UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
Investment Company Act File Number: 811-00862
The Growth Fund of America, Inc.
(Exact Name of Registrant as Specified in Charter)
P.O. Box 7650, One Market, Steuart Tower
San Francisco, California 94120
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (415) 421-9360
Date of fiscal year end: August 31
Date of reporting period: August 31, 2011
Patrick F. Quan
Capital Research and Management Company
P.O. Box 7650, One Market, Steuart Tower
San Francisco, California 94120
(Name and Address of Agent for Service)
Copies to:
Mark D. Perlow
K&L Gates LLP
Four Embarcadero Center, Suite 1200
San Francisco, California 94111
(Counsel for the Registrant)
ITEM 1 – Reports to Stockholders
The Growth Fund of America®
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Special feature
How GFA invests in volatile markets
See page 6
Annual report for the year ended August 31, 2011
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 33 American Funds. American Funds is one of the nation’s largest mutual fund families. For 80 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.
Fund results shown in this report, unless otherwise indicated, are for Class A shares at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower. Results are for past periods and are not predictive of results for 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, so they may lose value. For current information and month-end results, visit americanfunds.com.
Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended September 30, 2011 (the most recent calendar quarter-end): | ||||||||||||
Class A shares | 1 year | 5 years | 10 years | |||||||||
Reflecting 5.75% maximum sales charge | –8.96 | % | –2.14 | % | 3.82 | % |
The total annual fund operating expense ratio was 0.68% for Class A shares as of the most recent fiscal year-end.
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Applicable fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 27 and 28 for details.
Results for other share classes can be found on page 3.
See the prospectus and the Risk Factors section of this report for more information on risks associated with investing in the fund.
Fellow investors:
The 2011 fiscal year started strong as investors grew more confident in a U.S. economic expansion and continuing robust corporate profits. U.S. stocks rose during much of the first six months, but then flattened and declined in the final four months of the fiscal year, ending on a sour note in August. Volatility returned as worries about Europe’s debt crisis increased, and the U.S. economic recovery slowed. Reports of a weak employment outlook circulated as many cities and states laid off workers and cut spending.
In this volatile 12 months, The Growth Fund of America (GFA) posted a total return of 15.4%. On an absolute basis, the return seemed solid in an up-and-down year. But on a relative basis, the fund trailed the 18.5% total return of the unmanaged Standard & Poor’s 500 Composite Index, a broad measure of the U.S. stock market. As shown in the chart below, the fund also trailed the four Lipper indexes we use to measure GFA’s progress over the short term.
Over longer periods, GFA has continued to outpace the S&P 500 and its comparable Lipper peer group indexes by significant margins. For the 10 years ended August 31, 2011, a challenging period that included two major market declines, GFA posted an average annual total return of 4.0%, compared with 2.7% by the S&P 500. Over 20 years, GFA produced an average annual total return of 9.9%, compared with 7.9% by the S&P 500. Over its nearly 38-year lifetime, GFA had an average annual total return of 13.3%, compared with 10.3% by the S&P 500.
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Results at a glance | ||||||||||||||||
Total returns for periods ended August 31, 2011, with all distributions reinvested | ||||||||||||||||
Total returns | Average annual total returns | |||||||||||||||
1 year | 5 years | 10 years | Lifetime1 | |||||||||||||
The Growth Fund of America | ||||||||||||||||
(Class A shares) | 15.4 | % | 1.0 | % | 4.0 | % | 13.3 | % | ||||||||
Standard & Poor’s 500 Composite Index2 | 18.5 | 0.8 | 2.7 | 10.3 | ||||||||||||
Lipper Growth Funds Index3 | 19.1 | 0.8 | 2.0 | 9.3 | ||||||||||||
Lipper Capital Appreciation Funds Index3 | 16.0 | 2.8 | 3.7 | 10.5 | ||||||||||||
Lipper Large-Cap Growth Funds Index3 | 21.2 | 2.6 | 1.8 | — | 4 | |||||||||||
Lipper Large-Cap Core Funds Index3 | 16.9 | 0.6 | 2.1 | — | 4 | |||||||||||
1 Since Capital Research and Management Company (CRMC) began managing the fund on December 1, 1973. | ||||||||||||||||
2 The S&P 500 is unmanaged and its results do not reflect the effect of sales charges, commissions, account fees, expenses or taxes. | ||||||||||||||||
3 Results of the Lipper indexes do not reflect the effect of sales charges, account fees or taxes. | ||||||||||||||||
4 This Lipper index was not in existence when CRMC began managing the fund. |
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In this report | |
Special feature | |
6 | How GFA invests in volatile markets |
Contents | |
1 | Letter to investors |
4 | The value of a long-term perspective |
12 | Summary investment |
portfolio | |
18 | Financial statements |
35 | Board of directors and other officers |
[End Sidebar]
Investment results analysis
Information technology companies, which make up the largest investment sector for the fund, and consumer discretionary stocks helped results. Among technology stocks, Apple, the fund’s largest holding, rose 58.1%, aided by strong sales of its iPad and iPhone products. Oracle, a major supplier of database management software, increased 28.3%.
Internet retailer Amazon led the consumer discretionary group by rising 72.5% during the fiscal year. Other consumer discretionary stocks that helped were cable television provider Comcast (+27.8%), home improvement retailer Home Depot (+20.0%) and digital television services provider DIRECTV (+16.0%). Among our industrial holdings, railroad operator Union Pacific (+26.4%) also helped results.
Financial services stocks had a mixed impact on results. The fact that the fund owned few financial companies helped the fund relative to the S&P 500, which included more financials. However, the financial stocks the fund held hurt results. Bank of America, for example, declined 34.4%.
Unlike most of the past 10 years, international stocks detracted from results in the past 12 months. Relatively poor results in fund holdings in Canada, Mexico and Israel more than offset good investments in Hong Kong and Switzerland. The health care sector also detracted from results. Teva Pharmaceuticals fell 18.2%.
The road ahead
For the next 12 months, it appears that jobs, housing and consumer spending could continue to be slow to recover. It also appears that local, state and federal governments will continue to cut public spending in an attempt to balance their budgets. All of this will help keep a lid on economic growth. Standard & Poor’s, a major ratings agency, lowered the U.S. debt rating to AA+ on August 5 and issued a negative outlook, saying that the debt ceiling agreement reached in August failed to provide a clear path for reducing the U.S. fiscal deficit over the medium term and that the prolonged debate highlighted the vast gap between the Democrats and Republicans.
It’s important to remember, however, that the stock market is not the same as the economy because it often anticipates future developments. Therefore, returns from stocks can be quite different from growth rates in the economy. So, we will continue to search for healthy companies, selling at reasonable valuations, in an environment in which we will be cautiously aware of remaining volatility. Our feature story, beginning on page 6, describes how GFA invests in volatile markets and discusses some potentially strong growth companies over the next three to five years.
With government decisions on spending, individual taxation, job programs and increasing regulation on the U.S. legislative docket in the coming months, we will be monitoring events closely. We also will be tracking developments in Europe’s financial crisis with our worldwide network of investment professionals.
We remain confident about our long-term prospects and believe that our investment process, which focuses on fundamental investing with a global perspective, will help us get through this challenging period.
We thank our long-term investors for your continued support of The Growth Fund of America and look forward to keeping you informed about how we handle the challenges and opportunities ahead.
Cordially,
/s/ James F. Rothenberg
James F. Rothenberg
Vice Chairman of the Board
/s/ Donald D. O’Neal
Donald D. O’Neal
President
October 4, 2011
For current information about the fund, visit americanfunds.com.
Other share class results
unaudited
Classes B, C, F and 529
Fund results shown are for past periods and are not predictive of results for 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 September 30, 2011 (the most recent calendar quarter-end): | ||||||||||||
10 years1/ | ||||||||||||
1 year | 5 years | Life of class | ||||||||||
Class B shares2 | ||||||||||||
Reflecting applicable contingent deferred sales charge | ||||||||||||
(CDSC), maximum of 5%, payable only if shares | ||||||||||||
are sold within six years of purchase | –8.93 | % | –2.08 | % | 3.82 | % | ||||||
Not reflecting CDSC | –4.13 | –1.72 | 3.82 | |||||||||
Class C shares | ||||||||||||
Reflecting CDSC, maximum of 1%, payable only | ||||||||||||
if shares are sold within one year of purchase | –5.11 | –1.74 | 3.62 | |||||||||
Not reflecting CDSC | –4.16 | –1.74 | 3.62 | |||||||||
Class F-1 shares3 | ||||||||||||
Not reflecting annual asset-based fee charged | ||||||||||||
by sponsoring firm | –3.34 | –0.95 | 4.45 | |||||||||
Class F-2 shares3 — first sold 8/1/08 | ||||||||||||
Not reflecting annual asset-based fee charged | ||||||||||||
by sponsoring firm | –3.15 | — | –2.98 | |||||||||
Class 529-A shares4 — first sold 2/15/02 | ||||||||||||
Reflecting 5.75% maximum sales charge | –9.01 | –2.19 | 2.72 | |||||||||
Not reflecting maximum sales charge | –3.45 | –1.02 | 3.36 | |||||||||
Class 529-B shares2,4 — first sold 2/15/02 | ||||||||||||
Reflecting applicable CDSC, maximum of 5%, payable | ||||||||||||
only if shares are sold within six years of purchase | –8.99 | –2.17 | 2.63 | |||||||||
Not reflecting CDSC | –4.20 | –1.81 | 2.63 | |||||||||
Class 529-C shares4 — first sold 2/15/02 | ||||||||||||
Reflecting CDSC, maximum of 1%, payable only | ||||||||||||
if shares are sold within one year of purchase | –5.17 | –1.81 | 2.50 | |||||||||
Not reflecting CDSC | –4.21 | –1.81 | 2.50 | |||||||||
Class 529-E shares3,4 — first sold 3/1/02 | –3.70 | –1.31 | 2.89 | |||||||||
Class 529-F-1 shares3,4 — first sold 9/16/02 | ||||||||||||
Not reflecting annual asset-based fee charged | ||||||||||||
by sponsoring firm | –3.20 | –0.81 | 6.09 |
1Applicable to Classes B, C and F-1 shares only. All other share classes reflect results for the life of the class. |
2These shares are not available for purchase. |
3These shares are sold without any initial or contingent deferred sales charge. |
4Results shown do not reflect the $10 account setup fee and an annual $10 account maintenance fee. |
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Applicable fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 27 and 28 for details that include expense ratios for all share classes.
For information regarding the differences among the various share classes, refer to the fund’s prospectus.
The value of a long-term perspective
How a $10,000 investment has grown
Fund results shown are for Class A shares and reflect deduction of the maximum sales charge of 5.75% on the $10,000 investment.1 Thus, the net amount invested was $9,425.2 Results are for past periods and are not predictive of results for 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 based on a $1,000 investment (for periods ended August 31, 2011)* | ||||||||||||
1 year | 5 years | 10 years | ||||||||||
Class A shares | 8.77 | % | –0.19 | % | 3.35 | % | ||||||
*Assumes reinvestment of all distributions and payment of the maximum 5.75% sales charge. |
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The fund’s investment adviser waived a portion of its management fees from September 1, 2004, through December 31, 2008. Applicable fund results shown reflect the waiver, without which they would have been lower. See the Financial Highlights table on pages 27 and 28 for details.
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Date | The Growth Fund of America3 | Standard & Poor’s 500 Composite Index with dividends reinvested4 | Lipper Growth Funds Index5 | Consumer Price Index (inflation)6 | ||||||||||||
12/1/1973 | $ | 9,425 | $ | 10,000 | $ | 10,000 | $ | 10,000 | ||||||||
8/31/1974(7) | 7,874 | 7,749 | 7,204 | 10,893 | ||||||||||||
8/31/1975 | 9,792 | 9,776 | 9,126 | 11,830 | ||||||||||||
8/31/1976 | 11,165 | 12,043 | 10,607 | 12,505 | ||||||||||||
8/31/1977 | 12,377 | 11,835 | 10,558 | 13,333 | ||||||||||||
8/31/1978 | 20,136 | 13,315 | 13,315 | 14,379 | ||||||||||||
8/31/1979 | 23,595 | 14,881 | 15,033 | 16,078 | ||||||||||||
8/31/1980 | 31,496 | 17,588 | 19,013 | 18,148 | ||||||||||||
8/31/1981 | 35,383 | 18,539 | 20,125 | 20,109 | ||||||||||||
8/31/1982 | 38,595 | 19,134 | 20,339 | 21,285 | ||||||||||||
8/31/1983 | 56,382 | 27,582 | 30,631 | 21,830 | ||||||||||||
8/31/1984 | 56,805 | 29,280 | 29,823 | 22,767 | ||||||||||||
8/31/1985 | 64,493 | 34,616 | 34,712 | 23,529 | ||||||||||||
8/31/1986 | 82,962 | 48,158 | 46,117 | 23,900 | ||||||||||||
8/31/1987 | 109,731 | 64,779 | 59,044 | 24,924 | ||||||||||||
8/31/1988 | 97,962 | 53,241 | 49,752 | 25,926 | ||||||||||||
8/31/1989 | 136,507 | 74,101 | 67,293 | 27,146 | ||||||||||||
8/31/1990 | 123,184 | 70,400 | 62,015 | 28,671 | ||||||||||||
8/31/1991 | 160,815 | 89,300 | 79,872 | 29,760 | ||||||||||||
8/31/1992 | 168,703 | 96,368 | 84,053 | 30,697 | ||||||||||||
8/31/1993 | 210,269 | 110,996 | 101,030 | 31,547 | ||||||||||||
8/31/1994 | 222,852 | 117,057 | 105,782 | 32,462 | ||||||||||||
8/31/1995 | 279,812 | 142,129 | 128,702 | 33,312 | ||||||||||||
8/31/1996 | 282,323 | 168,734 | 142,829 | 34,270 | ||||||||||||
8/31/1997 | 391,124 | 237,282 | 191,969 | 35,033 | ||||||||||||
8/31/1998 | 390,174 | 256,505 | 196,093 | 35,599 | ||||||||||||
8/31/1999 | 629,203 | 358,611 | 277,049 | 36,405 | ||||||||||||
8/31/2000 | 965,880 | 417,104 | 354,976 | 37,647 | ||||||||||||
8/31/2001 | 721,756 | 315,433 | 236,853 | 38,671 | ||||||||||||
8/31/2002 | 578,827 | 258,698 | 188,774 | 39,368 | ||||||||||||
8/31/2003 | 701,724 | 289,889 | 214,778 | 40,218 | ||||||||||||
8/31/2004 | 762,451 | 323,073 | 227,211 | 41,285 | ||||||||||||
8/31/2005 | 924,112 | 363,626 | 261,043 | 42,789 | ||||||||||||
8/31/2006 | 1,013,358 | 395,887 | 277,109 | 44,423 | ||||||||||||
8/31/2007 | 1,182,434 | 455,775 | 320,863 | 45,298 | ||||||||||||
8/31/2008 | 1,085,043 | 405,029 | 284,553 | 47,731 | ||||||||||||
8/31/2009 | 894,135 | 331,128 | 228,567 | 47,023 | ||||||||||||
8/31/2010 | 922,764 | 347,454 | 241,543 | 47,563 | ||||||||||||
8/31/2011 | 1,065,029 | 411,656 | 287,751 | 49,356 |
[end moutain chart]
Year ended August 31 | 1974 | 7 | 1975 | 1976 | 1977 | 1978 | 1979 | 1980 | 1981 | |||||||||||||||||||||||
Total value (dollars in thousands) | ||||||||||||||||||||||||||||||||
Dividends reinvested | — | $ | .4 | .3 | — | .3 | — | .3 | .5 | |||||||||||||||||||||||
Value at year-end | $ | 7.9 | 9.8 | 11.2 | 12.4 | 20.1 | 23.6 | 31.5 | 35.4 | |||||||||||||||||||||||
GFA total return | (21.3 | %) | 24.4 | 14.0 | 10.9 | 62.7 | 17.2 | 33.5 | 12.3 | |||||||||||||||||||||||
Year ended August 31 | 1982 | 1983 | 1984 | 1985 | 1986 | 1987 | 1988 | 1989 | ||||||||||||||||||||||||
Total value (dollars in thousands) | ||||||||||||||||||||||||||||||||
Dividends reinvested | 1.7 | 2.3 | 1.6 | 1.2 | 1.0 | 1.4 | 1.5 | 1.7 | ||||||||||||||||||||||||
Value at year-end | 38.6 | 56.4 | 56.8 | 64.5 | 83.0 | 109.7 | 98.0 | 136.5 | ||||||||||||||||||||||||
GFA total return | 9.1 | 46.1 | 0.8 | 13.5 | 28.6 | 32.3 | (10.7 | ) | 39.3 | |||||||||||||||||||||||
Year ended August 31 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | ||||||||||||||||||||||||
Total value (dollars in thousands) | ||||||||||||||||||||||||||||||||
Dividends reinvested | 3.6 | 3.2 | 2.5 | 1.5 | .9 | 1.4 | 2.5 | 2.0 | ||||||||||||||||||||||||
Value at year-end | 123.2 | 160.8 | 168.7 | 210.3 | 222.9 | 279.8 | 282.3 | 391.1 | ||||||||||||||||||||||||
GFA total return | (9.8 | ) | 30.5 | 4.9 | 24.6 | 6.0 | 25.6 | 0.9 | 38.5 | |||||||||||||||||||||||
Year ended August 31 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | ||||||||||||||||||||||||
Total value (dollars in thousands) | ||||||||||||||||||||||||||||||||
Dividends reinvested | 2.5 | 2.0 | 1.1 | 3.9 | 1.4 | .6 | .2 | 2.8 | ||||||||||||||||||||||||
Value at year-end | 390.2 | 629.2 | 965.9 | 721.8 | 578.8 | 701.7 | 762.5 | 924.1 | ||||||||||||||||||||||||
GFA total return | (0.2 | ) | 61.3 | 53.5 | (25.3 | ) | (19.8 | ) | 21.2 | 8.7 | 21.2 | |||||||||||||||||||||
Year ended August 31 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | ||||||||||||||||||||||||||
Average | ||||||||||||||||||||||||||||||||
Total value (dollars in thousands) | annual total | |||||||||||||||||||||||||||||||
Dividends reinvested | 5.9 | 8.7 | 11.9 | 8.3 | 7.6 | 8.9 | return for | |||||||||||||||||||||||||
Value at year-end | 1,013.4 | 1,182.4 | 1,085.0 | 894.1 | 922.8 | 1,065.0 | 37-3/4 years | |||||||||||||||||||||||||
GFA total return | 9.7 | 16.7 | (8.2 | ) | (17.6 | ) | 3.2 | 15.4 | 13.2 | %3 |
1As outlined in the prospectus, the sales charge is reduced for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares. |
2The maximum initial sales charge was 8.5% prior to July 1, 1988. |
3Includes reinvested dividends of $97,426 and reinvested capital gain distributions of $479,731. |
4The S&P 500 is unmanaged, and its results include reinvested distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or taxes. |
5Results of the Lipper Growth Funds Index reflect fund expenses but do not reflect the effect of any applicable account fees, taxes or front-end sales charges. If any applicable front-end sales charges were included, results of the index would be lower. |
6Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics. |
7For the period December 1, 1973 (when Capital Research and Management Company became the fund’s investment adviser), through August 31, 1974. |
The results shown are before taxes on fund distributions and sale of fund shares.
