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: 811-862
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, 2004
Date of reporting period: August 31, 2004
Patrick F. Quan
Secretary
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:
Michael Glazer
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street
Los Angeles, California 90071
(Counsel for the Registrant)
ITEM 1 - Reports to Stockholders
[logo - American Funds(R)]
The right choice for the long term(R)
THE GROWTH FUND
OF AMERICA
HOW THE MULTIPLE PORTFOLIO COUNSELOR
SYSTEM WORKS FOR GFA
[photo of six girls dressed in soccer uniforms sitting on stadium bleachers
overlooking a playing field]
Annual report for the year ended August 31, 2004
THE GROWTH FUND OF AMERICA(R) invests in a wide range of companies that appear
to offer superior opportunities for growth of capital.
This fund is one of the 29 American Funds, the nation's third-largest mutual
fund family. For more than seven decades, 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.
Contents
Letter to shareholders 1
The value of a long-term perspective 4
Feature story: Managing for growth
How the multiple portfolio counselor
system works for GFA 6
Investment portfolio 11
Financial statements 16
Board of Directors 28
What makes American Funds different? back cover
ABOUT THE COVER: A successful girls' soccer team represents the teamwork,
cooperation and collaboration inherent in The Growth Fund of America's multiple
portfolio counselor system.
FIGURES SHOWN ARE PAST RESULTS FOR CLASS A SHARES AND ARE NOT PREDICTIVE OF
RESULTS IN FUTURE PERIODS. CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER
THAN THOSE SHOWN. SHARE PRICES AND RETURNS WILL VARY, SO INVESTORS MAY LOSE
MONEY. FOR THE MOST CURRENT INFORMATION AND MONTH-END RESULTS, VISIT
AMERICANFUNDS.COM. FUND RESULTS SHOWN, UNLESS OTHERWISE INDICATED, ARE AT NET
ASSET VALUE. IF A SALES CHARGE (MAXIMUM 5.75%) HAD BEEN DEDUCTED, THE RESULTS
WOULD HAVE BEEN LOWER.
Here are the average annual total returns on a $1,000 investment with all
distributions reinvested for periods ended September 30, 2004 (the most recent
calendar quarter):
1 year 5 years 10 years
Class A shares
Reflecting 5.75% maximum sales charge +8.00% +3.31% +13.01%
Other share class results and important information can be found on page 3.
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.
FELLOW SHAREHOLDERS:
[close-up photo of a child kicking a soccer ball]
The 12 months ended August 31 consisted of two distinctly different stock
markets. In the first six months, rising corporate earnings, tax cuts, low
interest rates and the weakness of the U.S. dollar helped fuel a rise in stock
prices. The second half ended on a more somber note, when stock prices fell as
investors became concerned about rising oil prices, the conflict in Iraq and the
presidential election. The second half was particularly hard on growth stocks,
which had experienced a strong recovery.
FISCAL 2004 RESULTS
For the full year, The Growth Fund of America (GFA) posted solid results with a
total return of 8.7%. As the table below shows, GFA's return trailed the general
stock market, as represented by Standard & Poor's 500 Composite Index, but
exceeded three of the four benchmark indexes the fund uses to measure its
progress. The unmanaged S&P 500 gained 11.4%. The fund's Lipper benchmarks had
increases ranging from 4.7% to 10.1%.
Over longer periods, GFA has continued to outpace the general market and its
comparable indexes by significant margins. The fund's average annual total
returns were 3.9% for the five years, 13.1% for the 10 years and 15.4% for its
lifetime.
WHAT HELPED RESULTS
Energy and biotechnology stocks helped GFA results the most. Rising crude oil
prices reached record levels, benefiting energy companies. The rise occurred
because both demand for oil products was somewhat higher than expected and
supply dipped below forecasts. Developing nations, including China in
particular, made stronger demands for oil. Supply was affected by turmoil in
Russia, Iraq, Venezuela and Nigeria. After experiencing years of relatively low
oil prices, energy companies have been disciplined about controlling costs and
spending, and were able to benefit when prices rose sharply. Energy companies
that made a major contribution included LUKoil Holding (+51.3%), one of the
largest companies in Russia, Burlington Resources (+49.7%), Suncor Energy
(+47.9%) and Devon Energy (+25.2%). The fund added to its energy holdings during
the past 12 months.
Results at a glance (with all distributions reinvested)
5-year 10-year Lifetime*
average average average
1-year annual annual annual
total total total total
returns returns returns returns
(9/1/03 - (9/1/99 - (9/1/94 - (12/1/73 -
8/31/04) 8/31/04) 8/31/04) 8/31/04)
The Growth Fund of America +8.7% +3.9% +13.1% +15.4%
Standard & Poor's 500 Composite Index+ +11.4 -2.1 +10.7 +12.0
Lipper Capital Appreciation Funds Index +6.5 -2.3 +7.7 +11.6
Lipper Growth Funds Index +5.8 -3.9 +7.9 +10.7
Lipper Multi-Cap Core Funds Index +10.1 +0.1 +9.4 +11.4
Lipper Multi-Cap Growth Funds Index +4.7 -4.5 +7.5 +11.5
*Since Capital Research and Management Company began managing the fund on
December 1, 1973.
+Unmanaged.
[action photo of a child goalie diving for a soccer ball]
Biotechnology stocks are a relatively small holding but the group's returns were
noteworthy. These stocks recovered in the past year after having difficulties in
2001 and 2002. Among the leaders were Elan (+419.0%), Biogen Idec (+78.5%) and
Sepracor (+84.3%). Elan and Biogen Idec were strong performers because of
positive clinical news about their joint venture to treat multiple sclerosis
with the new drug Antegren. Sepracor has been a superior stock because the Food
and Drug Administration has indicated that it will approve the company's new
drug Estorra, which will be used to treat insomnia.
A mixture of individual stocks also achieved significant gains. Yahoo!, a
leading Internet portal, rose 70.7%. Starbucks, the global coffeehouse chain,
rose 52.0% on increasing sales and earnings. Tyco International, a diversified
manufacturing concern (+52.2%), rebounded after new management restored investor
confidence in the strength of the company's basic businesses.
WHAT HURT THE FUND
Technology and media stocks, which played an important role in GFA's fiscal 2003
results, lagged in the recent fiscal year. Most technology stocks, whether they
were semiconductor, software or computer companies, had a poor second half. For
example, the NASDAQ Composite Index, which is dominated by large technology
stocks, declined 9.4% in the period from March 1, 2004, to the end of the fiscal
year. Among the fund's larger holdings that posted negative results for the year
were Applied Materials (-26.4%), Taiwan Semiconductor Manufacturing (-19.6%) and
Texas Instruments (-18.1%). We believe these companies are solid long-term
investments, but they had a very strong rebound last year and their valuations
had gotten a little too high.
Media companies were in a similar situation, having participated strongly in the
market recovery. Among those with below-market results were Comcast (-2.2%),
Time Warner (-0.1%) and News Corp. (+2.9%).
GOING FORWARD
A year ago we noted that it would not be realistic to expect a return to the
exceptionally high stock market gains that we experienced in the 1990s. Our
outlook has not changed today. We believe modest returns with some volatility
are likely in the future. Our investment approach has not changed either. We
will continue our focus on fundamental research, conducted globally, with a
long-term orientation. To learn more about how our investment professionals
manage the GFA portfolio, please read the feature article beginning on page 6.
It has been gratifying to see the large number of new shareholders who have
joined the fund in the past 12 months, bringing the number of shareholder
accounts to almost 5 million. We welcome our new shareholders and thank our
long-term investors for their continuing faith in The Growth Fund of America.
Cordially,
/s/ James F. Rothenberg /s/ Donald D. O'Neal
James F. Rothenberg Donald D. O'Neal
Chairman of the Board President
October 8, 2004
For current information about the fund, visit americanfunds.com.
OTHER SHARE CLASS RESULTS (unaudited)
CLASS B, CLASS C, CLASS F AND CLASS 529
Figures shown are past results and are not predictive of results in future
periods. Current and future results may be lower or higher than those shown.
Share prices and returns will vary, so investors may lose money. For the most
current information and month-end results, visit americanfunds.com.
