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, 2012
Patrick F. Quan
The Growth Fund of America, Inc.
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
Focusing on companies that can produce now and over the long term
See page 6
Annual report for the year ended August 31, 2012
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 more than 40 offered by American Funds, which is one of the nation’s largest mutual fund families. For more than 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, 2012 (the most recent calendar quarter-end): | ||||||||||||
Class A shares | 1 year | 5 years | 10 years | |||||||||
Reflecting 5.75% maximum sales charge | 20.57 | % | –1.12 | % | 8.08 | % |
The total annual fund operating expense ratio is 0.71% for Class A shares as of the prospectus dated November 1, 2012 (unaudited).
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. When applicable, investment results reflect fee waivers, without which results would have been lower. Visit americanfunds.com for more information.
Results for other share classes can be found on page 3.
Refer to the fund prospectus and the Risk Factors section of this report for more information on risks associated with investing in the fund.
Fellow investors:
Despite a steady stream of challenging headlines on a range of issues — from European sovereign debt, to growth in China, to fiscal concerns in the U.S. —the stock market climbed the proverbial “wall of worry” and had good returns for the 12 months ended August 31, 2012. There were periods of volatility, but the power of monetary easing by the Federal Reserve, and the strength of good fundamentals for certain individual stocks, overcame these concerns.
During the period, The Growth Fund of America (GFA) posted a total return of 13.1%. On an absolute basis, the return was satisfactory. On a relative basis, the fund trailed the 18.0% 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 trailed three of the four Lipper indexes we use to measure GFA’s progress but was in line with the 13.1% average of the four. For added perspective, we note how difficult stock markets were outside the U.S. in this period. The MSCI All Country World Index ex USA returned –1.4%.
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, 2012, GFA posted an average annual total return of 7.6%, compared with 6.5% by the S&P 500. Over 20 years, GFA produced an average annual total return of 10.3%, compared with 8.4% by the S&P 500. Over its nearly 39-year history, GFA had an average annual total return of 13.3%, compared with 10.5% by the S&P 500. We continue to believe that we have a sound and robust investment approach that can do well for our shareholders over the long term.
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Results at a glance | ||||||||||||||||
Total returns for periods ended August 31, 2012, 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) | 13.1 | % | 0.4 | % | 7.6 | % | 13.3 | % | ||||||||
Standard & Poor’s 500 Composite Index2 | 18.0 | 1.3 | 6.5 | 10.5 | ||||||||||||
Lipper Capital Appreciation Funds Index | 10.5 | 1.6 | 7.3 | 10.5 | ||||||||||||
Lipper Growth Funds Index | 13.6 | 0.4 | 5.6 | 9.4 | ||||||||||||
Lipper Large-Cap Core Funds Index | 14.8 | 0.6 | 5.4 | — | 3 | |||||||||||
Lipper Large-Cap Growth Funds Index | 13.4 | 1.9 | 5.6 | — | 3 | |||||||||||
1 Since Capital Research and Management Company (CRMC) began managing the fund on December 1, 1973. | ||||||||||||||||
2 The S&P 500 is unmanaged and, therefore, has no expenses. | ||||||||||||||||
3 This Lipper index was not in existence when CRMC began managing the fund. |
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In this report | |
Special feature | |
6 | Investing in companies that can do well in any market |
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 |
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Investment results analysis
The fund’s 20 largest holdings produced very satisfying results. GFA’s largest investment, Apple, had a total return of 72.9%, aided by rising sales of its iPad and iPhone products. Consumer discretionary stocks that helped were Comcast (+55.7%), the nation’s largest cable television provider, and home improvement retailer Home Depot (+70%).
Health care stocks made a major contribution to the fund over the past 12 months. Gilead Sciences, the fund’s fourth-largest holding, rose 44.6% during the period. Last November, Gilead agreed to acquire Pharmasset, a smaller company that is developing a drug to treat the hepatitis C virus. Pharmasset, also a GFA holding, rose 104.0% from the beginning of the fiscal year to the day when it was announced that a definitive agreement had been reached. In addition, Alexion Pharmaceuticals gained 85%.
GFA’s non-U.S. holdings, which constituted about 14% of net assets, detracted from results during the recent year. In particular, Canadian natural resource, materials and energy companies’ returns declined. They included Canadian Natural Resources (–19.5%) and Potash Corp. of Saskatchewan (–29.2%). Falling natural gas and oil prices hurt these firms. The fund’s investments in China, while relatively small, lagged because of slowing sales. Over most of the past decade, GFA’s international investments have helped the fund. We continue to believe that our investors will benefit in the long run from our involvement in non-U.S. markets because of the advantage of GFA’s extensive global research network.
The fund’s holdings of cash and cash equivalents, which totaled about 9% during the year, also detracted from results in a rising stock market on a relative basis. Many of the fund’s portfolio counselors believed it was prudent to hold some cash in this uncertain environment, a judgment that increases flexibility in the event of volatility and may yet prove to be helpful. Cash is not a top-down decision by the fund but is an aggregate of the views of individual portfolio counselors.
Welcome new portfolio counselors
Two portfolio counselors are leaving GFA at the end of the year and two new portfolio counselors have joined the fund. The new portfolio counselors are Barry Crosthwaite and Martin Romo, both veteran American Funds portfolio counselors. Barry has 15 years of experience with our firm and Martin has 20 years. The exiting counselors are Gordon Crawford, who is retiring at the end of the calendar year (see the box below for more details), and Dylan Yolles, who left the fund in September to take on new investing responsibilities with other American Funds. We thank Gordon and Dylan for their many contributions to GFA over the years.
The road ahead
In the coming months, we can expect to see a repeat of the negative headlines we’ve already been seeing. Sovereign debt problems in Europe and fiscal problems in the U.S. have not been resolved. It is harder to say whether we will continue with good market returns despite the news. The stock market will be looking for whether the trajectory of these issues is improving or not. Flare-ups in the Middle East, as well as developments in the U.S. presidential election, may add to volatility.
As we mention in our feature story, we seek to invest in companies that can do well in almost any environment. Turn to page 6 to see examples of companies in GFA that, in the recent past, have created their own demand or provided relatively recession-resistant services. We invest in stocks one at a time, after extensive, fundamental research. We invest with a long-term horizon at a time when many others have shortened their time frame. We pay close attention to valuation, which can help mitigate risk and increase return. Ours is a durable investment approach that has stood the test of time, and in which we are confident.
We thank you for your support of The Growth Fund of America.
Cordially,
/s/ James F. Rothenberg
James F. Rothenberg
Vice Chairman of the Board
/s/ Donald D. O’Neal
Donald D. O’Neal
President
October 8, 2012
For current information about the fund, visit americanfunds.com.
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[photo of Gordon Crawford]
We take this opportunity to say special thanks to Gordon Crawford, senior vice president of The Growth Fund of America, who will retire at the end of 2012 after a 40-year career at The Capital Group Companies. Twenty of those years were spent as a portfolio counselor with GFA, but he influenced the fund for all of his lengthy career as either an analyst or counselor. Gordon is a well-known and well-respected investor among the media/entertainment companies and their leaders. We thank him for his uniquely large contributions and long-term dedicated service. We wish him well.
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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, 2012 (the most recent calendar quarter-end): | ||||||||||||
10 years/ | ||||||||||||
1 year | 5 years | Life of class1 | ||||||||||
Class B shares2 | ||||||||||||
Reflecting applicable contingent deferred sales charge | ||||||||||||
(CDSC), maximum of 5%, payable only if shares | ||||||||||||
are sold within six years of purchase | 21.96 | % | –1.06 | % | 8.07 | % | ||||||
Not reflecting CDSC | 26.96 | –0.69 | 8.07 | |||||||||
Class C shares | ||||||||||||
Reflecting CDSC, maximum of 1%, payable only | ||||||||||||
if shares are sold within one year of purchase | 25.93 | –0.71 | 7.86 | |||||||||
Not reflecting CDSC | 26.93 | –0.71 | 7.86 | |||||||||
Class F-1 shares3 | ||||||||||||
Not reflecting annual asset-based fee charged | ||||||||||||
by sponsoring firm | 27.94 | 0.10 | 8.73 | |||||||||
Class F-2 shares3 — first sold 8/1/08 | ||||||||||||
Not reflecting annual asset-based fee charged | ||||||||||||
by sponsoring firm | 28.26 | — | 3.74 | |||||||||
Class 529-A shares4 | ||||||||||||
Reflecting 5.75% maximum sales charge | 20.50 | –1.16 | 8.05 | |||||||||
Not reflecting maximum sales charge | 27.87 | 0.02 | 8.69 | |||||||||
Class 529-B shares2,4 | ||||||||||||
Reflecting applicable CDSC, maximum of 5%, payable | ||||||||||||
only if shares are sold within six years of purchase | 21.82 | –1.15 | 7.95 | |||||||||
Not reflecting CDSC | 26.82 | –0.78 | 7.95 | |||||||||
Class 529-C shares4 | ||||||||||||
Reflecting CDSC, maximum of 1%, payable only | ||||||||||||
if shares are sold within one year of purchase | 25.85 | –0.77 | 7.79 | |||||||||
Not reflecting CDSC | 26.85 | –0.77 | 7.79 | |||||||||
Class 529-E shares3,4 | 27.53 | –0.26 | 8.34 | |||||||||
Class 529-F-1 shares3,4 | ||||||||||||
Not reflecting annual asset-based fee charged | ||||||||||||
by sponsoring firm | 28.08 | 0.22 | 8.80 |
1Applicable to Class F-2 shares only. All other share classes reflect 10-year results. |
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. When applicable, investment results reflect fee waivers, without which results would have been lower. Visit americanfunds.com for more information.
For information regarding the differences among the various share classes, refer to the fund 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, 2012)* | ||||||||||||
1 year | 5 years | 10 years | ||||||||||
Class A shares | 6.59 | % | –0.81 | % | 6.97 | % | ||||||
*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. When applicable, investment results reflect the waivers, without which results would have been lower. Visit americanfunds.com for more information.
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FY END (Aug 31) | 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# | 7,874 | 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 | ||||||||||||
8/31/2012 | 1,204,303 | 485,670 | 327,029 | 50,192 |
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 | 2012 | |||||||||||||||||||||||||
Total value (dollars in thousands) | ||||||||||||||||||||||||||||||||
Dividends reinvested | 5.9 | 8.7 | 11.9 | 8.3 | 7.6 | 8.09 | 8.0 | |||||||||||||||||||||||||
Value at year-end | 1,013.4 | 1,182.4 | 1,085.0 | 894.1 | 922.8 | 1,065.0 | 1,204.3 | |||||||||||||||||||||||||
GFA total return | 9.7 | 16.7 | (8.2 | ) | (17.6 | ) | 3.2 | 15.4 | 13.1 |
Average annual total return for 38-3/4 years 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 $105,406 and reinvested capital gain distributions of $479,731. |
4The S&P 500 is unmanaged and, therefore, has no expenses. |
5Results of the Lipper Growth Funds Index do not reflect any sales charges. |
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.
Investing in companies that can do well in any market
One goal of GFA’s portfolio counselors and analysts is to find companies that have pricing power and whose products can create their own demand.
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[photo of Don O’Neal]
Don O’Neal
“Whether the environment is improving or not, our mission is to find attractively priced, fundamentally sound companies in which to invest.”
President of the fund
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Investors faced plenty of unsettling headlines in the past year. Top of the list were the myriad troubles in Europe, including the potential breakup of the euro zone. In the U.S., the economy remains slow, the government is headed toward a “fiscal cliff,” the presidential election adds uncertainty and we’re even having major droughts affecting crops. Other large economies, like China and Brazil, appear to be slowing down. Despite all this, along with bouts of volatility, the U.S. stock market continued to climb the proverbial “wall of worry” the past 12 months. From August 31, 2011, to August 31, 2012, Standard & Poor’s 500 Composite Index, a broad measure of the U.S. stock market, gained 18%, which illustrates the difficulty of predicting the market in the short term.
The Growth Fund of America’s professional investors monitor these developments very closely with a worldwide investment network. “Whether the environment is improving or not, our mission is to find attractively priced, fundamentally sound companies in which to invest,” says Don O’Neal, president of GFA. “With a long-term horizon, it is often easiest to find them when the headlines are bad.”
In the following pages, we talk with several of GFA’s investment professionals who focus on companies they believe have the potential to do well in the coming years, even if some of the negative news continues to rattle stock markets. Here are several examples of those companies.
Companies with products that generate their own demand
One goal of GFA’s portfolio counselors and analysts is to find companies that have pricing power and whose products can create their own demand. GFA investment analyst Jay Markowitz, M.D., a specialist in biotechnology and pharmaceutical stocks, contends that “novel drugs for serious unmet medical needs fit that mandate.”
Jay came into investing from a career as a transplant surgeon at Johns Hopkins Medical Center in Baltimore where he was a member of the medical faculty. “I spent a fair amount of my career taking care of people who have suffered the ravages of hepatitis C, so I know it very well,” says Jay. “I have witnessed the consequences of liver disease and appreciate the dramatic advances that have now occurred and that have the potential to eradicate this disease.”
Hepatitis C, a virus that causes inflammation of the liver, affects more than 150 million people worldwide, according to estimates from the World Health Organization. The Centers for Disease Control and Prevention estimates that about 3 million people in the United States are infected. As many as three-quarters of them may not even know that they are infected, says Jay.
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[photo of Jim Rothenberg]
Jim Rothenberg
“For me, investing is about finding companies that create wealth by growing over time and producing a stream of earnings and dividends. Stock markets rise and fall for a host of reasons, but great companies can continue to make progress often in difficult economic environments.”
Vice chairman of the fund
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[photo of Jay Markowitz]
Jay Markowitz, M.D.
“I’ve found that drug companies with transformational therapies have often offered positive returns regardless of what the broader stock market is doing.”
Investment analyst, biotechnology and pharmaceuticals
[End Photo Caption]
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Several pharmaceutical companies are developing treatments for hepatitis C and have made some progress in recent years in reducing the length of treatment from 48 weeks to 24 weeks. Cure rates have been improved from 45% to somewhere between 70% and 80%, depending on the patient’s condition when diagnosed, says Jay. But the drugs still can have serious side effects depending on the individual.