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[photo of Don O’Neal]
Don O’Neal
[End Photo Caption]
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Jim Rothenberg
[End Photo Caption]
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“We continue to take a long-term view in how we invest, which seems to contrast with what many others are doing. We believe this is a source of competitive advantage for our investors over time.”
— Don O’Neal
[End Pull Quote]
How GFA invests in volatile markets
In the past 12 months, increased stock market volatility has been disturbing to many investors, and it’s not difficult to understand why. Recent market gyrations have been the result of the U.S. debt ceiling debate, Standard & Poor’s downgrade of the U.S. credit rating, the European debt crisis and the slowing pace of the U.S. economic recovery. In addition, short-term electronic trading can move stock prices with lightning speed, power and sometimes little regard for the fundamentals.
Some of the stock market volatility is due to the rising influence of short-term traders, says Don O’Neal, president of The Growth Fund of America (GFA). “We view this as unfortunate because of the negative impact on investor confidence and the faith in our market system. It differs sharply with how we manage investor portfolios, which hasn’t changed at all. We continue to take a long-term view in how we invest, which seems to contrast with what many others are doing. We believe this is a source of competitive advantage for our investors over time.”
High-quality growth companies are trading at lower valuations
Volatile markets and negative news have led to some high-quality companies trading at lower valuations in recent months. “Today corporate America is on sale,” says veteran portfolio counselor Gregg Ireland. “Growth and quality are on sale. This is an unusual period. Within groups, you can list all the companies from the slowest growing to the fastest growing or the least quality to the best quality. You won’t pay much more for the best quality or growth compared with lower quality and growth.”
Gregg says GFA’s investment analysts have been on the road visiting companies and calling on suppliers and competitors to try to understand which companies are best positioned to take advantage of the opportunities available. “This is not a time to panic and not a time to be selling,” Gregg says. “I look at this period as an opportunity to add to positions I already have or to start new positions in companies I have been waiting to buy when the price was right.”
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[photo of Donnalisa Barnum]
Donnalisa Barnum
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[photo of Gregg Ireland]
Gregg Ireland
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“The U.S. banking system is in much better shape today than it was in the summer of 2008, when every major bank was in serious trouble.”
— Jim Rothenberg
[End Pull Quote]
[photo of a cowboy walking a horse on a lead]
Some professional investors have expressed fears that the current economic environment may be a repeat of 2008 when the stock market declined sharply. Jim Rothenberg, vice chairman of GFA, disagrees, describing his outlook as “cautiously optimistic.” “The U.S. banking system is in much better shape today than it was in the summer of 2008, when every major bank was in serious trouble,” he says. “We’ve seen the credit markets deal with this volatility without too much of a hiccup. Trading has gone on normally in both equities and fixed income. I think that’s a huge difference from 2008.”
U.S. corporations have dramatically improved their situation, Jim says. “They’ve downsized their operations, their balance sheets are much improved and they have sizable amounts of cash. They are in much better shape to deal with a slower economy than they were back in 2008. And while the U.S. may still be too leveraged, the country is a lot less leveraged than it was in 2008, particularly in the financial system.”
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A wealth of experience
The Growth Fund of America currently has 12 portfolio counselors who bring together 359 years of investment
experience to managing your investment. Here are the specific years of experience for these primary
decision-makers for the fund.*
Years of investment | ||||
Portfolio counselor | experience* | |||
Ronald B. Morrow | 43 | |||
Gordon Crawford | 40 | |||
James F. Rothenberg | 40 | |||
James E. Drasdo | 39 | |||
Gregg E. Ireland | 39 | |||
Donnalisa Barnum | 29 | |||
Michael T. Kerr | 27 | |||
Donald D. O’Neal | 25 | |||
Carl M. Kawaja | 24 | |||
Bradley J. Vogt | 23 | |||
J. Blair Frank | 17 | |||
Dylan J. Yolles | 13 | |||
*As of August 31, 2011. |
[End Sidebar]
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[photo of Ron Morrow]
Ron Morrow
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[photo of Jim Drasdo]
Jim Drasdo
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Jim says that when most stock market pundits speak, they mostly talk about “the market.” “I don’t spend a lot of time thinking about the market’s valuation because I don’t invest in “the market” but in individual securities. I think there are many companies whose fundamentals continue to be solid and their balance sheets clean. But their stock prices have fallen, so this down period gives you a more attractive entry point than before. I feel pretty comfortable that as in past times, in a difficult environment, you will find some attractive stocks to buy.”
Which companies show special potential over the next three to five years?
What companies do GFA portfolio counselors and investment analysts cite as potentially strong growth companies over the next three to five years? Here are a few examples:
Apple, GFA’s largest holding, has been a favorite of portfolio counselor Blair Frank. “Many people worry that Apple can’t get any bigger. We see many opportunities for growth, even from this large size,” Blair says. “For example, currently 15% of Apple’s sales are in China. We believe sales there can increase to equal the U.S. sales percentage. This alone would add 20% to the company’s revenues. Apple has $80 billion of cash on its balance sheet, and an impressive track record of innovation and customer satisfaction. The company grew its revenues by over 80% last quarter and yet its stock sells for less than 12 times earnings. We see opportunity for appreciation in the stock and, importantly, a margin of safety for our investors if the company hits a rough patch.”
Energy stocks remain “a long-term conviction for me,” says Mike Kerr, a portfolio counselor who has specialized in this industry. “If you believe that emerging markets like China, Brazil and India will grow in the next five years, their growth will be highly energy- and oil-intensive. Very few industries have pricing power and oil is one of them in the next five to 10 years.”
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J. Blair Frank
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Mike T. Kerr
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“As we employ a bottom-up, one-company-at-a-time approach in constructing portfolios, the most obvious way in which we assess and manage risk is at the individual security level.”
— Don O’Neal
[End Pull Quote]
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Gordon Crawford
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Brad Vogt
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Oil shale and natural gas are two of the most potentially exciting energy opportunities in the world, says Mike. “For an investor who has followed the oil industry for years, I am happy to see two of these resource opportunities in the United States.” He cites Noble Energy, a Houston-based company with oil shale properties, as a company with potential growth prospects for the next five years. Noble Energy also announced in December 2010 a significant natural gas discovery in offshore Israel.
Portfolio counselor Donnalisa Barnum looks for companies that have good growth, good financial characteristics and good management. “I define good management as executives who say they are going to do something and then actually do it. Most importantly, they make the right decision that will hold up over a long period of time. In addition to those characteristics, I favor companies that
will do well no matter what happens to the economy.”
Intuitive Surgical, a Sunnyvale, Calif., corporation that manufactures robotic surgical systems, fits into her strategy, she says. Its da Vinci® Surgical System allows surgery to be performed remotely by surgeons using robotic manipulators. Donnalisa believes that there is great potential for the widespread use of this system in a large number of medical conditions, including prostate and gynecological surgery and cardiac valve repair. For a patient, the surgical system can offer the potential benefits of a minimally invasive procedure, including less pain, less blood loss, less need for blood transfusions, a shorter hospital stay and a faster return to normal activities.
Although the U.S. corporate outlook is quite positive, clouds remain in the macroeconomic outlook and some of the investment professionals in GFA remain concerned. Veteran portfolio counselor Gordon Crawford says he thinks it’s time for “a healthy dose of caution” with respect to the troubling debt in developed nations, including the U.S. and several European countries. He is also concerned about how federal, state and local government spending cuts and layoffs impact U.S. consumer spending, which accounts for 70% of the American economy. Government consumption, expenditures and gross investment is 20.3% of the nation’s gross domestic product. Gordon says he feels better in the current market with more fixed income and cash in his portfolio.
[photo of a cowboy knotting a rope which is attached to a horse]
How GFA uses risk measures to help protect investors in volatile markets
The fund looks at investment risk much as the dictionary defines risk: “the possibility of harm or loss.” Some industry participants use volatility and risk interchangeably, but they are not the same thing. “The fund uses a combination of quantitative and qualitative measures to consider risk and protect shareholders. Many of the quantitative measures we see are models,” Don says. “All models of financial systems that we have seen in the past few decades failed at points of stress. They are good and useful tools but they should not be substituted for a holistic view of risk.
“As we employ a bottom-up, one-company-at-a-time approach in constructing portfolios, the most obvious way in which we assess and manage risk is at the individual security level,” Don says. “We forecast a company’s business (typically three to five years out), debate what can go right or wrong, assess valuation, and thus deeply evaluate the risk/reward tradeoff in that particular security. The key tools here are not quantitative models but fundamental research and the perspective of experienced people.”
The fund’s in-depth, globally oriented research is aimed at acquiring deep knowledge of companies and industries, increasing the likelihood of making good investment decisions, Don says. Our experienced GFA investment professionals average 30 years of experience (including 26 years with Capital Research and Management Company).
The Multiple Portfolio Counselor System,SM developed more than 50 years ago at CRMC, blends teamwork with individual accountability and also helps to limit risk. GFA’s assets are divided into portions that are managed independently by portfolio counselors who reflect a variety of investment styles, backgrounds, ages and industry experience. A group of investment analysts also manages a portion of the fund. This system of multiple points of view moderates volatility and provides tremendous diversification. But because of individual accountability, it maintains focus and conviction.
The effect of experience can be significant. Many portfolio counselors have been around for so long that they have seen cycles and patterns come and go. They have developed perspective and judgment, which is very helpful in times of volatility. n
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Carl M. Kawaja
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Dylan Yolles
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Summary investment portfolio August 31, 2011
The following summary investment portfolio is designed to streamline the report and help investors better focus on the fund’s principal holdings. See the inside back cover for details on how to obtain a complete schedule of portfolio holdings.
[begin pie chart]
Industry sector diversification (percent of net assets) | ||||
Information technology | 18.39 | % | ||
Consumer discretionary | 16.56 | |||
Energy | 11.58 | |||
Health care | 10.12 | |||
Financials | 8.24 | |||
Other industries | 26.75 | |||
Other securities | 0.27 | |||
Short-term securities & other assets less liabilities | 8.09 |
[end pie chart]
Largest equity holdings | Percent of net assets | |||
Apple | 3.7 | % | ||
Amazon.com | 2.1 | |||
Oracle | 1.9 | |||
Microsoft | 1.5 | |||
Comcast | 1.5 | |||
Home Depot | 1.4 | |||
Apache | 1.4 | |||
DIRECTV | 1.3 | |||
Philip Morris International | 1.3 | |||
Union Pacific | 1.2 |
Percent | ||||||||||||
Value | of net | |||||||||||
Common stocks - 91.64% | Shares | (000 | ) | assets | ||||||||
Information technology - 18.39% | ||||||||||||
Apple Inc. (1) | 13,050,000 | $ | 5,022,031 | 3.65 | % | |||||||
Manufacturer of personal computers and various software products, as well as portable media players, browsers and smartphones. | ||||||||||||
Oracle Corp. | 95,303,676 | 2,675,174 | 1.95 | |||||||||
Major supplier of database management software. Also develops business applications and provides consulting and support. | ||||||||||||
Microsoft Corp. | 78,487,100 | 2,087,757 | 1.52 | |||||||||
A world leader in software and Internet technologies. Its products include the Windows operating system and Office software. | ||||||||||||
Google Inc., Class A (1) | 2,871,436 | 1,553,332 | 1.13 | |||||||||
One of the most frequently used website search engines in the world. | ||||||||||||
Texas Instruments Inc. | 37,444,000 | 981,407 | .71 | |||||||||
Global maker of semiconductors and a leading producer of digital signal processors. | ||||||||||||
QUALCOMM Inc. | 16,505,194 | 849,357 | .62 | |||||||||
Develops and licenses technologies for digital wireless communications products. | ||||||||||||
Samsung Electronics Co. Ltd. | 1,056,700 | 736,922 | .54 | |||||||||
Korea's top electronics manufacturer and a global leader in semiconductor production. | ||||||||||||
EMC Corp. (1) | 31,005,000 | 700,403 | .51 | |||||||||
A leading maker of computer memory storage and retrieval products. | ||||||||||||
Visa Inc., Class A | 7,746,400 | 680,754 | .49 | |||||||||
Major consumer payment system operator and financial services manager. | ||||||||||||
Corning Inc. | 44,540,000 | 669,436 | .49 | |||||||||
Leading manufacturer of optical fiber, ceramics and high-performance glass used in industrial and scientific products. | ||||||||||||
Other securities | 9,326,873 | 6.78 | ||||||||||
25,283,446 | 18.39 | |||||||||||
Consumer discretionary - 16.56% | ||||||||||||
Amazon.com, Inc. (1) | �� | 13,197,000 | 2,841,182 | 2.07 | ||||||||
Major online retailer of books, CDs, DVDs, toys, apparel, home furnishings and other products. | ||||||||||||
Comcast Corp., Class A | 69,382,100 | 1,492,409 | ||||||||||
Comcast Corp., Class A, special nonvoting shares | 24,800,000 | 524,768 | 1.47 | |||||||||
The largest cable TV provider in the U.S. | ||||||||||||
Home Depot, Inc. | 58,764,400 | 1,961,556 | 1.43 | |||||||||
The world's largest home improvement retailer. | ||||||||||||
DIRECTV, Class A (1) (2) | 40,270,000 | 1,770,672 | 1.29 | |||||||||
Digital television services provider in the United States, Latin America and the Caribbean. | ||||||||||||
NIKE, Inc., Class B | 14,513,600 | 1,257,603 | .91 | |||||||||
The world's leading athletic shoe company. Also operates shoe and sportswear stores. | ||||||||||||
News Corp., Class A | 61,405,800 | 1,060,478 | .77 | |||||||||
A leading global media conglomerate with businesses ranging from movies and television to operation of satellite TV platforms. | ||||||||||||
Time Warner Cable Inc. | 14,734,735 | 965,125 | .70 | |||||||||
Major cable television provider operating in the United States. | ||||||||||||
YUM! Brands, Inc. | 15,431,000 | 838,983 | .61 | |||||||||
Quick-service-oriented restaurant company whose brands include KFC, Long John Silver's, Pizza Hut and Taco Bell. | ||||||||||||
Las Vegas Sands Corp. (1) | 17,385,000 | 809,619 | .59 | |||||||||
Hotel, gaming and resort development company. | ||||||||||||
Time Warner Inc. | 24,236,591 | 767,330 | .56 | |||||||||
This media and communications conglomerate combines Internet services with film, TV, cable and publishing. | ||||||||||||
Johnson Controls, Inc. | 20,749,900 | 661,507 | .48 | |||||||||
A leading manufacturer of components for automotive systems and building controls. | ||||||||||||
Other securities | 7,818,745 | 5.68 | ||||||||||
22,769,977 | 16.56 | |||||||||||
Energy - 11.58% | ||||||||||||
Apache Corp. | 18,645,400 | 1,921,781 | 1.40 | |||||||||
An independent oil and gas exploration and development company with onshore and offshore operations worldwide. | ||||||||||||
Schlumberger Ltd. | 18,956,700 | 1,480,897 | 1.08 | |||||||||
A leading provider of services and technology to the petroleum industry. | ||||||||||||
EOG Resources, Inc. (2) | 14,755,837 | 1,366,243 | .99 | |||||||||
An oil and gas exploration and production company with global operations. | ||||||||||||
Suncor Energy Inc. | 36,897,388 | 1,182,314 | .86 | |||||||||
Explores for, processes and sells oil and natural gas. | ||||||||||||
Southwestern Energy Co. (1) (2) | 21,925,000 | 832,054 | .60 | |||||||||
Energy company engaged in the exploration, development and production of natural gas and crude oil. | ||||||||||||
Noble Energy, Inc. | 8,734,000 | 771,736 | .56 | |||||||||
Specializes in oil and natural gas exploration and development. | ||||||||||||
Canadian Natural Resources, Ltd. | 19,555,000 | 738,829 | .54 | |||||||||
One of Canada's largest oil and natural gas producers. | ||||||||||||
Other securities | 7,626,538 | 5.55 | ||||||||||
15,920,392 | 11.58 | |||||||||||
Health care - 10.12% | ||||||||||||
Allergan, Inc. (2) | 15,955,400 | 1,305,311 | .95 | |||||||||
Produces eye care, skin care and specialty pharmaceutical products, including Botox. | ||||||||||||
Gilead Sciences, Inc. (1) | 27,070,000 | 1,079,687 | .79 | |||||||||
Develops drugs to treat infectious diseases and cancer. | ||||||||||||
Merck & Co., Inc. | 31,298,762 | 1,036,615 | .75 | |||||||||
Among the world's largest pharmaceutical companies, and a leader in cardiovascular medicine. | ||||||||||||
UnitedHealth Group Inc. | 20,845,000 | 990,554 | .72 | |||||||||