Returns for periods ended September 30, 2004 (the most recent calendar quarter):
1 year Life of class
CLASS B SHARES
Reflecting applicable contingent deferred sales charge
(CDSC), maximum of 5%, payable only if shares are sold
within six years of purchase +8.70% -3.49%(1)
Not reflecting CDSC +13.70% -3.12%(1)
CLASS C SHARES
Reflecting CDSC, maximum of 1%, payable only if shares
are sold within one year of purchase +12.68% +0.58%(2)
Not reflecting CDSC +13.68% +0.58%(2)
CLASS F SHARES(3)
Not reflecting annual asset-based fee charged by sponsoring firm +14.55% +1.38%(2)
CLASS 529-A SHARES
Reflecting 5.75% maximum sales charge +7.94% +1.71%(4)
Not reflecting maximum sales charge +14.51% +4.03%(4)
CLASS 529-B SHARES
Reflecting applicable CDSC, maximum of 5%, payable
only if shares are sold within six years of purchase +8.48% +1.62%(4)
Not reflecting CDSC +13.48% +3.09%(4)
CLASS 529-C SHARES
Reflecting CDSC, maximum of 1%, payable only if shares
are sold within one year of purchase +12.53% +3.11%(4)
Not reflecting CDSC +13.53% +3.11%(4)
CLASS 529-E SHARES(3) +14.11% +3.16%(5)
CLASS 529-F SHARES(3)
Not reflecting annual asset-based fee charged by sponsoring firm +14.41% +16.32%(6)
(1) Average annual total return from March 15, 2000, when Class B shares were
first sold.
(2) Average annual total return from March 15, 2001, when Class C and Class F
shares were first sold.
(3) These shares are sold without any initial or contingent deferred sales
charge.
(4) Average annual total return from February 15, 2002, when Class 529-A, Class
529-B and Class 529-C shares were first sold.
(5) Average annual total return from March 1, 2002, when Class 529-E shares
were first sold.
(6) Average annual total return from September 16, 2002, when Class 529-F
shares were first sold.
There are several ways to invest in The Growth Fund of America. Class A shares
are subject to a 5.75% maximum up-front sales charge that declines for accounts
(and aggregated investments) of $25,000 or more and is eliminated for purchases
of $1 million or more. Other share classes, which are generally not available
for certain employer-sponsored retirement plans, have no up-front sales charges
but are subject to additional annual expenses and fees. Annual expenses for
Class B shares were 0.74 percentage points higher than for Class A shares; Class
B shares convert to Class A shares after eight years of ownership. If redeemed
within six years, Class B shares may also be subject to a contingent deferred
sales charge ("CDSC") of up to 5% that declines over time. Class C shares were
subject to annual expenses 0.80 percentage points higher than those for Class A
shares and a 1% CDSC if redeemed within the first year after purchase. Class C
shares convert to Class F shares after 10 years. Class F shares, which are
available only through certain fee-based programs offered by broker-dealer firms
and registered investment advisers, had higher annual expenses (by 0.02
percentage points) than did Class A shares, and an annual asset-based fee
charged by the sponsoring firm. Expenses are deducted from income earned by the
fund. As a result, dividends and investment results will differ for each share
class.
THE VALUE OF A LONG-TERM PERSPECTIVE
HOW A $10,000 INVESTMENT HAS GROWN
Figures shown are past results for Class A shares and are not predictive of
results in future periods. Current and future results may be lower or higher
than those shown. Share prices and returns will vary, so investors may lose
money. For the most current information and month-end results, visit
americanfunds.com. Fund figures 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)
AVERAGE ANNUAL TOTAL RETURNS
(based on a $1,000 investment with all distributions reinvested)
For periods ended
August 31, 2004
CLASS A SHARES*
Reflecting 5.75% maximum sales charge
1 year +2.42%
5 years +2.69%
10 years +12.42%
*Results for other share classes can be found on page 3.
[begin mountain chart]
<table>
<s> <c> <c> <c> <c> <c> <c>
Lipper Standard &
The Growth Multi-Cap Poor's 500 Lipper Multi- Consumer
Fund of Core Funds Composite Cap Growth Price Index Original
Year America Index Index Funds Index (inflation) Investment
1974* $7,874 $7,761 $7,749 $ 7,845 $10,893 $10,000
1975 $9,792 $9,873 $9,776 $ 9,431 $11,830 $10,000
1976 $11,165 $11,715 $12,043 $10,765 $12,505 $10,000
1977 $12,377 $11,697 $11,835 $11,007 $13,333 $10,000
1978 $20,136 $14,369 $13,315 $14,823 $14,379 $10,000
1979 $23,595 $16,280 $14,881 $17,014 $16,078 $10,000
1980 $31,496 $20,040 $17,588 $22,374 $18,148 $10,000
1981 $35,383 $21,228 $18,539 $24,287 $20,109 $10,000
1982 $38,595 $22,123 $19,134 $25,570 $21,285 $10,000
1983 $56,382 $32,033 $27,582 $38,044 $21,830 $10,000
1984 $56,805 $31,782 $29,280 $36,701 $22,767 $10,000
1985 $64,493 $36,607 $34,616 $41,413 $23,529 $10,000
1986 $82,962 $48,803 $48,158 $55,640 $23,900 $10,000
1987 $109,731 $62,610 $64,779 $72,149 $24,924 $10,000
1988 $97,962 $51,546 $53,241 $58,985 $25,926 $10,000
1989 $136,507 $69,658 $74,101 $83,543 $27,146 $10,000
1990 $123,184 $65,613 $70,400 $76,088 $28,671 $10,000
1991 $160,815 $82,704 $89,300 $101,155 $29,760 $10,000
1992 $168,703 $87,795 $96,368 $106,268 $30,697 $10,000
1993 $210,269 $104,956 $110,996 $133,701 $31,547 $10,000
1994 $222,852 $112,215 $117,057 $138,309 $32,462 $10,000
1995 $279,812 $132,843 $142,129 $172,196 $33,312 $10,000
1996 $282,323 $153,447 $168,734 $192,309 $34,270 $10,000
1997 $391,124 $207,038 $237,282 $252,795 $35,033 $10,000
1998 $390,174 $204,380 $256,505 $241,989 $35,599 $10,000
1999 $629,203 $273,501 $358,611 $359,870 $36,405 $10,000
2000 $965,880 $340,564 $417,104 $549,013 $37,647 $10,000
2001 $721,756 $263,388 $315,433 $308,552 $38,671 $10,000
2002 $578,827 $217,245 $258,698 $225,096 $39,368 $10,000
2003 $701,724 $249,447 $289,889 $272,701 $40,218 $10,000
2004 $762,451(3) $274,632(4) $323,073(4)(5) $285,459(4) $41,285(6) $10,000
Year ended August 31
</table>
[end mountain chart]
Year ended August 31 1974# 1975 1976 1977 1978 1979 1980
Total value
Dividends reinvested -- $362 283 -- 254 -- 307
Value at year-end $7,874 9,792 11,165 12,377 20,136 23,595 31,496
GFA total return (21.3%) 24.4 14.0 10.9 62.7 17.2 33.5
Year ended August 31 1981 1982 1983 1984 1985 1986 1987
Total value
Dividends reinvested 546 1,673 2,290 1,643 1,249 979 1,354
Value at year-end 35,383 38,595 56,382 56,805 64,493 82,962 109,731
GFA total return 12.3 9.1 46.1 0.8 13.5 28.6 32.3
Year ended August 31 1988 1989 1990 1991 1992 1993 1994
Total value
Dividends reinvested 1,503 1,743 3,611 3,208 2,510 1,454 929
Value at year-end 97,962 136,507 123,184 160,815 168,703 210,269 222,852
GFA total return (10.7) 39.3 (9.8) 30.5 4.9 24.6 6.0
Year ended August 31 1995 1996 1997 1998 1999 2000 2001
Total value
Dividends reinvested 1,372 2,452 2,019 2,525 1,956 1,081 3,900
Value at year-end 279,812 282,323 391,124 390,174 629,203 965,880 721,756
GFA total return 25.6 0.9 38.5 (0.2) 61.3 53.5 (25.3)
Year ended August 31 2002 2003 2004 Average
Total value annual total
Dividends reinvested 1,400 592 190 return for
Value at year-end 578,827 701,724 762,451 30-3/4years
GFA total return (19.8) 21.2 8.7 15.1(3)
# For 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.
(1) As outlined in the prospectus, the sales charge is reduced for accounts
(and aggregated investments) of $25,000 or more and eliminated for
purchases of $1 million or more.