Gilead Sciences, one of GFA’s largest holdings, is striving to improve the treatment of hepatitis C as it has successfully done with HIV (human immunodeficiency virus; a retrovirus that causes AIDS). In January 2012, Gilead Sciences acquired Pharmasset, a company entering the final phase of testing a promising drug for hepatitis C. Gilead Sciences is hopeful that it will become the key ingredient in an effective, safe and convenient pill that cures people of their infection.
Does Gilead have the potential to create its own demand for its medicines? “I’ve found that drug companies with transformational therapies have often offered positive returns regardless of what the broader stock market is doing,” says Jay.
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[photo of Brad Barrett]
Brad Barrett
“I try to meet deep down in the organization with the operators of various business units, strategy
advisers and technology experts.”
Investment analyst, media
[End Photo Caption]
Companies with products that are recession-resistant
In the highly competitive media market, Comcast, one of the largest providers of cable television and internet services, has been in a position of strength that has allowed the company to do relatively well despite the environment. The Philadelphia-based company sells a bundle of video, broadband and phone services and merged in 2011 with NBC Universal to give it entertainment content as well.
Brad Barrett, an investment analyst who covers media companies, sees three major reasons for the company’s historically strong position. “The first is that cable television and internet access are essential to the lives of many of its customers. Cable TV and cable broadband are some of the very last things to be cut during hard times.” In fact, Comcast grew right through the recession of 2008 and 2009. The second reason is that “Comcast has generated a lot of cash and returned much of it to shareholders in dividends and share buybacks,” says Brad.
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The third reason is that Comcast has tended to trade at a valuation that is lower than the typical company, which tends to provide downside protection in volatile markets.
How does Brad research such a complex media company? He visits company headquarters and meets with the management team multiple times a year. Brad also attends industry events. “I try to meet deep down in the organization with the operators of various business units, strategy advisers and technology experts. It is also important that I meet regularly with their competitors, like DirecTV and Netflix, in order to have a deep understanding of the industry.”
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[Begin Sidebar]
A wealth of experience | |
The Growth Fund of America currently has 13 portfolio counselors who bring together 391 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 | 44 |
James F. Rothenberg | 41 |
Gordon Crawford† | 40 |
James E. Drasdo | 40 |
Gregg E. Ireland | 40 |
Donnalisa Barnum | 30 |
Michael T. Kerr | 28 |
Donald D. O’Neal | 26 |
Carl M. Kawaja | 25 |
Bradley J. Vogt | 24 |
Martin Romo | 20 |
J. Blair Frank | 18 |
Barry Crosthwaite | 15 |
*As of August 31, 2012. | |
†Until November 30, 2012. |
[End Sidebar]
[Begin Photo Caption]
[photo of Craig Gordon]
Craig Gordon, M.D.
“Most people don’t understand the global power of drugs for rare diseases. There are 7,000 rare diseases and only a fraction have treatments.”
Investment analyst, pharmaceuticals
[End Photo Caption]
[Begin Sidebar]
Companies that have pricing power
Alexion Pharmaceuticals, the fund’s 20th largest holding, specializes in developing treatments for severe, rare diseases that, at most, affect one out of every 50,000 people.
The company’s leading drug so far is Soliris®, which treats a rare type of anemia. Compensating for the small market of 5,000 to 10,000 patients in the U.S., and a similar number in Great Britain, is the fact that there are no other treatments. The drug thus has pricing power because it solves a health problem that no one else has been able to solve. “The drug is curative for a very rare and devastating disease and it has been reimbursed by insurance companies in the U.S., Europe, Australia and Japan,” says investment analyst Craig Gordon, M.D. “Most people don’t understand the global power of drugs for rare diseases. There are 7,000 rare diseases and only a fraction have treatments.” In 2012, Soliris is expected to produce more than $1.1 billion in revenue.
Craig is well-trained for analyzing complex drugs and how they react to patients with rare diseases. After graduating from medical school, he practiced general medicine for three years and then spent two years as a specialist in rheumatology. With a lifelong interest in investing instilled by his father, he decided to go to business school to get his MBA. To pay for it, he worked nights and weekends as an emergency room physician.
He says there are definite advantages for an investment analyst who specializes in pharmaceuticals to have actually practiced medicine. “You understand the mentality of the average physician and the typical patient. You learn how insurance companies think and which procedures and drugs they will likely reimburse, and which stand less of a chance.”
[End Sidebar]
[photo of peaches]
Companies that can attract more business by improving their customer service
“If you look over the past few years beginning in 2007, the housing market has been in the doldrums, yet Home Depot, the nation’s largest home improvement retailer, has been doing relatively well,” says Jessica Spaly, an investment analyst who specializes in retail companies.
The slow housing market has played into the company’s favor, leading more homeowners to consider repairs and home renovations rather than moving to new homes. Even as the housing market improves, it could benefit Home Depot further as contractors and construction firms go there for supplies.
“Home Depot has migrated from a decentralized, large firm to a centralized company that leverages the latest practices in technology and improvements in the supply chain,” says Jessica. “Store associates now have handheld tools that tell them exactly where inventory is located, so they can spend less time looking for items and more time helping customers. Inventory is now mostly ordered centrally using algorithms driven off sales patterns rather than at the store level by employees using their own judgment. This leads to more accurate ordering and, importantly, frees up store associates from ordering products to assisting clients.”
[Begin Photo Caption]
[photo of Anne-Marie Peterson]
Anne-Marie Peterson
“lululemon athletica is an example of a small women’s apparel company that grew to be large through many different market environments.”
Investment analyst, retail
[End Photo Caption]
In Home Depot’s 2011 annual report, Frank Blake, the company’s chief executive officer, wrote that by the end of fiscal 2011 the company had increased the percentage of its employee time allocated to customer service to about 53%, up from 40% four years ago. He said that the company is on track to reach its goal of having 60% of store labor dedicated to helping customers by the end of 2013.
Jessica, who is based in San Francisco, says an important part of her job covering Home Depot is visiting stores to monitor if management’s statements are being followed at the store level. “With the location of Home Depot stores in metropolitan areas throughout the U.S., you can see the company in action anytime you want.”
Small companies can grow to large companies, even in a difficult environment
“lululemon athletica is an example of a small women’s apparel company that grew to be large through many different market environments,” says Anne-Marie Peterson, also an investment analyst in retail companies. lululemon began in Vancouver, British Columbia, as a yoga athletic apparel company in a small shop in 1998. It was created by Dennis “Chip” Wilson in response to increased female participation in sports and in accordance with his belief in yoga as the optimal way to maintain athletic excellence into an advanced age.
The company evolved from simply making yoga clothing to making yoga apparel a fashion statement. “When you create the market, the company can experience powerful growth,” says Anne-Marie. “lululemon has taken boring athletic apparel and made it look appealing and compelling.”
It was a game changer. The company went public in 2007 and stores spread from its birthplace in Canada to the United States. “In the past, yoga apparel was a commodity purchase and today it is a fashion purchase,” says Anne-Marie. “It has moved into the sweet spot of consumer preferences. Today you can wear your trendy yoga pants to the grocery store after your workout and stand out because of the styling.” n
[photo of a wooden bucket of peaches and a ladder under a peach tree]
[Begin Photo Caption]
[photo of Jessica Spaly]
Jessica Spaly
“If you look over the past few years beginning in 2007, the housing market has been in the doldrums, yet Home Depot, the nation’s largest home improvement retailer, has been doing relatively well.”
Investment analyst, retail
[End Photo Caption]
Summary investment portfolio August 31, 2012
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) | ||||
Consumer discretionary | 19.40 | % | ||
Information technology | 18.10 | |||
Health care | 13.30 | |||
Energy | 10.27 | |||
Financials | 7.28 | |||
Other industries | 22.55 | |||
Other securities | .17 | |||
Short-term securities & other assets less liabilities | 8.93 |
[end pie chart]
Largest equity holdings | Percent of net assets | |||
Apple | 4.2 | % | ||
Amazon | 3.3 | |||
Comcast | 2.7 | |||
Gilead Sciences | 2.4 | |||
Home Depot | 2.3 | |||
Oracle | 2.3 | |||
Philip Morris International | 1.7 | |||
EOG Resources | 1.3 | |||
1.2 | ||||
Costco Wholesale | 1.1 |
Percent | ||||||||||||
Value | of net | |||||||||||
Common stocks - 90.90% | Shares | (000 | ) | assets | ||||||||
Consumer discretionary - 19.40% | ||||||||||||
Amazon.com, Inc. (1) | 15,184,600 | $ | 3,769,273 | 3.28 | % | |||||||
Major online retailer of books, CDs, DVDs, toys, apparel, home furnishings and other products. | ||||||||||||
Comcast Corp., Class A | 71,237,678 | 2,388,599 | ||||||||||
Comcast Corp., Class A, special nonvoting shares | 20,525,000 | 674,657 | 2.67 | |||||||||
The largest cable TV provider in the U.S. | ||||||||||||
Home Depot, Inc. | 45,705,200 | 2,593,770 | 2.26 | |||||||||
The world's largest home improvement retailer. | ||||||||||||
News Corp., Class A | 50,379,800 | 1,178,384 | 1.03 | |||||||||
A leading global media conglomerate with businesses ranging from movies and television to operation of satellite TV platforms. | ||||||||||||
DIRECTV (1) | 21,000,000 | 1,093,890 | .95 | |||||||||
Digital television services provider in the United States, Latin America and the Caribbean. | ||||||||||||
NIKE, Inc., Class B | 11,043,600 | 1,075,205 | .94 | |||||||||
The world's leading athletic shoe company. Also operates shoe and sportswear stores. | ||||||||||||
YUM! Brands, Inc. | 12,946,000 | 824,919 | .72 | |||||||||
Quick-service-oriented restaurant company whose brands include Taco Bell, KFC and Pizza Hut. | ||||||||||||
Time Warner Cable Inc. | 8,120,536 | 721,266 | .63 | |||||||||
Major cable television provider operating in the United States. | ||||||||||||
Sands China Ltd. | 146,157,400 | 516,341 | .45 | |||||||||
Owns and operates integrated resorts and casinos in Macao. | ||||||||||||
Virgin Media Inc. (2) | 18,635,400 | 513,778 | .45 | |||||||||
United Kingdom-based provider of television, Internet, mobile phone and fixed-line telephone services. | ||||||||||||
Other securities | 6,912,340 | 6.02 | ||||||||||
22,262,422 | 19.40 | |||||||||||
Information technology - 18.10% | ||||||||||||
Apple Inc. | 7,258,500 | 4,828,645 | 4.21 | |||||||||
Manufacturer of personal computers and various software products, as well as tablets, laptops, media players, browsers and smartphones. | ||||||||||||
Oracle Corp. | 81,808,676 | 2,589,245 | 2.26 | |||||||||
Major supplier of database management software. Also develops business applications and provides consulting and support. | ||||||||||||
Google Inc., Class A (1) | 2,026,736 | 1,388,497 | 1.21 | |||||||||
One of the most frequently used website search engines in the world. | ||||||||||||
Microsoft Corp. | 36,303,900 | 1,118,886 | .98 | |||||||||
A world leader in software and Internet technologies. Its products include the Windows operating system and Office software. | ||||||||||||
Texas Instruments Inc. | 30,402,500 | 882,889 | .77 | |||||||||
Global maker of semiconductors and a leading producer of digital signal processors. | ||||||||||||
Samsung Electronics Co. Ltd. | 663,483 | 721,009 | .63 | |||||||||
Korea's top electronics manufacturer and a global leader in semiconductor production. | ||||||||||||
ASML Holding NV (New York registered) | 9,147,778 | 519,319 | ||||||||||
ASML Holding NV | 2,380,000 | 134,815 | .57 | |||||||||
A leading supplier of lithography equipment used in manufacturing semiconductors. | ||||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 168,046,000 | 467,371 | ||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR) | 11,350,000 | 166,845 | .55 | |||||||||
One of the world's largest semiconductor manufacturers. | ||||||||||||
Avago Technologies Ltd. (2) | 14,517,620 | 530,909 | .46 | |||||||||
Manufacturer of analog interface components and subsystems for communications, industrial and consumer applications. | ||||||||||||
Other securities | 7,427,224 | 6.46 | ||||||||||
20,775,654 | 18.10 | |||||||||||
Health care - 13.30% | ||||||||||||
Gilead Sciences, Inc. (1) (2) | 48,457,166 | 2,795,494 | 2.44 | |||||||||
Develops drugs to treat infectious diseases and cancer. | ||||||||||||
Allergan, Inc. | 13,770,400 | 1,186,045 | 1.03 | |||||||||
Produces eye care, skin care and specialty pharmaceutical products, including Botox. | ||||||||||||
Merck & Co., Inc. | 24,367,178 | 1,049,007 | .91 | |||||||||
Among the world's largest pharmaceutical companies, and a leader in cardiovascular medicine. | ||||||||||||
UnitedHealth Group Inc. | 18,430,000 | 1,000,749 | .87 | |||||||||
Provides managed health care services across the U.S. | ||||||||||||
