | 49,682 | | $ | (19,387,883 | ) | | (624,492 | ) | $ | 22,595,190 | | | 728,346 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (*) Includes exchanges between share classes of the fund. | | | | | | | | | | | | | | | | | | | | | | |
6. Investment transactions
The fund made purchases and sales of investment securities, excluding short-term securities, of $24,012,140,000 and $16,828,722,000, respectively, during the six months ended February 28, 2007.
Expense example | unaudited |
As a shareholder of the fund, you incur two types of costs: (1) transaction costs such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (September 1, 2006, through February 28, 2007).
Actual expenses:
The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.
Hypothetical example for comparison purposes:
The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | Beginning account value 9/1/2006 | | Ending account value 2/28/2007 | | Expenses paid during period* | | Annualized expense ratio |
| | | | | | | | | |
| Class A -- actual return | | $1,000.00 | | $1,072.61 | | $3.19 | | .62% |
| Class A -- assumed 5% return | | 1,000.00 | | 1,021.72 | | 3.11 | | .62 |
| Class B -- actual return | | 1,000.00 | | 1,068.53 | | 7.03 | | 1.37 |
| Class B -- assumed 5% return | | 1,000.00 | | 1,018.00 | | 6.85 | | 1.37 |
| Class C -- actual return | | 1,000.00 | | 1,068.08 | | 7.33 | | 1.43 |
| Class C -- assumed 5% return | | 1,000.00 | | 1,017.70 | | 7.15 | | 1.43 |
| Class F -- actual return | | 1,000.00 | | 1,072.89 | | 3.14 | | .61 |
| Class F -- assumed 5% return | | 1,000.00 | | 1,021.77 | | 3.06 | | .61 |
| Class 529-A -- actual return | | 1,000.00 | | 1,072.56 | | 3.39 | | .66 |
| Class 529-A -- assumed 5% return | | 1,000.00 | | 1,021.52 | | 3.31 | | .66 |
| Class 529-B -- actual return | | 1,000.00 | | 1,068.31 | | 7.59 | | 1.48 |
| Class 529-B -- assumed 5% return | | 1,000.00 | | 1,017.46 | | 7.40 | | 1.48 |
| Class 529-C -- actual return | | 1,000.00 | | 1,067.75 | | 7.54 | | 1.47 |
| Class 529-C -- assumed 5% return | | 1,000.00 | | 1,017.50 | | 7.35 | | 1.47 |
| Class 529-E -- actual return | | 1,000.00 | | 1,070.76 | | 4.98 | | .97 |
| Class 529-E -- assumed 5% return | | 1,000.00 | | 1,019.98 | | 4.86 | | .97 |
| Class 529-F -- actual return | | 1,000.00 | | 1,073.48 | | 2.42 | | .47 |
| Class 529-F -- assumed 5% return | | 1,000.00 | | 1,022.46 | | 2.36 | | .47 |
| Class R-1 -- actual return | | 1,000.00 | | 1,068.25 | | 7.18 | | 1.40 |
| Class R-1 -- assumed 5% return | | 1,000.00 | | 1,017.85 | | 7.00 | | 1.40 |
| Class R-2 -- actual return | | 1,000.00 | | 1,068.25 | | 7.13 | | 1.39 |
| Class R-2 -- assumed 5% return | | 1,000.00 | | 1,017.90 | | 6.95 | | 1.39 |
| Class R-3 -- actual return | | 1,000.00 | | 1,070.81 | | 4.78 | | .93 |
| Class R-3 -- assumed 5% return | | 1,000.00 | | 1,020.18 | | 4.66 | | .93 |
| Class R-4 -- actual return | | 1,000.00 | | 1,072.39 | | 3.39 | | .66 |
| Class R-4 -- assumed 5% return | | 1,000.00 | | 1,021.52 | | 3.31 | | .66 |
| Class R-5 -- actual return | | 1,000.00 | | 1,073.73 | | 1.85 | | .36 |
| Class R-5 -- assumed 5% return | | 1,000.00 | | 1,023.01 | | 1.81 | | .36 |
| | | | | | | | | |
* Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period (181), and divided by 365 (to reflect the one-half year period).
| Other share class results | unaudited |
Class B, Class C, Class F and Class 529
Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.