Provides managed health care services across the U.S. | ||||||||||||
Biogen Idec Inc. (1) | 8,695,400 | 819,107 | .60 | |||||||||
A leader in developing therapies to treat multiple sclerosis and cancer. | ||||||||||||
Medco Health Solutions, Inc. (1) | 13,246,100 | 717,144 | .52 | |||||||||
Manages pharmacy benefits for clients including unions, corporations and HMOs. | ||||||||||||
Intuitive Surgical, Inc. (1) | 1,829,600 | 697,718 | .51 | |||||||||
Manufacturer of robotic-assisted minimally invasive surgical systems. | ||||||||||||
Other securities | 7,262,871 | 5.28 | ||||||||||
13,909,007 | 10.12 | |||||||||||
Financials - 8.24% | ||||||||||||
Wells Fargo & Co. | 41,655,978 | 1,087,221 | .79 | |||||||||
One of the largest banks in the U.S. and a leader in online banking. | ||||||||||||
Industrial and Commercial Bank of China Ltd., Class H | 1,507,488,335 | 991,329 | .72 | |||||||||
A state-owned commercial bank in China and one of the world's largest banks. | ||||||||||||
Goldman Sachs Group, Inc. | 7,456,000 | 866,536 | .63 | |||||||||
Provides investment banking services. | ||||||||||||
Citigroup Inc. | 27,257,000 | 846,330 | .62 | |||||||||
Financial services company engaged in consumer, corporate and investment banking and insurance. | ||||||||||||
Bank of America Corp. | 82,833,298 | 676,748 | .49 | |||||||||
One of the world's largest commercial banks. | ||||||||||||
Other securities | 6,863,822 | 4.99 | ||||||||||
11,331,986 | 8.24 | |||||||||||
Industrials - 8.19% | ||||||||||||
Union Pacific Corp. | 18,499,700 | 1,705,117 | 1.24 | |||||||||
Operates the largest railroad in the U.S.; also delivers freight to Canada and Mexico. | ||||||||||||
CSX Corp. | 41,127,717 | 902,342 | .66 | |||||||||
Operates a major rail system and provides freight transportation across the U.S. | ||||||||||||
General Dynamics Corp. | 10,161,400 | 651,143 | .47 | |||||||||
This major defense contractor manufactures warships, submarines and information systems. | ||||||||||||
Other securities | 8,003,543 | 5.82 | ||||||||||
11,262,145 | 8.19 | |||||||||||
Materials - 6.16% | ||||||||||||
Barrick Gold Corp. | 24,000,000 | 1,218,000 | .89 | |||||||||
Owns and operates gold mines in North and South America, Australia and Africa. | ||||||||||||
Newmont Mining Corp. | 17,648,000 | 1,105,118 | .80 | |||||||||
One of the world's largest gold producers, with international gold and mineral mining operations. | ||||||||||||
Syngenta AG | 3,230,000 | 1,028,101 | .75 | |||||||||
One of the world's largest agrochemical companies. Develops seeds and crop protection products. | ||||||||||||
Dow Chemical Co. | 24,858,700 | 707,230 | .52 | |||||||||
A major producer of plastics, chemicals, herbicides and pesticides. | ||||||||||||
Other securities | 4,404,596 | 3.20 | ||||||||||
8,463,045 | 6.16 | |||||||||||
Consumer staples - 5.59% | ||||||||||||
Philip Morris International Inc. | 25,266,700 | 1,751,488 | 1.27 | |||||||||
One of the world's largest international tobacco companies. | ||||||||||||
Costco Wholesale Corp. | 18,925,000 | 1,486,369 | 1.08 | |||||||||
Operates membership warehouse clubs that serve both small businesses and consumers in North America, Asia, the U.K. and Australia. | ||||||||||||
CVS/Caremark Corp. | 27,800,000 | 998,298 | .73 | |||||||||
A major U.S. drugstore chain. | ||||||||||||
Other securities | 3,446,290 | 2.51 | ||||||||||
7,682,445 | 5.59 | |||||||||||
Other - 1.87% | ||||||||||||
Other securities | 2,574,186 | 1.87 | ||||||||||
Miscellaneous - 4.94% | ||||||||||||
Other common stocks in initial period of acquisition | 6,791,880 | 4.94 | ||||||||||
Total common stocks (cost: $104,239,171,000) | 125,988,509 | 91.64 | ||||||||||
Percent | ||||||||||||
Value | of net | |||||||||||
Preferred stocks - 0.05% | (000 | ) | assets | |||||||||
Other - 0.05% | ||||||||||||
Other securities | 66,658 | .05 | ||||||||||
Total preferred stocks (cost: $87,500,000) | 66,658 | .05 | ||||||||||
Percent | ||||||||||||
Value | of net | |||||||||||
Warrants - 0.02% | (000 | ) | assets | |||||||||
Financials - 0.01% | ||||||||||||
Other securities | 12,903 | .01 | ||||||||||
Miscellaneous - 0.01% | ||||||||||||
Other warrants in initial period of acquisition | 13,551 | .01 | ||||||||||
Total warrants (cost: $57,447,000) | 26,454 | .02 | ||||||||||
Percent | ||||||||||||
Value | of net | |||||||||||
Convertible securities - 0.17% | (000 | ) | assets | |||||||||
Other - 0.17% | ||||||||||||
Other securities | 238,454 | .17 | ||||||||||
Total convertible securities (cost: $160,064,000) | 238,454 | .17 | ||||||||||
Percent | ||||||||||||
Value | of net | |||||||||||
Bonds & notes - 0.03% | (000 | ) | assets | |||||||||
Other - 0.03% | ||||||||||||
Other securities | 41,682 | .03 | ||||||||||
Total bonds & notes (cost: $48,647,000) | 41,682 | .03 | ||||||||||
Principal | Percent | |||||||||||
amount | Value | of net | ||||||||||
Short-term securities - 7.86% | (000 | ) | (000 | ) | assets | |||||||
Freddie Mac 0.05%-0.301% due 9/6/2011-6/26/2012 | $ | 4,589,895 | $ | 4,588,373 | 3.34 | |||||||
Fannie Mae 0.055%-0.25% due 9/13/2011-6/1/2012 | 1,814,708 | 1,814,149 | 1.32 | |||||||||
Federal Home Loan Bank 0.09%-0.321% due 9/19/2011-8/15/2012 (3) | 1,524,000 | 1,523,395 | 1.11 | |||||||||
U.S. Treasury Bills 0.209%-0.291% due 11/17/2011-3/8/2012 | 745,300 | 745,224 | .54 | |||||||||
Other securities | 2,137,871 | 1.55 | ||||||||||
Total short-term securities (cost: $10,804,919,000) | 10,809,012 | 7.86 | ||||||||||
Total investment securities (cost: $115,397,748,000) | 137,170,769 | 99.77 | ||||||||||
Other assets less liabilities | 315,749 | .23 | ||||||||||
Net assets | $ | 137,486,518 | 100.00 | % |
As permitted by U.S. Securities and Exchange Commission regulations, "Miscellaneous" securities include holdings in their first year of acquisition that have not previously been publicly disclosed. |
“Other securities” includes all issues that are not disclosed separately in the summary investment portfolio. Some of these securities (with an aggregate value of $1,679,819,000, which represented 1.22% of the net assets of the fund) may be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. Some of these securities (with an aggregate value of $300,353,000, an aggregate cost of $224,023,000, and representing .22% of the net assets of the fund) were acquired through private placement transactions from 7/7/2000 to 6/21/2011 that may subject them to legal or contractual restrictions on resale. |
“Miscellaneous” and “Other securities” include securities which were valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities was $1,338,301,000, which represented .97% of the net assets of the fund. This amount includes $1,031,157,000 related to certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading. |
Insert AffiliatesTable
A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the fund's holdings in that company represent 5% or more of the outstanding voting shares. The value of the fund's affiliated-company holdings is either shown in the summary investment portfolio or included in the value of "Other securities" under the respective industry sectors. Further details on such holdings and related transactions during the year ended August 31, 2011, appear below. |
Beginning shares or principal amount | Additions | Reductions | Ending shares or principal amount | Dividend or interest income (000) | Value of affiliates at 8/31/2011 (000) | |||||||||||||||||||
DIRECTV, Class A (1) | 32,560,000 | 9,315,000 | 1,605,000 | 40,270,000 | $ | - | $ | 1,770,672 | ||||||||||||||||
EOG Resources, Inc. | 9,284,837 | 5,471,000 | - | 14,755,837 | 8,049 | 1,366,243 | ||||||||||||||||||
Allergan, Inc. | 5,540,000 | 10,415,400 | - | 15,955,400 | 2,777 | 1,305,311 | ||||||||||||||||||
Southwestern Energy Co. (1) | - | 21,925,000 | - | 21,925,000 | - | 832,054 | ||||||||||||||||||
Nexen Inc. (CAD denominated) | 16,317,912 | 112,792 | 47,230 | 16,383,474 | 2,781 | 349,987 | ||||||||||||||||||
Nexen Inc. | - | 10,435,000 | - | 10,435,000 | 400 | 222,787 | ||||||||||||||||||
First Solar, Inc. (1) | 4,229,800 | 1,340,000 | 900 | 5,568,900 | - | 556,779 | ||||||||||||||||||
Edwards Lifesciences Corp. (1) | 5,975,800 | 3,289,200 | 2,055,000 | 7,210,000 | - | 543,995 | ||||||||||||||||||
Virgin Media Inc. | - | 19,765,400 | - | 19,765,400 | 2,217 | 501,251 | ||||||||||||||||||
Linear Technology Corp. | 19,850,000 | - | 4,690,000 | 15,160,000 | 18,378 | 434,031 | ||||||||||||||||||
Celanese Corp., Series A (4) | 6,300,000 | 2,484,500 | - | 8,784,500 | 1,323 | 412,959 | ||||||||||||||||||
KLA-Tencor Corp. | 10,940,000 | - | - | 10,940,000 | 12,034 | 401,279 | ||||||||||||||||||
Kerry Group PLC, Class A | 8,965,824 | - | 100,000 | 8,865,824 | 3,694 | 343,865 | ||||||||||||||||||
Flextronics International Ltd. (1) | 40,080,464 | - | - | 40,080,464 | - | 230,463 | ||||||||||||||||||
Human Genome Sciences, Inc. (1) | - | 10,297,900 | - | 10,297,900 | - | 132,534 | ||||||||||||||||||
AMR Corp. (1) (5) | 16,950,000 | - | 12,200,000 | 4,750,000 | - | - | ||||||||||||||||||
AMR Corp. 6.25% convertible notes 2014(5) | $ | 8,000,000 | - | $ | 8,000,000 | - | 205 | - | ||||||||||||||||
Avago Technologies Ltd. (4) (5) | 9,591,220 | 2,670,000 | - | 12,261,220 | 2,697 | - | ||||||||||||||||||
Corning Inc.(5) | 88,230,000 | 11,500,000 | 55,190,000 | 44,540,000 | 14,118 | - | ||||||||||||||||||
CRH PLC (5) | 32,675,233 | 8,955,000 | 24,060,470 | 17,569,763 | 24,130 | - | ||||||||||||||||||
FMC Technologies, Inc. (1) (5) | 6,000,000 | 6,000,000 | - | 12,000,000 | - | - | ||||||||||||||||||
Harman International Industries, Inc.(5) | 3,772,000 | - | 1,955,800 | 1,816,200 | 280 | - | ||||||||||||||||||
Intuitive Surgical, Inc. (1) (5) | 1,805,100 | 169,500 | 145,000 | 1,829,600 | - | - | ||||||||||||||||||
Sigma-Aldrich Corp.(5) | 6,455,000 | 200,000 | 1,260,000 | 5,395,000 | 4,400 | - | ||||||||||||||||||
St. Jude Medical, Inc.(5) | 16,825,000 | 3,488,000 | 7,525,000 | 12,788,000 | 5,266 | - | ||||||||||||||||||
Strayer Education, Inc.(5) | 904,000 | - | 904,000 | - | 934 | - | ||||||||||||||||||
Syngenta AG(5) | 4,650,000 | 850,399 | 2,270,399 | 3,230,000 | - | - | ||||||||||||||||||
United States Steel Corp.(5) | 7,232,200 | - | 2,500,000 | 4,732,200 | 1,146 | - | ||||||||||||||||||
Vertex Pharmaceuticals Inc. (1) (5) | 13,155,175 | 1,000,000 | 5,186,175 | 8,969,000 | - | - | ||||||||||||||||||
Xilinx, Inc.(5) | 16,267,400 | - | 10,267,400 | 6,000,000 | 7,665 | - | ||||||||||||||||||
$ | 112,494 | $ | 9,404,210 |
The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item. |
(1) Security did not produce income during the last 12 months. |
(2) Represents an affiliated company as defined under the Investment Company Act of 1940. |
(3) Coupon rate may change periodically. |
(4) This security was an unaffiliated issuer in its initial period of acquisition at 8/31/2010; it was not publicly disclosed. |
(5) Unaffiliated issuer at 8/31/2011. |
The descriptions of the companies shown in the summary investment portfolio, which were obtained from published reports and other sources believed to be reliable, are supplemental and are not covered by the Report of Independent Registered Public Accounting Firm. |
Key to abbreviation |
CAD = Canadian dollars |
See Notes to Financial Statements |
Financial statements
Statement of assets and liabilities | ||||||||
at August 31, 2011 | (dollars in thousands) | |||||||
Assets: | ||||||||
Investment securities, at value: | ||||||||
Unaffiliated issuers (cost: $106,848,127) | $ | 127,766,559 | ||||||
Affiliated issuers (cost: $8,549,621) | 9,404,210 | $ | 137,170,769 | |||||
Cash | 91 | |||||||
Receivables for: | ||||||||
Sales of investments | 906,815 | |||||||
Sales of fund's shares | 169,862 | |||||||
Dividends and interest | 193,303 | 1,269,980 | ||||||
138,440,840 | ||||||||
Liabilities: | ||||||||
Payables for: | ||||||||
Purchases of investments | 247,211 | |||||||
Repurchases of fund's shares | 574,218 | |||||||
Investment advisory services | 31,726 | |||||||
Services provided by related parties | 96,048 | |||||||
Directors' deferred compensation | 3,890 | |||||||
Other | 1,229 | 954,322 | ||||||
Net assets at August 31, 2011 | $ | 137,486,518 | ||||||
Net assets consist of: | ||||||||
Capital paid in on shares of capital stock | $ | 123,048,613 | ||||||
Undistributed net investment income | 479,904 | |||||||
Accumulated net realized loss | (7,815,459 | ) | ||||||
Net unrealized appreciation | 21,773,460 | |||||||
Net assets at August 31, 2011 | $ | 137,486,518 |
(dollars and shares in thousands, except per-share amounts) | ||||||||||||
Total authorized capital stock - 7,500,000 shares, $.001 par value (4,733,660 total shares outstanding) | ||||||||||||
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Class A | $ | 57,082,273 | 1,952,970 | $ | 29.23 | |||||||
Class B | 2,228,021 | 78,928 | 28.23 | |||||||||
Class C | 6,538,599 | 233,378 | 28.02 | |||||||||
Class F-1 | 13,023,219 | 448,406 | 29.04 | |||||||||
Class F-2 | 3,716,579 | 127,046 | 29.25 | |||||||||
Class 529-A | 3,357,802 | 115,565 | 29.06 | |||||||||
Class 529-B | 309,947 | 10,973 | 28.25 | |||||||||
Class 529-C | 934,014 | 33,142 | 28.18 | |||||||||
Class 529-E | 165,035 | 5,727 | 28.82 | |||||||||
Class 529-F-1 | 106,549 | 3,669 | 29.04 | |||||||||
Class R-1 | 560,602 | 19,839 | 28.26 | |||||||||
Class R-2 | 2,336,618 | 82,229 | 28.42 | |||||||||
Class R-3 | 10,764,987 | 374,586 | 28.74 | |||||||||
Class R-4 | 14,937,342 | 515,239 | 28.99 | |||||||||
Class R-5 | 11,366,283 | 388,701 | 29.24 | |||||||||
Class R-6 | 10,058,648 | 343,262 | 29.30 | |||||||||
See Notes to Financial Statements |
Statement of operations | ||||||||
for the year ended August 31, 2011 | (dollars in thousands) | |||||||
Investment income: | ||||||||
Income: | ||||||||
Dividends (net of non-U.S. taxes of $52,683; | ||||||||
also includes $112,289 from affiliates) | $ | 2,059,840 | ||||||
Interest (incudes $205 from affiliates) | 55,405 | $ | 2,115,245 | |||||
Fees and expenses*: | ||||||||
Investment advisory services | 426,988 | |||||||
Distribution services | 452,195 | |||||||
Transfer agent services | 103,453 | |||||||
Administrative services | 132,985 | |||||||
Reports to shareholders | 6,662 | |||||||
Registration statement and prospectus | 2,293 | |||||||
Directors' compensation | 965 | |||||||
Auditing and legal | 208 | |||||||
Custodian | 6,089 | |||||||
Other | 5,266 | 1,137,104 | ||||||
Net investment income | 978,141 | |||||||
Net realized gain and unrealized appreciation | ||||||||
on investments and currency: | ||||||||
Net realized gain (loss) on: | ||||||||
Investments (net of non-U.S. taxes of $945; also includes $447,289 net loss from affiliates) | 4,795,615 | |||||||
Currency transactions | (4,381 | ) | 4,791,234 | |||||
Net unrealized appreciation (depreciation) on: | ||||||||
Investments | 16,788,256 | |||||||
Currency translations | (472 | ) | 16,787,784 | |||||
Net realized gain and unrealized appreciation | ||||||||
on investments and currency | 21,579,018 | |||||||
Net increase in net assets resulting | ||||||||
from operations | $ | 22,557,159 | ||||||
(*) Additional information related to class-specific fees and expenses is included | ||||||||
in the Notes to Financial Statements. | ||||||||
See Notes to Financial Statements | ||||||||
Statements of changes in net assets | ||||||||
(dollars in thousands) | ||||||||
Year ended August 31 | ||||||||
2011 | 2010 | |||||||
Operations: | ||||||||
Net investment income | $ | 978,141 | $ | 1,082,946 | ||||
Net realized gain on investments and currency transactions | 4,791,234 | 5,642,931 | ||||||
Net unrealized appreciation (depreciation) on investments and currency translations | 16,787,784 | (1,935,781 | ) | |||||
Net increase in net assets resulting from operations | 22,557,159 | 4,790,096 | ||||||
Dividends paid to shareholders from net investment income | (1,243,930 | ) | (1,158,261 | ) | ||||
Net capital share transactions | (24,045,350 | ) | (6,743,174 | ) | ||||
Total decrease in net assets | (2,732,121 | ) | (3,111,339 | ) | ||||
Net assets: | ||||||||
Beginning of year | 140,218,639 | 143,329,978 | ||||||
End of year (including undistributed | ||||||||
net investment income: $479,904 and $635,003, respectively) | $ | 137,486,518 | $ | 140,218,639 | ||||
See Notes to Financial Statements |
Notes to financial statements
1. | 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. In 2009, shareholders approved a proposal to reorganize the fund from a Maryland corporation to a Delaware statutory trust. The reorganization may be completed in 2011 or 2012; however, the fund reserves the right to delay the implementation.
The fund has 16 share classes consisting of five retail share classes, five 529 college savings plan share classes and six retirement plan share classes. The 529 college savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F-1) can be used to save for college education. The six retirement plan share classes (R-1, R-2, R-3, R-4, R-5 and R-6) are generally offered only through eligible employer-sponsored retirement plans. The fund’s share classes are described below:
Share class | Initial sales charge | Contingent deferred sales charge upon redemption | Conversion feature |
Classes 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 |
Classes B and 529-B* | None | Declines from 5% to 0% for redemptions within six years of purchase | Classes B and 529-B convert to Classes 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-1 after 10 years |
Class 529-C | None | 1% for redemptions within one year of purchase | None |
Class 529-E | None | None | None |
Classes F-1, F-2 and 529-F-1 | None | None | None |
Classes R-1, R-2, R-3, R-4, R-5 and R-6 | None | None | None |
*Class B and 529-B shares of the fund are not available for purchase.
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.
2. | 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 fund follows the significant accounting policies described below, as well as the valuation policies described in the next section on valuation.
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.
Currency translation – Assets and liabilities, including investment securities, denominated in currencies other than U.S. dollars 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. On the accompanying financial statements, the effects of changes in 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 currencies other than U.S. dollars are disclosed separately.
3. | Valuation |
The fund’s investments are reported at fair value as defined by accounting principles generally accepted in the United States of America. The fund generally determines the net asset value of each share class as of approximately 4:00 p.m. New York time each day the New York Stock Exchange is open.
Methods and inputs – The fund uses the following methods and inputs to establish the fair value of its assets and liabilities. Use of particular methods and inputs may vary over time based on availability and relevance as market and economic conditions evolve.
Equity securities are generally 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 on which the security trades.
Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are generally valued at prices obtained, from one or more pricing vendors. Vendors value such securities based on one or more of the inputs described in the following table. The table provides examples of inputs that are commonly relevant for valuing particular classes of fixed-income securities in which the fund is authorized to invest. However, these classifications are not exclusive, and any of the inputs may be used to value any other class of fixed-income security.
Fixed-income class | Examples of standard inputs |
All | Benchmark yields, transactions, bids, offers, quotations from dealers and trading systems, new issues, spreads and other relationships observed in the markets among comparable securities; and proprietary pricing models such as yield measures calculated using factors such as cash flows, financial or collateral performance and other reference data (collectively referred to as “standard inputs”) |
Corporate bonds & notes; convertible securities | Standard inputs and underlying equity of the issuer |
Bonds & notes of governments & government agencies | Standard inputs and interest rate volatilities |
Where the investment adviser deems it appropriate to do so (such as when vendor prices are unavailable or not deemed to be representative), fixed-income securities will be valued in good faith at the mean quoted bid and asked prices that are reasonably and timely available (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 generally 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 fair 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.
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 guidelines 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 equity securities trading outside the U.S.) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange. Various inputs may be reviewed in order to make a good faith determination of a security’s fair value. These inputs 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. Fair valuations and valuations of investments that are not actively trading involve judgment and may differ materially from valuations that would have been used had greater market activity occurred.
Classifications - The fund classifies its assets and liabilities into three levels based on the inputs used to value the assets or liabilities. Level 1 values are based on quoted prices in active markets for identical securities. Level 2 values are based on significant observable market inputs, such as quoted prices for similar securities and quoted prices in inactive markets. Certain securities trading outside the U.S. may transfer between Level 1 and Level 2 due to valuation adjustments resulting from significant market movements following the close of local trading. Level 3 values are based on significant unobservable inputs that reflect the fund’s determination of assumptions that market participants might reasonably use in valuing the securities. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. For example, U.S. government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. The following table presents the fund’s valuation levels as of August 31, 2011 (dollars in thousands):
Investment securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
Common stocks: | ||||||||||||||||||
Information technology | $ | 25,283,446 | $ | - | $ | - | $ | 25,283,446 | ||||||||||
Consumer discretionary | 22,769,977 | - | - | 22,769,977 | ||||||||||||||
Energy | 15,879,163 | - | 41,229 | 15,920,392 | ||||||||||||||
Health care | 13,909,007 | - | - | 13,909,007 | ||||||||||||||
Financials | 10,840,677 | 491,309 | (1 | ) | - | 11,331,986 | ||||||||||||
Industrials | 11,262,145 | - | - | 11,262,145 | ||||||||||||||
Materials | 8,456,254 | - | 6,791 | 8,463,045 | ||||||||||||||
Consumer staples | 7,682,445 | - | - | 7,682,445 | ||||||||||||||
Other | 2,574,186 | - | - | 2,574,186 | ||||||||||||||
Miscellaneous | 6,252,032 | 539,848 | (1 | ) | - | 6,791,880 | ||||||||||||
Preferred stocks | - | - | 66,658 | 66,658 | ||||||||||||||
Warrants | 26,454 | - | - | 26,454 | ||||||||||||||
Convertible securities | - | 45,988 | 192,466 | 238,454 | ||||||||||||||
Bonds & notes | - | 41,682 | - | 41,682 | ||||||||||||||
Short-term securities | - | 10,809,012 | - | 10,809,012 | ||||||||||||||
Total | $ | 124,935,786 | $ | 11,927,839 | $ | 307,144 | $ | 137,170,769 | ||||||||||
(1) Includes certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading; therefore, $1,031,157,000 of investment securities were classified as Level 2 instead of Level 1. |
The following table reconciles the valuation of the fund's Level 3 investment securities and related transactions for the year ended August 31, 2011 (dollars in thousands): | |||||||||||||||||||||||||
Beginning value at 9/1/2010 | Transfers into Level 3(2) | Purchases | Sales | Net realized loss(3) | Unrealized depreciation(3) | Ending value at 8/31/2011 | |||||||||||||||||||
Investment securities | $ | 25 | $ | 196,930 | $ | 203,023 | _ (4) | $ | (1,256 | ) | $ | (91,578 | ) | $ | 307,144 | ||||||||||
Net unrealized depreciation during the period on Level 3 investment securities held at August 31, 2011 (dollars in thousands)(3): | $ | (92,811 | ) | ||||||||||||||||||||||
(2) Transfers into or out of Level 3 are based on the beginning market value of the quarter in which they occurred. | |||||||||||||||||||||||||
(3) Net realized loss and unrealized depreciation are included in the related amounts on investments in the statement of operations. | |||||||||||||||||||||||||
(4) Amount less than one thousand. |
4. | Risk factors |
Investing in the fund may involve certain risks including, but not limited to, those described below.
Market conditions — The prices of, and the income generated by, the common stocks and other securities held by the fund may decline due to market conditions and other factors, including those directly involving the issuers of securities held by the fund.
Investing in growth-oriented stocks — Growth-oriented stocks may involve larger price swings and greater potential for loss than other types of investments.
Investing outside the U.S. — Securities of issuers domiciled outside the U.S., or with significant operations outside the U.S., may lose value because of political, social, economic or market developments in the countries or regions in which the issuer operates. These securities may also lose value due to changes in foreign currency exchange rates against the U.S. dollar and/or currencies of other countries. Securities markets in certain countries may be more volatile and/or less liquid than those in the U.S. Investments outside the U.S. may also be subject to different settlement and accounting practices and different regulatory, legal and reporting standards, and may be more difficult to value, than those in the U.S.
Management — The investment adviser to the fund actively manages the fund’s investments. Consequently, the fund is subject to the risk that the methods and analyses employed by the investment adviser in this process may not produce the desired results. This could cause the fund to lose value or its investment results to lag relevant benchmarks or other funds with similar objectives.
5. | Taxation and distributions |
Federal income taxation – 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.
As of and during the period ended August 31, 2011, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any interest or penalties.
The fund is not subject to examination by U.S. federal tax authorities for tax years before 2007, by state tax authorities for tax years before 2006 and by tax authorities outside the U.S. for tax years before 2005.
Non-U.S. taxation – Dividend and interest income are 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.
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 different treatment for items such as currency gains and losses; short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; unrealized appreciation of certain investments in securities outside the U.S.; cost of investments sold; net capital losses; and non-U.S. taxes on capital gains. 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.
During the year ended August 31, 2011, the fund reclassified $110,901,000 from accumulated net realized loss to undistributed net investment income and $211,000 from undistributed net investment income to capital paid in on shares of capital stock to align financial reporting with tax reporting.
As of August 31, 2011, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities were as follows:
(dollars in thousands) | ||||
Undistributed ordinary income | $ | 620,256 | ||
Post-October currency loss deferrals (realized during the period November 1, 2010, through August 31, 2011) * | (1,882 | ) | ||
Capital loss carryforward expiring 2018† | (7,219,511 | ) | ||
Gross unrealized appreciation on investment securities | 28,179,233 | |||
Gross unrealized depreciation on investment securities | (7,136,739 | ) | ||
Net unrealized appreciation on investment securities | 21,042,494 | |||
Cost of investment securities | 116,128,275 | |||
* These deferrals are considered incurred in the subsequent year. | ||||
† Reflects the utilization of capital loss carryforwards of $4,770,326,000. The capital loss carryforward will be used to offset any capital gains realized by the fund in future years through the expiration date. The fund will not make distributions from capital gains while a capital loss carryforward remains. |
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after August 31, 2011, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
Tax-basis distributions paid to shareholders from ordinary income were as follows (dollars in thousands):
Year ended August 31 | ||||||||
Share class | 2011 | 2010 | ||||||
Class A | $ | 531,599 | $ | 508,627 | ||||
Class B | - | 1,938 | ||||||
Class C | 6,580 | 13,544 | ||||||
Class F-1 | 132,266 | 140,687 | ||||||
Class F-2 | 49,446 | 42,452 | ||||||
Class 529-A | 27,288 | 22,127 | ||||||
Class 529-B | - | 358 | ||||||
Class 529-C | 1,061 | 1,150 | ||||||
Class 529-E | 933 | 798 | ||||||
Class 529-F-1 | 1,099 | 856 | ||||||
Class R-1 | 1,236 | 1,358 | ||||||
Class R-2 | 4,448 | 5,449 | ||||||
Class R-3 | 74,452 | 75,896 | ||||||
Class R-4 | 159,063 | 140,976 | ||||||
Class R-5 | 162,757 | 163,718 | ||||||
Class R-6 | 91,702 | 38,327 | ||||||
Total | $ | 1,243,930 | $ | 1,158,261 |
6. | Fees and transactions with related parties |
Capital Research and Management Company (“CRMC”), the fund’s investment adviser, is the parent company of American Funds Distributors,® Inc. (“AFD”), the principal underwriter of the fund’s shares, and American Funds Service Company® (“AFS”), the fund’s transfer agent.
Investment advisory services – The fund has an investment advisory and service agreement with CRMC that provides for monthly fees accrued daily. These fees are based on a series of decreasing annual rates beginning with 0.500% on the first $1 billion of daily net assets and decreasing to 0.233% on such assets in excess of $210 billion. For the year ended August 31, 2011, the investment advisory services fee was $426,988,000, which was equivalent to an annualized rate of 0.271% 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 below:
Distribution services – The fund has plans of distribution for all share classes, except Classes F-2, R-5 and R-6. 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 with a plan 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 Classes A and 529-A, distribution-related expenses include 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 August 31, 2011, there were no unreimbursed expenses subject to reimbursement for Classes A or 529-A.
Share class | Currently approved limits | Plan limits |
Class A | 0.25% | 0.25% |
Class 529-A | 0.25 | 0.50 |
Classes B and 529-B | 1.00 | 1.00 |
Classes C, 529-C and R-1 | 1.00 | 1.00 |
Class R-2 | 0.75 | 1.00 |
Classes 529-E and R-3 | 0.50 | 0.75 |
Classes F-1, 529-F-1 and R-4 | 0.25 | 0.50 |
Transfer agent services – The fund has a transfer agent agreement with AFS for Classes 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 as described below.
Administrative services – The fund has an administrative services agreement with CRMC for all share classes, except Classes A and B, to provide certain services, including transfer agent and recordkeeping services; coordinating, monitoring, assisting and overseeing third-party service providers; and educating advisers and shareholders about the impact of market-related events, tax laws affecting investments, retirement plan restrictions, exchange limitations and other related matters. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5 and 0.05% for Class R-6) 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 administrative services fee payable to the Commonwealth of Virginia for the maintenance of the 529 college savings plan. The quarterly fee is based on a series of decreasing annual rates beginning with 0.10% on the first $30 billion of the net assets invested in Class 529 shares of the American Funds and decreasing to 0.06% on such assets between $120 billion and $150 billion. The fee for any given calendar quarter is accrued and calculated on the basis of the average net assets of Class 529 shares of the American Funds for the last month of the prior calendar quarter. 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 year ended August 31, 2011, were as follows (dollars in thousands):
Administrative services | ||||||||||||||||||||
Share class | Distribution services | Transfer agent services | CRMC administrative services | Transfer agent services | Commonwealth of Virginia administrative services | |||||||||||||||
Class A | $ | 152,598 | $ | 99,282 | Not applicable | Not applicable | Not applicable | |||||||||||||
Class B | 28,806 | 4,171 | Not applicable | Not applicable | Not applicable | |||||||||||||||
Class C | 76,031 | Included in administrative services | $ | 11,409 | $ | 1,909 | Not applicable | |||||||||||||
Class F-1 | 38,472 | 20,454 | 1,045 | Not applicable | ||||||||||||||||
Class F-2 | Not applicable | 6,519 | 165 | Not applicable | ||||||||||||||||
Class 529-A | 7,226 | 3,903 | 670 | $ | 3,436 | |||||||||||||||
Class 529-B | 3,730 | 423 | 125 | 373 | ||||||||||||||||
Class 529-C | 9,730 | 1,108 | 282 | 976 | ||||||||||||||||
Class 529-E | 856 | 183 | 33 | 171 | ||||||||||||||||
Class 529-F-1 | - | 126 | 22 | 111 | ||||||||||||||||
Class R-1 | 6,280 | 884 | 78 | Not applicable | ||||||||||||||||
Class R-2 | 19,698 | 3,911 | 5,517 | Not applicable | ||||||||||||||||
Class R-3 | 63,358 | 18,863 | 4,761 | Not applicable | ||||||||||||||||
Class R-4 | 45,410 | 27,087 | 172 | Not applicable | ||||||||||||||||
Class R-5 | Not applicable | 13,596 | 79 | Not applicable | ||||||||||||||||
Class R-6 | Not applicable | 4,561 | 33 | Not applicable | ||||||||||||||||
Total | $ | 452,195 | $ | 103,453 | $ | 113,027 | $ | 14,891 | $ | 5,067 |
Directors’ deferred compensation – 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 $965,000, shown on the accompanying financial statements, includes $442,000 in current fees (either paid in cash or deferred) and a net increase of $523,000 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.
7. | Capital share transactions |
Capital share transactions in the fund were as follows (dollars and shares in thousands):
Sales(*) | Reinvestments of dividends and distributions | Repurchases(*) | Net (decrease) increase | |||||||||||||||||||||||||||||
Share class | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | ||||||||||||||||||||||||
Year ended August 31, 2011 | ||||||||||||||||||||||||||||||||
Class A | $ | 5,586,951 | 183,617 | $ | 515,811 | 17,001 | $ | (15,635,437 | ) | (514,982 | ) | $ | (9,532,675 | ) | (314,364 | ) | ||||||||||||||||
Class B | 37,592 | 1,275 | - | - | (1,185,607 | ) | (40,449 | ) | (1,148,015 | ) | (39,174 | ) | ||||||||||||||||||||
Class C | 531,232 | 18,161 | 6,262 | 214 | (2,017,874 | ) | (69,163 | ) | (1,480,380 | ) | (50,788 | ) | ||||||||||||||||||||
Class F-1 | 2,252,172 | 74,640 | 124,534 | 4,131 | (6,331,610 | ) | (210,351 | ) | (3,954,904 | ) | (131,580 | ) | ||||||||||||||||||||
Class F-2 | 1,468,359 | 48,857 | 36,619 | 1,208 | (2,288,573 | ) | (75,023 | ) | (783,595 | ) | (24,958 | ) | ||||||||||||||||||||
Class 529-A | 501,640 | 16,587 | 27,283 | 904 | (359,443 | ) | (11,914 | ) | 169,480 | 5,577 | ||||||||||||||||||||||
Class 529-B | 5,816 | 197 | - | - | (109,390 | ) | (3,733 | ) | (103,574 | ) | (3,536 | ) | ||||||||||||||||||||
Class 529-C | 134,290 | 4,560 | 1,061 | 36 | (126,834 | ) | (4,327 | ) | 8,517 | 269 | ||||||||||||||||||||||
Class 529-E | 22,642 | 756 | 933 | 31 | (20,268 | ) | (676 | ) | 3,307 | 111 | ||||||||||||||||||||||
Class 529-F-1 | 25,459 | 839 | 1,098 | 37 | (25,314 | ) | (833 | ) | 1,243 | 43 | ||||||||||||||||||||||
Class R-1 | 123,487 | 4,292 | 1,231 | 42 | (185,045 | ) | (6,302 | ) | (60,327 | ) | (1,968 | ) | ||||||||||||||||||||
Class R-2 | 572,336 | 19,332 | 4,444 | 150 | (920,045 | ) | (30,935 | ) | (343,265 | ) | (11,453 | ) | ||||||||||||||||||||
Class R-3 | 2,046,839 | 68,453 | 74,281 | 2,485 | (4,542,701 | ) | (151,107 | ) | (2,421,581 | ) | (80,169 | ) | ||||||||||||||||||||
Class R-4 | 3,512,296 | 117,286 | 159,005 | 5,283 | (7,756,274 | ) | (256,407 | ) | (4,084,973 | ) | (133,838 | ) | ||||||||||||||||||||
Class R-5 | 2,901,025 | 95,733 | 162,270 | 5,357 | (6,643,137 | ) | (216,444 | ) | (3,579,842 | ) | (115,354 | ) | ||||||||||||||||||||
Class R-6 | 5,394,491 | 175,598 | 91,536 | 3,016 | (2,220,793 | ) | (72,157 | ) | 3,265,234 | 106,457 | ||||||||||||||||||||||
Total net increase | ||||||||||||||||||||||||||||||||
(decrease) | $ | 25,116,627 | 830,183 | $ | 1,206,368 | 39,895 | $ | (50,368,345 | ) | (1,664,803 | ) | $ | (24,045,350 | ) | (794,725 | ) | ||||||||||||||||
Year ended August 31, 2010 | ||||||||||||||||||||||||||||||||
Class A | $ | 6,836,812 | 252,892 | $ | 489,387 | 18,025 | $ | (12,713,898 | ) | (473,621 | ) | $ | (5,387,699 | ) | (202,704 | ) | ||||||||||||||||
Class B | 60,035 | 2,295 | 1,867 | 71 | (1,388,581 | ) | (53,012 | ) | (1,326,679 | ) | (50,646 | ) | ||||||||||||||||||||
Class C | 810,993 | 31,212 | 12,789 | 489 | (1,566,072 | ) | (60,658 | ) | (742,290 | ) | (28,957 | ) | ||||||||||||||||||||
Class F-1 | 3,324,276 | 124,181 | 127,954 | 4,744 | (5,761,581 | ) | (216,022 | ) | (2,309,351 | ) | (87,097 | ) | ||||||||||||||||||||
Class F-2 | 1,827,784 | 68,025 | 31,492 | 1,161 | (1,274,456 | ) | (47,239 | ) | 584,820 | 21,947 | ||||||||||||||||||||||
Class 529-A | 462,475 | 17,197 | 22,122 | 819 | (280,904 | ) | (10,516 | ) | 203,693 | 7,500 | ||||||||||||||||||||||
Class 529-B | 7,179 | 275 | 358 | 14 | �� | (79,932 | ) | (3,032 | ) | (72,395 | ) | (2,743 | ) | |||||||||||||||||||
Class 529-C | 135,913 | 5,202 | 1,147 | 44 | (108,622 | ) | (4,179 | ) | 28,438 | 1,067 | ||||||||||||||||||||||
Class 529-E | 22,212 | 834 | 797 | 29 | (16,942 | ) | (636 | ) | 6,067 | 227 | ||||||||||||||||||||||
Class 529-F-1 | 23,868 | 892 | 856 | 32 | (13,196 | ) | (495 | ) | 11,528 | 429 | ||||||||||||||||||||||
Class R-1 | 169,513 | 6,457 | 1,351 | 51 | (113,137 | ) | (4,371 | ) | 57,727 | 2,137 | ||||||||||||||||||||||
Class R-2 | 658,225 | 25,038 | 5,441 | 205 | (759,497 | ) | (28,984 | ) | (95,831 | ) | (3,741 | ) | ||||||||||||||||||||
Class R-3 | 3,007,381 | 113,365 | 75,727 | 2,830 | (3,416,526 | ) | (128,850 | ) | (333,418 | ) | (12,655 | ) | ||||||||||||||||||||
Class R-4 | 4,652,580 | 173,924 | 140,952 | 5,234 | (4,666,904 | ) | (175,870 | ) | 126,628 | 3,288 | ||||||||||||||||||||||
Class R-5 | 4,196,132 | 156,763 | 162,119 | 5,982 | (5,930,673 | ) | (220,894 | ) | (1,572,422 | ) | (58,149 | ) | ||||||||||||||||||||
Class R-6 | 4,716,943 | 175,060 | 38,267 | 1,409 | (677,200 | ) | (25,136 | ) | 4,078,010 | 151,333 | ||||||||||||||||||||||
Total net increase | ||||||||||||||||||||||||||||||||
(decrease) | $ | 30,912,321 | 1,153,612 | $ | 1,112,626 | 41,139 | $ | (38,768,121 | ) | (1,453,515 | ) | $ | (6,743,174 | ) | (258,764 | ) | ||||||||||||||||
* Includes exchanges between share classes of the fund. |
8. | Investment transactions |
The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $50,434,051,000 and $69,661,627,000, respectively, during the year ended August 31, 2011.