Alexion Pharmaceuticals, Inc. (1) | 9,250,000 | 991,692 | .86 | |||||||||
Develops drug treatments for cardiovascular, autoimmune and neurologic diseases. | ||||||||||||
Biogen Idec Inc. (1) | 6,035,000 | 884,671 | .77 | |||||||||
A leader in developing therapies to treat multiple sclerosis and cancer. | ||||||||||||
Edwards Lifesciences Corp. (1) (2) | 8,408,109 | 858,552 | .75 | |||||||||
Manufacturer of tissue heart valves and related repair products for the treatment of advanced cardiovascular disease. | ||||||||||||
Intuitive Surgical, Inc. (1) | 1,723,694 | 847,695 | .74 | |||||||||
Manufacturer of robotic-assisted, minimally invasive surgical systems. | ||||||||||||
Amgen Inc. | 8,262,400 | 693,381 | .60 | |||||||||
The world's largest biotechnology company. | ||||||||||||
Regeneron Pharmaceuticals, Inc. (1) | 4,122,000 | 610,262 | .53 | |||||||||
Biotechnology company focused on the treatment of serious medical conditions. | ||||||||||||
Celgene Corp. (1) | 7,590,000 | 546,784 | .48 | |||||||||
A global pharmaceutical company, making drugs to treat cancer and inflammatory diseases. | ||||||||||||
Other securities | 3,801,523 | 3.32 | ||||||||||
15,265,855 | 13.30 | |||||||||||
Energy - 10.27% | ||||||||||||
EOG Resources, Inc. (2) | 13,837,152 | 1,498,564 | 1.31 | |||||||||
An oil and gas exploration and production company with global operations. | ||||||||||||
Suncor Energy Inc. | 31,198,020 | 975,106 | .85 | |||||||||
Explores for, processes and sells oil and natural gas. | ||||||||||||
Apache Corp. | 11,030,000 | 945,822 | .82 | |||||||||
An independent oil and gas exploration and development company with onshore and offshore operations worldwide. | ||||||||||||
Schlumberger Ltd. | 11,365,000 | 822,599 | .72 | |||||||||
A leading provider of services and technology to the petroleum industry. | ||||||||||||
FMC Technologies, Inc. (1) (2) | 15,179,100 | 710,989 | .62 | |||||||||
Engaged in offshore energy production, food processing and airplane loading systems. | ||||||||||||
Noble Energy, Inc. | 7,899,000 | 694,322 | .60 | |||||||||
Specializes in oil and natural gas exploration and development. | ||||||||||||
Canadian Natural Resources, Ltd. | 20,980,000 | 638,286 | .56 | |||||||||
One of Canada's largest oil and natural gas producers. | ||||||||||||
Baker Hughes Inc. | 12,410,000 | 565,896 | .49 | |||||||||
A leading provider of drilling services and products to oil, gas and mining industries around the world. | ||||||||||||
Southwestern Energy Co. (1) | 16,930,000 | 527,031 | .46 | |||||||||
Energy company engaged in the exploration, development and production of natural gas and crude oil. | ||||||||||||
Other securities | 4,403,251 | 3.84 | ||||||||||
11,781,866 | 10.27 | |||||||||||
Financials - 7.28% | ||||||||||||
Aon PLC, Class A (2) | 18,142,995 | 942,710 | .82 | |||||||||
Provider of risk management services, insurance and reinsurance brokerage, and human resource consulting and outsourcing. | ||||||||||||
Wells Fargo & Co. | 25,610,978 | 871,542 | .76 | |||||||||
One of the largest banks in the U.S. | ||||||||||||
Citigroup Inc. | 26,747,500 | 794,668 | .69 | |||||||||
Financial services company engaged in consumer, corporate and investment banking and insurance. | ||||||||||||
Bank of America Corp. | 70,000,000 | 559,300 | .49 | |||||||||
One of the world's largest commercial banks. | ||||||||||||
Other securities | 5,190,057 | 4.52 | ||||||||||
8,358,277 | 7.28 | |||||||||||
Industrials - 6.42% | ||||||||||||
Union Pacific Corp. | 9,863,300 | 1,197,799 | 1.04 | |||||||||
Operates the largest railroad in the U.S.; also delivers freight to Canada and Mexico. | ||||||||||||
CSX Corp. | 31,524,801 | 708,047 | .62 | |||||||||
Operates a major rail system and provides freight transportation across the U.S. | ||||||||||||
Other securities | 5,464,690 | 4.76 | ||||||||||
7,370,536 | 6.42 | |||||||||||
Consumer staples - 5.36% | ||||||||||||
Philip Morris International Inc. | 21,590,000 | 1,927,987 | 1.68 | |||||||||
One of the world's largest international tobacco companies. | ||||||||||||
Costco Wholesale Corp. | 13,368,183 | 1,308,344 | 1.14 | |||||||||
Operates membership warehouse clubs that serve both small businesses and consumers in North America, Asia, the U.K. and Australia. | ||||||||||||
CVS/Caremark Corp. | 19,915,000 | 907,128 | .79 | |||||||||
A major U.S. drugstore chain. | ||||||||||||
Other securities | 2,013,167 | 1.75 | ||||||||||
6,156,626 | 5.36 | |||||||||||
Materials - 4.96% | ||||||||||||
Barrick Gold Corp. | 24,000,000 | 924,480 | .81 | |||||||||
Owns and operates gold mines in North and South America, Australia and Africa. | ||||||||||||
Newmont Mining Corp. | 17,195,891 | 871,488 | .76 | |||||||||
One of the world's largest gold producers, with international gold and mineral mining operations. | ||||||||||||
Dow Chemical Co. | 28,128,700 | 824,452 | .72 | |||||||||
A major producer of plastics, chemicals, herbicides and pesticides. | ||||||||||||
Praxair, Inc. | 5,572,437 | 587,892 | .51 | |||||||||
A major supplier of industrial gases in North and South America. | ||||||||||||
Other securities | 2,485,566 | 2.16 | ||||||||||
5,693,878 | 4.96 | |||||||||||
Telecommunication services - 2.11% | ||||||||||||
Crown Castle International Corp. (1) (2) | 18,177,430 | 1,153,540 | 1.00 | |||||||||
A leading provider of wireless communications and transmission sites. | ||||||||||||
Other securities | 1,261,586 | 1.11 | ||||||||||
2,415,126 | 2.11 | |||||||||||
Utilities - 0.10% | ||||||||||||
Other securities | 116,861 | .10 | ||||||||||
Miscellaneous - 3.60% | ||||||||||||
Other common stocks in initial period of acquisition | 4,135,162 | 3.60 | ||||||||||
Total common stocks (cost: $72,898,721,000) | 104,332,263 | 90.90 | ||||||||||
Preferred stocks - 0.00% | ||||||||||||
Telecommunication services - 0.00% | ||||||||||||
Other securities | 191 | .00 | ||||||||||
Total preferred stocks (cost: $21,000,000) | 191 | .00 | ||||||||||
Warrants - 0.10% | ||||||||||||
Other - 0.02% | ||||||||||||
Other securities | 21,139 | .02 | ||||||||||
Miscellaneous - 0.08% | ||||||||||||
Other warrants in initial period of acquisition | 93,366 | .08 | ||||||||||
Total warrants (cost: $115,941,000) | 114,505 | .10 | ||||||||||
Convertible securities - 0.04% | ||||||||||||
Telecommunication services - 0.04% | ||||||||||||
Other securities | 47,613 | .04 | ||||||||||
Total convertible securities (cost: $65,063,000) | 47,613 | .04 | ||||||||||
Bonds & notes - 0.03% | ||||||||||||
Other - 0.03% | ||||||||||||
Other securities | 32,151 | .03 | ||||||||||
Total bonds & notes (cost: $39,109,000) | 32,151 | .03 | ||||||||||
Principal | ||||||||||||
Short-term securities - 8.99% | amount (000) | |||||||||||
Fannie Mae 0.09%-0.19% due 9/5/2012-3/5/2013 | $ | 2,276,850 | $ | 2,276,171 | 1.98 | |||||||
Freddie Mac 0.10%-0.20% due 9/4/2012-4/26/2013 | 2,214,082 | 2,213,046 | 1.93 | |||||||||
U.S. Treasury Bills 0.10%-0.178% due 9/6/2012-4/4/2013 | 2,178,500 | 2,178,082 | 1.90 | |||||||||
Federal Home Loan Bank 0.105%-0.20% due 9/5/2012-8/28/2013 | 1,883,800 | 1,883,227 | 1.64 | |||||||||
Other securities | 1,772,063 | 1.54 | ||||||||||
Total short-term securities (cost: $10,321,958,000) | 10,322,589 | 8.99 | ||||||||||
Total investment securities (cost: $83,461,792,000) | 114,849,312 | 100.06 | ||||||||||
Other assets less liabilities | (75,677 | ) | (.06 | ) | ||||||||
Net assets | $ | 114,773,635 | 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, including those that were valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities was $27,657,000, which represented .02% of the net assets of the fund. Some of these securities (with an aggregate value of $1,165,756,000, which represented 1.02% of the net assets of the fund) were acquired in transactions exempt from registration under Rule 144A or section 4(2) of the Securities Act of 1933 and 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 $27,657,000, an aggregate cost of $62,523,000, and that represented .02% of the net assets of the fund) were acquired from 7/7/2000 to 6/21/2011 through private placement transactions exempt from registration under the Securities Act of 1933, which may subject them to legal or contractual restrictions on resale. |
Investments in affiliates | ||||||
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, 2012, appear below. |
Beginning shares | Additions | Reductions | Ending shares | Dividend income (000) | Value of affiliates at 8/31/2012 (000) | |||||||||||||||||||
Gilead Sciences, Inc. (1) | 27,070,000 | 21,864,400 | 477,234 | 48,457,166 | $ | - | $ | 2,795,494 | ||||||||||||||||
EOG Resources, Inc. | 14,755,837 | 846,315 | 1,765,000 | 13,837,152 | 9,100 | 1,498,564 | ||||||||||||||||||
Crown Castle International Corp. (1) | 13,329,250 | 4,848,180 | - | 18,177,430 | - | 1,153,540 | ||||||||||||||||||
Aon PLC, Class A | 5,793,000 | 12,749,995 | 400,000 | 18,142,995 | 9,659 | 942,710 | ||||||||||||||||||
Edwards Lifesciences Corp. (1) | 7,210,000 | 1,293,109 | 95,000 | 8,408,109 | - | 858,552 | ||||||||||||||||||
FMC Technologies, Inc. (1) | 12,000,000 | 5,054,100 | 1,875,000 | 15,179,100 | - | 710,989 | ||||||||||||||||||
Avago Technologies Ltd. | 12,261,220 | 5,591,400 | 3,335,000 | 14,517,620 | 5,749 | 530,909 | ||||||||||||||||||
Virgin Media Inc. | 19,765,400 | - | 1,130,000 | 18,635,400 | 3,117 | 513,778 | ||||||||||||||||||
Celanese Corp., Series A | 8,784,500 | 1,375,500 | - | 10,160,000 | 2,591 | 388,722 | ||||||||||||||||||
Illumina, Inc. (1) | 5,425,000 | 1,821,900 | - | 7,246,900 | - | 304,950 | ||||||||||||||||||
BioMarin Pharmaceutical Inc. (1) (3) | 5,393,600 | 1,118,900 | - | 6,512,500 | - | 243,177 | ||||||||||||||||||
Flextronics International Ltd. (1) | 40,080,464 | - | 6,040,000 | 34,040,464 | - | 229,092 | ||||||||||||||||||
KBR, Inc. | 6,575,289 | 826,000 | - | 7,401,289 | 1,398 | 200,501 | ||||||||||||||||||
Allergan, Inc.(4) | 15,955,400 | 550,000 | 2,735,000 | 13,770,400 | 3,013 | - | ||||||||||||||||||
Denbury Resources Inc. (1) (4) | 19,515,000 | 300,000 | 6,612,500 | 13,202,500 | - | - | ||||||||||||||||||
DIRECTV (1) (4) | 40,270,000 | 500,000 | 19,770,000 | 21,000,000 | - | - | ||||||||||||||||||
First Solar, Inc. (1) (4) | 5,568,900 | - | 4,228,900 | 1,340,000 | - | - | ||||||||||||||||||
Human Genome Sciences, Inc. (4) | 10,297,900 | 1,177,900 | 11,475,800 | - | - | - | ||||||||||||||||||
Kerry Group PLC, Class A(4) | 8,865,824 | - | 1,000,000 | 7,865,824 | 3,786 | - | ||||||||||||||||||
KLA-Tencor Corp.(4) | 10,940,000 | - | 5,940,000 | 5,000,000 | 11,579 | - | ||||||||||||||||||
Linear Technology Corp.(4) | 15,160,000 | - | 8,330,000 | 6,830,000 | 11,446 | - | ||||||||||||||||||
Nexen Inc.(4) | 10,435,000 | 3,500,000 | 8,950,000 | 4,985,000 | 1,990 | - | ||||||||||||||||||
Nexen Inc. (CAD denominated) (4) | 16,383,474 | 32,309 | 16,415,783 | - | 1,225 | - | ||||||||||||||||||
Southwest Airlines Co.(4) | 36,889,000 | 2,000,000 | 16,889,000 | 22,000,000 | 959 | - | ||||||||||||||||||
Southwestern Energy Co. (1) (4) | 21,925,000 | 2,755,000 | 7,750,000 | 16,930,000 | - | - | ||||||||||||||||||
Stericycle, Inc. (1) (4) | 4,239,000 | - | 1,329,000 | 2,910,000 | - | - | ||||||||||||||||||
$ | 65,612 | $ | 10,370,978 |
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) This security was an unaffiliated issuer in its initial period of acquisition at 8/31/2011; it was not publicly disclosed. |
(4) Unaffiliated issuer at 8/31/2012. |
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 abbreviations |
ADR = American Depositary Receipts |
CAD = Canadian dollars |
See Notes to Financial Statements |
Financial statements
Statement of assets and liabilities | ||||||||
at August 31, 2012 | (dollars in thousands) | |||||||
Assets: | ||||||||
Investment securities, at value: | ||||||||
Unaffiliated issuers (cost: $75,809,954) | $ | 104,478,334 | ||||||
Affiliated issuers (cost: $7,651,838) | 10,370,978 | $ | 114,849,312 | |||||
Cash denominated in currencies other than U.S. dollars | ||||||||
(cost: $2,093) | 2,093 | |||||||
Cash | 76 | |||||||
Receivables for: | ||||||||
Sales of investments | 617,906 | |||||||
Sales of fund's shares | 94,409 | |||||||
Dividends and interest | 140,405 | 852,720 | ||||||
115,704,201 | ||||||||
Liabilities: | ||||||||
Payables for: | ||||||||
Purchases of investments | 172,825 | |||||||
Repurchases of fund's shares | 649,770 | |||||||
Investment advisory services | 27,489 | |||||||
Services provided by related parties | 75,336 | |||||||
Directors' deferred compensation | 4,078 | |||||||
Other | 1,068 | 930,566 | ||||||
Net assets at August 31, 2012 | $ | 114,773,635 | ||||||
Net assets consist of: | ||||||||
Capital paid in on shares of capital stock | $ | 86,344,732 | ||||||
Undistributed net investment income | 471,519 | |||||||
Accumulated net realized loss | (3,429,617 | ) | ||||||
Net unrealized appreciation | 31,387,001 | |||||||
Net assets at August 31, 2012 | $ | 114,773,635 |
(dollars and shares in thousands, except per-share amounts) | ||||||||||||
Total authorized capital stock - 7,500,000 shares, $.001 par value (3,519,890 total shares outstanding) | ||||||||||||
Net assets | Shares outstanding | Net asset value per share | ||||||||||
Class A | $ | 55,441,104 | 1,690,172 | $ | 32.80 | |||||||
Class B | 1,503,288 | 47,444 | 31.69 | |||||||||
Class C | 5,741,116 | 182,616 | 31.44 | |||||||||
Class F-1 | 11,323,039 | 347,250 | 32.61 | |||||||||
Class F-2 | 2,854,605 | 86,952 | 32.83 | |||||||||
Class 529-A | 3,821,891 | 117,268 | 32.59 | |||||||||
Class 529-B | 236,954 | 7,482 | 31.67 | |||||||||
Class 529-C | 1,007,827 | 31,891 | 31.60 | |||||||||
Class 529-E | 181,855 | 5,624 | 32.33 | |||||||||
Class 529-F-1 | 124,844 | 3,833 | 32.57 | |||||||||
Class R-1 | 496,689 | 15,657 | 31.72 | |||||||||
Class R-2 | 2,182,466 | 68,388 | 31.91 | |||||||||
Class R-3 | 7,916,211 | 245,173 | 32.29 | |||||||||
Class R-4 | 8,093,144 | 248,528 | 32.56 | |||||||||
Class R-5 | 6,311,696 | 192,337 | 32.82 | |||||||||
Class R-6 | 7,536,906 | 229,275 | 32.87 | |||||||||
See Notes to Financial Statements |
Statement of operations | ||||||||
for the year ended August 31, 2012 | (dollars in thousands) | |||||||
Investment income: | ||||||||
Income: | ||||||||
Dividends (net of non-U.S. taxes of $44,841; | ||||||||
also includes $65,612 from affiliates) | $ | 1,643,645 | ||||||
Interest | 46,983 | $ | 1,690,628 | |||||