Average annual total returns for periods ended March 31, 2007
| (the most recent calendar quarter): | | | Life |
| | 1 year | 5 years | of class |
Class B shares— first sold 3/15/00 | | | |
| Reflecting applicable contingent deferred sales | | | |
charge (CDSC), maximum of 5%, payable only | | | |
if shares are sold within six years of purchase | +1.98% | +7.47% | +2.59% |
| Not reflecting CDSC | +6.98% | +7.77% | +2.59% |
| | | | |
Class C shares— first sold 3/15/01 | | | |
| Reflecting CDSC, maximum of 1%, payable only | | | |
if shares are sold within one year of purchase | +5.90% | +7.72% | +5.84% |
| Not reflecting CDSC | +6.90% | +7.72% | +5.84% |
| | | | |
Class F shares*— first sold 3/15/01 | | | |
| Not reflecting annual asset-based fee charged by | | | |
sponsoring firm | +7.81% | +8.59% | +6.69% |
| | | | |
Class 529-A shares†— first sold 2/15/02 | | | |
| Reflecting 5.75% maximum sales charge | +1.54% | +7.29% | +7.83% |
| Not reflecting maximum sales charge | +7.74% | +8.57% | +9.08% |
| | | | |
Class 529-B shares†— first sold 2/15/02 | | | |
| Reflecting applicable CDSC, maximum of 5%, payable | | | |
only if shares are sold within six years of purchase | +1.86% | +7.33% | +7.99% |
| Not reflecting CDSC | +6.86% | +7.63% | +8.13% |
| | | | |
Class 529-C shares†— first sold 2/15/02 | | | |
| Reflecting CDSC, maximum of 1%, payable only | | | |
if shares are sold within one year of purchase | +5.83% | +7.62% | +8.14% |
| Not reflecting CDSC | +6.83% | +7.62% | +8.14% |
| | | | |
Class 529-E shares*†— first sold 3/1/02 | +7.40% | +8.19% | +8.48% |
| | | | |
Class 529-F shares*†— first sold 9/16/02 | | | |
| Not reflecting annual asset-based fee charged | | | |
by sponsoring firm | +7.91% | — | +15.47% |
*These shares are sold without any initial or contingent deferred sales charge.
† Results shown do not reflect the $10 initial account setup fee and an annual $10 account maintenance fee.
The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased it to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on pages 22 to 25 for details.
For information regarding the differences among the various share classes, please refer to the fund’s prospectus.
Office of the fund
One Market
Steuart Tower, Suite 1800
Mailing address: P.O. Box 7650
San Francisco, CA 94120-7650
Investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
Independent registered public
accounting firm
Deloitte & Touche LLP
695 Town Center Drive
Suite 1200
Costa Mesa, CA 92626-7188
Transfer agent for shareholder accounts
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 25065
Santa Ana, CA 92799-5065
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
Custodian of assets
State Street Bank and Trust Company
One Lincoln Street
Boston, MA 02111
Counsel
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street
Los Angeles, CA 90071-2228
Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus, which can be obtained from your financial adviser and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.
“American Funds Proxy Voting Guidelines” — which describes how we vote proxies relating to portfolio securities — is available free of charge on the U.S. Securities and Exchange Commission (SEC) website at sec.gov, on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the SEC for the 12 months ended June 30 by August 31. The report also is available on the SEC and American Funds websites.
A complete February 28, 2007, portfolio of The Growth Fund of America’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).
The Growth Fund of America files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website. You may also review or, for a fee, copy this filing at the SEC’s Public Reference Room in Washington, D.C. (800/SEC-0330). Additionally, the list of portfolio holdings also is available by calling AFS.
This report is for the information of shareholders of The Growth Fund of America, but it also may be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after June 30, 2007, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.
[logo - American Funds®]
The right choice for the long term®
What makes American Funds different?
For 75 years, we have followed a consistent philosophy that we firmly believe is in our investors’ best interests. The range of opportunities offered by our family of just 30 carefully conceived, broadly diversified funds has attracted over 40 million shareholder accounts.
Our unique combination of strengths includes these five factors:
• A long-term, value-oriented approach
We seek to buy securities at reasonable prices relative to their prospects and hold them for the long term.
• An extensive global research effort
Our investment professionals travel the world to find the best investment opportunities and gain a comprehensive understanding of companies and markets.
• The multiple portfolio counselor system
Our unique method of portfolio management, developed nearly 50 years ago, blends teamwork with individual accountability and has provided American Funds with a sustainable method of achieving fund objectives.
• Experienced investment professionals
American Funds portfolio counselors have an average of 24 years of investment experience, providing a wealth of knowledge and experience that few organizations have.
• A commitment to low operating expenses
The American Funds provide exceptional value for shareholders, with operating expenses that are among the lowest in the mutual fund industry.
American Funds span a range of investment objectives
• Growth funds
AMCAP Fund®
EuroPacific Growth Fund®
> The Growth Fund of America®
The New Economy Fund®
New Perspective Fund®
New World FundSM
SMALLCAP World Fund®
• Growth-and-income funds
American Mutual Fund®
Capital World Growth and Income FundSM
Fundamental InvestorsSM
The Investment Company of America®
Washington Mutual Investors FundSM
• Equity-income funds
Capital Income Builder®
The Income Fund of America®
• Balanced fund
American Balanced Fund®
• Bond funds
American High-Income TrustSM
The Bond Fund of AmericaSM
Capital World Bond Fund®
Intermediate Bond Fund of America®
Short-Term Bond Fund of AmericaSM
U.S. Government Securities FundSM
• Tax-exempt bond funds
American High-Income Municipal Bond Fund®
Limited Term Tax-Exempt Bond Fund of AmericaSM
The Tax-Exempt Bond Fund of America®
State-specific tax-exempt funds
The Tax-Exempt Fund of California®
The Tax-Exempt Fund of Maryland®
The Tax-Exempt Fund of Virginia®
• Money market funds
The Cash Management Trust of America®
The Tax-Exempt Money Fund of AmericaSM
The U.S. Treasury Money Fund of AmericaSM
• American Funds Target Date Retirement SeriesSM
The Capital Group Companies
American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
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