Financial highlights(1)
Income (loss) from investment operations(2) | Dividends and distributions | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | Net investment income (loss) | Net gains (losses) on securities (both realized and unrealized) | Total from investment operations | Dividends (from net investment income) | Distributions (from capital gains) | Total dividends and distributions | Net asset value, end of period | Total return(3) (4) | Net assets, end of period (in millions) | Ratio of expenses to average net assets before waivers | Ratio of expenses to average net assets after waivers(4) | Ratio of net income (loss) to average net assets(4) | ||||||||||||||||||||||||||||||||||||||||
Class A: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | $ | 25.53 | $ | .20 | $ | 3.75 | $ | 3.95 | $ | (.25 | ) | $ | - | $ | (.25 | ) | $ | 29.23 | 15.42 | % | $ | 57,082 | .68 | % | .68 | % | .67 | % | ||||||||||||||||||||||||
Year ended 8/31/2010 | 24.93 | .21 | .60 | .81 | (.21 | ) | - | (.21 | ) | 25.53 | 3.20 | 57,890 | .69 | .69 | .76 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 30.61 | .22 | (5.67 | ) | (5.45 | ) | (.23 | ) | - | (.23 | ) | 24.93 | (17.59 | ) | 61,587 | .76 | .75 | 1.00 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 35.77 | .36 | (3.10 | ) | (2.74 | ) | (.36 | ) | (2.06 | ) | (2.42 | ) | 30.61 | (8.24 | ) | 81,529 | .65 | .62 | 1.09 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 31.93 | .32 | 4.89 | 5.21 | (.27 | ) | (1.10 | ) | (1.37 | ) | 35.77 | 16.69 | 90,125 | .64 | .62 | .94 | ||||||||||||||||||||||||||||||||||||
Class B: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 24.65 | (.03 | ) | 3.61 | 3.58 | - | - | - | 28.23 | 14.52 | 2,228 | 1.43 | 1.43 | (.09 | ) | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.08 | - | (5) | .58 | .58 | (.01 | ) | - | (.01 | ) | 24.65 | 2.42 | 2,911 | 1.45 | 1.45 | (.01 | ) | |||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 29.44 | .06 | (5.41 | ) | (5.35 | ) | (.01 | ) | - | (.01 | ) | 24.08 | (18.18 | ) | 4,063 | 1.50 | 1.49 | .27 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 34.48 | .11 | (2.99 | ) | (2.88 | ) | (.10 | ) | (2.06 | ) | (2.16 | ) | 29.44 | (8.91 | ) | 6,367 | 1.39 | 1.37 | .34 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 30.83 | .06 | 4.73 | 4.79 | (.04 | ) | (1.10 | ) | (1.14 | ) | 34.48 | 15.82 | 7,596 | 1.39 | 1.36 | .20 | ||||||||||||||||||||||||||||||||||||
Class C: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 24.49 | (.03 | ) | 3.58 | 3.55 | (.02 | ) | - | (.02 | ) | 28.02 | 14.51 | 6,539 | 1.46 | 1.46 | (.12 | ) | |||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 23.96 | - | (5) | .57 | .57 | (.04 | ) | - | (.04 | ) | 24.49 | 2.38 | 6,959 | 1.47 | 1.47 | (.02 | ) | |||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 29.30 | .06 | (5.39 | ) | (5.33 | ) | (.01 | ) | - | (.01 | ) | 23.96 | (18.18 | ) | 7,502 | 1.50 | 1.49 | .26 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 34.34 | .09 | (2.97 | ) | (2.88 | ) | (.10 | ) | (2.06 | ) | (2.16 | ) | 29.30 | (8.95 | ) | 10,209 | 1.44 | 1.41 | .29 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 30.73 | .05 | 4.70 | 4.75 | (.04 | ) | (1.10 | ) | (1.14 | ) | 34.34 | 15.74 | 11,091 | 1.45 | 1.42 | .14 | ||||||||||||||||||||||||||||||||||||
Class F-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 25.37 | .20 | 3.72 | 3.92 | (.25 | ) | - | (.25 | ) | 29.04 | 15.40 | 13,023 | .67 | .67 | .67 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.78 | .21 | .60 | .81 | (.22 | ) | - | (.22 | ) | 25.37 | 3.22 | 14,714 | .67 | .67 | .79 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 30.41 | .24 | (5.63 | ) | (5.39 | ) | (.24 | ) | - | (.24 | ) | 24.78 | (17.52 | ) | 16,531 | .69 | .68 | 1.08 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 35.56 | .36 | (3.08 | ) | (2.72 | ) | (.37 | ) | (2.06 | ) | (2.43 | ) | 30.41 | (8.23 | ) | 25,528 | .63 | .61 | 1.09 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 31.76 | .32 | 4.87 | 5.19 | (.29 | ) | (1.10 | ) | (1.39 | ) | 35.56 | 16.71 | 25,404 | .63 | .61 | .95 | ||||||||||||||||||||||||||||||||||||
Class F-2: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 25.55 | .28 | 3.74 | 4.02 | (.32 | ) | - | (.32 | ) | 29.25 | 15.69 | 3,717 | .43 | .43 | .91 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.97 | .28 | .59 | .87 | (.29 | ) | - | (.29 | ) | 25.55 | 3.43 | 3,884 | .44 | .44 | 1.02 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 30.61 | .26 | (5.63 | ) | (5.37 | ) | (.27 | ) | - | (.27 | ) | 24.97 | (17.31 | ) | 3,247 | .46 | .46 | 1.19 | ||||||||||||||||||||||||||||||||||
Period from 8/1/2008 to 8/31/2008 | 30.43 | .03 | .15 | .18 | - | - | - | 30.61 | .59 | 114 | .04 | .03 | .09 | |||||||||||||||||||||||||||||||||||||||
Class 529-A: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 25.39 | .19 | 3.72 | 3.91 | (.24 | ) | - | (.24 | ) | 29.06 | 15.38 | 3,358 | .73 | .73 | .62 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.81 | .20 | .59 | .79 | (.21 | ) | - | (.21 | ) | 25.39 | 3.14 | 2,793 | .73 | .73 | .73 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 30.47 | .22 | (5.64 | ) | (5.42 | ) | (.24 | ) | - | (.24 | ) | 24.81 | (17.60 | ) | 2,543 | .77 | .76 | .99 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 35.62 | .34 | (3.08 | ) | (2.74 | ) | (.35 | ) | (2.06 | ) | (2.41 | ) | 30.47 | (8.27 | ) | 2,859 | .69 | .66 | 1.03 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 31.81 | .31 | 4.87 | 5.18 | (.27 | ) | (1.10 | ) | (1.37 | ) | 35.62 | 16.66 | 2,725 | .69 | .66 | .90 | ||||||||||||||||||||||||||||||||||||
Class 529-B: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 24.69 | (.06 | ) | 3.62 | 3.56 | - | - | - | 28.25 | 14.42 | 310 | 1.53 | 1.53 | (.19 | ) | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.14 | (.02 | ) | .59 | .57 | (.02 | ) | - | (.02 | ) | 24.69 | 2.36 | 358 | 1.53 | 1.53 | (.08 | ) | |||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 29.56 | .04 | (5.45 | ) | (5.41 | ) | (.01 | ) | - | (.01 | ) | 24.14 | (18.28 | ) | 416 | 1.58 | 1.57 | .17 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 34.62 | .07 | (2.99 | ) | (2.92 | ) | (.08 | ) | (2.06 | ) | (2.14 | ) | 29.56 | (9.00 | ) | 514 | 1.50 | 1.48 | .23 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 30.97 | .03 | 4.74 | 4.77 | (.02 | ) | (1.10 | ) | (1.12 | ) | 34.62 | 15.69 | 534 | 1.51 | 1.48 | .08 | ||||||||||||||||||||||||||||||||||||
Class 529-C: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 24.66 | (.05 | ) | 3.60 | 3.55 | (.03 | ) | - | (.03 | ) | 28.18 | 14.40 | 934 | 1.53 | 1.53 | (.18 | ) | |||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.13 | (.02 | ) | .59 | .57 | (.04 | ) | - | (.04 | ) | 24.66 | 2.33 | 811 | 1.53 | 1.53 | (.07 | ) | |||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 29.55 | .04 | (5.44 | ) | (5.40 | ) | (.02 | ) | - | (.02 | ) | 24.13 | (18.25 | ) | 767 | 1.58 | 1.57 | .18 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 34.62 | .07 | (2.99 | ) | (2.92 | ) | (.09 | ) | (2.06 | ) | (2.15 | ) | 29.55 | (8.99 | ) | 881 | 1.50 | 1.47 | .23 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 30.99 | .03 | 4.74 | 4.77 | (.04 | ) | (1.10 | ) | (1.14 | ) | 34.62 | 15.66 | 849 | 1.50 | 1.48 | .08 | ||||||||||||||||||||||||||||||||||||
Class 529-E: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 25.19 | .10 | 3.69 | 3.79 | (.16 | ) | - | (.16 | ) | 28.82 | 15.04 | 165 | 1.01 | 1.01 | .34 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.63 | .12 | .59 | .71 | (.15 | ) | - | (.15 | ) | 25.19 | 2.83 | 142 | 1.02 | 1.02 | .44 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 30.21 | .15 | (5.57 | ) | (5.42 | ) | (.16 | ) | - | (.16 | ) | 24.63 | (17.82 | ) | 133 | 1.07 | 1.06 | .68 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 35.34 | .24 | (3.06 | ) | (2.82 | ) | (.25 | ) | (2.06 | ) | (2.31 | ) | 30.21 | (8.55 | ) | 147 | .99 | .97 | .73 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 31.58 | .20 | 4.84 | 5.04 | (.18 | ) | (1.10 | ) | (1.28 | ) | 35.34 | 16.29 | 143 | .99 | .97 | .59 | ||||||||||||||||||||||||||||||||||||
Class 529-F-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | $ | 25.38 | $ | .25 | $ | 3.71 | $ | 3.96 | $ | (.30 | ) | $ | - | $ | (.30 | ) | $ | 29.04 | 15.56 | % | $ | 106 | .52 | % | .52 | % | .83 | % | ||||||||||||||||||||||||
Year ended 8/31/2010 | 24.79 | .25 | .60 | .85 | (.26 | ) | - | (.26 | ) | 25.38 | 3.37 | 92 | .52 | .52 | .94 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 30.46 | .26 | (5.64 | ) | (5.38 | ) | (.29 | ) | - | (.29 | ) | 24.79 | (17.41 | ) | 79 | .57 | .56 | 1.18 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 35.61 | .41 | (3.08 | ) | (2.67 | ) | (.42 | ) | (2.06 | ) | (2.48 | ) | 30.46 | (8.09 | ) | 85 | .49 | .47 | 1.24 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 31.80 | .37 | 4.87 | 5.24 | (.33 | ) | (1.10 | ) | (1.43 | ) | 35.61 | 16.86 | 81 | .49 | .47 | 1.09 | ||||||||||||||||||||||||||||||||||||
Class R-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 24.72 | (.03 | ) | 3.63 | 3.60 | (.06 | ) | - | (.06 | ) | 28.26 | 14.54 | 561 | 1.43 | 1.43 | (.09 | ) | |||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.19 | - | (5) | .60 | .60 | (.07 | ) | - | (.07 | ) | 24.72 | 2.45 | 539 | 1.44 | 1.44 | .02 | ||||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 29.65 | .06 | (5.46 | ) | (5.40 | ) | (.06 | ) | - | (.06 | ) | 24.19 | (18.17 | ) | 476 | 1.47 | 1.46 | .29 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 34.76 | .10 | (3.02 | ) | (2.92 | ) | (.13 | ) | (2.06 | ) | (2.19 | ) | 29.65 | (8.96 | ) | 503 | 1.42 | 1.39 | .30 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 31.13 | .05 | 4.77 | 4.82 | (.09 | ) | (1.10 | ) | (1.19 | ) | 34.76 | 15.79 | 408 | 1.43 | 1.40 | .16 | ||||||||||||||||||||||||||||||||||||
Class R-2: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 24.84 | (.01 | ) | 3.64 | 3.63 | (.05 | ) | - | (.05 | ) | 28.42 | 14.60 | 2,337 | 1.39 | 1.39 | (.04 | ) | |||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.30 | .01 | .59 | .60 | (.06 | ) | - | (.06 | ) | 24.84 | 2.44 | 2,327 | 1.41 | 1.41 | .04 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 29.77 | .06 | (5.48 | ) | (5.42 | ) | (.05 | ) | - | (.05 | ) | 24.30 | (18.17 | ) | 2,367 | 1.48 | 1.47 | .27 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 34.84 | .12 | (3.01 | ) | (2.89 | ) | (.12 | ) | (2.06 | ) | (2.18 | ) | 29.77 | (8.87 | ) | 2,708 | 1.36 | 1.33 | .37 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 31.16 | .05 | 4.77 | 4.82 | (.04 | ) | (1.10 | ) | (1.14 | ) | 34.84 | 15.76 | 2,815 | 1.42 | 1.40 | .16 | ||||||||||||||||||||||||||||||||||||
Class R-3: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 25.12 | .11 | 3.68 | 3.79 | (.17 | ) | - | (.17 | ) | 28.74 | 15.06 | 10,765 | .97 | .97 | .38 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.55 | .13 | .60 | .73 | (.16 | ) | - | (.16 | ) | 25.12 | 2.94 | 11,422 | .97 | .97 | .48 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 30.11 | .16 | (5.56 | ) | (5.40 | ) | (.16 | ) | - | (.16 | ) | 24.55 | (17.78 | ) | 11,477 | .99 | .98 | .76 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 35.23 | .26 | (3.05 | ) | (2.79 | ) | (.27 | ) | (2.06 | ) | (2.33 | ) | 30.11 | (8.50 | ) | 13,098 | .94 | .91 | .79 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 31.49 | .21 | 4.83 | 5.04 | (.20 | ) | (1.10 | ) | (1.30 | ) | 35.23 | 16.33 | 13,652 | .96 | .93 | .63 | ||||||||||||||||||||||||||||||||||||
Class R-4: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 25.33 | .20 | 3.71 | 3.91 | (.25 | ) | - | (.25 | ) | 28.99 | 15.40 | 14,937 | .68 | .68 | .66 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.75 | .21 | .60 | .81 | (.23 | ) | - | (.23 | ) | 25.33 | 3.20 | 16,442 | .68 | .68 | .77 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 30.38 | .23 | (5.62 | ) | (5.39 | ) | (.24 | ) | - | (.24 | ) | 24.75 | (17.53 | ) | 15,985 | .70 | .69 | 1.04 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 35.52 | .35 | (3.08 | ) | (2.73 | ) | (.35 | ) | (2.06 | ) | (2.41 | ) | 30.38 | (8.26 | ) | 17,215 | .67 | .64 | 1.06 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 31.73 | .31 | 4.85 | 5.16 | (.27 | ) | (1.10 | ) | (1.37 | ) | 35.52 | 16.63 | 17,856 | .68 | .65 | .91 | ||||||||||||||||||||||||||||||||||||
Class R-5: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 25.54 | .29 | 3.74 | 4.03 | (.33 | ) | - | (.33 | ) | 29.24 | 15.75 | 11,366 | .38 | .38 | .96 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.94 | .29 | .60 | .89 | (.29 | ) | - | (.29 | ) | 25.54 | 3.51 | 12,874 | .39 | .39 | 1.07 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2009 | 30.66 | .30 | (5.69 | ) | (5.39 | ) | (.33 | ) | - | (.33 | ) | 24.94 | (17.30 | ) | 14,023 | .40 | .40 | 1.36 | ||||||||||||||||||||||||||||||||||
Year ended 8/31/2008 | 35.82 | .45 | (3.09 | ) | (2.64 | ) | (.46 | ) | (2.06 | ) | (2.52 | ) | 30.66 | (7.96 | ) | 17,362 | .37 | .34 | 1.35 | |||||||||||||||||||||||||||||||||
Year ended 8/31/2007 | 31.98 | .41 | 4.89 | 5.30 | (.36 | ) | (1.10 | ) | (1.46 | ) | 35.82 | 16.97 | 12,630 | .38 | .35 | 1.21 | ||||||||||||||||||||||||||||||||||||
Class R-6: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2011 | 25.60 | .31 | 3.74 | 4.05 | (.35 | ) | - | (.35 | ) | 29.30 | 15.78 | 10,059 | .33 | .33 | 1.02 | |||||||||||||||||||||||||||||||||||||
Year ended 8/31/2010 | 24.97 | .31 | .60 | .91 | (.28 | ) | - | (.28 | ) | 25.60 | 3.58 | 6,061 | .34 | .34 | 1.16 | |||||||||||||||||||||||||||||||||||||
Period from 5/1/2009 to 8/31/2009 | 21.68 | .09 | 3.20 | 3.29 | - | - | - | 24.97 | 15.17 | 2,134 | .14 | .14 | .38 |
Year ended August 31 | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Portfolio turnover rate for all share classes | 34 | % | 33 | % | 38 | % | 32 | % | 26 | % |
(1)Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year. | |||||||||||||
(2)Based on average shares outstanding. | |||||||||||||
(3) Total returns exclude any applicable sales charges, including contingent deferred sales charges. | |||||||||||||
(4)This column reflects the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services. | |||||||||||||
(5)Amount less than $.01. | |||||||||||||
See Notes to Financial Statements |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of The Growth Fund of America, Inc.:
We have audited the accompanying statement of assets and liabilities of The Growth Fund of America, Inc. (the “Fund”), including the summary investment portfolio as of August 31, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2011, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Growth Fund of America, Inc. as of August 31, 2011, 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 periods presented, in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Costa Mesa, California
October 4, 2011
Tax information
unaudited
We are required to advise you within 60 days of the fund’s fiscal year-end regarding the federal tax status of certain distributions received by shareholders during such fiscal year. The fund hereby designates the following amounts for the fund’s fiscal year ended August 31, 2011:
Qualified dividend income | 100 | % | ||
Corporate dividends received deduction | $ | 1,000,193,000 | ||
U.S. government income that may be exempt from state taxation | $ | 13,683,000 |
Individual shareholders should refer to their Form 1099 or other tax information, which will be mailed in January 2012, to determine the calendar year amounts to be included on their 2011 tax returns. Shareholders should consult their tax advisers.