Fees and expenses*: | ||||||||
Investment advisory services | 345,218 | |||||||
Distribution services | 354,753 | |||||||
Transfer agent services | 169,929 | |||||||
Administrative services | 35,530 | |||||||
Reports to shareholders | 5,938 | |||||||
Registration statement and prospectus | 1,467 | |||||||
Directors' compensation | 497 | |||||||
Auditing and legal | 191 | |||||||
Custodian | 3,447 | |||||||
Other | 5,368 | 922,338 | ||||||
Net investment income | 768,290 | |||||||
Net realized gain and unrealized appreciation | ||||||||
on investments and currency: | ||||||||
Net realized gain (loss) on: | ||||||||
Investments (includes $563,560 net loss from affiliates) | 4,496,523 | |||||||
Currency transactions | (2,617 | ) | 4,493,906 | |||||
Net unrealized appreciation (depreciation) on: | ||||||||
Investments | 9,614,499 | |||||||
Currency translations | (958 | ) | 9,613,541 | |||||
Net realized gain and unrealized appreciation | ||||||||
on investments and currency | 14,107,447 | |||||||
Net increase in net assets resulting | ||||||||
from operations | $ | 14,875,737 | ||||||
(*) 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 | ||||||||
2012 | 2011 | |||||||
Operations: | ||||||||
Net investment income | $ | 768,290 | $ | 978,141 | ||||
Net realized gain on investments and currency transactions | 4,493,906 | 4,791,234 | ||||||
Net unrealized appreciation on investments and currency translations | 9,613,541 | 16,787,784 | ||||||
Net increase in net assets resulting from operations | 14,875,737 | 22,557,159 | ||||||
Dividends paid to shareholders from net investment income | (884,496 | ) | (1,243,930 | ) | ||||
Net capital share transactions | (36,704,124 | ) | (24,045,350 | ) | ||||
Total decrease in net assets | (22,712,883 | ) | (2,732,121 | ) | ||||
Net assets: | ||||||||
Beginning of year | 137,486,518 | 140,218,639 | ||||||
End of year (including undistributed | ||||||||
net investment income: $471,519 and $479,904, respectively) | $ | 114,773,635 | $ | 137,486,518 | ||||
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. Shareholders approved a proposal to reorganize the fund from a Maryland corporation to a Delaware statutory trust. The reorganization may be completed in 2012 or 2013; however, the fund reserves the right to delay the implementation.
The fund has 16 share classes consisting of five retail share classes (Classes A, B and C, as well as two F share classes, F-1 and F-2), five 529 college savings plan share classes (Classes 529-A, 529-B, 529-C, 529-E and 529-F-1) and six retirement plan share classes (Classes R-1, R-2, R-3, R-4, R-5 and R-6). The 529 college savings plan share classes can be used to save for college education. The retirement plan share classes are generally offered only through eligible employer-sponsored retirement plans. The fund’s share classes are further 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 supplied by one or more pricing vendors 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 |
Capital Research and Management Company (“CRMC”), the fund’s investment adviser, values the fund’s investments at fair value as defined by accounting principles generally accepted in the United States of America. The net asset value of each share class of the fund is generally determined as of approximately 4:00 p.m. New York time each day the New York Stock Exchange is open.
Methods and inputs – The fund’s investment adviser uses the following methods and inputs to establish the fair value of the fund’s 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 |
When the fund’s 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 ask prices that are reasonably and timely available (or bid prices, if ask 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 fund’s 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 fund’s investment adviser are fair valued as determined in good faith under fair value guidelines adopted by authority of the fund’s board of directors as further described below. The investment adviser follows fair valuation guidelines, consistent with U.S. Securities and Exchange Commission rules and guidance, to consider relevant principles and factors when making fair value determinations. The investment adviser considers relevant indications of value that are reasonably and timely available to it in determining the fair value to be assigned to a particular security, such as 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. In addition, the closing prices of equity securities that trade in markets outside U.S. time zones may be adjusted to reflect significant events that occur after the close of local trading but before the net asset value of each share class of the fund is determined. 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.
Processes and structure – The fund’s board of directors has delegated authority to the fund’s investment adviser to make fair value determinations, subject to board oversight. The investment adviser has established a Joint Fair Valuation Committee (the “Fair Valuation Committee”) to administer, implement and oversee the fair valuation process, and to make fair value decisions. The Fair Valuation Committee regularly reviews its own fair value decisions, as well as decisions made under its standing instructions to the investment adviser’s valuation teams. The Fair Valuation Committee reviews changes in fair value measurements from period to period and may, as deemed appropriate, update the fair valuation guidelines to better reflect the results of back testing and address new or evolving issues. The Fair Valuation Committee reports any changes to the fair valuation guidelines to the board of directors with supplemental information to support the changes. The fund’s board and audit committee also regularly review reports that describe fair value determinations and methods.
The fund’s investment adviser has also established a Fixed-Income Pricing Review Group to administer and oversee the fixed-income valuation process, including the use of fixed-income pricing vendors. This group regularly reviews pricing vendor information and market data. Pricing decisions, processes and controls over security valuation are also subject to additional internal reviews, including an annual control self-evaluation program facilitated by the investment adviser’s compliance group.
Classifications – The fund’s investment adviser classifies the fund’s 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 investment adviser’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, 2012 (dollars in thousands):
Investment securities | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
Assets: | |||||||||||||||||
Common stocks: | |||||||||||||||||
Consumer discretionary | $ | 22,262,422 | - | $ | - | $ | 22,262,422 | ||||||||||
Information technology | 20,775,654 | - | - | 20,775,654 | |||||||||||||
Health care | 15,265,855 | - | - | 15,265,855 | |||||||||||||
Energy | 11,754,400 | - | 27,466 | 11,781,866 | |||||||||||||
Financials | 8,358,277 | - | - | 8,358,277 | |||||||||||||
Industrials | 7,370,536 | - | - | 7,370,536 | |||||||||||||
Consumer staples | 6,156,626 | - | - | 6,156,626 | |||||||||||||
Materials | 5,693,878 | - | - | 5,693,878 | |||||||||||||
Telecommunication services | 2,415,126 | - | - | 2,415,126 | |||||||||||||
Utilities | 116,861 | - | - | 116,861 | |||||||||||||
Miscellaneous | 4,135,162 | - | - | 4,135,162 | |||||||||||||
Preferred stocks | - | - | 191 | 191 | |||||||||||||
Warrants | 114,505 | - | - | 114,505 | |||||||||||||
Convertible securities | - | 47,613 | - | 47,613 | |||||||||||||
Bonds & notes | - | 32,151 | - | 32,151 | |||||||||||||
Short-term securities | - | 10,322,589 | - | 10,322,589 | |||||||||||||
Total | $ | 104,419,302 | $ | 10,402,353 | $ | 27,657 | $ | 114,849,312 |
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 or instability 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. The risks of investing outside the U.S. may be heightened in connection with investments in emerging and developing countries.
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, 2012, 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 2008, by state tax authorities for tax years before 2007 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; and net capital losses. 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, 2012, the fund reclassified $108,064,000 from accumulated net realized loss to undistributed net investment income and $243,000 from undistributed net investment income to capital paid in on shares of capital stock to align financial reporting with tax reporting.
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.
As of August 31, 2012, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities were as follows:
(dollars in thousands) | |||||
Undistributed ordinary income | $ | 480,778 | |||
Capital loss carryforward expiring 2018* | (2,526,373 | ) | |||
Post-October capital loss deferral† | (414,628 | ) | |||
Gross unrealized appreciation on investment securities | 35,031,945 | ||||
Gross unrealized depreciation on investment securities | (4,137,962 | ) | |||
Net unrealized appreciation on investment securities | 30,893,983 | ||||
Cost of investment securities | 83,955,329 | ||||
*Reflects the utilization of capital loss carryforward of $4,693,138,000. 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. | |||||
†This deferral is considered incurred in the subsequent year. |
Tax-basis distributions paid to shareholders from ordinary income were as follows (dollars in thousands):
Year ended August 31 | ||||||||
Share class | 2012 | 2011 | ||||||
Class A | $ | 405,819 | $ | 531,599 | ||||
Class B | - | - | ||||||
Class C | - | 6,580 | ||||||
Class F-1 | 87,419 | 132,266 | ||||||
Class F-2 | 33,344 | 49,446 | ||||||
Class 529-A | 25,030 | 27,288 | ||||||
Class 529-B | - | - | ||||||
Class 529-C | - | 1,061 | ||||||
Class 529-E | 767 | 933 | ||||||
Class 529-F-1 | 1,045 | 1,099 | ||||||
Class R-1 | - | 1,236 | ||||||
Class R-2 | - | 4,448 | ||||||
Class R-3 | 34,926 | 74,452 | ||||||
Class R-4 | 85,157 | 159,063 | ||||||
Class R-5 | 96,087 | 162,757 | ||||||
Class R-6 | 114,902 | 91,702 | ||||||
Total | $ | 884,496 | $ | 1,243,930 |
6. | Fees and transactions with related parties |
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, 2012, the investment advisory services fee was $345,218,000, which was equivalent to an annualized rate of 0.279% 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 Class F-2, R-5 and R-6 shares. 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 Class A and 529-A shares, 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, 2012, there were no unreimbursed expenses subject to reimbursement for Class A or 529-A shares.
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 shareholder services agreement with AFS under which the fund compensates AFS for providing transfer agent services to each of the fund’s share classes. These services include recordkeeping, shareholder communications and transaction processing. In addition, the fund reimburses AFS for amounts paid to third parties for performing transfer agent services on behalf of fund shareholders.
During the period September 1, 2011, through December 31, 2011, only Class A and B shares were subject to the shareholder services agreement with AFS. During this period, AFS and other third parties were compensated for providing transfer agent services to Class C, F, 529 and R shares through the fees paid by the fund to CRMC under the fund’s administrative services agreement with CRMC as described in the administrative services section below; CRMC paid for any transfer agent services expenses in excess of 0.10% of the respective average daily net assets of each of such share classes.
Effective January 1, 2012, the shareholder services agreement with AFS was modified to include Class C, F, 529 and R shares and payment for transfer agent services for such classes under the administrative services agreement terminated. Under this structure, transfer agent services expenses for some classes may exceed 0.10% of average daily net assets, resulting in an increase in expenses paid by some share classes.
For the year ended August 31, 2012, the total transfer agent services fee paid under these agreements was $169,929,000, of which $150,175,000 was paid by the fund to AFS and $19,754,000 was paid by the fund to CRMC through its administrative services agreement with the fund. Amounts paid to CRMC by the fund were then paid by CRMC to AFS and other third parties.
Administrative services – The fund has an administrative services agreement with CRMC under which the fund compensates CRMC for providing administrative services to Class A, C, F, 529 and R shares. These services include, but are not limited to, coordinating, monitoring, assisting and overseeing third parties that provide services to fund shareholders.
During the period September 1, 2011, through December 31, 2011, the agreement applied only to Class C, F, 529 and R shares. The agreement also required CRMC to arrange for the provision of transfer agent services for such share classes, which paid CRMC annual fees up to 0.15% (0.10% for Class R-5 and 0.05% for Class R-6) of their respective average daily net assets. During this period, up to 0.05% of these fees were used to compensate CRMC for performing administrative services; all other amounts paid under this agreement were used to compensate AFS and other third parties for transfer agent services.
Effective January 1, 2012, the administrative services agreement with CRMC was modified to include Class A shares. Under the revised agreement, Class A shares pay an annual fee of 0.01% and Class C, F, 529 and R shares pay an annual fee of 0.05% of their respective average daily net assets to CRMC for administrative services. Fees for transfer agent services are no longer included as part of the administrative services fee paid by the fund to CRMC.
For the year ended August 31, 2012, total fees paid to CRMC for performing administrative services were $35,530,000.
529 plan services – Each 529 share class is subject to service fees to compensate 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. The fee is included in other expenses on the accompanying financial statements. The Commonwealth of Virginia is not considered a related party.