(2) The maximum initial sales charge was 8.5% prior to July 1, 1988. There is
no sales charge on dividends or capital gain distributions that are
reinvested in additional shares.
(3) Includes reinvested dividends of $43,387 and reinvested capital gain
distributions of $369,777.
(4) Includes reinvested dividends.
(5) The S&P 500 is unmanaged, does not reflect sales charges, commissions or
expenses and cannot be invested in directly.
(6) Computed from data supplied by the U.S. Department of Labor, Bureau of
Labor Statistics.
[close-up photo of children running after a soccer ball}
MANAGING FOR GROWTH
How the multiple portfolio counselor system works for GFA
For 46 years, American Funds has relied on a unique approach to managing
investments -- the multiple portfolio counselor system. It has provided broad
diversification, continuity of management, consistent long-term results and a
way to manage effectively a large and growing pool of money. The Growth Fund of
America has been using the system since it joined the American Funds family on
December 1, 1973.
[Begin Caption]
Don O'Neal
[photo of Don O'Neal]
[End Caption]
[Begin Caption]
Jim Rothenberg
[photo of Jim Rothenberg]
[End Caption]
[Begin Caption]
Mike Shanahan
[photo of Mike Shanahan]
[End Caption]
[Begin Pull Quote]
"The Growth Fund of America has gone from being a small to a medium-sized to a
large fund over 31 years, yet the fund has produced above-average long-term
results all along the way." -- Don O'Neal
[End Pull Quote]
Don O'Neal, president of the fund, says there is ample evidence that the system
works over long periods of time. "The Growth Fund of America has gone from being
a small to a medium-sized to a large fund over 31 years, yet the fund has
produced above-average long-term results all along the way. The multiple
portfolio counselor system is one of the keys to our success, and we have a lot
of confidence in it."
The past few years have been noteworthy for The Growth Fund of America. Assets
have grown considerably, and the fund has added a large number of new
shareholders and experienced both a sharp market decline and recovery. In that
environment, GFA has posted some of its best five-year results compared with
market indexes or peer funds since the early 1980s. Today, with more than $75
billion in assets, it has become one of the largest mutual funds in the United
States. We thought it might be a good time to take a close look at how GFA
manages for growth.
THE FUND'S OVERALL OPERATION
How does the multiple portfolio counselor system work? Imagine the GFA portfolio
as a pie cut into slices. The senior fund officers have carefully chosen a team
of portfolio counselors, generalists who invest broadly in many industries. Like
mixing different paints to achieve the right color, they have picked portfolio
counselors with strengths in value and growth investing, conservative and
enterprising styles and different industry expertise to create a multitalented
group. Each portfolio counselor is given a slice of the pie to manage in line
with the fund's broad objective, as though each were managing a portfolio
individually.
With the recent addition of two counselors, the fund now has eight. GFA started
with two portfolio counselors after joining American Funds in 1973.
One slice of the portfolio, up to 25% of the fund's assets, is given to a group
of research analysts, specialists who focus on individual industries, to manage
by themselves. In addition, an investment group makes sure that all investments
fit into the fund's mandate and that each individual's investment choices mesh
with the other holdings.
Why has it worked? Jim Rothenberg, chairman of the fund, says, "First, you get
talented individual decision makers who are accountable for their own results.
Secondly, their results are blended so that the total portfolio is more
diversified and is relatively more stable than if it were managed by only one
person."
DIVERSITY OF VIEWS BRINGS BENEFITS
The GFA portfolio is diversified across 240 stocks in many industries. It is
also diversified across different styles and perspectives on the market. "Most
of the time, our counselors are devoted to fundamental research and fundamental
investing," explains Mike Shanahan, a veteran portfolio counselor. "We select
stocks on a company-by-company basis. But within that context, the world looks
different to each counselor. They have varying degrees of comfort about risk,
for example. And they don't produce the same portfolios."
[Begin Sidebar]
A WEALTH OF EXPERIENCE
The Growth Fund of America currently has eight portfolio counselors who bring
together 229 years of investment experience to managing your investment. Here
are the specific years of experience for these primary decision makers for the
fund.*
[photo of coach instructing girl soccer player]
Years of
investment
Portfolio counselor experience*
R. Michael Shanahan 40
James F. Rothenberg 34
Gordon Crawford 33
James E. Drasdo 33
Gregg E. Ireland 31
Michael T. Kerr 21
Donald D. O'Neal 19
Timothy P. Dunn 18
*As of November 1, 2004
[End Sidebar]
Mike contrasts his sometimes more conservative view of the market with the more
optimistic growth view of Gordon Crawford, another veteran GFA counselor. "There
are material differences between Gordon and me with regard to risk preferences
and projections into the future. These differences benefit the fund. For
example, Gordon's growth approach benefited the fund during the bull market of
the late 1990s, and my more cautious approach of holding cash helped the fund in
the market decline of 2000 to 2002. The fund tries to provide a diversity of
outlooks among our counselors with a mix of age, experience, background and
location."
Mike believes the multiple portfolio counselor system has helped GFA navigate
difficult markets. "Any market tends to go to extremes," he says. "The multiple
manager system works because it mitigates the extremes. The fund never goes too
far in one direction. By creating a group of individuals with different styles,
experiences and expertise, we have been able to smooth out short-term peaks and
valleys in the market and deliver long-term consistent results with less risk.
That's because the results of portfolio counselors whose style and investments
are currently in favor may temper the results of those whose investments are out
of season."
ADDING PORTFOLIO COUNSELORS HELPS MANAGE GROWTH OF ASSETS
The multiple portfolio counselor system has enabled the fund to mitigate the
challenges of size and complexity that accompany growth. Gordon explains how the
addition of new counselors has helped. When new assets flow into the funds,
shareholders want to see their money put to work. If the fund kept a small
number of portfolio counselors, they'd have to add more stocks to their existing
portfolios. "We'd have to expand the number of stocks we manage to keep up with
the flow of new assets," he says. "But there are just so many hours in a day and
so many things you can grasp. There is no portfolio counselor who knows every
energy, technology, media, retailing, industrial, financial and non-U.S. stock
inside and out. Since we added new counselors to the fund, they have been able
to invest in their high-conviction ideas. That puts less pressure on the veteran
portfolio counselors so we can concentrate on our own areas of conviction and
expertise."
The system also makes it easier when a portfolio counselor retires or leaves the
fund. At that time, only a small portion of the portfolio changes hands, says
Don. "When we know a portfolio counselor is leaving, we will move his or her
assets to existing or new portfolio counselors over a period of time. These
smooth, gradual transitions have helped keep the fund's investment approach
consistent."
The recent addition of two new portfolio counselors -- Gregg Ireland and Tim
Dunn -- illustrates GFA's emphasis on diversity. Both are seasoned portfolio
counselors who have extensive experience in investing in the United States and
overseas. But their investing styles are quite different. "I'm a contrarian,"
says Gregg. "I like to invest in companies that are out of favor, experiencing
temporary problems and at the lower end of their business cycles -- presumably
at attractive prices. I like to own turnarounds and cyclical stocks. When I do
my research, I try to ascertain whether a company's underlying businesses are
still good even though it has currently run into a rough patch. Then I look for
a catalyst for change. It may be a new product, a new market or new management."
One such turnaround in Gregg's portfolio is Tyco International, a diversified
manufacturer of electronics and telecommunications equipment, security systems
and medical products. The company had run into trouble because of aggressive
accounting policies and sales tax fraud charges against a former chief executive
officer. Gregg and research analyst Martin Jacobs believed, however, that Tyco's
underlying businesses were still strong. "At the end of the day, it was still a
good collection of businesses, with solid profitability and cash flow
overshadowed by all the noise and drama over accounting and legal problems,"
Martin says. "A new chief executive officer, Ed Breen, was elected and he
replaced most of the company's management team. The entire board of directors
also resigned." The stock has recovered considerably since Gregg and Martin's
purchases.
In contrast, Tim likes to invest in growth companies with strong international
businesses. He favors growth-oriented companies in technology, consumer
products, financial services and health care. Avon Products, the widely known
cosmetics firm, is a favorite holding. Even though growth of Avon Products in
the United States is modest, sales in India, Eastern Europe, China and Brazil
are experiencing double-digit increases. Tim likes the multiple portfolio
counselor system because it divides the portfolio into manageable portions. It
helps to increase the number of high-conviction stocks in the portfolio, he
says. "If you had only one manager, it's doubtful that he or she would be able
to recall what makes the 211th largest stock of the 240 in the fund special," he
says.