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 six-month period (March 1, 2011, through August 31, 2011).
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.
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.
Notes:
There are some account fees that are charged to certain types of accounts, such as individual retirement accounts and 529 college savings plan 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-1, F-2 and 529-F-1 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 be lower by the amount of these fees.
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 3/1/2011 | Ending account value 8/31/2011 | Expenses paid during period* | Annualized expense ratio | |||||||||||||
Class A -- actual return | $ | 1,000.00 | $ | 913.44 | $ | 3.28 | .68 | % | ||||||||
Class A -- assumed 5% return | 1,000.00 | 1,021.78 | 3.47 | .68 | ||||||||||||
Class B -- actual return | 1,000.00 | 909.77 | 6.88 | 1.43 | ||||||||||||
Class B -- assumed 5% return | 1,000.00 | 1,018.00 | 7.27 | 1.43 | ||||||||||||
Class C -- actual return | 1,000.00 | 909.75 | 7.03 | 1.46 | ||||||||||||
Class C -- assumed 5% return | 1,000.00 | 1,017.85 | 7.43 | 1.46 | ||||||||||||
Class F-1 -- actual return | 1,000.00 | 913.22 | 3.23 | .67 | ||||||||||||
Class F-1 -- assumed 5% return | 1,000.00 | 1,021.83 | 3.41 | .67 | ||||||||||||
Class F-2 -- actual return | 1,000.00 | 914.36 | 2.07 | .43 | ||||||||||||
Class F-2 -- assumed 5% return | 1,000.00 | 1,023.04 | 2.19 | .43 | ||||||||||||
Class 529-A -- actual return | 1,000.00 | 913.27 | 3.57 | .74 | ||||||||||||
Class 529-A -- assumed 5% return | 1,000.00 | 1,021.48 | 3.77 | .74 | ||||||||||||
Class 529-B -- actual return | 1,000.00 | 909.54 | 7.41 | 1.54 | ||||||||||||
Class 529-B -- assumed 5% return | 1,000.00 | 1,017.44 | 7.83 | 1.54 | ||||||||||||
Class 529-C -- actual return | 1,000.00 | 909.31 | 7.36 | 1.53 | ||||||||||||
Class 529-C -- assumed 5% return | 1,000.00 | 1,017.49 | 7.78 | 1.53 | ||||||||||||
Class 529-E -- actual return | 1,000.00 | 911.75 | 4.87 | 1.01 | ||||||||||||
Class 529-E -- assumed 5% return | 1,000.00 | 1,020.11 | 5.14 | 1.01 | ||||||||||||
Class 529-F-1 -- actual return | 1,000.00 | 914.06 | 2.56 | .53 | ||||||||||||
Class 529-F-1 -- assumed 5% return | 1,000.00 | 1,022.53 | 2.70 | .53 | ||||||||||||
Class R-1 -- actual return | 1,000.00 | 909.86 | 6.88 | 1.43 | ||||||||||||
Class R-1 -- assumed 5% return | 1,000.00 | 1,018.00 | 7.27 | 1.43 | ||||||||||||
Class R-2 -- actual return | 1,000.00 | 910.01 | 6.69 | 1.39 | ||||||||||||
Class R-2 -- assumed 5% return | 1,000.00 | 1,018.20 | 7.07 | 1.39 | ||||||||||||
Class R-3 -- actual return | 1,000.00 | 912.09 | 4.67 | .97 | ||||||||||||
Class R-3 -- assumed 5% return | 1,000.00 | 1,020.32 | 4.94 | .97 | ||||||||||||
Class R-4 -- actual return | 1,000.00 | 913.36 | 3.28 | .68 | ||||||||||||
Class R-4 -- assumed 5% return | 1,000.00 | 1,021.78 | 3.47 | .68 | ||||||||||||
Class R-5 -- actual return | 1,000.00 | 914.60 | 1.83 | .38 | ||||||||||||
Class R-5 -- assumed 5% return | 1,000.00 | 1,023.29 | 1.94 | .38 | ||||||||||||
Class R-6 -- actual return | 1,000.00 | 914.78 | 1.59 | .33 | ||||||||||||
Class R-6 -- assumed 5% return | 1,000.00 | 1,023.54 | 1.68 | .33 | ||||||||||||
*The “expenses paid during period” 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, and divided by 365 (to reflect the one-half year period). |
Approval of Investment Advisory and Service Agreement
The fund’s board has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through November 30, 2012. The board approved the agreement following the recommendation of the fund’s Contracts Committee (the “committee”), which is composed of all of the fund’s independent board members. The board and the committee determined that the fund’s advisory fee structure was fair and reasonable in relation to the services provided and that approving the agreement was in the best interests of the fund and its shareholders.
In reaching this decision, the board and the committee took into account information furnished to them throughout the year, as well as information prepared specifically in connection with their review of the agreement and were advised by their independent counsel. They considered the factors discussed below, among others, but did not identify any single issue or particular piece of information that, in isolation, was the controlling factor.
1. Nature, extent and quality of services
The board and the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ongoing evolution of CRMC’s organizational structure designed to maintain and strengthen these qualities. The board and the committee also considered the nature, extent and quality of administrative, compliance and shareholder services provided by CRMC to the fund under the agreement and other agreements as well as the benefits to fund shareholders from investing in a fund that is part of a large family of funds. The board and the committee concluded that the nature, extent and quality of the services provided by CRMC have benefited and should continue to benefit the fund and its shareholders.
2. Investment results
The board and the committee considered the investment results of the fund in light of its objective of providing growth of capital. They compared the fund’s total returns with those of other relevant funds (including the other funds that are the basis of the Lipper index for the category in which the fund is included) and market data such as relevant market indices, in each case as available at the time of the related board and committee meetings. This report, including the letter to shareholders and related disclosures, contains certain information about the fund’s investment results. The board and the committee concluded that the fund’s long-term results have been satisfactory and that CRMC’s record in managing the fund indicated that its continued management should benefit the fund and its shareholders.
3. Advisory fees and total expenses
The board and the committee compared the advisory fees and total expense levels of the fund to those of other relevant funds. They observed that the fund’s advisory fees and expenses remain significantly below those of most other relevant funds. The board and the committee also noted the breakpoint discounts in the fund’s advisory fee structure that reduce the level of fees charged by CRMC to the fund as fund assets increase. In addition, they reviewed information regarding the advisory fees paid by clients of an affiliate of CRMC. They noted that, to the extent there were differences between the advisory fees paid by the fund and the advisory fees paid by those clients, the differences appropriately reflected the investment, operational and regulatory differences between advising the fund and the other clients. The board and the committee concluded that the fund’s cost structure was fair and reasonable in relation to the services provided, and that the shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund.
4. Ancillary benefits
The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to CRMC’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers. The board and the committee took these ancillary benefits into account in evaluating the reasonableness of the advisory fees and other amounts paid to CRMC by the fund.
5. Adviser financial information
The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, including personnel, systems and resources of investment, compliance, trading, accounting and other administrative operations. They considered CRMC’s costs and willingness to invest in technology, infrastructure and staff to maintain and expand services and capabilities, respond to industry and regulatory developments and attract and retain qualified personnel. They noted information regarding the compensation structure for CRMC’s investment professionals. The board and the committee also compared CRMC’s profitability to the reported results of several large, publicly held investment management companies. The board and the committee noted the competitiveness and cyclicality of both the mutual fund industry and the capital markets, and the importance in that environment of CRMC’s long-term profitability for maintaining its independence, company culture and management continuity. They further considered the breakpoint discounts in the fund’s advisory fee structure. The board and the committee concluded that the fund’s advisory fee structure reflected a reasonable sharing of benefits between CRMC and the fund’s shareholders.
Board of directors and other officers
“Independent” directors1 | ||
Year first | ||
elected a | ||
director of | ||
Name and age | the fund2 | Principal occupation(s) during past five years |
Ronald P. Badie, 68 | 2008 | Retired; former Vice Chairman, Deutsche Bank Alex. |
Brown | ||
Joseph C. Berenato, 65 | 2003 | Chairman, Ducommun Incorporated (aerospace |
Chairman of the Board | components manufacturer); former CEO, Ducommun | |
(Independent and | Incorporated | |
Non-Executive) | ||
Louise H. Bryson, 67 | 2008 | Chair Emerita of the Board of Trustees, J. Paul Getty |
Trust; former President, Distribution, Lifetime | ||
Entertainment Network; former Executive Vice | ||
President and General Manager, Lifetime Movie | ||
Network | ||
Robert J. Denison, 70 | 2005 | Chair, First Security Management (private investment) |
Mary Anne Dolan, 64 | 2010 | Founder and President, MAD Ink (communications |
company) | ||
Robert A. Fox, 74 | 1970 | Managing General Partner, Fox Investments LP; |
corporate director | ||
John G. Freund, 57 | 2010 | Founder and Managing Director, Skyline Ventures |
(venture capital investor in health care companies) | ||
Leonade D. Jones, 63 | 1993 | Retired; former Treasurer, The Washington Post |
Company | ||
William H. Kling, 69 | 2010 | President Emeritus, American Public Media |
John G. McDonald, 74 | 1976 | Stanford Investors Professor, Graduate School of |
Business, Stanford University | ||
Christopher E. Stone, 55 | 2010 | Daniel and Florence Guggenheim Professor of the |
Practice of Criminal Justice, John F. Kennedy School | ||
of Government, Harvard University | ||
“Independent” directors1 | ||
Number of | ||
portfolios | ||
in fund | ||
complex3 | ||
overseen by | ||
Name and age | director | Other directorships4 held by director |
Ronald P. Badie, 68 | 3 | Amphenol Corporation; Nautilus, Inc.; Obagi Medical |
Products, Inc. | ||
Joseph C. Berenato, 65 | 6 | None |
Chairman of the Board | ||
(Independent and | ||
Non-Executive) | ||
Louise H. Bryson, 67 | 7 | None |
Robert J. Denison, 70 | 6 | None |
Mary Anne Dolan, 64 | 10 | None |
Robert A. Fox, 74 | 9 | None |
John G. Freund, 57 | 3 | Mako Surgical Corporation; MAP Pharmaceuticals, |
Inc.; XenoPort, Inc. | ||
Leonade D. Jones, 63 | 9 | None |
William H. Kling, 69 | 10 | None |
John G. McDonald, 74 | 13 | iStar Financial, Inc.; Plum Creek Timber Co.; |
QuinStreet, Inc.; Scholastic Corporation | ||
Christopher E. Stone, 55 | 6 | None |
Gail L. Neale, a director of the fund since 1998, and Henry E. Riggs, a director of the fund since 1989, have retired from the board. The directors thank Ms. Neale and Mr. Riggs for their service and dedication to the fund.
“Interested” directors5 | ||
Year first | ||
elected a | ||
director or | Principal occupation(s) during past five years and | |
Name, age and | officer of | positions held with affiliated entities or the |
position with fund | the fund2 | principal underwriter of the fund |
James F. Rothenberg, 65 | 1997 | Vice Chairman of the Board, Capital Research and |
Vice Chairman of the Board | Management Company; Director and Non-Executive | |
Chair, American Funds Distributors, Inc.;6 Director | ||
and Non-Executive Chair, The Capital Group | ||
Companies, Inc.6 | ||
Donald D. O’Neal, 51 | 1995 | Senior Vice President — Capital Research Global |
President | Investors, Capital Research and Management | |
Company; Director, The Capital Group Companies, Inc.6 | ||
“Interested” directors5 | ||
Number of | ||
portfolios | ||
in fund | ||
complex3 | ||
Name, age and | overseen by | |
position with fund | director | Other directorships4 held by director |
James F. Rothenberg, 65 | 2 | None |
Vice Chairman of the Board | ||
Donald D. O’Neal, 51 | 20 | None |
President |
The fund’s statement of additional information includes further details about fund directors and is available without charge upon request by calling American Funds Service Company at 800/421-0180 or by visiting the American Funds website at americanfunds.com. The address for all directors and officers of the fund is 333 South Hope Street, Los Angeles, CA 90071, Attention: Secretary.
See page 36 for footnotes.
Other officers7 | ||
Year first | ||
elected | Principal occupation(s) during past five years | |
Name, age and | an officer | and positions held with affiliated entities or the |
position with fund | of the fund2 | principal underwriter of the fund |
Paul G. Haaga, Jr., 62 | 1994 | Chairman of the Board, Capital Research and |
Executive Vice President | Management Company; Senior Vice President — Fixed Income, Capital Research and Management Company | |
Gordon Crawford, 64 | 1992 | Senior Vice President — Capital Research Global |
Senior Vice President | Investors, Capital Research and Management Company | |
Gregg E. Ireland, 61 | 2008 | Senior Vice President — Capital World Investors, |
Senior Vice President | Capital Research and Management Company | |
Michael T. Kerr, 52 | 1998 | Senior Vice President — Capital World Investors, |
Senior Vice President | Capital Research and Management Company; Director, | |
Capital Research and Management Company | ||
Bradley J. Vogt, 46 | 1999 | Senior Vice President — Capital Research Global |
Senior Vice President | Investors, Capital Research Company;6 Chairman, | |
Capital Research Company;6 Director, American Funds | ||
Distributors, Inc.;6 Director, The Capital Group | ||
Companies, Inc.6 | ||
Brad A. Barrett, 33 | 2010 | Vice President — Capital Research Global Investors, |
Vice President | Capital Research Company6 | |
Walter R. Burkley, 45 | 2010 | Senior Vice President and Senior Counsel — Fund |
Vice President | Business Management Group, Capital Research and | |
Management Company | ||
Barry S. Crosthwaite, 53 | 2010 | Senior Vice President — Capital Research Global |
Vice President | Investors, Capital Research Company6 | |
Martin Romo, 44 | 2010 | Senior Vice President — Capital World Investors, |
Vice President | Capital Research Company;6 Director and Co- | |
President, Capital Research Company;6 Director, | ||
The Capital Group Companies, Inc.6 | ||
Dylan J. Yolles, 42 | 2010 | Senior Vice President — Capital Research Global |
Vice President | Investors, Capital Research Company6 | |
Patrick F. Quan, 53 | 1986–1998 | Vice President — Fund Business Management |
Secretary | 2000 | Group, Capital Research and Management Company |
Jeffrey P. Regal, 40 | 2006 | Vice President — Fund Business Management |
Treasurer | Group, Capital Research and Management Company | |
Julie E. Lawton, 38 | 2010 | Associate, Capital Research and Management |
Assistant Secretary | Company | |
Dori Laskin, 60 | 2011 | Vice President — Fund Business Management |
Assistant Treasurer | Group, Capital Research and Management Company | |
Neal F. Wellons, 40 | 2010 | Vice President — Fund Business Management |
Assistant Treasurer | Group, Capital Research and Management Company |
1The term “independent” director refers to a director who is not an “interested person” of the fund within the meaning of the Investment Company Act of 1940. |
2Directors and officers of the fund serve until their resignation, removal or retirement. |
3Capital Research and Management Company manages the American Funds, consisting of 33 funds. Capital Research and Management Company also manages American Funds Insurance Series,® which is composed of 18 funds and serves as the underlying investment vehicle for certain variable insurance contracts; and American Funds Target Date Retirement Series,® which is composed of 10 funds and is available through tax-deferred retirement plans and IRAs. |
4This includes all directorships (other than those in the American Funds or other funds managed by Capital Research and Management Company) that are held by each director as a director of a public company or a registered investment company. |
5“Interested persons” within the meaning of the Investment Company Act of 1940, on the basis of their affiliation with the fund’s investment adviser, Capital Research and Management Company, or affiliated entities (including the fund’s principal underwriter). |
6Company affiliated with Capital Research and Management Company. |
7All of the officers listed, except Mr. Barrett, are officers and/or directors/trustees of one or more of the other funds for which Capital Research and Management Company serves as investment adviser. |
Office of the fund
One Market
Steuart Tower, Suite 2000
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
6455 Irvine Center Drive
Irvine, CA 92618
Transfer agent for shareholder accounts
American Funds Service Company
(Write to the address near you.)
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
K&L Gates LLP
Four Embarcadero Center, Suite 1200
San Francisco, CA 94111-5994
Independent registered public accounting firm
Deloitte & Touche LLP
695 Town Center Drive
Suite 1200
Costa Mesa, CA 92626-7188
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
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 and summary prospectus, which can be obtained from your financial professional 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 Procedures and Principles” — which describes how we vote proxies relating to portfolio securities — is available on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the U.S. Securities and Exchange Commission (SEC) for the 12 months ended June 30 by August 31. The proxy voting record is available free of charge on the SEC website at sec.gov and on the American Funds website.
A complete August 31, 2011, 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. Additional information regarding the operation of the Public Reference Room may be obtained by calling the SEC’s Office of Investor Education and Advocacy at 800/SEC-0330. Additionally, the list of portfolio holdings 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 or summary prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after December 31, 2011, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.
The American Funds difference
Since 1931, American Funds has helped investors pursue long-term investment success. Our consistent approach — in combination with a proven system — has resulted in a superior long-term track record.
Consistent approach
We base our decisions on a long-term perspective because we believe it is the best way to achieve superior long-term investment results. Our portfolio counselors average 27 years of investment experience, including 22 years at our company, reflecting a career commitment to our long-term approach.
Proven system
Our system combines individual accountability with teamwork. Each fund is divided into portions that are managed by investment professionals with varied backgrounds, ages and investment styles. An extensive global research effort is the backbone of our system.