Class-specific expenses under the agreements described above for the year ended August 31, 2012, were as follows (dollars in thousands):
Share class | Distribution services | Transfer agent services | Administrative services | 529 plan services | ||||||||||||
Class A | $ | 131,225 | $ | 98,946 | $ | 3,720 | Not applicable | |||||||||
Class B | 18,064 | 3,133 | Not applicable | Not applicable | ||||||||||||
Class C | 60,167 | 10,068 | 2,313 | Not applicable | ||||||||||||
Class F-1 | 29,304 | 10,638 | 5,821 | Not applicable | ||||||||||||
Class F-2 | Not applicable | 3,159 | 1,509 | Not applicable | ||||||||||||
Class 529-A | 7,567 | 4,418 | 1,636 | $ | 3,543 | |||||||||||
Class 529-B | 2,666 | 378 | 122 | 267 | ||||||||||||
Class 529-C | 9,565 | 1,285 | 442 | 959 | ||||||||||||
Class 529-E | 857 | 156 | 82 | 171 | ||||||||||||
Class 529-F-1 | - | 141 | 52 | 114 | ||||||||||||
Class R-1 | 5,217 | 555 | 255 | Not applicable | ||||||||||||
Class R-2 | 16,638 | 7,230 | 1,107 | Not applicable | ||||||||||||
Class R-3 | 45,354 | 13,629 | 4,435 | Not applicable | ||||||||||||
Class R-4 | 28,129 | 11,835 | 5,320 | Not applicable | ||||||||||||
Class R-5 | Not applicable | 4,324 | 4,108 | Not applicable | ||||||||||||
Class R-6 | Not applicable | 34 | 4,608 | Not applicable | ||||||||||||
Total class-specific expenses | $ | 354,753 | $ | 169,929 | $ | 35,530 | $ | 5,054 |
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 $497,000, shown on the accompanying financial statements, includes $420,000 in current fees (either paid in cash or deferred) and a net increase of $77,000 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 | Repurchases(*) | Net (decrease) increase | |||||||||||||||||||||||||||||
Share class | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | ||||||||||||||||||||||||
Year ended August 31, 2012 | ||||||||||||||||||||||||||||||||
Class A | $ | 4,056,002 | 132,752 | $ | 396,549 | 13,933 | $ | (12,449,147 | ) | (409,483 | ) | $ | (7,996,596 | ) | (262,798 | ) | ||||||||||||||||
Class B | 18,334 | 621 | - | - | (941,726 | ) | (32,105 | ) | (923,392 | ) | (31,484 | ) | ||||||||||||||||||||
Class C | 344,694 | 11,701 | - | - | (1,826,411 | ) | (62,463 | ) | (1,481,717 | ) | (50,762 | ) | ||||||||||||||||||||
Class F-1 | 1,569,854 | 51,387 | 85,810 | 3,033 | (4,685,153 | ) | (155,576 | ) | (3,029,489 | ) | (101,156 | ) | ||||||||||||||||||||
Class F-2 | 468,120 | 15,316 | 29,280 | 1,030 | (1,705,637 | ) | (56,440 | ) | (1,208,237 | ) | (40,094 | ) | ||||||||||||||||||||
Class 529-A | 437,279 | 14,429 | 25,020 | 884 | (413,594 | ) | (13,610 | ) | 48,705 | 1,703 | ||||||||||||||||||||||
Class 529-B | 3,392 | 115 | - | - | (105,825 | ) | (3,606 | ) | (102,433 | ) | (3,491 | ) | ||||||||||||||||||||
Class 529-C | 111,493 | 3,782 | - | - | (148,414 | ) | (5,033 | ) | (36,921 | ) | (1,251 | ) | ||||||||||||||||||||
Class 529-E | 19,359 | 646 | 767 | 27 | (23,332 | ) | (776 | ) | (3,206 | ) | (103 | ) | ||||||||||||||||||||
Class 529-F-1 | 25,480 | 843 | 1,045 | 37 | (21,798 | ) | (716 | ) | 4,727 | 164 | ||||||||||||||||||||||
Class R-1 | 60,061 | 2,037 | - | - | (182,869 | ) | (6,219 | ) | (122,808 | ) | (4,182 | ) | ||||||||||||||||||||
Class R-2 | 451,015 | 15,168 | - | - | (861,004 | ) | (29,009 | ) | (409,989 | ) | (13,841 | ) | ||||||||||||||||||||
Class R-3 | 1,182,793 | 39,448 | 34,831 | 1,241 | (5,075,759 | ) | (170,102 | ) | (3,858,135 | ) | (129,413 | ) | ||||||||||||||||||||
Class R-4 | 1,511,447 | 50,226 | 85,127 | 3,013 | (9,641,535 | ) | (319,950 | ) | (8,044,961 | ) | (266,711 | ) | ||||||||||||||||||||
Class R-5 | 1,456,386 | 48,366 | 95,857 | 3,374 | (7,494,604 | ) | (248,104 | ) | (5,942,361 | ) | (196,364 | ) | ||||||||||||||||||||
Class R-6 | 2,664,486 | 88,730 | 114,760 | 4,034 | (6,376,557 | ) | (206,751 | ) | (3,597,311 | ) | (113,987 | ) | ||||||||||||||||||||
Total net increase (decrease) | $ | 14,380,195 | 475,567 | $ | 869,046 | 30,606 | $ | (51,953,365 | ) | (1,719,943 | ) | $ | (36,704,124 | ) | (1,213,770 | ) | ||||||||||||||||
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 | ) | ||||||||||||||||
8. | Investment transactions |
The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $17,874,390,000 and $53,743,306,000, respectively, during the year ended August 31, 2012.
Financial highlights
Income (loss) from investment operations(1) | 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(2) (3) | 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(3) | Ratio of net income (loss) to average net assets(3) | ||||||||||||||||||||||||||||||||||||||||
Class A: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | $ | 29.23 | $ | .20 | $ | 3.59 | $ | 3.79 | $ | (.22 | ) | $ | - | $ | (.22 | ) | $ | 32.80 | 13.07 | % | $ | 55,441 | .71 | % | .71 | % | .66 | % | ||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class B: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 28.23 | (.03 | ) | 3.49 | 3.46 | - | - | - | 31.69 | 12.26 | 1,503 | 1.46 | 1.46 | (.10 | ) | |||||||||||||||||||||||||||||||||||||
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 | _(4) | .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 | |||||||||||||||||||||||||||||||||
Class C: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 28.02 | (.04 | ) | 3.46 | 3.42 | - | - | - | 31.44 | 12.21 | 5,741 | 1.49 | 1.49 | (.13 | ) | |||||||||||||||||||||||||||||||||||||
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 | _(4) | .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 | |||||||||||||||||||||||||||||||||
Class F-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 29.04 | .21 | 3.58 | 3.79 | (.22 | ) | - | (.22 | ) | 32.61 | 13.15 | 11,323 | .68 | .68 | .69 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class F-2: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 29.25 | .28 | 3.60 | 3.88 | (.30 | ) | - | (.30 | ) | 32.83 | 13.42 | 2,855 | .44 | .44 | .93 | |||||||||||||||||||||||||||||||||||||
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(5) | 30.43 | .03 | .15 | .18 | - | - | - | 30.61 | .59 | 114 | .04 | .03 | .09 | |||||||||||||||||||||||||||||||||||||||
Class 529-A: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 29.06 | .18 | 3.57 | 3.75 | (.22 | ) | - | (.22 | ) | 32.59 | 13.00 | 3,822 | .77 | .77 | .60 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class 529-B: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 28.25 | (.06 | ) | 3.48 | 3.42 | - | - | - | 31.67 | 12.11 | 237 | 1.57 | 1.57 | (.21 | ) | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class 529-C: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 28.18 | (.06 | ) | 3.48 | 3.42 | - | - | - | 31.60 | 12.14 | 1,008 | 1.56 | 1.56 | (.19 | ) | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class 529-E: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 28.82 | .10 | 3.54 | 3.64 | (.13 | ) | - | (.13 | ) | 32.33 | 12.71 | 182 | 1.03 | 1.03 | .35 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class 529-F-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | $ | 29.04 | $ | .25 | $ | 3.56 | $ | 3.81 | $ | (.28 | ) | $ | - | $ | (.28 | ) | $ | 32.57 | 13.27 | % | $ | 125 | .56 | % | .56 | % | .81 | % | ||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class R-1: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 28.26 | (.02 | ) | 3.48 | 3.46 | - | - | - | 31.72 | 12.24 | 497 | 1.44 | 1.44 | (.07 | ) | |||||||||||||||||||||||||||||||||||||
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 | _(4) | .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 | |||||||||||||||||||||||||||||||||
Class R-2: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 28.42 | (.01 | ) | 3.50 | 3.49 | - | - | - | 31.91 | 12.28 | 2,182 | 1.41 | 1.41 | (.04 | ) | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class R-3: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 28.74 | .11 | 3.55 | 3.66 | (.11 | ) | - | (.11 | ) | 32.29 | 12.78 | 7,916 | .98 | .98 | .38 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class R-4: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 28.99 | .20 | 3.57 | 3.77 | (.20 | ) | - | (.20 | ) | 32.56 | 13.10 | 8,093 | .69 | .69 | .66 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class R-5: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 29.24 | .29 | 3.60 | 3.89 | (.31 | ) | - | (.31 | ) | 32.82 | 13.48 | 6,312 | .39 | .39 | .97 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class R-6: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 8/31/2012 | 29.30 | .31 | 3.60 | 3.91 | (.34 | ) | - | (.34 | ) | 32.87 | 13.52 | 7,537 | .34 | .34 | 1.02 | |||||||||||||||||||||||||||||||||||||
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(5) | 21.68 | .09 | 3.20 | 3.29 | - | - | - | 24.97 | 15.17 | 2,134 | .14 | .14 | .38 |
Year ended August 31 | ||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
Portfolio turnover rate for all share classes | 18 | % | 34 | % | 33 | % | 38 | % | 32 | % |
(1)Based on average shares outstanding. | |||||||||||||
(2)Total returns exclude any applicable sales charges, including contingent deferred sales charges. | |||||||||||||
(3)This column reflects the impact, if any, of certain waivers from CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services. | |||||||||||||
(4)Amount less than $.01. | |||||||||||||
(5)Based on operations for the period shown and, accordingly, is not representative of a full year. | |||||||||||||
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, 2012, 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, 2012, 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, 2012, 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 8, 2012
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, 2012, through August 31, 2012).
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 3/1/2012 | Ending account value 8/31/2012 | Expenses paid during period* | Annualized expense ratio | |||||||||||||
Class A -- actual return | $ | 1,000.00 | $ | 1,020.21 | $ | 3.61 | .71 | % | ||||||||
Class A -- assumed 5% return | 1,000.00 | 1,021.57 | 3.61 | .71 | ||||||||||||
Class B -- actual return | 1,000.00 | 1,016.68 | 7.35 | 1.45 | ||||||||||||
Class B -- assumed 5% return | 1,000.00 | 1,017.85 | 7.35 | 1.45 | ||||||||||||
Class C -- actual return | 1,000.00 | 1,016.49 | 7.60 | 1.50 | ||||||||||||
Class C -- assumed 5% return | 1,000.00 | 1,017.60 | 7.61 | 1.50 | ||||||||||||
Class F-1 -- actual return | 1,000.00 | 1,020.66 | 3.40 | .67 | ||||||||||||
Class F-1 -- assumed 5% return | 1,000.00 | 1,021.77 | 3.40 | .67 | ||||||||||||
Class F-2 -- actual return | 1,000.00 | 1,021.80 | 2.19 | .43 | ||||||||||||
Class F-2 -- assumed 5% return | 1,000.00 | 1,022.97 | 2.19 | .43 | ||||||||||||
Class 529-A -- actual return | 1,000.00 | 1,020.03 | 3.96 | .78 | ||||||||||||
Class 529-A -- assumed 5% return | 1,000.00 | 1,021.22 | 3.96 | .78 | ||||||||||||
Class 529-B -- actual return | 1,000.00 | 1,016.04 | 7.96 | 1.57 | ||||||||||||
Class 529-B -- assumed 5% return | 1,000.00 | 1,017.24 | 7.96 | 1.57 | ||||||||||||
Class 529-C -- actual return | 1,000.00 | 1,015.75 | 7.96 | 1.57 | ||||||||||||
Class 529-C -- assumed 5% return | 1,000.00 | 1,017.24 | 7.96 | 1.57 | ||||||||||||
Class 529-E -- actual return | 1,000.00 | 1,018.59 | 5.23 | 1.03 | ||||||||||||
Class 529-E -- assumed 5% return | 1,000.00 | 1,019.96 | 5.23 | 1.03 | ||||||||||||
Class 529-F-1 -- actual return | 1,000.00 | 1,021.00 | 2.84 | .56 | ||||||||||||
Class 529-F-1 -- assumed 5% return | 1,000.00 | 1,022.32 | 2.85 | .56 | ||||||||||||
Class R-1 -- actual return | 1,000.00 | 1,016.34 | 7.30 | 1.44 | ||||||||||||
Class R-1 -- assumed 5% return | 1,000.00 | 1,017.90 | 7.30 | 1.44 | ||||||||||||
Class R-2 -- actual return | 1,000.00 | 1,016.56 | 7.10 | 1.40 | ||||||||||||
Class R-2 -- assumed 5% return | 1,000.00 | 1,018.10 | 7.10 | 1.40 | ||||||||||||
Class R-3 -- actual return | 1,000.00 | 1,018.94 | 5.02 | .99 | ||||||||||||
Class R-3 -- assumed 5% return | 1,000.00 | 1,020.16 | 5.03 | .99 | ||||||||||||
Class R-4 -- actual return | 1,000.00 | 1,020.37 | 3.45 | .68 | ||||||||||||
Class R-4 -- assumed 5% return | 1,000.00 | 1,021.72 | 3.46 | .68 | ||||||||||||
Class R-5 -- actual return | 1,000.00 | 1,022.11 | 1.93 | .38 | ||||||||||||
Class R-5 -- assumed 5% return | 1,000.00 | 1,023.23 | 1.93 | .38 | ||||||||||||
Class R-6 -- actual return | 1,000.00 | 1,022.09 | 1.73 | .34 | ||||||||||||
Class R-6 -- assumed 5% return | 1,000.00 | 1,023.43 | 1.73 | .34 | ||||||||||||
*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 366 (to reflect the one-half year period). |
Tax information
unaudited
We are required to advise you of the federal tax status of certain distributions received by shareholders during the fiscal year. The fund hereby designates the following amounts for the fund’s fiscal year ended August 31, 2012:
Qualified dividend income | 100 | % | ||
Corporate dividends received deduction | 100 | % | ||
U.S. government income that may be exempt from state taxation | $ | 14,064,000 |
Individual shareholders should refer to their Form 1099 or other tax information, which will be mailed in January 2013, to determine the calendar year amounts to be included on their 2012 tax returns. Shareholders should consult their tax advisers.