ENCOURAGING PERSONAL GROWTH OF RESEARCH ANALYSTS
The research portfolio encourages personal growth of research analysts, who
specialize in specific industries. In many investment firms, research analysts
make recommendations to buy and sell stocks but don't actually manage money
themselves. In GFA and the other American Funds, they play an important role in
the multiple portfolio counselor system, managing a portion of the assets as a
group. "They are managing real money. It sharpens their focus and gives the
analysts independence, autonomy and empowerment," Don says.
The research portfolio is also a source of communication to other analysts and
the portfolio counselors. "It's important to look at what analysts do in
addition to what they say," Don says. "When they buy or sell one of their
stocks, it tells you exactly where their convictions lie."
[Begin Sidebar]
"By creating a group of individuals with different styles, experiences and
expertise, we have been able to smooth out short-term peaks and valleys in the
market and deliver long-term consistent results with less risk." -- Mike
Shanahan
[End Sidebar]
[Begin Caption]
Gordon Crawford
[photo of Gordon Crawford]
[End Caption]
[Begin Caption]
Martin Jacobs
[photo of Martin Jacobs]
[End Caption]
[Begin Caption]
Gregg Ireland
[photo of Gregg Ireland]
[End Caption]
[Begin Caption]
Tim Dunn
[photo of Tim Dunn]
[End Caption]
[Begin Caption]
Mark Merritt
photo of Mark Merritt
[End Caption]
[Begin Caption]
Jim Drasdo
photo of Jim Drasdo
[End Caption]
[Begin Caption]
Mike Kerr
photo of Mike Kerr
[End Caption]
[Begin Caption]
Cathy Kehr
photo of Cathy Kehr
[End Caption]
[Begin Pull Quote]
"If you have seven or eight smart people in a nonthreatening,
information-providing environment, the wisdom of the whole is better than that
of any one person." -- Jim Drasdo
[End Pull Quote]
Of the 34 research analysts who participate in GFA, 32 have five or more years
of investment experience, 17 have been in the business for 10 years or more, and
10 have been professional investors for 15 years or more. Most work out of the
Los Angeles and San Francisco offices of Capital Research and Management
Company, the investment adviser to American Funds, but others operate out of
London, Geneva, Tokyo, New York and Washington, D.C.
Mark Merritt, a coordinator for the GFA research portfolio, says one of the
significant contributions of the group is the depth of knowledge the analysts
bring to the fund. "Some have been covering industries for 10 or 20 years," he
says. "Their knowledge of industries, companies and management is on a higher
level compared with that of the average analyst who is often just out of college
or business school. The veteran analysts know everyone in the industry and their
telephone calls get returned. They meet with management regularly, build
financial models and thoroughly review financial statements. When appropriate,
they make on-site visits to factories and retail stores." Mark has been covering
retail companies for 10 years and some of his largest investments are Target,
Lowe's Companies, Best Buy, Limited Brands and Walgreen, which are also some of
the fund's largest holdings. He meets with suppliers, customers and competitors
and spends a lot of time walking stores to gain an objective, well-rounded view
of a company's business and long-term prospects.
Energy analyst Cathy Kehr believes she must visit oil fields in person "to
understand what is going on in companies' backyards -- not just at corporate
headquarters." Her global energy research specialty takes her around the world
much of the time. In the past year, she visited oil fields in Kazakhstan,
Argentina, Bolivia, Canada and the United States. Sharing information with a
cluster of other energy analysts and experts in Capital Research's global
network helps her make informed investment decisions, she says.
Veteran portfolio counselor Jim Drasdo likes visiting companies with a research
analyst. "I can focus on the big picture and he or she can focus on the details.
We learn a lot that way. It's good to have a great, grand strategy but we have
to block and tackle, too."
THE VALUE OF CUMULATIVE WISDOM
Why has the multiple portfolio counselor system worked out well? "I believe in
something called cumulative wisdom," Jim Drasdo says. "If you have seven or
eight smart people in a nonthreatening, information-providing environment, the
wisdom of the whole is better than that of any one person. There is something
good about the system. It is hard to explain, but there is something that works
here."
[photo of three children in soccer uniforms - one holding a soccer ball]
INVESTMENT PORTFOLIO, August 31, 2004
Beginning with this report, a summary portfolio, now approved under rules
adopted by the Securities and Exchange Commission this year, will replace the
complete listing of portfolio holdings used in previous shareholder reports.
This summary portfolio is designed to streamline the report and help investors
better focus on a fund's principal holdings. The schedule includes each of the
fund's 50 largest holdings and investments of any issuer for which the total
value of all holdings in that issuer exceeds 1% of the fund's net assets. A
complete schedule of portfolio holdings is available upon request, free of
charge, by calling American Funds Service Company at 800/421-0180 or accessing
the U.S. Securities and Exchange Commission website at www.sec.gov.
[begin pie chart]
Percent of
INDUSTRY SECTOR DIVERSIFICATION Net Assets
CONSUMER DISCRETIONARY 19.85 %
INFORMATION TECHNOLOGY 18.56
HEALTH CARE 12.70
ENERGY 9.51
INDUSTRIALS 8.81
OTHER INDUSTRIES 20.34
CASH & EQUIVALENTS 10.23
[end pie chart]
Percent
of net
LARGEST EQUITY HOLDINGS assets
Time Warner 2.54 %
American International Group 2.47
Microsoft 2.19
Target 1.85
Lowe's Companies 1.78
Altria Group 1.65
Comcast 1.62
Sanofi-Aventis 1.62
Freddie Mac 1.30
Tyco International 1.29
Shares Market Percent
value of net
COMMON STOCKS - 89.63% (000) assets
CONSUMER DISCRETIONARY - 19.83%
Time Warner Inc. (1) 122,900,000 2,009,415 2.54%
Target Corp. 32,870,000 1,465,345 1.85
Lowe's Companies, Inc. 28,320,400 1,407,524 1.78
Comcast Corp., Class A (1) 29,041,387 818,096
Comcast Corp., Class A, special nonvoting stock (1) 16,756,000 464,979 1.62
IAC/InterActiveCorp (1) 42,750,000 975,127 1.23
Carnival Corp., units 16,459,100 753,662 .95
News Corp. Ltd., preferred (ADR) 24,520,367 729,481 .92
Liberty Media Corp., Class A (1) 68,625,000 611,449 .77
Cox Communications, Inc., Class A (1) 16,681,200 548,144 .69
eBay Inc. (1) 6,146,600 531,927 .67
Starbucks Corp. (1) 11,329,200 489,875 .62
Best Buy Co., Inc. 10,530,000 489,856 .62
Limited Brands, Inc. 20,700,000 415,656 .52
Other securities 2,797,000 3,998,090 5.05
15,708,626 19.83
INFORMATION TECHNOLOGY - 18.56%
Microsoft Corp. 63,657,125 1,737,840 2.19
Texas Instruments Inc. 42,550,000 831,427 1.05
Applied Materials, Inc. (1) 49,665,000 789,177 1.00
First Data Corp. 18,340,000 774,865 .98
Yahoo! Inc. (1) 26,452,154 754,151 .95
Taiwan Semiconductor Manufacturing Co. Ltd. 520,321,765 722,456 .91
Linear Technology Corp. 14,425,000 515,982 .65
Corning Inc. (1) 46,820,000 473,818 .60
Analog Devices, Inc. 11,716,666 406,803 .52
Xilinx, Inc. 14,800,000 405,964 .51
Other securities 7,289,769 9.20