Superior long-term track record
Our equity funds have beaten their Lipper peer indexes in 89% of 10-year periods and 96% of 20-year periods. Our fixed-income funds have beaten their Lipper indexes in 65% of 10-year periods and 75% of 20-year periods.* Our fund management fees have consistently been among the lowest in the industry.†
*Based on Class A share results for periods through 12/31/10. Periods covered are the shorter of the fund’s lifetime or since the comparable Lipper index inception date. |
†Based on management fees for the 20-year period ended 12/31/10 versus comparable Lipper categories, excluding funds of funds. |
American Funds span a range of investment objectives
•Growth funds |
Emphasis on long-term growth through stocks |
AMCAP Fund® |
EuroPacific Growth Fund® |
The Growth Fund of America® |
The New Economy Fund® |
New Perspective Fund® |
New World Fund® |
SMALLCAP World Fund® |
•Growth-and-income funds |
Emphasis on long-term growth and dividends through stocks |
American Mutual Fund® |
Capital World Growth and Income FundSM |
Fundamental InvestorsSM |
International Growth and Income FundSM |
The Investment Company of America® |
Washington Mutual Investors FundSM |
•Equity-income funds |
Emphasis on above-average income and growth through stocks and/or bonds |
Capital Income Builder® |
The Income Fund of America® |
•Balanced funds |
Emphasis on long-term growth and current income through stocks and bonds |
American Balanced Fund® |
American Funds Global Balanced FundSM |
•Bond funds |
Emphasis on current income through bonds |
American Funds Mortgage FundSM |
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 |
Emphasis on tax-exempt current income through municipal bonds |
American Funds Short-Term Tax-Exempt Bond FundSM |
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 |
American Funds Tax-Exempt Fund of New YorkSM |
The Tax-Exempt Fund of California® |
The Tax-Exempt Fund of Maryland® |
The Tax-Exempt Fund of Virginia® |
•Money market fund |
American Funds Money Market Fund® |
•American Funds Target Date Retirement Series® |
The Capital Group Companies
American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
Lit. No. MFGEAR-905-1011P
Litho in USA AGD/Q/8057-S28696
Printed on paper containing 10% post-consumer waste
Printed with inks containing soy and/or vegetable oil
ITEM 2 – Code of Ethics
The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer. The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics. Such request can be made to American Funds Service Company at 800/421-0180 or to the Secretary of the Registrant, One Market, Steuart Tower, Suite 2000, San Francisco, California 94105.
ITEM 3 – Audit Committee Financial Expert
The Registrant’s board has determined that Ronald P. Badie, a member of the Registrant’s audit committee, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase the designee’s duties, obligations or liability as compared to his or her duties, obligations and liability as a member of the audit committee and of the board, nor will it reduce the responsibility of the other audit committee members. There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the board had designated them as such. Most importantly, the board believes each member of the audit committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.
ITEM 4 – Principal Accountant Fees and Services
Registrant: | ||||
a) Audit Fees: | ||||
2010 | $82,000 | |||
2011 | $87,000 | |||
b) Audit-Related Fees: | ||||
2010 | $36,000 | |||
2011 | $61,000 | |||
The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s investment adviser conducted in accordance with Statement on Standards for Attestation Engagements Number 16 (which replaced Statement on Auditing Standards Number 70) issued by the American Institute of Certified Public Accountants. | ||||
c) Tax Fees: | ||||
2010 | $9,000 | |||
2011 | $17,000 | |||
The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns including returns relating to the Registrant’s investments in non-U.S. jurisdictions. | ||||
d) All Other Fees: | ||||
2010 | None | |||
2011 | None | |||
Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below): | ||||
a) Audit Fees: | ||||
Not Applicable | ||||
b) Audit-Related Fees: | ||||
2010 | $1,196,000 | |||
2011 | $984,000 | |||
The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s transfer agent, principal underwriter and investment adviser conducted in accordance with Statement on Standards for Attestation Engagements Number 16 (which replaced Statement on Auditing Standards Number 70) issued by the American Institute of Certified Public Accountants. | ||||
c) Tax Fees: | ||||
2010 | $10,000 | |||
2011 | $17,000 | |||
The tax fees consist of consulting services relating to the Registrant’s investments. | ||||
d) All Other Fees: | ||||
2010 | $2,000 | |||
2011 | $2,000 | |||
The other fees consist of subscription services related to an accounting research tool. | ||||
All audit and permissible non-audit services that the Registrant’s audit committee considers compatible with maintaining the independent registered public accounting firm’s independence are required to be pre-approved by the committee. The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The committee will not delegate its responsibility to pre-approve these services to the investment adviser. The committee may delegate to one or more committee members the authority to review and pre-approve audit and permissible non-audit services. Actions taken under any such delegation will be reported to the full committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser and affiliates.
Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant, adviser and affiliates that provide ongoing services to the Registrant, were $1,661,000 for fiscal year 2010 and $1,671,000 for fiscal year 2011. The non-audit services represented by these amounts were brought to the attention of the committee and considered to be compatible with maintaining the auditors’ independence.
ITEM 5 – Audit Committee of Listed Registrants
Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.
ITEM 6 – Schedule of Investments
The Growth Fund of America®
Investment portfolio
August 31, 2011
Common stocks — 91.64% | Shares | Value (000) | ||||||
INFORMATION TECHNOLOGY — 18.39% | ||||||||
Apple Inc.1 | 13,050,000 | $ | 5,022,031 | |||||
Oracle Corp. | 95,303,676 | 2,675,174 | ||||||
Microsoft Corp. | 78,487,100 | 2,087,757 | ||||||
Google Inc., Class A1 | 2,871,436 | 1,553,332 | ||||||
Texas Instruments Inc. | 37,444,000 | 981,407 | ||||||
QUALCOMM Inc. | 16,505,194 | 849,357 | ||||||
Samsung Electronics Co. Ltd. | 1,056,700 | 736,922 | ||||||
EMC Corp.1 | 31,005,000 | 700,403 | ||||||
Visa Inc., Class A | 7,746,400 | 680,754 | ||||||
Corning Inc. | 44,540,000 | 669,436 | ||||||
Yahoo! Inc.1 | 46,487,136 | 632,458 | ||||||
First Solar, Inc.1,2 | 5,568,900 | 556,779 | ||||||
Baidu, Inc., Class A (ADR)1 | 3,766,000 | 549,008 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 156,580,000 | 374,590 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR) | 11,350,000 | 135,859 | ||||||
Intel Corp. | 24,000,000 | 483,120 | ||||||
International Business Machines Corp. | 2,800,000 | 481,348 | ||||||
Linear Technology Corp.2 | 15,160,000 | 434,031 | ||||||
Avago Technologies Ltd. | 12,261,220 | 405,969 | ||||||
KLA-Tencor Corp.2 | 10,940,000 | 401,279 | ||||||
Accenture PLC, Class A | 7,280,000 | 390,135 | ||||||
Electronic Arts1 | 16,388,200 | 370,046 | ||||||
SINA Corp.1 | 3,000,000 | 322,230 | ||||||
Automatic Data Processing, Inc. | 6,305,000 | 315,439 | ||||||
Altera Corp. | 8,000,000 | 291,120 | ||||||
Murata Manufacturing Co., Ltd. | 4,200,000 | 255,609 | ||||||
Motorola Solutions, Inc.1 | 5,900,000 | 248,331 | ||||||
Flextronics International Ltd.1,2 | 40,080,464 | 230,463 | ||||||
MediaTek Inc. | 22,709,996 | 228,200 | ||||||
TE Connectivity Ltd. | 6,923,000 | 211,982 | ||||||
FLIR Systems, Inc. | 7,498,000 | 193,973 | ||||||
ASML Holding NV (New York registered) | 4,217,778 | 148,761 | ||||||
ASML Holding NV | 1,130,000 | 40,021 | ||||||
Xilinx, Inc. | 6,000,000 | 186,840 | ||||||
Fidelity National Information Services, Inc. | 6,513,700 | 183,556 | ||||||
Intuit Inc.1 | 3,015,000 | 148,730 | ||||||
Maxim Integrated Products, Inc. | 5,902,120 | 136,044 | ||||||
Juniper Networks, Inc.1 | 5,750,000 | 120,347 | ||||||
Quanta Computer Inc. | 55,014,258 | 111,320 | ||||||
National Instruments Corp. | 4,105,010 | 104,391 | ||||||
Nokia Corp. (ADR) | 13,089,474 | 84,296 | ||||||
Nintendo Co., Ltd. | 460,400 | 80,571 | ||||||
SAP AG | 1,285,000 | 70,144 | ||||||
AOL Inc.1 | 3,993,164 | 62,214 | ||||||
HTC Corp. | 2,096,450 | 54,634 | ||||||
Rohm Co., Ltd. | 1,005,000 | 51,582 | ||||||
Comverse Technology, Inc.1 | 6,000,000 | 41,400 | ||||||
Lender Processing Services, Inc. | 1,550,000 | 27,342 | ||||||
Advanced Micro Devices, Inc.1 | 3,800,000 | 25,954 | ||||||
AVEVA Group PLC | 1,000,000 | 25,583 | ||||||
Redecard SA, ordinary nominative | 1,621,300 | 24,953 | ||||||
Applied Materials, Inc. | 1,900,000 | 21,508 | ||||||
Akamai Technologies, Inc.1 | 980,000 | 21,501 | ||||||
Hewlett-Packard Co. | 580,000 | 15,097 | ||||||
Western Union Co. | 890,000 | 14,703 | ||||||
Monster Worldwide, Inc.1 | 1,114,500 | 10,521 | ||||||
Analog Devices, Inc. | 87,559 | 2,891 | ||||||
25,283,446 | ||||||||
CONSUMER DISCRETIONARY — 16.56% | ||||||||
Amazon.com, Inc.1 | 13,197,000 | 2,841,182 | ||||||
Comcast Corp., Class A | 69,382,100 | 1,492,409 | ||||||
Comcast Corp., Class A, special nonvoting shares | 24,800,000 | 524,768 | ||||||
Home Depot, Inc. | 58,764,400 | 1,961,556 | ||||||
DIRECTV, Class A1,2 | 40,270,000 | 1,770,672 | ||||||
NIKE, Inc., Class B | 14,513,600 | 1,257,603 | ||||||
News Corp., Class A | 61,405,800 | 1,060,478 | ||||||
Time Warner Cable Inc. | 14,734,735 | 965,125 | ||||||
YUM! Brands, Inc. | 15,431,000 | 838,983 | ||||||
Las Vegas Sands Corp.1 | 17,385,000 | 809,619 | ||||||
Time Warner Inc. | 24,236,591 | 767,330 | ||||||
Johnson Controls, Inc. | 20,749,900 | 661,507 | ||||||
Sands China Ltd.1 | 193,456,800 | 601,303 | ||||||
Walt Disney Co. | 16,400,000 | 558,584 | ||||||
General Motors Co.1 | 20,880,234 | 501,752 | ||||||
Virgin Media Inc.2 | 19,765,400 | 501,251 | ||||||
Nikon Corp. | 17,858,300 | 390,891 | ||||||
Carnival Corp., units | 11,820,000 | 390,415 | ||||||
Naspers Ltd., Class N | 6,770,000 | 354,313 | ||||||
McDonald’s Corp. | 3,835,000 | 346,914 | ||||||
priceline.com Inc.1 | 620,000 | 333,101 | ||||||
CarMax, Inc.1 | 11,185,000 | 314,410 | ||||||
Liberty Media Corp., Series A1 | 2,000,165 | 142,632 | ||||||
Starbucks Corp. | 8,000,000 | 308,960 | ||||||
Daimler AG | 5,220,000 | 282,470 | ||||||
Expedia, Inc. | 8,988,659 | 272,446 | ||||||
AutoNation, Inc.1 | 6,660,000 | 268,931 | ||||||
Wynn Resorts, Ltd. | 1,500,000 | 232,080 | ||||||
Kohl’s Corp. | 4,500,000 | 208,530 | ||||||
Marriott International, Inc., Class A | 7,000,000 | 204,960 | ||||||
Lowe’s Companies, Inc. | 8,850,000 | 176,380 | ||||||
Sirius XM Radio Inc.1 | 95,340,000 | 171,612 | ||||||
Shaw Communications Inc., Class B, nonvoting | 7,500,000 | 171,150 | ||||||
Chipotle Mexican Grill, Inc.1 | 500,000 | 156,685 | ||||||
Harley-Davidson, Inc. | 3,599,500 | 139,157 | ||||||
Darden Restaurants, Inc. | 2,500,000 | 120,250 | ||||||
Staples, Inc. | 6,900,000 | 101,706 | ||||||
Toyota Motor Corp. | 2,730,000 | 97,477 | ||||||
Li & Fung Ltd. | 53,130,000 | 95,808 | ||||||
D.R. Horton, Inc. | 7,080,000 | 74,482 | ||||||
Apollo Group, Inc., Class A1 | 1,470,000 | 68,833 | ||||||
Harman International Industries, Inc. | 1,816,200 | 65,728 | ||||||
LG Electronics Inc. | 1,050,000 | 65,548 | ||||||
Genting Singapore PLC1 | 37,000,000 | 51,154 | ||||||
Toll Corp.1 | 2,840,710 | 48,832 | ||||||
22,769,977 | ||||||||
ENERGY — 11.58% | ||||||||
Apache Corp. | 18,645,400 | 1,921,781 | ||||||
Schlumberger Ltd. | 18,956,700 | 1,480,897 | ||||||
EOG Resources, Inc.2 | 14,755,837 | 1,366,243 | ||||||
Suncor Energy Inc. | 36,897,388 | 1,182,314 | ||||||
Southwestern Energy Co.1,2 | 21,925,000 | 832,054 | ||||||
Noble Energy, Inc. | 8,734,000 | 771,736 | ||||||
Canadian Natural Resources, Ltd. | 19,555,000 | 738,829 | ||||||
Devon Energy Corp. | 8,459,900 | 573,835 | ||||||
Nexen Inc. (CAD denominated)2 | 16,383,474 | 349,987 | ||||||
Nexen Inc.2 | 10,435,000 | 222,787 | ||||||
FMC Technologies, Inc.1 | 12,000,000 | 533,520 | ||||||
CONSOL Energy Inc. | 9,715,213 | 443,597 | ||||||
Pioneer Natural Resources Co. | 4,885,000 | 381,861 | ||||||
Talisman Energy Inc. | 22,750,000 | 379,925 | ||||||
Concho Resources Inc.1,3 | 2,207,506 | 191,943 | ||||||
Concho Resources Inc.1 | 2,080,000 | 180,856 | ||||||
Newfield Exploration Co.1 | 6,670,000 | 340,503 | ||||||
Denbury Resources Inc.1 | 19,515,000 | 311,264 | ||||||
Cimarex Energy Co. | 4,275,000 | 303,910 | ||||||
Range Resources Corp. | 4,100,000 | 265,516 | ||||||
BG Group PLC | 12,275,000 | 265,414 | ||||||
Technip SA | 2,670,000 | 260,658 | ||||||
Core Laboratories NV | 2,247,345 | 250,759 | ||||||
Woodside Petroleum Ltd. | 6,640,000 | 249,702 | ||||||
Chevron Corp. | 2,450,000 | 242,329 | ||||||
Tenaris SA (ADR) | 6,917,894 | 229,674 | ||||||
Pacific Rubiales Energy Corp. | 8,351,000 | 205,428 | ||||||
Baker Hughes Inc. | 3,300,000 | 201,663 | ||||||
Occidental Petroleum Corp. | 2,240,000 | 194,298 | ||||||
Murphy Oil Corp. | 3,456,000 | 185,172 | ||||||
Halliburton Co. | 3,705,000 | 164,391 | ||||||
Cenovus Energy Inc. | 4,026,503 | 145,551 | ||||||
Peabody Energy Corp. | 2,830,000 | 138,104 | ||||||
Petróleo Brasileiro SA – Petrobras, ordinary nominative (ADR) | 4,339,200 | 126,054 | ||||||
ConocoPhillips | 1,615,000 | 109,933 | ||||||
Cobalt International Energy, Inc.1 | 8,466,200 | 81,868 | ||||||
Diamond Offshore Drilling, Inc. | 680,000 | 43,336 | ||||||
Laricina Energy Ltd.1,4,5 | 950,000 | 41,229 | ||||||
OAO Gazprom (ADR) | 592,000 | 7,370 | ||||||
Imperial Oil Ltd. | 100,000 | 4,101 | ||||||
15,920,392 | ||||||||
HEALTH CARE — 10.12% | ||||||||
Allergan, Inc.2 | 15,955,400 | 1,305,311 | ||||||
Gilead Sciences, Inc.1 | 27,070,000 | 1,079,687 | ||||||
Merck & Co., Inc. | 31,298,762 | 1,036,615 | ||||||
UnitedHealth Group Inc. | 20,845,000 | 990,554 | ||||||
Biogen Idec Inc.1 | 8,695,400 | 819,107 | ||||||
Medco Health Solutions, Inc.1 | 13,246,100 | 717,144 | ||||||
Intuitive Surgical, Inc.1 | 1,829,600 | 697,718 | ||||||
Amgen Inc. | 10,983,900 | 608,563 | ||||||
St. Jude Medical, Inc. | 12,788,000 | 582,366 | ||||||
Edwards Lifesciences Corp.1,2 | 7,210,000 | 543,995 | ||||||
Alexion Pharmaceuticals, Inc.1 | 8,830,000 | 511,654 | ||||||
Bristol-Myers Squibb Co. | 15,160,000 | 451,010 | ||||||
Vertex Pharmaceuticals Inc.1 | 8,969,000 | 406,027 | ||||||
Baxter International Inc. | 6,670,000 | 373,387 | ||||||
Stryker Corp. | 7,505,000 | 366,544 | ||||||
Aetna Inc. | 8,815,000 | 352,864 | ||||||
Celgene Corp.1 | 5,920,000 | 352,062 | ||||||
Hospira, Inc.1 | 6,740,000 | 311,388 | ||||||
Boston Scientific Corp.1 | 44,645,000 | 302,693 | ||||||
Illumina, Inc.1 | 5,425,000 | 282,642 | ||||||
Novo Nordisk A/S, Class B | 2,527,400 | 269,749 | ||||||
Pharmasset, Inc.1 | 1,845,900 | 242,404 | ||||||
Medtronic, Inc. | 5,825,000 | 204,283 | ||||||
Zimmer Holdings, Inc.1 | 3,180,000 | 180,910 | ||||||
Johnson & Johnson | 2,675,000 | 176,015 | ||||||
Thermo Fisher Scientific Inc.1 | 2,965,000 | 162,867 | ||||||
Abbott Laboratories | 2,619,407 | 137,545 | ||||||
Human Genome Sciences, Inc.1,2 | 10,297,900 | 132,534 | ||||||
Teva Pharmaceutical Industries Ltd. (ADR) | 3,000,000 | 124,080 | ||||||
Hologic, Inc.1 | 7,095,000 | 118,061 | ||||||
Thoratec Corp.1 | 1,273,000 | 43,613 | ||||||
Covance Inc.1 | 516,847 | 25,615 | ||||||
13,909,007 | ||||||||
FINANCIALS — 8.24% | ||||||||
Wells Fargo & Co. | 41,655,978 | 1,087,221 | ||||||
Industrial and Commercial Bank of China Ltd., Class H | 1,507,488,335 | 991,329 | ||||||