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, 2013. 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, 69 | 2008 | Retired; former Vice Chairman, Deutsche Bank Alex. |
Brown | ||
Joseph C. Berenato, 66 | 2003 | Former Chairman and CEO, Ducommun Incorporated |
Chairman of the Board | (aerospace components manufacturer) | |
(Independent and | ||
Non-Executive) | ||
Louise H. Bryson, 68 | 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, 71 | 2005 | Chair, First Security Management (private investment) |
Mary Anne Dolan, 65 | 2010 | Founder and President, MAD Ink (communications |
company) | ||
Robert A. Fox, 75 | 1970 | Managing General Partner, Fox Investments LP; |
corporate director | ||
John G. Freund, 58 | 2010 | Founder and Managing Director, Skyline Ventures |
(venture capital investor in health care companies) | ||
Leonade D. Jones, 64 | 1993 | Retired; former Treasurer, The Washington Post |
Company | ||
William H. Kling, 70 | 2010 | President Emeritus, American Public Media |
John G. McDonald, 75 | 1976 | Stanford Investors Professor, Graduate School of |
Business, Stanford University | ||
Christopher E. Stone, 56 | 2010 | President, Open Society Foundations; former |
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, 69 | 3 | Amphenol Corporation; Nautilus, Inc.; |
Obagi Medical Products, Inc. | ||
Joseph C. Berenato, 66 | 6 | None |
Chairman of the Board | ||
(Independent and | ||
Non-Executive) | ||
Louise H. Bryson, 68 | 7 | None |
Robert J. Denison, 71 | 6 | None |
Mary Anne Dolan, 65 | 10 | None |
Robert A. Fox, 75 | 9 | None |
John G. Freund, 58 | 3 | Mako Surgical Corporation; XenoPort, Inc. |
Leonade D. Jones, 64 | 9 | None |
William H. Kling, 70 | 10 | None |
John G. McDonald, 75 | 13 | iStar Financial, Inc.; Plum Creek Timber Co.; |
QuinStreet, Inc.; Scholastic Corporation | ||
Christopher E. Stone, 56 | 6 | None |
“Interested” directors5,7 | ||
Year first | ||
elected a | ||
director or | Principal occupation(s) during past five years | |
Name, age and | officer of | and positions held with affiliated entities or the |
position with fund | the fund2 | principal underwriter of the fund |
James F. Rothenberg, 66 | 1997 | Chairman of the Board, Capital Research and |
Vice Chairman of the Board | Management Company; Director and Non-Executive | |
Chairman, American Funds Distributors, Inc.;6 | ||
Director and Non-Executive Chair, The Capital Group | ||
Companies, Inc.6 | ||
Donald D. O’Neal, 52 | 1995 | Senior Vice President — Capital Research Global |
President | Investors, Capital Research and Management | |
Company; Director, Capital Research and | ||
Management Company | ||
“Interested” directors5,7 | ||
Number of | ||
portfolios in | ||
fund complex3 | ||
Name, age and | overseen | |
position with fund | by director | Other directorships4 held by director |
James F. Rothenberg, 66 | 2 | None |
Vice Chairman of the Board | ||
Donald D. O’Neal, 52 | 21 | 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 800/421-4225 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 |
Michael T. Kerr, 53 | 1998 | Senior Vice President — Capital World Investors, |
Executive Vice President | Capital Research and Management Company; | |
Director, Capital Research and Management | ||
Company | ||
Paul F. Roye, 58 | 2012 | Senior Vice President — Fund Business Management |
Executive Vice President | Group, Capital Research and Management Company; | |
Director, American Funds Service Company;6 former | ||
Director, Division of Investment Management, United | ||
States Securities and Exchange Commission | ||
Gordon Crawford, 65 | 1992 | Senior Vice President — Capital Research Global |
Senior Vice President | Investors, Capital Research and Management | |
Company | ||
Gregg E. Ireland, 62 | 2008 | Senior Vice President — Capital World Investors, |
Senior Vice President | Capital Research and Management Company | |
Bradley J. Vogt, 47 | 1999 | Director, Capital Research and Management |
Senior Vice President | Company; Chairman, Capital Research Company;6 | |
Senior Vice President — Capital Research Global | ||
Investors, Capital Research Company;6 Director, | ||
American Funds Distributors, Inc.6 | ||
Brad A. Barrett, 34 | 2010 | Vice President — Capital Research Global Investors, |
Vice President | Capital Research Company6 | |
Walter R. Burkley, 46 | 2010 | Senior Vice President and Senior Counsel — Fund |
Vice President | Business Management Group, Capital Research and | |
Management Company | ||
Barry S. Crosthwaite, 54 | 2010 | Senior Vice President — Capital Research Global |
Vice President | Investors, Capital Research Company;6 Director, | |
American Funds Service Company6 | ||
Martin Romo, 45 | 2010 | Director, Capital Research and Management |
Vice President | Company; Senior Vice President — Capital World | |
Investors, Capital Research Company;6 Director and | ||
Co-President, Capital Research Company6 | ||
Patrick F. Quan, 54 | 1986–1998 | Vice President — Fund Business Management |
Secretary | 2000 | Group, Capital Research and Management Company |
Jeffrey P. Regal, 41 | 2006 | Vice President — Fund Business Management |
Treasurer | Group, Capital Research and Management Company | |
Julie E. Lawton, 39 | 2010 | Assistant Vice President — Fund Business |
Assistant Secretary | Management Group, Capital Research and | |
Management Company | ||
Dori Laskin, 61 | 2011 | Vice President — Fund Business Management |
Assistant Treasurer | Group, Capital Research and Management Company | |
Neal F. Wellons, 41 | 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. Capital Research and Management Company also manages American Funds Insurance Series,® which is composed of 19 funds and serves as the underlying investment vehicle for certain variable insurance contracts; American Funds Target Date Retirement Series,® which is composed of 10 funds and is available through tax-deferred retirement plans and IRAs; American Funds Portfolio Series,SM which is composed of eight funds; and American Funds College Target Date Series,SM which is composed of seven funds. |
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 trustee or 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 investment objectives, risks, charges and expenses. This and other important information is contained in the fund 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 800/421-4225 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, 2012, 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, 2012, 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 25 years of investment experience, including 21 years at our company, reflecting a career commitment to our long-term approach.1
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 91% of 10-year periods and 96% of 20-year periods. Our fixed-income funds have beaten their Lipper indexes in 60% of 10-year periods and 67% of 20-year periods.2 Our fund management fees have been among the lowest in the industry.3
1As of 12/31/11. |
2Based on Class A share results for periods through 12/31/11. Periods covered are the shorter of the fund’s lifetime or since the comparable Lipper index inception date. |
3Based on management fees for the 20-year period ended 12/31/11 |
versus comparable Lipper categories, excluding funds of funds. |
American Funds span a range of investment objectives
•Growth funds |
AMCAP Fund® |
EuroPacific Growth Fund® |
The Growth Fund of America® |
The New Economy Fund® |
New Perspective Fund® |
New World Fund® |
SMALLCAP World Fund® |
•Growth-and-income funds |
American Mutual Fund® |
Capital World Growth and Income Fund® |
Fundamental InvestorsSM |
International Growth and Income FundSM |
The Investment Company of America® |
Washington Mutual Investors FundSM |
•Equity-income funds |
Capital Income Builder® |
The Income Fund of America® |
•Balanced funds |
American Balanced Fund® |
American Funds Global Balanced FundSM |
•Bond funds |
American Funds Mortgage Fund® |
American High-Income Trust® |
The Bond Fund of America® |
Capital World Bond Fund® |
Intermediate Bond Fund of America® |
Short-Term Bond Fund of America® |
U.S. Government Securities Fund® |
•Tax-exempt bond funds |
American Funds Short-Term Tax-Exempt Bond Fund® |
American High-Income Municipal Bond Fund® |
Limited Term Tax-Exempt Bond Fund of America® |
The Tax-Exempt Bond Fund of America® |
State-specific tax-exempt funds |
American Funds Tax-Exempt Fund of New York® |
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 Portfolio SeriesSM |
American Funds Global Growth PortfolioSM |
American Funds Growth PortfolioSM |
American Funds Growth and Income PortfolioSM |
American Funds Balanced PortfolioSM |
American Funds Income PortfolioSM |
American Funds Tax-Advantaged Income PortfolioSM |
American Funds Preservation PortfolioSM |
American Funds Tax-Exempt Preservation PortfolioSM |
•American Funds Target Date Retirement Series® |
•American Funds College Target Date SeriesSM |
The Capital Group Companies
American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
Lit. No. MFGEAR-905-1012P
Litho in USA AGD/Q/8057-S33526
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 Christopher E. Stone, 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: | ||||
2011 | $87,000 | |||
2012 | $94,000 | |||
b) Audit-Related Fees: | ||||
2011 | $61,000 | |||
2012 | $45,000 | |||
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 issued by the American Institute of Certified Public Accountants. | ||||
c) Tax Fees: | ||||
2011 | $17,000 | |||
2012 | $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: | ||||
2011 | None | |||
2012 | 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: | ||||
2011 | $984,000 | |||
2012 | $1,151,000 | |||
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 issued by the American Institute of Certified Public Accountants. | ||||
c) Tax Fees: | ||||
2011 | $17,000 | |||
2012 | $59,000 | |||
The tax fees consist of consulting services relating to the Registrant’s investments. | ||||
d) All Other Fees: | ||||
2011 | $2,000 | |||
2012 | $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 $1,671,000 for fiscal year 2011 and $1,777,000 for fiscal year 2012. 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, 2012
Common stocks — 90.90% | Shares | Value (000) | ||||||
CONSUMER DISCRETIONARY — 19.40% | ||||||||
Amazon.com, Inc.1 | 15,184,600 | $ | 3,769,273 | |||||
Comcast Corp., Class A | 71,237,678 | 2,388,599 | ||||||
Comcast Corp., Class A, special nonvoting shares | 20,525,000 | 674,657 | ||||||
Home Depot, Inc. | 45,705,200 | 2,593,770 | ||||||
News Corp., Class A | 50,379,800 | 1,178,384 | ||||||
DIRECTV1 | 21,000,000 | 1,093,890 | ||||||
NIKE, Inc., Class B | 11,043,600 | 1,075,205 | ||||||
YUM! Brands, Inc. | 12,946,000 | 824,919 | ||||||
Time Warner Cable Inc. | 8,120,536 | 721,266 | ||||||
Sands China Ltd. | 146,157,400 | 516,341 | ||||||
Virgin Media Inc.2 | 18,635,400 | 513,778 | ||||||
Johnson Controls, Inc. | 17,739,900 | 482,703 | ||||||
Las Vegas Sands Corp. | 10,942,000 | 463,831 | ||||||
Liberty Media Corp., Class A1 | 4,391,300 | 457,925 | ||||||