14,702,252 18.56
HEALTH CARE - 12.70%
Sanofi-Aventis 17,990,129 1,279,554 1.62
Biogen Idec Inc. (1) 15,911,000 944,000 1.19
AstraZeneca PLC (Sweden) 10,818,000 501,409
AstraZeneca PLC (ADR) 2,797,000 130,144
AstraZeneca PLC 2,800,000 129,087 .96
Eli Lilly and Co. 10,700,000 678,915 .86
Amgen Inc. (1) 11,160,000 661,676 .83
Guidant Corp. 10,062,200 601,720 .76
Other securities 5,132,370 6.48
10,058,875 12.70
ENERGY - 9.51%
Schlumberger Ltd. 14,198,300 877,455 1.11
Devon Energy Corp. 7,695,000 498,713 .63
LUKoil Holding (ADR) 3,750,000 442,500 .56
Other securities 2,728,600 5,712,829 7.21
7,531,497 9.51
INDUSTRIALS - 8.81%
Tyco International Ltd. 32,675,000 1,023,381 1.29
General Electric Co. 23,740,000 778,435 .98
FedEx Corp. 6,822,300 559,360 .71
Illinois Tool Works Inc. 5,950,000 543,176 .69
Boeing Co. 10,200,000 532,644 .67
Southwest Airlines Co. 35,079,877 519,884 .66
United Parcel Service, Inc., Class B 7,078,300 517,070 .65
General Dynamics Corp. 5,120,700 499,985 .63
Other securities 23,864,166 2,004,926 2.53
6,978,861 8.81
FINANCIALS - 8.50%
American International Group, Inc. 27,480,200 1,957,689 2.47
Freddie Mac 15,306,600 1,027,379 1.30
Fannie Mae 13,423,200 999,357 1.26
Other securities 57,068 2,744,975 3.47
6,729,400 8.50
CONSUMER STAPLES - 5.46%
Altria Group, Inc. 26,700,000 1,306,965 1.65
Walgreen Co. 23,560,000 858,762 1.09
Other securities 5,500,000 2,156,399 2.72
4,322,126 5.46
TELECOMMUNICATION SERVICES - 3.53%
Vodafone Group PLC (ADR) 33,010,000 755,929
Vodafone Group PLC 68,465,000 155,967 1.15
AT&T Wireless Services, Inc. (1) 42,672,500 623,872 .79
Sprint Corp. 24,545,350 483,053 .61
Other securities 10,140,700 778,137 .98
2,796,958 3.53
OTHER - 2.73% 1,567,800 2,158,848 2.73
TOTAL COMMON STOCKS (cost: $63,967,460,000) 70,987,443 89.63
RIGHTS AND WARRANTS - 0.00%
Other - 0.00%
TOTAL RIGHTS AND WARRANTS (cost: $20,166,000) 1,724 .00
CONVERTIBLE SECURITIES - 0.12%
Other - 0.12%
TOTAL CONVERTIBLE SECURITIES (cost: $89,044,000) 94,868 .12
Principal Market Percent
amount value of net
BONDS & NOTES - 0.02% (000) (000) assets
CONSUMER DISCRETIONARY - 0.02%
AOL Time Warner Inc. 5.625% 2005 $ 10,795 11,036 .02
Other securities .00
TOTAL BONDS & notes (cost: $10,582,000) 11,036 .02
Principal Market Percent
amount value of net
SHORT-TERM SECURITIES - 10.09% (000) (000) assets
U.S. Treasury bills 0.963%-1.517% due 9/2-11/18/2004 2,825,200 2,821,493 3.56
Freddie Mac 1.32%-1.685% due 9/1-11/23/2004 225,000 224,561 .28
Edison Asset Securitization LLC 1.39%-1.63% due 9/17-10/27/2004 (2) 100,000 99,818
General Electric Capital Services Inc. 1.40% due 9/20/2004 50,000 49,960
General Electric Capital Corp. 1.42%-1.58% due 9/27-10/15/2004 50,000 49,922 .25
Fannie Mae 1.32%-1.62% due 9/13-11/3/2004 200,000 199,672 .25
AIG Funding, Inc. 1.26%-1.52% due 9/7-10/13/2004 100,000 99,923
American General Finance Corp. 1.38%-1.51% due 9/13/2004 20,000 19,990 .16
Other securities 4,426,552 5.59
TOTAL SHORT-TERM SECURITIES (cost: $7,991,915,000) 7,991,891 10.09
TOTAL INVESTMENT SECURITIES (cost: $72,079,167,000) 79,086,962 99.86
New Taiwanese Dollar (cost: $9,522,000) 9,494 .01
Other assets less liabilities 102,416 .13
NET ASSETS $79,198,872 100.00%
"Other securities" includes all issues that are not required to be disclosed in
the summary Investment portfolio.
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 of that company. The market value of the fund's
holdings in affiliated companies is included in "Other securities" under their
respective indutry sectors in the preceding summary investment portfolio.
Further details on these holdings and related transactions during the year ended
August 31, 2004 appear below.
Beginning
Company shares or principal Purchases Sales
amount
American Pharmaceutical Partners, Inc (1) - 3,800,000 -
Big Lots, Inc (1) 5,800,000 1,200,000 -
Burlington Resources Inc 4,500,000 15,260,000 -
ENSCO Intl Inc - 8,235,000 -
EOG Resources, Inc 5,700,000 500,000 -
Express Scripts, Inc. (1) 3,890,000 820,000 -
Forest Laboratories, Inc (1) 18,110,000 2,201,800 -
Maxim Integrated Products, Inc 11,430,000 9,772,012 4,612,012
Pogo Producing Co 2,844,400 800,000 -
Rowan Companies, Inc (1) - 6,450,000 -
Sabre Holdings Corp 7,062,811 - -
SINA Corp (1) - 2,552,000 -
Ending Dividend Market
Company shares or principal income value
amount (000) (000)
American Pharmaceutical Partners, Inc (1) 3,800,000 $ - 115,558
Big Lots, Inc (1) 7,000,000 - 85,330
Burlington Resources Inc 19,760,000 3,855 715,905
ENSCO Intl Inc 8,235,000 495 240,133
EOG Resources, Inc 6,200,000 1,314 358,174
Express Scripts, Inc. (1) 4,710,000 - 297,672
Forest Laboratories, Inc (1) 20,311,800 - 931,296
Maxim Integrated Products, Inc 16,590,000 3,473 720,504
Pogo Producing Co 3,644,400 664 160,281
Rowan Companies, Inc (1) 6,450,000 - 156,864
Sabre Holdings Corp 7,062,811 2,084 162,445
SINA Corp (1) 2,552,000 - 53,158
$ 11,885 $ 3,997,320
The following footnotes to the portfolio 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) Purchased in a private placement transaction; resale may be
limited to qualified institutional buyers; resale to the public may require
registration. The total value of all such restricted securities, including
those included in "Other securities" in the summary investment portfolio,
was $2,203,316, which represented 2.78% of the net assets of the fund.
ADR = American Depositary Receipts
See Notes to Financial Statements
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
at August 31, 2004 (dollars and shares in thousands,
except per-share amounts)
ASSETS:
Investment securities at market:
Unaffiliated issuers (cost: $68,872,201) $75,089,642
Affiliated issuers (cost: $3,206,966) 3,997,320 $79,086,962
Cash denominated in non-U.S. currencies (cost: $9,522) 9,494
Cash 40,915
Receivables for:
Sales of investments $171,783
Sales of fund's shares 167,178
Dividends and interest 69,398 408,359
79,545,730
LIABILITIES:
Payables for:
Purchases of investments 208,952
Repurchases of fund's shares 60,590
Investment advisory services 19,160
Services provided by affiliates 55,519
Deferred Directors' compensation 1,355
Other fees and expenses 1,282 346,858
NET ASSETS AT AUGUST 31, 2004 $79,198,872
NET ASSETS CONSIST OF:
Capital paid in on shares of capital stock $72,557,766
Undistributed net investment income 52,263
Accumulated net realized loss (418,779)
Net unrealized appreciation 7,007,622
NET ASSETS AT AUGUST 31, 2004 $79,198,872
Total authorized capital stock - 5,500,000 shares, $.001 par value (3,257,708
total shares outstanding)
Net asset value
Net assets Shares outstanding per share (1)
Class A $52,432,242 2,145,949 24.43
Class B 4,787,858 201,761 23.73
Class C 4,814,095 203,320 23.68
Class F 7,236,750 297,465 24.33
Class 529-A 815,325 33,449 24.38
Class 529-B 218,732 9,149 23.91
Class 529-C 272,879 11,410 23.91
Class 529-E 44,324 1,830 24.22
Class 529-F 15,489 636 24.34
Class R-1 57,016 2,374 24.02
Class R-2 857,218 35,706 24.01
Class R-3 3,147,678 130,165 24.18
Class R-4 3,320,348 136,370 24.35
Class R-5 1,178,918 48,124 24.50
(1) Maximum offering price and redemption price per share were equal to the net
asset value per share for all share classes, except for classes A and 529-A, for
which the maximum offering prices per share were $25.92 and $25.87,
respectively.