Goldman Sachs Group, Inc. | 7,456,000 | 866,536 | ||||||
Citigroup Inc. | 27,257,000 | 846,330 | ||||||
Bank of America Corp. | 82,833,298 | 676,748 | ||||||
JPMorgan Chase & Co. | 15,148,000 | 568,959 | ||||||
AIA Group Ltd. | 152,613,800 | 536,099 | ||||||
Agricultural Bank of China, Class H | 1,071,645,000 | 516,150 | ||||||
American Express Co. | 8,980,000 | 446,396 | ||||||
HDFC Bank Ltd.4 | 25,485,965 | 262,174 | ||||||
HDFC Bank Ltd. (ADR) | 2,700,000 | 90,072 | ||||||
ACE Ltd. | 4,865,000 | 314,182 | ||||||
Fifth Third Bancorp | 29,301,000 | 311,177 | ||||||
ICICI Bank Ltd. (ADR) | 6,137,200 | 241,560 | ||||||
ICICI Bank Ltd.4 | 1,750,000 | 33,231 | ||||||
Bank of Nova Scotia | 4,910,000 | 273,402 | ||||||
Aon Corp. | 5,793,000 | 270,707 | ||||||
State Street Corp. | 7,508,100 | 266,688 | ||||||
Morgan Stanley | 15,000,000 | 262,500 | ||||||
Marsh & McLennan Companies, Inc. | 7,387,171 | 219,547 | ||||||
Bank of New York Mellon Corp. | 10,322,000 | 213,356 | ||||||
Berkshire Hathaway Inc., Class A1 | 1,930 | 211,854 | ||||||
Housing Development Finance Corp. Ltd.4 | 13,600,000 | 195,904 | ||||||
PNC Financial Services Group, Inc. | 3,866,058 | 193,844 | ||||||
Onex Corp. | 5,200,000 | 184,519 | ||||||
New York Community Bancorp, Inc. | 11,100,000 | 142,191 | ||||||
Credit Suisse Group AG | 4,450,000 | 127,340 | ||||||
Toronto-Dominion Bank | 1,480,000 | 117,079 | ||||||
AMP Ltd. | 22,673,816 | 109,794 | ||||||
UBS AG1 | 6,274,666 | 90,867 | ||||||
Banco Santander, SA | 9,332,751 | 86,070 | ||||||
Jefferies Group, Inc. | 5,000,000 | 82,050 | ||||||
Moody’s Corp. | 2,396,100 | 73,872 | ||||||
Popular, Inc.1 | 33,528,333 | 69,739 | ||||||
BOK Financial Corp. | 1,250,000 | 61,500 | ||||||
Genworth Financial, Inc., Class A1 | 7,647,700 | 52,846 | ||||||
City National Corp. | 1,066,475 | 47,874 | ||||||
Willis Group Holdings PLC | 1,210,000 | 47,347 | ||||||
Zions Bancorporation | 2,450,000 | 42,728 | ||||||
Regions Financial Corp. | 5,700,000 | 25,878 | ||||||
Discover Financial Services | 910,000 | 22,896 | ||||||
First Horizon National Corp. | 3,000,000 | 21,120 | ||||||
BB&T Corp. | 930,000 | 20,730 | ||||||
Weyerhaeuser Co. | 422,321 | 7,614 | ||||||
Washington Mutual, Inc.1 | 24,571,428 | 1,966 | ||||||
11,331,986 | ||||||||
INDUSTRIALS — 8.19% | ||||||||
Union Pacific Corp. | 18,499,700 | 1,705,117 | ||||||
CSX Corp. | 41,127,717 | 902,342 | ||||||
General Dynamics Corp. | 10,161,400 | 651,143 | ||||||
Norfolk Southern Corp. | 8,700,000 | 588,816 | ||||||
Boeing Co. | 7,700,000 | 514,822 | ||||||
Precision Castparts Corp. | 2,828,000 | 463,368 | ||||||
Caterpillar Inc. | 4,800,000 | 436,800 | ||||||
Lockheed Martin Corp. | 5,870,146 | 435,506 | ||||||
United Parcel Service, Inc., Class B | 6,250,000 | 421,187 | ||||||
United Technologies Corp. | 5,293,320 | 393,029 | ||||||
Stericycle, Inc.1 | 4,239,000 | 371,803 | ||||||
Southwest Airlines Co. | 36,889,000 | 317,983 | ||||||
Wolseley PLC | 11,765,000 | 305,952 | ||||||
United Continental Holdings, Inc.1 | 16,399,250 | 304,862 | ||||||
Delta Air Lines, Inc.1 | 39,590,000 | 298,113 | ||||||
Deere & Co. | 3,670,000 | 296,609 | ||||||
Jardine Matheson Holdings Ltd. | 5,080,000 | 281,432 | ||||||
PACCAR Inc | 7,230,000 | 272,065 | ||||||
Ingersoll-Rand PLC | 7,670,800 | 257,049 | ||||||
Iron Mountain Inc. | 7,880,000 | 256,415 | ||||||
General Electric Co. | 15,000,000 | 244,650 | ||||||
3M Co. | 2,936,900 | 243,704 | ||||||
Cummins Inc. | 2,525,000 | 234,623 | ||||||
Atlas Copco AB, Class A | 8,115,000 | 183,248 | ||||||
KBR, Inc. | 6,575,289 | 197,587 | ||||||
Joy Global Inc. | 2,238,600 | 186,811 | ||||||
Ryanair Holdings PLC (ADR) | 6,285,000 | 166,050 | ||||||
SGS SA | 75,000 | 139,605 | ||||||
MTU Aero Engines Holding AG | 1,877,000 | 127,832 | ||||||
Northrop Grumman Corp. | 850,000 | 46,427 | ||||||
AMR Corp.1 | 4,750,000 | 17,195 | ||||||
11,262,145 | ||||||||
MATERIALS — 6.16% | ||||||||
Barrick Gold Corp. | 24,000,000 | 1,218,000 | ||||||
Newmont Mining Corp. | 17,648,000 | 1,105,118 | ||||||
Syngenta AG | 3,230,000 | 1,028,101 | ||||||
Dow Chemical Co. | 24,858,700 | 707,230 | ||||||
Praxair, Inc. | 5,272,437 | 519,282 | ||||||
Freeport-McMoRan Copper & Gold Inc. | 11,000,000 | 518,540 | ||||||
Cliffs Natural Resources Inc. | 6,160,000 | 510,356 | ||||||
Celanese Corp., Series A2 | 8,784,500 | 412,959 | ||||||
Sigma-Aldrich Corp. | 5,395,000 | 347,384 | ||||||
CRH PLC | 17,569,763 | 313,720 | ||||||
Rio Tinto PLC | 4,970,000 | 306,738 | ||||||
Potash Corp. of Saskatchewan Inc. | 4,855,000 | 281,493 | ||||||
Nitto Denko Corp. | 6,000,000 | 232,180 | ||||||
Israel Chemicals Ltd. | 14,000,000 | 202,043 | ||||||
United States Steel Corp. | 4,732,200 | 142,534 | ||||||
Steel Dynamics, Inc. | 10,850,000 | 138,120 | ||||||
Nucor Corp. | 2,800,000 | 101,024 | ||||||
ArcelorMittal | 4,150,000 | 91,658 | ||||||
Alcoa Inc. | 7,000,000 | 89,670 | ||||||
Ecolab Inc. | 1,000,000 | 53,600 | ||||||
FMC Corp. | 500,000 | 37,965 | ||||||
Kuraray Co., Ltd. | 2,290,000 | 32,689 | ||||||
Air Products and Chemicals, Inc. | 335,000 | 27,426 | ||||||
Akzo Nobel NV | 412,000 | 20,975 | ||||||
AK Steel Holding Corp. | 1,940,881 | 17,449 | ||||||
Sino-Forest Corp.1,4 | 9,900,000 | 6,791 | ||||||
8,463,045 | ||||||||
CONSUMER STAPLES — 5.59% | ||||||||
Philip Morris International Inc. | 25,266,700 | 1,751,488 | ||||||
Costco Wholesale Corp. | 18,925,000 | 1,486,369 | ||||||
CVS/Caremark Corp. | 27,800,000 | 998,298 | ||||||
Avon Products, Inc. | 20,480,000 | 462,029 | ||||||
Kerry Group PLC, Class A2 | 8,865,824 | 343,865 | ||||||
Altria Group, Inc. | 11,836,700 | 321,840 | ||||||
Wilmar International Ltd. | 70,000,000 | 308,063 | ||||||
PepsiCo, Inc. | 4,222,500 | 272,056 | ||||||
Colgate-Palmolive Co. | 2,421,500 | 217,862 | ||||||
Coca-Cola Co. | 3,065,000 | 215,929 | ||||||
AMOREPACIFIC Corp. | 197,000 | 214,570 | ||||||
Diageo PLC | 10,500,000 | 211,354 | ||||||
Estée Lauder Companies Inc., Class A | 2,009,000 | 196,199 | ||||||
Molson Coors Brewing Co., Class B | 4,196,900 | 183,614 | ||||||
British American Tobacco PLC | 3,750,000 | 167,007 | ||||||
Whole Foods Market, Inc. | 1,697,600 | 112,093 | ||||||
L’Oréal SA | 1,010,000 | 109,961 | ||||||
Procter & Gamble Co. | 1,725,000 | 109,848 | ||||||
7,682,445 | ||||||||
TELECOMMUNICATION SERVICES — 1.70% | ||||||||
Crown Castle International Corp.1 | 13,329,250 | 578,889 | ||||||
SOFTBANK CORP. | 17,343,300 | 572,372 | ||||||
América Móvil, SAB de CV, Series L (ADR) | 21,480,000 | 549,029 | ||||||
American Tower Corp., Class A1 | 4,615,000 | 248,564 | ||||||
MetroPCS Communications, Inc.1 | 18,097,771 | 201,971 | ||||||
Telephone and Data Systems, Inc., special common shares | 2,303,100 | 58,384 | ||||||
Sprint Nextel Corp., Series 11 | 14,000,000 | 52,640 | ||||||
CenturyLink, Inc. | 1,224,674 | 44,272 | ||||||
Leap Wireless International, Inc.1 | 3,900,000 | 35,256 | ||||||
Broadview Networks Holdings, Inc., Class A1,4,5 | 31,812 | — | ||||||
2,341,377 | ||||||||
UTILITIES — 0.17% | ||||||||
Edison International | 3,270,000 | 121,611 | ||||||
NRG Energy, Inc.1 | 2,500,000 | 58,600 | ||||||
RRI Energy, Inc.1 | 17,302,000 | 52,598 | ||||||
232,809 | ||||||||
MISCELLANEOUS — 4.94% | ||||||||
Other common stocks in initial period of acquisition | 6,791,880 | |||||||
Total common stocks (cost: $104,239,171,000) | 125,988,509 | |||||||
Preferred stocks — 0.05% | Shares | |||||||
INFORMATION TECHNOLOGY — 0.05% | ||||||||
Zynga Inc., Class C1,4,5 | 4,740,144 | 66,500 | ||||||
TELECOMMUNICATION SERVICES — 0.00% | ||||||||
Broadview Networks Holdings, Inc., Series B1,4,5 | 1,272 | 158 | ||||||
Total preferred stocks (cost: $87,500,000) | 66,658 | |||||||
Warrants — 0.02% | ||||||||
FINANCIALS — 0.01% | ||||||||
Citigroup Inc., Class A, warrants, expire 20191 | 24,718,700 | 12,903 | ||||||
Washington Mutual, Inc., warrants, expire 20131,4 | 2,857,142 | — | ||||||
12,903 | ||||||||
MISCELLANEOUS — 0.01% | ||||||||
Other warrants in initial period of acquisition | 13,551 | |||||||
Total warrants (cost: $57,447,000) | 26,454 | |||||||
Shares or | ||||||||
Convertible securities — 0.17% | principal amount | |||||||
CONSUMER DISCRETIONARY — 0.14% | ||||||||
Groupon Inc., Series G, convertible preferred1,4,5 | 3,007,282 | 192,466 | ||||||
TELECOMMUNICATION SERVICES — 0.03% | ||||||||
Clearwire Corp. 8.25% convertible notes 20403 | $ | 65,000,000 | 45,988 | |||||
Total convertible securities (cost: $160,064,000) | 238,454 | |||||||
Principal amount | ||||||||
Bonds & notes — 0.03% | (000 | ) | ||||||
TELECOMMUNICATION SERVICES — 0.03% | ||||||||
LightSquared, Term Loan B, 12.00% 20146,7,8 | $ | 30,371 | 23,143 | |||||
Clearwire Communications and Clearwire Finance, Inc., Series A, 12.00% 20153 | 4,000 | 3,800 | ||||||
Clearwire Communications and Clearwire Finance, Inc. 12.00% 20173 | 12,000 | 9,990 | ||||||
36,933 | ||||||||
CONSUMER DISCRETIONARY — 0.00% | ||||||||
MGM Resorts International 13.00% 2013 | 4,125 | 4,749 | ||||||
�� | ||||||||
Total bonds & notes (cost: $48,647,000) | 41,682 | |||||||
Short-term securities — 7.86% | ||||||||
Freddie Mac 0.05%–0.301% due 9/6/2011–6/26/2012 | 4,589,895 | 4,588,373 | ||||||
Fannie Mae 0.055%–0.25% due 9/13/2011–6/1/2012 | 1,814,708 | 1,814,149 | ||||||
Federal Home Loan Bank 0.09%–0.321% due 9/19/2011–8/15/2012 | 1,499,000 | 1,498,388 | ||||||
Federal Home Loan Bank 0.16% due 10/21/20119 | 25,000 | 25,007 | ||||||
U.S. Treasury Bills 0.209%–0.291% due 11/17/2011–3/8/2012 | 745,300 | 745,224 | ||||||
Federal Farm Credit Banks 0.13%–0.321% due 10/18/2011–4/4/2012 | 445,000 | 444,923 | ||||||
Jupiter Securitization Co., LLC 0.15%–0.16% due 9/15–10/12/20113 | 225,000 | 224,962 | ||||||
Falcon Asset Securitization Co., LLC 0.16% due 9/28/20113 | 75,000 | 74,991 | ||||||
Coca-Cola Co. 0.09%–0.16% due 9/9–11/1/20113 | 270,100 | 270,075 | ||||||
Hewlett-Packard Co. 0.13%–0.15% due 9/20–10/24/20113 | 264,500 | 264,455 | ||||||
CAFCO, LLC 0.15%–0.21% due 9/19–10/19/2011 | 147,300 | 147,275 | ||||||
Ciesco LLC 0.14%–0.25% due 9/15–11/28/2011 | 84,100 | 84,085 | ||||||
Straight-A Funding LLC 0.16% due 9/1–10/5/20113 | 205,225 | 205,168 | ||||||
NetJets Inc. 0.09%–0.11% due 9/15–10/7/20113 | 64,100 | 64,096 | ||||||
Wal-Mart Stores, Inc. 0.10% due 9/8/20113 | 60,000 | 59,999 | ||||||
Merck & Co. Inc. 0.05% due 9/14/20113 | 50,000 | 49,999 | ||||||
Private Export Funding Corp. 0.19% due 11/22/20113 | 45,000 | 44,978 | ||||||
Variable Funding Capital Corp. 0.17% due 10/18/20113 | 44,000 | 43,986 | ||||||
Abbott Laboratories 0.07% due 9/26/20113 | 36,000 | 35,998 | ||||||
General Electric Capital Services, Inc. 0.18% due 11/8/2011 | 33,500 | 33,490 | ||||||
PepsiCo Inc. 0.10% due 10/17/20113 | 25,000 | 24,996 | ||||||
Johnson & Johnson 0.23% due 10/4/20113 | 24,300 | 24,298 | ||||||
Procter & Gamble Co. 0.11% due 10/11/20113 | 20,100 | 20,098 | ||||||
eBay Inc. 0.14% due 9/7/20113 | 20,000 | 19,999 | ||||||
Total short-term securities (cost: $10,804,919,000) | 10,809,012 | |||||||
Total investment securities (cost: $115,397,748,000) | 137,170,769 | |||||||
Other assets less liabilities | 315,749 | |||||||
Net assets | $ | 137,486,518 |
As permitted by U.S. Securities and Exchange Commission regulations, “Miscellaneous” securities include holdings in their first year of acquisition that have not previously been publicly disclosed.
1Security did not produce income during the last 12 months.
2Represents an affiliated company as defined under the Investment Company Act of 1940.
3Acquired in a transaction exempt from registration under the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $1,679,819,000, which represented 1.22% of the net assets of the fund.
4Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities, including those in “Miscellaneous,” was $1,338,301,000, which represented .97% of the net assets of the fund. This amount includes $1,031,157,000 related to certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading.
5Acquired through a private placement transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restrictions on resale. Further details on these holdings appear on the next page.
Acquisition | Cost | Value | Percent of | ||||||||||
date(s) | (000 | ) | (000 | ) | net assets | ||||||||
Groupon Inc., Series G, convertible preferred | 12/17/2010 | $ | 95,000 | $ | 192,466 | .14 | % | ||||||
Zynga Inc., Class C | 2/18/2011 | 66,500 | 66,500 | .05 | |||||||||
Laricina Energy Ltd. | 6/21/2011 | 41,523 | 41,229 | .03 | |||||||||
Broadview Networks Holdings, Inc., Series B | 7/7/2000–3/6/2002 | 21,000 | 158 | — | |||||||||
Broadview Networks Holdings, Inc., Class A | 7/7/2000–3/6/2002 | — | — | — | |||||||||
Total restricted securities | $ | 224,023 | $ | 300,353 | .22 | % |
6Payment in kind; the issuer has the option of paying additional securities in lieu of cash.
7Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
8Loan participations and assignments; may be subject to legal or contractual restrictions on resale. The total value of all such loans was $23,143,000, which represented .02% of the net assets of the fund.
9Coupon rate may change periodically.
Key to abbreviations
ADR = American Depositary Receipts
CAD = Canadian dollars
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
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 and summary prospectus, which can be obtained from your financial professional 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.
MFGEFP-905-1011O-S29396
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INVESTMENT PORTFOLIO
To the Shareholders and Board of Directors of
The Growth Fund of America, Inc.:
We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of The Growth Fund of America, Inc. (the “Fund”) as of August 31, 2011, and for the year then ended and have issued our report thereon dated October 4, 2011, which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR. Our audit also included the Fund’s investment portfolio (the “Schedule”) as of August 31, 2011, appearing in Item 6 of this Form N-CSR. This Schedule is the responsibility of the Fund’s management. Our responsibility is to express an opinion based on our audit. In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Fund referred to above, presents fairly, in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Costa Mesa, California
October 4, 2011
ITEM 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 8 – Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.
ITEM 10 – Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of directors since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a nominating and governance committee comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full board of directors. While the committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the board. Such suggestions must be sent in writing to the nominating and governance committee of the Registrant, c/o the Registrant’s Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the nominating and governance committee.
ITEM 11 – Controls and Procedures
(a) | The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule. |
(b) | There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
ITEM 12 – Exhibits
(a)(1) | The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto. |
(a)(2) | The certifications required by Rule 30a-2 of the Investment Company Act of 1940 and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE GROWTH FUND OF AMERICA, INC. | |
By /s/ Paul G. Haaga, Jr. | |
Paul G. Haaga, Jr., Executive Vice President and Principal Executive Officer | |
Date: October 31, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By /s/ Paul G. Haaga, Jr. |
Paul G. Haaga, Jr., Executive Vice President and Principal Executive Officer |
Date: October 31, 2011 |
By /s/ Jeffrey P. Regal |
Jeffrey P. Regal, Treasurer and Principal Financial Officer |
Date: October 31, 2011 |