General Motors Co.1 | 20,891,632 | 446,036 | ||||||
Time Warner Inc. | 9,300,000 | 386,415 | ||||||
Nikon Corp. | 14,000,000 | 384,801 | ||||||
Naspers Ltd., Class N | 6,270,000 | 364,873 | ||||||
Expedia, Inc. | 4,769,329 | 244,953 | ||||||
AutoNation, Inc.1 | 6,000,000 | 241,200 | ||||||
Carnival Corp., units | 6,820,000 | 236,518 | ||||||
Marriott International, Inc., Class A | 6,143,059 | 231,470 | ||||||
lululemon athletica inc.1 | 3,332,100 | 217,220 | ||||||
Toyota Motor Corp. | 5,205,000 | 205,754 | ||||||
Lowe’s Companies, Inc. | 6,400,000 | 182,272 | ||||||
British Sky Broadcasting Group PLC | 13,525,000 | 163,430 | ||||||
Industria de Diseño Textil, SA | 1,465,400 | 162,956 | ||||||
Mattel, Inc. | 4,400,000 | 154,616 | ||||||
priceline.com Inc.1 | 242,000 | 146,306 | ||||||
D.R. Horton, Inc. | 7,580,000 | 143,944 | ||||||
Darden Restaurants, Inc. | 2,500,000 | 129,875 | ||||||
Shaw Communications Inc., Class B, nonvoting | 6,123,900 | 125,295 | ||||||
Daimler AG | 2,475,474 | 121,432 | ||||||
Toll Corp.1 | 3,700,000 | 121,064 | ||||||
Chipotle Mexican Grill, Inc.1 | 417,000 | 120,363 | ||||||
Starbucks Corp. | 2,000,000 | 99,220 | ||||||
Groupon, Inc., Class A1 | 23,279,128 | 96,608 | ||||||
Harley-Davidson, Inc. | 2,028,500 | 85,116 | ||||||
Bayerische Motoren Werke AG | 1,080,000 | 78,327 | ||||||
Volkswagen AG, nonvoting preferred | 425,000 | 75,053 | ||||||
Isuzu Motors Ltd. | 14,200,000 | 72,365 | ||||||
Kia Motors Corp. | 950,000 | 62,043 | ||||||
Burberry Group PLC | 2,725,000 | 58,543 | ||||||
Li & Fung Ltd. | 34,030,000 | 55,284 | ||||||
Nordstrom, Inc. | 940,000 | 54,360 | ||||||
Wynn Resorts, Ltd. | 520,000 | 53,648 | ||||||
Swatch Group Ltd, non-registered shares | 120,000 | 49,121 | ||||||
Genting Singapore PLC | 37,000,000 | 40,517 | ||||||
BorgWarner Inc.1 | 350,000 | 24,073 | ||||||
Harman International Industries, Inc. | 500,000 | 23,015 | ||||||
Hyundai Mobis Co., Ltd. | 74,000 | 20,055 | ||||||
Tiffany & Co. | 290,000 | 17,965 | ||||||
Ctrip.com International, Ltd. (ADR)1 | 730,000 | 11,775 | ||||||
22,262,422 | ||||||||
INFORMATION TECHNOLOGY — 18.10% | ||||||||
Apple Inc. | 7,258,500 | 4,828,645 | ||||||
Oracle Corp. | 81,808,676 | 2,589,245 | ||||||
Google Inc., Class A1 | 2,026,736 | 1,388,497 | ||||||
Microsoft Corp. | 36,303,900 | 1,118,886 | ||||||
Texas Instruments Inc. | 30,402,500 | 882,889 | ||||||
Samsung Electronics Co. Ltd. | 663,483 | 721,009 | ||||||
ASML Holding NV (New York registered) | 9,147,778 | 519,319 | ||||||
ASML Holding NV | 2,380,000 | 134,815 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 168,046,000 | 467,371 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR) | 11,350,000 | 166,845 | ||||||
Avago Technologies Ltd.2 | 14,517,620 | 530,909 | ||||||
Visa Inc., Class A | 3,925,000 | 503,381 | ||||||
Accenture PLC, Class A | 7,750,000 | 477,400 | ||||||
Yahoo! Inc.1 | 31,564,143 | 462,415 | ||||||
EMC Corp.1 | 16,465,000 | 432,865 | ||||||
Baidu, Inc., Class A (ADR)1 | 3,565,000 | 397,284 | ||||||
Altera Corp. | 8,000,000 | 298,640 | ||||||
Broadcom Corp., Class A | 8,203,000 | 291,453 | ||||||
Automatic Data Processing, Inc. | 4,985,000 | 289,529 | ||||||
Motorola Solutions, Inc. | 5,900,000 | 281,194 | ||||||
Rackspace Hosting, Inc.1 | 4,470,000 | 268,111 | ||||||
KLA-Tencor Corp. | 5,000,000 | 256,550 | ||||||
International Business Machines Corp. | 1,250,000 | 243,562 | ||||||
Flextronics International Ltd.1,2 | 34,040,464 | 229,092 | ||||||
Linear Technology Corp. | 6,830,000 | 225,561 | ||||||
Intel Corp. | 9,000,000 | 223,470 | ||||||
Arm Holdings PLC | 22,383,000 | 204,004 | ||||||
SINA Corp.1 | 3,075,000 | 172,507 | ||||||
TE Connectivity Ltd. | 4,623,000 | 162,591 | ||||||
Maxim Integrated Products, Inc. | 5,902,120 | 160,184 | ||||||
Murata Manufacturing Co., Ltd. | 3,200,000 | 157,762 | ||||||
Mail.ru Group Ltd. (GDR) | 4,100,000 | 134,357 | ||||||
Mail.ru Group Ltd. (GDR)1,3 | 350,000 | 11,469 | ||||||
Corning Inc. | 10,680,000 | 128,053 | ||||||
NetApp, Inc.1 | 3,645,144 | 125,830 | ||||||
AOL Inc.1 | 3,648,255 | 122,837 | ||||||
MasterCard Inc., Class A | 265,000 | 112,068 | ||||||
Quanta Computer Inc. | 42,254,258 | 109,053 | ||||||
National Instruments Corp. | 4,105,010 | 105,745 | ||||||
Electronic Arts Inc.1 | 7,481,500 | 99,728 | ||||||
Dolby Laboratories, Inc., Class A1 | 2,650,000 | 87,927 | ||||||
SAP AG | 1,285,000 | 84,709 | ||||||
FLIR Systems, Inc. | 3,500,000 | 69,300 | ||||||
QUALCOMM Inc. | 1,105,000 | 67,913 | ||||||
Xilinx, Inc. | 1,500,000 | 50,865 | ||||||
Nokia Corp. (ADR) | 13,089,474 | 36,912 | ||||||
Nokia Corp. | 1,000,000 | 2,843 | ||||||
FactSet Research Systems, Inc. | 430,000 | 39,676 | ||||||
Amphenol Corp. | 600,000 | 36,522 | ||||||
Comverse Technology, Inc.1 | 6,011,792 | 36,071 | ||||||
Intuit Inc. | 600,000 | 35,124 | ||||||
Gemalto NV | 440,000 | 34,872 | ||||||
Rohm Co., Ltd. | 1,005,000 | 32,796 | ||||||
MediaTek Inc. | 3,000,000 | 32,052 | ||||||
Nintendo Co., Ltd. | 250,000 | 27,971 | ||||||
First Solar, Inc.1 | 1,340,000 | 26,787 | ||||||
Infineon Technologies AG | 3,575,000 | 24,709 | ||||||
Compuware Corp.1 | 1,000,000 | 10,000 | ||||||
Analog Devices, Inc. | 87,559 | 3,480 | ||||||
20,775,654 | ||||||||
HEALTH CARE — 13.30% | ||||||||
Gilead Sciences, Inc.1,2 | 48,457,166 | 2,795,494 | ||||||
Allergan, Inc. | 13,770,400 | 1,186,045 | ||||||
Merck & Co., Inc. | 24,367,178 | 1,049,007 | ||||||
UnitedHealth Group Inc. | 18,430,000 | 1,000,749 | ||||||
Alexion Pharmaceuticals, Inc.1 | 9,250,000 | 991,692 | ||||||
Biogen Idec Inc.1 | 6,035,000 | 884,671 | ||||||
Edwards Lifesciences Corp.1,2 | 8,408,109 | 858,552 | ||||||
Intuitive Surgical, Inc.1 | 1,723,694 | 847,695 | ||||||
Amgen Inc. | 8,262,400 | 693,381 | ||||||
Regeneron Pharmaceuticals, Inc.1 | 4,122,000 | 610,262 | ||||||
Celgene Corp.1 | 7,590,000 | 546,784 | ||||||
Express Scripts Holding Co.1 | 6,439,420 | 403,236 | ||||||
St. Jude Medical, Inc. | 10,465,000 | 395,158 | ||||||
Stryker Corp. | 7,202,616 | 383,611 | ||||||
Baxter International Inc. | 6,164,100 | 361,709 | ||||||
Illumina, Inc.1,2 | 7,246,900 | 304,950 | ||||||
Bristol-Myers Squibb Co. | 8,400,000 | 277,284 | ||||||
BioMarin Pharmaceutical Inc.1,2 | 6,512,500 | 243,177 | ||||||
Vertex Pharmaceuticals Inc.1 | 4,340,800 | 231,495 | ||||||
Abbott Laboratories | 2,500,000 | 163,850 | ||||||
Boston Scientific Corp.1 | 29,995,000 | 161,973 | ||||||
Hospira, Inc.1 | 4,387,840 | 147,344 | ||||||
Medtronic, Inc. | 3,545,000 | 144,140 | ||||||
Grifols, SA, Class A1 | 4,487,000 | 126,420 | ||||||
Zimmer Holdings, Inc. | 1,780,000 | 109,968 | ||||||
Hologic, Inc.1 | 4,595,000 | 90,200 | ||||||
Novo Nordisk A/S, Class B | 526,431 | 82,908 | ||||||
Thermo Fisher Scientific Inc. | 1,439,300 | 82,544 | ||||||
Aetna Inc. | 1,081,028 | 41,522 | ||||||
Cardinal Health, Inc. | 1,000,000 | 39,550 | ||||||
Dendreon Corp.1 | 2,335,000 | 10,484 | ||||||
15,265,855 | ||||||||
ENERGY — 10.27% | ||||||||
EOG Resources, Inc.2 | 13,837,152 | 1,498,564 | ||||||
Suncor Energy Inc. | 31,198,020 | 975,106 | ||||||
Apache Corp. | 11,030,000 | 945,822 | ||||||
Schlumberger Ltd. | 11,365,000 | 822,599 | ||||||
FMC Technologies, Inc.1,2 | 15,179,100 | 710,989 | ||||||
Noble Energy, Inc. | 7,899,000 | 694,322 | ||||||
Canadian Natural Resources, Ltd. | 20,980,000 | 638,286 | ||||||
Baker Hughes Inc. | 12,410,000 | 565,896 | ||||||
Southwestern Energy Co.1 | 16,930,000 | 527,031 | ||||||
Pioneer Natural Resources Co. | 4,885,000 | 475,604 | ||||||
Concho Resources Inc.1 | 4,287,506 | 384,761 | ||||||
Devon Energy Corp. | 5,959,900 | 344,661 | ||||||
CONSOL Energy Inc. | 9,715,213 | 293,399 | ||||||
Technip SA | 2,670,000 | 281,226 | ||||||
Pacific Rubiales Energy Corp. | 10,421,000 | 254,777 | ||||||
Cimarex Energy Co. | 4,275,000 | 244,573 | ||||||
Cobalt International Energy, Inc.1 | 10,466,200 | 237,687 | ||||||
Chevron Corp. | 2,115,000 | 237,218 | ||||||
Denbury Resources Inc.1 | 13,202,500 | 204,507 | ||||||
Core Laboratories NV | 1,500,000 | 183,285 | ||||||
Royal Dutch Shell PLC, Class B (ADR) | 2,520,000 | 181,919 | ||||||
Murphy Oil Corp. | 3,456,000 | 177,396 | ||||||
Petróleo Brasileiro SA – Petrobras, ordinary nominative (ADR) | 3,589,200 | 75,876 | ||||||
BP PLC | 12,470,000 | 87,389 | ||||||
BP PLC (ADR) | 1,138,700 | 47,894 | ||||||
Occidental Petroleum Corp. | 1,500,000 | 127,515 | ||||||
Nexen Inc. | 4,985,000 | 125,672 | ||||||
Helmerich & Payne, Inc. | 2,310,000 | 105,428 | ||||||
Woodside Petroleum Ltd. | 2,340,000 | 82,923 | ||||||
Tenaris SA (ADR) | 1,145,000 | 47,758 | ||||||
Diamond Offshore Drilling, Inc. | 680,000 | 45,574 | ||||||
Talisman Energy Inc. | 3,250,000 | 45,305 | ||||||
BG Group PLC | 1,975,000 | 40,392 | ||||||
Laricina Energy Ltd.1,4,5 | 950,000 | 27,466 | ||||||
Range Resources Corp. | 360,000 | 23,468 | ||||||
Oceaneering International, Inc. | 258,800 | 13,856 | ||||||
OJSC Gazprom (ADR) | 592,000 | 5,722 | ||||||
11,781,866 | ||||||||
FINANCIALS — 7.28% | ||||||||
Aon PLC, Class A2 | 18,142,995 | 942,710 | ||||||
Wells Fargo & Co. | 25,610,978 | 871,542 | ||||||
Citigroup Inc. | 26,747,500 | 794,668 | ||||||
Bank of America Corp. | 70,000,000 | 559,300 | ||||||
AIA Group Ltd. | 131,625,000 | 452,273 | ||||||
Marsh & McLennan Companies, Inc. | 12,047,171 | 411,652 | ||||||
ACE Ltd. | 4,446,100 | 327,811 | ||||||
American Express Co. | 5,380,000 | 313,654 | ||||||
State Street Corp. | 6,268,163 | 260,756 | ||||||
American Tower Corp. | 3,615,000 | 254,496 | ||||||
Goldman Sachs Group, Inc. | 2,329,696 | 246,296 | ||||||
Agricultural Bank of China, Class H | 663,184,000 | 244,549 | ||||||
Fifth Third Bancorp | 15,000,000 | 227,100 | ||||||
Berkshire Hathaway Inc., Class A1 | 1,685 | 213,253 | ||||||
Charles Schwab Corp. | 15,300,000 | 206,397 | ||||||
Onex Corp. | 5,200,000 | 204,466 | ||||||
ICICI Bank Ltd. (ADR) | 4,965,000 | 161,511 | ||||||
ICICI Bank Ltd. | 1,750,000 | 28,382 | ||||||
Morgan Stanley | 10,000,000 | 150,000 | ||||||
Industrial and Commercial Bank of China Ltd., Class H | 263,820,000 | 142,864 | ||||||
XL Group PLC | 5,835,000 | 134,905 | ||||||
JPMorgan Chase & Co. | 3,371,712 | 125,225 | ||||||
AMP Ltd. | 22,673,816 | 104,478 | ||||||
Toronto-Dominion Bank | 1,255,000 | 102,666 | ||||||
Bank of New York Mellon Corp. | 3,875,000 | 87,343 | ||||||
HDFC Bank Ltd. (ADR) | 2,480,000 | 83,278 | ||||||
PNC Financial Services Group, Inc. | 1,159,000 | 72,043 | ||||||
BOK Financial Corp. | 1,250,000 | 71,963 | ||||||
Deutsche Bank AG | 2,000,000 | 71,129 | ||||||
UBS AG | 6,274,666 | 70,193 | ||||||
Popular, Inc.1 | 4,080,000 | 64,627 | ||||||
Willis Group Holdings PLC | 1,710,000 | 63,817 | ||||||
Moody’s Corp. | 1,399,500 | 55,420 | ||||||
Genworth Financial, Inc., Class A1 | 7,647,700 | 40,456 | ||||||
City National Corp. | 774,000 | 39,745 | ||||||
First Republic Bank | 1,110,000 | 36,286 | ||||||
Bank of Nova Scotia | 630,000 | 33,393 | ||||||
Regions Financial Corp. | 4,485,000 | 31,216 | ||||||
Zions Bancorporation | 1,005,000 | 19,346 | ||||||
New York Community Bancorp, Inc. | 1,290,000 | 17,105 | ||||||