See Notes to Financial Statements
STATEMENT OF OPERATIONS
for the year ended August 31, 2004 (dollars in thousands)
INVESTMENT INCOME:
Income:
Dividends (net of non-U.S. withholding tax of
$19,660; also includes $11,885 from affiliates) $523,035
Interest 102,940 $625,975
Fees and expenses:
Investment advisory services 205,522
Distribution services 246,856
Transfer agent services 67,519
Administrative services 31,390
Reports to shareholders 2,605
Registration statement and prospectus 3,428
Postage, stationery and supplies 6,926
Directors' compensation 336
Auditing and legal 153
Custodian 4,700
State and local taxes 1
Other 220
Total expenses before reimbursement 569,656
Reimbursement of expenses 717 568,939
Net investment income 57,036
NET REALIZED GAIN AND UNREALIZED APPRECIATION ON
INVESTMENTS AND NON-U.S. CURRENCY:
Net realized gain on:
Investments (includes $75,074 net gain from affiliates) 1,376,854
Non-U.S. currency transactions 140,155 1,517,009
Net unrealized appreciation on:
Investments 2,932,997
Non-U.S. currency translations 861 2,933,858
Net realized gain and unrealized appreciation
on investments and non-U.S. currency 4,450,867
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,507,903
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
(dollars in thousands)
Year ended August 31
2004 2003
OPERATIONS:
Net investment income $57,036 $78,333
Net realized gain on investments and
non-U.S. currency transactions 1,517,009 220,101
Net unrealized appreciation on investments
and non-U.S. currency translations 2,933,858 8,438,265
Net increase in net assets resulting
from operations 4,507,903 8,736,699
DIVIDENDS PAID TO SHAREHOLDERS FROM NET INVESTMENT INCOME (20,306) (37,508)
CAPITAL SHARE TRANSACTIONS 21,009,117 8,890,875
TOTAL INCREASE IN NET ASSETS 25,496,714 17,590,066
NET ASSETS:
Beginning of year 53,702,158 36,112,092
End of year (including undistributed
net investment income: $52,263 and $17,706,
respectively) $79,198,872 $53,702,158
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The Growth Fund of America, Inc. (the "fund") is registered under
the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund invests in a wide range of companies that appear to
offer superior opportunities for growth of capital.
The fund offers 14 share classes consisting of four retail share classes, five
CollegeAmerica(R) savings plan share classes and five retirement plan share
classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C,
529-E and 529-F) are sponsored by the Commonwealth of Virginia and can be
utilized to save for college education. The five retirement plan share classes
(R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry
any conversion rights. The fund's share classes are described below:
- ---------------------------------------------------------------------------------------------------------
Share class Initial sales charge Contingent deferred sales Conversion feature
charge upon redemption
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes A and 529-A Up to 5.75% None (except 1% for None
certain redemptions
within one year of
purchase without an
initial sales charge)
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes B and 529-B None Declines from 5% to zero Classes B and 529-B convert to
for redemptions within classes A and 529-A,
six years of purchase respectively, after eight years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class C None 1% for redemptions within Class C converts to Class F
one year of purchase after 10 years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-C None 1% for redemptions within None
one year of purchase
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-E None None None
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes F and 529-F None None None
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes R-1, R-2, R-3, None None None
R-4 and R-5
- ---------------------------------------------------------------------------------------------------------
Holders of all share classes have equal pro rata rights to assets, dividends and
liquidation. Each share class has identical voting rights, except for the
exclusive right to vote on matters affecting only its class. Share classes have
different fees and expenses ("class-specific fees and expenses"), primarily due
to different arrangements for distribution, administrative and shareholder
services. Differences in class-specific fees and expenses will result in
differences in net investment income and, therefore, the payment of different
per-share dividends by each class.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared to
comply with accounting principles generally accepted in the United States of
America. These principles require management to make estimates and assumptions
that affect reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies followed by the fund:
SECURITY VALUATION - Equity securities are valued at the official
closing price of, or the last reported sale price on, the exchange or
market on which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any
sales, at the last available bid price. Prices for each security are
taken from the principal exchange or market in which the security
trades. Fixed-income securities are valued at prices obtained from an
independent pricing service, when such prices are available. However,
where the investment adviser deems it appropriate, such securities
will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type. Short-term
securities maturing within 60 days are valued at amortized cost, which
approximates market value. The ability of the issuers of the debt
securities held by the fund to meet their obligations may be affected
by economic developments in a specific industry, state or region.
Securities and other assets for which representative market quotations
are not readily available are fair valued as determined in good faith
by authority of the fund's Board of Directors. Various factors may be
reviewed in order to make a good faith determination of a security's
fair value. These factors include, but are not limited to, the type
and cost of the security; contractual or legal restrictions on resale
of the security; relevant financial or business developments of the
issuer; actively traded similar or related securities; conversion or
exchange rights on the security; related corporate actions;
significant events occurring after the close of trading in the
security; and changes in overall market conditions.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security
transactions are recorded by the fund as of the date the trades are
executed with brokers. Realized gains and losses from security
transactions are determined based on the specific identified cost of
the securities. Dividend income is recognized on the ex-dividend date
and interest income is recognized on an accrual basis. Market
discounts, premiums and original issue discounts on fixed-income
securities are amortized daily over the expected life of the security.
CLASS ALLOCATIONS - Income, fees and expenses (other than
class-specific fees and expenses) and realized and unrealized gains
and losses are allocated daily among the various share classes based
on their relative net assets. Class-specific fees and expenses, such
as distribution, administrative and shareholder services, are charged
directly to the respective share class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and
distributions paid to shareholders are recorded on the ex-dividend
date.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities, including
investment securities, denominated in non-U.S. currencies are
translated into U.S. dollars at the exchange rates in effect at the
end of the reporting period. Purchases and sales of investment
securities and income and expenses are translated into U.S. dollars at
the exchange rates on the dates of such transactions. In the
accompanying financial statements, the effects of changes in non-U.S.
exchange rates on investment securities are included with the net
realized gain or loss and net unrealized appreciation or depreciation
on investments. The realized gain or loss and unrealized appreciation
or depreciation resulting from all other transactions denominated in
non-U.S. currencies are disclosed separately.
2. NON-U.S. INVESTMENTS
INVESTMENT RISK - The risks of investing in securities of non-U.S. issuers may
include, but are not limited to, investment and repatriation restrictions;
revaluation of currencies; adverse political, social and economic developments;
government involvement in the private sector; limited and less reliable investor
information; lack of liquidity; certain local tax law considerations; and
limited regulation of the securities markets.
TAXATION - Dividend income is recorded net of non-U.S. taxes paid.
3. FEDERAL INCOME TAXATION AND DISTRIBUTIONS
The fund complies with the requirements under Subchapter M of the Internal
Revenue Code applicable to mutual funds and intends to distribute substantially
all of its net taxable income and net capital gains each year. The fund is not
subject to income taxes to the extent such distributions are made.
DISTRIBUTIONS - Distributions paid to shareholders are based on net investment
income and net realized gains determined on a tax basis, which may differ from
net investment income and net realized gains for financial reporting purposes.
These differences are due primarily to differing treatment for items such as
non-U.S. currency gains and losses; short-term capital gains and losses; capital
losses related to sales of securities within 30 days of purchase; deferred
expenses; 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. As of August
31, 2004, the cost of investment securities and cash denominated in non-U.S.
currencies for federal income tax purposes was $72,102,425,000.
During the year ended August 31, 2004, the fund reclassified $1,688,000 and
$485,000 from undistributed net investment income to accumulated net realized
loss and paid-in capital, respectively, to align financial reporting with tax
reporting.
As of August 31, 2004, the components of distributable earnings on a tax basis
were as follows:
(dollars in thousands)
Undistributed net investment income and currency gains $ 53,618
Short-term capital loss carryforward expiring in 2011 (405,043)
Gross unrealized appreciation on investment securities 10,402,358
Gross unrealized depreciation on investment securities (3,408,327)
Net unrealized appreciation on investment securities 6,994,031
Undistributed net investment income and currency gains above include currency
losses of $1,298,000 that were realized during the period November 1, 2002
through August 31, 2003. The short-term capital loss carryforward above reflects
the utilization of a capital loss carryforward of $1,528,612,000. The remaining
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 capital loss carryforwards remain.