Weyerhaeuser Co. | 422,321 | 10,520 | ||||||
Credit Suisse Group AG | 468,000 | 9,039 | ||||||
WMI Holdings Corp.1 | 841,863 | 404 | ||||||
8,358,277 | ||||||||
INDUSTRIALS — 6.42% | ||||||||
Union Pacific Corp. | 9,863,300 | 1,197,799 | ||||||
CSX Corp. | 31,524,801 | 708,047 | ||||||
United Parcel Service, Inc., Class B | 5,980,000 | 441,384 | ||||||
Boeing Co. | 5,830,400 | 416,291 | ||||||
Cummins Inc. | 3,995,000 | 387,955 | ||||||
General Dynamics Corp. | 5,884,600 | 385,500 | ||||||
Norfolk Southern Corp. | 5,136,700 | 372,205 | ||||||
Precision Castparts Corp. | 2,015,200 | 324,608 | ||||||
Stericycle, Inc.1 | 2,910,000 | 266,323 | ||||||
United Continental Holdings, Inc.1 | 12,954,000 | 239,001 | ||||||
KBR, Inc.2 | 7,401,289 | 200,501 | ||||||
Southwest Airlines Co. | 22,000,000 | 196,680 | ||||||
Ryanair Holdings PLC (ADR)1 | 6,285,000 | 195,086 | ||||||
MTU Aero Engines Holding AG | 2,330,000 | 177,804 | ||||||
United Technologies Corp. | 2,065,000 | 164,890 | ||||||
European Aeronautic Defence and Space Co. EADS NV | 4,214,844 | 160,739 | ||||||
Fastenal Co. | 3,535,000 | 152,323 | ||||||
SGS SA | 75,000 | 151,304 | ||||||
Iron Mountain Inc. | 4,601,510 | 150,930 | ||||||
Lockheed Martin Corp. | 1,500,000 | 136,710 | ||||||
Deere & Co. | 1,795,000 | 134,823 | ||||||
Ingersoll-Rand PLC | 2,300,000 | 107,548 | ||||||
Aggreko PLC | 2,634,998 | 98,742 | ||||||
General Electric Co. | 4,250,000 | 88,018 | ||||||
Schneider Electric SA | 1,325,000 | 83,679 | ||||||
PACCAR Inc | 2,000,000 | 79,820 | ||||||
Atlas Copco AB, Class A | 3,000,000 | 67,138 | ||||||
Delta Air Lines, Inc.1 | 6,390,000 | 55,274 | ||||||
Bureau Veritas SA | 564,010 | 52,035 | ||||||
Globaltrans Investment PLC (GDR)3 | 2,300,000 | 43,240 | ||||||
Globaltrans Investment PLC (GDR) | 124,642 | 2,343 | ||||||
Meggitt PLC | 6,255,183 | 39,252 | ||||||
Honeywell International Inc. | 600,000 | 35,070 | ||||||
KONE Oyj, Class B | 540,000 | 33,044 | ||||||
Chart Industries, Inc.1 | 350,000 | 24,430 | ||||||
7,370,536 | ||||||||
CONSUMER STAPLES — 5.36% | ||||||||
Philip Morris International Inc. | 21,590,000 | 1,927,987 | ||||||
Costco Wholesale Corp. | 13,368,183 | 1,308,344 | ||||||
CVS/Caremark Corp. | 19,915,000 | 907,128 | ||||||
Kerry Group PLC, Class A | 7,865,824 | 376,848 | ||||||
Estée Lauder Companies Inc., Class A | 4,018,000 | 240,879 | ||||||
Diageo PLC | 8,500,000 | 232,819 | ||||||
Whole Foods Market, Inc. | 2,096,600 | 202,846 | ||||||
Green Mountain Coffee Roasters, Inc.1 | 6,623,023 | 161,006 | ||||||
L’Oréal SA, non-registered shares | 1,010,000 | 124,167 | ||||||
PepsiCo, Inc. | 1,680,000 | 121,682 | ||||||
Molson Coors Brewing Co., Class B | 2,690,000 | 119,813 | ||||||
Procter & Gamble Co. | 1,250,000 | 83,988 | ||||||
Avon Products, Inc. | 5,362,808 | 82,855 | ||||||
British American Tobacco PLC | 1,300,000 | 68,150 | ||||||
Colgate-Palmolive Co. | 500,000 | 53,155 | ||||||
Coca-Cola Co. | 1,140,400 | 42,651 | ||||||
Nestlé SA | 600,000 | 37,300 | ||||||
AMOREPACIFIC Corp. | 34,666 | 35,716 | ||||||
Danone SA | 470,000 | 29,292 | ||||||
6,156,626 | ||||||||
MATERIALS — 4.96% | ||||||||
Barrick Gold Corp. | 24,000,000 | 924,480 | ||||||
Newmont Mining Corp. | 17,195,891 | 871,488 | ||||||
Dow Chemical Co. | 28,128,700 | 824,452 | ||||||
Praxair, Inc. | 5,572,437 | 587,892 | ||||||
LyondellBasell Industries NV, Class A | 9,586,241 | 468,192 | ||||||
Syngenta AG | 1,290,000 | 434,954 | ||||||
Celanese Corp., Series A2 | 10,160,000 | 388,722 | ||||||
CRH PLC | 11,240,960 | 198,298 | ||||||
Sigma-Aldrich Corp. | 2,395,000 | 170,117 | ||||||
Potash Corp. of Saskatchewan Inc. | 3,970,000 | 163,048 | ||||||
Cliffs Natural Resources Inc. | 3,850,200 | 137,991 | ||||||
Nitto Denko Corp. | 2,000,000 | 92,343 | ||||||
Steel Dynamics, Inc. | 5,208,000 | 63,642 | ||||||
Alcoa Inc. | 6,510,000 | 55,726 | ||||||
FMC Corp. | 1,000,000 | 54,320 | ||||||
Nucor Corp. | 1,300,000 | 48,945 | ||||||
ArcelorMittal | 2,850,000 | 42,497 | ||||||
United States Steel Corp. | 1,982,200 | 38,554 | ||||||
Ecolab Inc. | 500,000 | 32,015 | ||||||
Kuraray Co., Ltd. | 2,290,000 | 26,411 | ||||||
Akzo Nobel NV | 412,000 | 23,744 | ||||||
Glencore International PLC | 3,768,280 | 23,039 | ||||||
Huntsman Corp. | 1,600,000 | 23,008 | ||||||
Sino-Forest Corp.1,5 | 2,820,000 | — | ||||||
5,693,878 | ||||||||
TELECOMMUNICATION SERVICES — 2.11% | ||||||||
Crown Castle International Corp.1,2 | 18,177,430 | 1,153,540 | ||||||
Sprint Nextel Corp., Series 11 | 99,144,000 | 480,848 | ||||||
SOFTBANK CORP. | 8,800,000 | 358,541 | ||||||
América Móvil, SAB de CV, Series L (ADR) | 7,880,000 | 201,649 | ||||||
MetroPCS Communications, Inc.1 | 17,290,305 | 168,235 | ||||||
Millicom International Cellular SA (SDR) | 359,923 | 30,980 | ||||||
Leap Wireless International, Inc.1 | 3,900,000 | 21,333 | ||||||
Broadview Networks Holdings, Inc., Class A1,4,5 | 31,812 | — | ||||||
2,415,126 | ||||||||
UTILITIES — 0.10% | ||||||||
Power Grid Corp. of India Ltd. | 22,100,000 | 47,458 | ||||||
RRI Energy, Inc.1 | 16,045,000 | 40,594 | ||||||
NRG Energy, Inc. | 1,350,000 | 28,809 | ||||||
116,861 | ||||||||
MISCELLANEOUS — 3.60% | ||||||||
Other common stocks in initial period of acquisition | 4,135,162 | |||||||
Total common stocks (cost: $72,898,721,000) | 104,332,263 | |||||||
Value | ||||||||
Preferred stocks — 0.00% | Shares | (000 | ) | |||||
TELECOMMUNICATION SERVICES — 0.00% | ||||||||
Broadview Networks Holdings, Inc., Series B1,4,5 | 1,272 | $ | 191 | |||||
Total preferred stocks (cost: $21,000,000) | 191 | |||||||
Warrants — 0.10% | ||||||||
CONSUMER DISCRETIONARY — 0.01% | ||||||||
General Motors Co., Series A, warrants, expire 20161 | 534,593 | 6,693 | ||||||
General Motors Co., Series B, warrants, expire 20191 | 534,593 | 4,042 | ||||||
10,735 | ||||||||
FINANCIALS — 0.01% | ||||||||
Citigroup Inc., Class A, warrants, expire 20191 | 25,500,000 | 10,404 | ||||||
MISCELLANEOUS — 0.08% | ||||||||
Other warrants in initial period of acquisition | 93,366 | |||||||
Total warrants (cost: $115,941,000) | 114,505 | |||||||
Principal amount | ||||||||
Convertible securities — 0.04% | (000 | ) | ||||||
TELECOMMUNICATION SERVICES — 0.04% | ||||||||
Clearwire Corp. 8.25% convertible notes 20403 | $ | 65,000 | 47,613 | |||||
Total convertible securities (cost: $65,063,000) | 47,613 | |||||||
Bonds & notes — 0.03% | ||||||||
TELECOMMUNICATION SERVICES — 0.03% | ||||||||
LightSquared, Term Loan B, 12.00% 20146,7,8,9 | 31,780 | 21,878 | ||||||
Cricket Communications, Inc. 7.75% 2016 | 1,250 | 1,325 | ||||||
Cricket Communications, Inc. 7.75% 2020 | 4,375 | 4,266 | ||||||
27,469 | ||||||||
CONSUMER DISCRETIONARY — 0.00% | ||||||||
MGM Resorts International 13.00% 2013 | 4,125 | 4,682 | ||||||
Total bonds & notes (cost: $39,109,000) | 32,151 | |||||||
Short-term securities — 8.99% | ||||||||
Fannie Mae 0.09%–0.19% due 9/5/2012–3/5/2013 | 2,276,850 | 2,276,171 | ||||||
Freddie Mac 0.10%–0.20% due 9/4/2012–4/26/2013 | 2,214,082 | 2,213,046 | ||||||
U.S. Treasury Bills 0.10%–0.178% due 9/6/2012–4/4/2013 | 2,178,500 | 2,178,082 | ||||||
Federal Home Loan Bank 0.105%–0.20% due 9/5/2012–8/28/2013 | 1,883,800 | 1,883,227 | ||||||
Federal Farm Credit Banks 0.14%–0.22% due 9/7/2012–7/5/2013 | 380,000 | 379,805 | ||||||
Straight-A Funding LLC 0.17%–0.18% due 9/4–10/10/20123 | 207,821 | 207,791 | ||||||
Wells Fargo & Co. 0.15%–0.18% due 9/18–12/4/2012 | 141,800 | 141,740 | ||||||
Variable Funding Capital Company LLC 0.20% due 10/15/20123 | 39,500 | 39,488 | ||||||
Coca-Cola Co. 0.21%–0.24% due 10/23–12/19/20123 | 160,750 | 160,667 | ||||||
Private Export Funding Corp. 0.14%–0.17% due 9/11–11/20/20123 | 130,000 | 129,954 | ||||||
United Technologies Corp. 0.14%–0.20% due 9/21–10/24/20123 | 114,600 | 114,566 | ||||||
Procter & Gamble Co. 0.12%–0.15% due 9/10–9/24/20123 | 110,000 | 109,993 | ||||||
Wal-Mart Stores, Inc. 0.12% due 9/12–10/3/20123 | 100,700 | 100,692 | ||||||
Merck & Co. Inc. 0.13%–0.14% due 9/10–9/13/20123 | 93,397 | 93,393 | ||||||
National Rural Utilities Cooperative Finance Corp. 0.14% due 9/18–9/24/2012 | 50,800 | 50,796 | ||||||
General Electric Co. 0.17% due 9/26/2012 | 50,000 | 49,995 | ||||||
Abbott Laboratories 0.12% due 9/18/20123 | 46,900 | 46,897 | ||||||
Paccar Financial Corp. 0.11% due 9/25/2012 | 46,000 | 45,996 | ||||||
Regents of the University of California 0.15%–0.16% due 9/13–10/2/2012 | 40,300 | 40,297 | ||||||
NetJets Inc. 0.13% due 9/14/20123 | 30,000 | 29,998 | ||||||
Honeywell International Inc. 0.15% due 9/26/20123 | 30,000 | 29,995 | ||||||
Total short-term securities (cost: $10,321,958,000) | 10,322,589 | |||||||
Total investment securities (cost: $83,461,792,000) | 114,849,312 | |||||||
Other assets less liabilities | (75,677 | ) | ||||||
Net assets | $ | 114,773,635 |
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 Rule 144A or section 4(2) of 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 $1,165,756,000, which represented 1.02% of the net assets of the fund.
4Acquired 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 below.
Acquisition | Cost | Value | Percent of | ||||||||||
date(s) | (000 | ) | (000 | ) | net assets | ||||||||
Laricina Energy Ltd. | 6/21/2011 | $ | 41,523 | $ | 27,466 | .02 | % | ||||||
Broadview Networks Holdings, Inc., Series B | 7/7/2000–3/6/2002 | 21,000 | 191 | .00 | |||||||||
Broadview Networks Holdings, Inc., Class A | 7/7/2000–3/6/2002 | — | — | .00 | |||||||||
Total restricted securities | $ | 62,523 | $ | 27,657 | .02 | % |
5Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities was $27,657,000, which represented .02% of the net assets of the fund.
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.
8Scheduled interest and/or principal payment was not received.
9Loan participations and assignments; may be subject to legal or contractual restrictions on resale. The total value of all such loans was $21,878,000, which represented .02% of the net assets of the fund.
Key to abbreviations
ADR = American Depositary Receipts
GDR = Global Depositary Receipts
SDR = Swedish Depositary Receipts
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 investment objectives, risks, charges and expenses. This and other important information is contained in the fund 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 800/421-4225 or visit the American Funds website at americanfunds.com.
MFGEFP-905-1012O-S32860
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, 2012, and for the year then ended and have issued our report thereon dated October 8, 2012, 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, 2012, 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 8, 2012
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 F. Roye | |
Paul F. Roye, Executive Vice President and Principal Executive Officer | |
Date: October 31, 2012 |
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 F. Roye |
Paul F. Roye, Executive Vice President and Principal Executive Officer |
Date: October 31, 2012 |
By /s/ Jeffrey P. Regal |
Jeffrey P. Regal, Treasurer and Principal Financial Officer |
Date: October 31, 2012 |