Tax basis distributions paid to shareholders from net investment income and
currency gains were as follows (dollars in thousands):
Share class Year ended August 31, 2004 Year ended August 31, 2003
Class A $ 11,834 $ 31,898
Class B - -
Class C - -
Class F 4,078 4,413
Class 529-A 640 455
Class 529-B - -
Class 529-C - -
Class 529-E - 13
Class 529-F 9 1
Class R-1 - 2
Class R-2 - 63
Class R-3 1,019 218
Class R-4 1,782 109
Class R-5 944 336
Total $ 20,306 $ 37,508
4. FEES AND TRANSACTIONS WITH RELATED PARTIES
Capital Research and Management Company ("CRMC"), the fund's investment adviser,
is the parent company of American Funds Service Company ("AFS"), the fund's
transfer agent, and American Funds Distributors, Inc. ("AFD"), the principal
underwriter of the fund's shares.
INVESTMENT ADVISORY SERVICES - The Investment Advisory and Service Agreement
with CRMC provides for monthly fees accrued daily. At the beginning of the year,
these fees were based on a declining series of annual rates beginning with 0.50%
on the first $1 billion of daily net assets and decreasing to 0.276% on such
assets in excess of $55 billion. The Board of Directors approved an amended
agreement effective March 1, 2004, reducing the existing annual rates to 0.280%
from 0.281% on daily net assets in excess of $34 billion but not exceeding $44
billion; 0.275% from 0.278% on daily net assets in excess of $44 billion but not
exceeding $55 billion; and 0.270% from 0.276% on daily net assets in excess of
$55 billion. The new agreement also continued the series of rates to include
additional annual rates of 0.265% on daily net assets in excess of $71 billion
but not exceeding $89 billion and 0.260% on such assets in excess of $89
billion. For the year ended August 31, 2004, the investment advisory services
fee was $205,522,000, which was equivalent to an annualized rate of 0.294% 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 adopted plans of distribution for
all share classes, except Class R-5. Under the plans, the Board of
Directors approves certain categories of expenses that are used to
finance activities primarily intended to sell fund shares. The plans
provide for annual expenses, based on a percentage of average daily
net assets, ranging from 0.25% to 1.00% as noted below. In some cases,
the Board of Directors has approved expense amounts lower than plan
limits. All share classes may use up to 0.25% of average daily net
assets to pay service fees, or to compensate AFD for paying service
fees, to firms that have entered into agreements with AFD for
providing certain shareholder services. Expenses in excess of these
amounts, up to approved limits, may be used to compensate dealers and
wholesalers for shares sold.
For classes A and 529-A, the Board of Directors has also approved the
reimbursement of dealer and wholesaler commissions paid by AFD for
certain shares sold without a sales charge. Each class reimburses 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, 2004, unreimbursed expenses subject to reimbursement
totaled $19,241,000 for Class A. There were no unreimbursed expenses
subject to reimbursement for Class 529-A.
------------------------------------------------ ----------------------------- -----------------------------
Share class Currently approved limits Plan limits
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class A 0.25% 0.25%
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class 529-A 0.25 0.50
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
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, 529-F and R-4 0.25 0.50
------------------------------------------------ ----------------------------- -----------------------------
TRANSFER AGENT SERVICES - The fund has a transfer agent agreement with
AFS for classes A and B. Under this agreement, these share classes
compensate AFS for transfer agent services including shareholder
recordkeeping, communications and transaction processing. AFS is also
compensated for certain transfer agent services provided to all other
share classes from the administrative services fees paid to CRMC
described below.
ADMINISTRATIVE SERVICES - The fund has an administrative services
agreement with CRMC to provide transfer agent and other related
shareholder services for all classes of shares other than classes A
and B. Each relevant class pays CRMC annual fees of 0.15% (0.10% for
Class R-5) based on its respective average daily net assets. Each
relevant class also pays AFS additional amounts for certain transfer
agent services. CRMC and AFS may use these fees to compensate third
parties for performing these services. During the year ended August
31, 2004, CRMC voluntarily agreed to pay a portion of these fees for
Class R-2. Each 529 share class is subject to an additional annual
administrative services fee of 0.10% of its respective average daily
net assets; this fee is payable to the Commonwealth of Virginia for
the maintenance of the CollegeAmerica plan. Although these amounts are
included with administrative services fees in the accompanying
financial statements, the Commonwealth of Virginia is not considered a
related party. Administrative services fees are presented gross of any
payments made by CRMC.
Expenses under the agreements described above for the year ended
August 31, 2004, were as follows (dollars in thousands):
--------------------------------------------------------------------------------------------------------------
Share class Distribution Transfer agent Administrative services
services services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
CRMC Transfer agent Commonwealth of
administrative services Virginia
services administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class A $123,089 $62,133 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class B 43,869 5,386 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class C 40,595 Included $6,089 $1,175 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class F 14,450 Included 8,670 694 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-A 945 Included 962 117 $ 641
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-B 1,786 Included 268 91 179
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-C 2,159 Included 324 90 216
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-E 177 Included 53 6 35
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-F 28 Included 17 2 11
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-1 427 Included 64 20 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-2 4,430 Included 886 2,294 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-3 9,959 Included 2,988 1,734 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-4 4,942 Included 2,965 44 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-5 Not applicable Included 737 18 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Total $246,856 $67,519 $24,023 $6,285 $1,082
--------------------------------------------------------------------------------------------------------------
DEFERRED DIRECTORS' COMPENSATION - Since the adoption of the deferred
compensation plan in 1993, Directors who are unaffiliated with CRMC may elect to
defer the cash payment of part or all of their compensation. These deferred
amounts, which remain as liabilities of the fund, are treated as if invested in
shares of the fund or other American Funds. These amounts represent general,
unsecured liabilities of the fund and vary according to the total returns of the
selected funds. Directors' compensation in the accompanying financial statements
includes $220,000 in current fees (either paid in cash or deferred) and a net
increase of $116,000 in the value of the deferred amounts.
AFFILIATED OFFICERS AND DIRECTORS - Officers and certain Directors of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated
officers or Directors received any compensation directly from the fund.
5. CAPITAL SHARE TRANSACTIONS
Capital share transactions in the fund were as follows (dollars and shares in
thousands):
Reinvestments of
Share class Sales(1) dividends and distributions
Amount Shares Amount Shares
Year ended August 31, 2004
Class A $ 13,997,627 571,535 $ 11,368 479
Class B 1,361,390 57,197 - -
Class C 2,272,540 95,568 - -
Class F 4,026,826 165,027 3,553 150
Class 529-A 396,211 16,197 640 27
Class 529-B 94,663 3,934 - -
Class 529-C 135,685 5,626 - -
Class 529-E 21,280 876 - -
Class 529-F 10,194 420 9 -*
Class R-1 45,559 1,891 - -
Class R-2 652,292 26,868 - -
Class R-3 2,767,267 113,203 1,018 43
Class R-4 3,346,408 136,236 1,779 75
Class R-5 1,025,373 41,161 907 38
Total net increase
(decrease) $ 30,153,315 1,235,739 $ 19,274 812
Year ended August 31, 2003
Class A $ 9,047,567 464,304 $ 30,635 1,635
Class B 1,070,469 55,879 - -
Class C 1,255,978 65,233 - -
Class F 2,106,047 107,747 3,909 209
Class 529-A 210,052 10,828 455 24
Class 529-B 65,004 3,377 - -
Class 529-C 74,845 3,886 - -
Class 529-E 14,036 728 13 1
Class 529-F 4,649 239 1 -*
Class R-1 20,507 1,061 2 -*
Class R-2 304,985 15,642 63 3
Class R-3 740,993 37,695 218 12
Class R-4 400,549 20,284 109 6
Class R-5 190,807 9,343 292 16
Total net increase
(decrease) $ 15,506,488 796,246 $ 35,697 1,906
Share class Repurchases(1) Net increase
Amount Shares Amount Shares
Year ended August 31, 2004
Class A $ (6,407,752) (261,061) $ 7,601,243 310,953
Class B (337,205) (14,098) 1,024,185 43,099
Class C (430,258) (18,004) 1,842,282 77,564
Class F (824,402) (33,759) 3,205,977 131,418
Class 529-A (23,708) (964) 373,143 15,260
Class 529-B (4,482) (185) 90,181 3,749
Class 529-C (8,634) (359) 127,051 5,267
Class 529-E (1,490) (62) 19,790 814
Class 529-F (487) (20) 9,716 400
Class R-1 (13,212) (547) 32,347 1,344
Class R-2 (118,354) (4,877) 533,938 21,991
Class R-3 (399,246) (16,323) 2,369,039 96,923
Class R-4 (439,571) (17,816) 2,908,616 118,495
Class R-5 (154,671) (6,245) 871,609 34,954
Total net increase
(decrease) $ (9,163,472) (374,320) $ 21,009,117 862,231
Year ended August 31, 2003
Class A $ (5,340,089) (281,360) $ 3,738,113 184,579
Class B (293,438) (15,873) 777,031 40,006
Class C (269,689) (14,499) 986,289 50,734
Class F (511,381) (26,978) 1,598,575 80,978
Class 529-A (8,258) (429) 202,249 10,423
Class 529-B (2,057) (107) 62,947 3,270
Class 529-C (3,782) (195) 71,063 3,691
Class 529-E (218) (11) 13,831 718
Class 529-F (57) (3) 4,593 236
Class R-1 (1,954) (99) 18,555 962
Class R-2 (45,532) (2,350) 259,516 13,295
Class R-3 (98,763) (5,062) 642,448 32,645
Class R-4 (51,101) (2,582) 349,557 17,708
Class R-5 (24,991) (1,283) 166,108 8,076
Total net increase
(decrease) $ (6,651,310) (350,831) $ 8,890,875 447,321
* Amount less than one thousand.
(1) Includes exchanges between share classes of the fund.
6. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding short-term
securities, of $30,325,456,000 and $11,934,808,000, respectively, during the
year ended August 31, 2004.
The fund receives a reduction in its custodian fee equal to the amount of
interest calculated on certain cash balances held at the custodian bank. For the
year ended August 31, 2004, the custodian fee of $4,700,000 included $32,000
that was offset by this reduction, rather than paid in cash.
FINANCIAL HIGHLIGHTS (1)
Income (loss) from investment operations(2)
Net
Net asset gains (losses)
value, Net on securities Total from
beginning investment (both realized investment
of period income (loss) and unrealized) operations
CLASS A:
Year ended 8/31/2004 $22.49 $.05 $1.90 $1.95
Year ended 8/31/2003 18.57 .06 3.88 3.94
Year ended 8/31/2002 23.20 .04 (4.62) (4.58)
Year ended 8/31/2001 35.91 .15 (8.62) (8.47)
Year ended 8/31/2000 26.20 .18 12.77 12.95
CLASS B:
Year ended 8/31/2004 22.00 (.13) 1.86 1.73
Year ended 8/31/2003 18.28 (.09) 3.81 3.72
Year ended 8/31/2002 22.98 (.13) (4.57) (4.70)
Year ended 8/31/2001 35.79 (.07) (8.56) (8.63)
Period from 3/15/2000 to 8/31/2000 32.44 - (5) 3.35 3.35
CLASS C:
Year ended 8/31/2004 21.96 (.14) 1.86 1.72
Year ended 8/31/2003 18.26 (.10) 3.80 3.70
Year ended 8/31/2002 22.95 (.13) (4.56) (4.69)
Period from 3/15/2001 to 8/31/2001 23.78 (.08) (.75) (.83)
CLASS F:
Year ended 8/31/2004 22.41 .04 1.90 1.94
Year ended 8/31/2003 18.53 .05 3.87 3.92
Year ended 8/31/2002 23.19 .03 (4.61) (4.58)
Period from 3/15/2001 to 8/31/2001 23.92 .02 (.75) (.73)
CLASS 529-A:
Year ended 8/31/2004 22.47 .04 1.90 1.94
Year ended 8/31/2003 18.56 .07 3.88 3.95
Period from 2/15/2002 to 8/31/2002 22.62 .01 (4.07) (4.06)
CLASS 529-B:
Year ended 8/31/2004 22.20 (.18) 1.89 1.71
Year ended 8/31/2003 18.48 (.12) 3.84 3.72
Period from 2/15/2002 to 8/31/2002 22.62 (.08) (4.06) (4.14)
CLASS 529-C:
Year ended 8/31/2004 22.21 (.17) 1.87 1.70
Year ended 8/31/2003 18.48 (.12) 3.85 3.73
Period from 2/15/2002 to 8/31/2002 22.62 (.08) (4.06) (4.14)
CLASS 529-E:
Year ended 8/31/2004 22.37 (.05) 1.90 1.85
Year ended 8/31/2003 18.55 (.02) 3.87 3.85
Period from 3/1/2002 to 8/31/2002 22.95 (.02) (4.38) (4.40)
CLASS 529-F:
Year ended 8/31/2004 22.45 .02 1.89 1.91
Period from 9/16/2002 to 8/31/2003 18.39 .03 4.06 4.09
FINANCIAL HIGHLIGHTS (1) (continued)
Income (loss) from investment operations(2)
Net
Net asset gains(losses)
value, Net on securities Total from
beginning investment (both realized investment
of period income (loss) and unrealized) operations
CLASS R-1:
Year ended 8/31/2004 $22.28 $(.15) $1.89 $1.74
Year ended 8/31/2003 18.53 (.11) 3.87 3.76
Period from 6/6/2002 to 8/31/2002 21.08 (.03) (2.52) (2.55)
CLASS R-2:
Year ended 8/31/2004 22.26 (.14) 1.89 1.75
Year ended 8/31/2003 18.53 (.10) 3.86 3.76
Period from 5/21/2002 to 8/31/2002 22.11 (.03) (3.55) (3.58)
CLASS R-3:
Year ended 8/31/2004 22.35 (.03) 1.88 1.85
Year ended 8/31/2003 18.55 (.02) 3.86 3.84
Period from 5/21/2002 to 8/31/2002 22.11 (.01) (3.55) (3.56)
CLASS R-4:
Year ended 8/31/2004 22.44 .05 1.90 1.95
Year ended 8/31/2003 18.57 .05 3.87 3.92
Period from 5/28/2002 to 8/31/2002 22.01 .01 (3.45) (3.44)
CLASS R-5:
Year ended 8/31/2004 22.52 .12 1.91 2.03
Year ended 8/31/2003 18.58 .11 3.89 4.00
Period from 5/15/2002 to 8/31/2002 22.40 .03 (3.85) (3.82)
FINANCIAL HIGHLIGHTS (1)
Dividends and distributions
Dividends
(from net Distributions Total Net asset
investment (from capital dividends and value, end
income) gains) distributions of period
CLASS A:
Year ended 8/31/2004 $(.01) $ - $(.01) $24.43
Year ended 8/31/2003 (.02) - (.02) 22.49
Year ended 8/31/2002 (.05) - (.05) 18.57
Year ended 8/31/2001 (.15) (4.09) (4.24) 23.20
Year ended 8/31/2000 (.04) (3.20) (3.24) 35.91
CLASS B:
Year ended 8/31/2004 - - - 23.73
Year ended 8/31/2003 - - - 22.00
Year ended 8/31/2002 - - - 18.28
Year ended 8/31/2001 (.09) (4.09) (4.18) 22.98
Period from 3/15/2000 to 8/31/2000 - - - 35.79
CLASS C:
Year ended 8/31/2004 - - - 23.68
Year ended 8/31/2003 - - - 21.96
Year ended 8/31/2002 - - - 18.26
Period from 3/15/2001 to 8/31/2001 - - - 22.95
CLASS F:
Year ended 8/31/2004 (.02) - (.02) 24.33
Year ended 8/31/2003 (.04) - (.04) 22.41
Year ended 8/31/2002 (.08) - (.08) 18.53
Period from 3/15/2001 to 8/31/2001 - - - 23.19
CLASS 529-A:
Year ended 8/31/2004 (.03) - (.03) 24.38
Year ended 8/31/2003 (.04) - (.04) 22.47
Period from 2/15/2002 to 8/31/2002 - - - 18.56
CLASS 529-B:
Year ended 8/31/2004 - - - 23.91
Year ended 8/31/2003 - - - 22.20
Period from 2/15/2002 to 8/31/2002 - - - 18.48
CLASS 529-C:
Year ended 8/31/2004 - - - 23.91
Year ended 8/31/2003 - - - 22.21
Period from 2/15/2002 to 8/31/2002 - - - 18.48
CLASS 529-E:
Year ended 8/31/2004 - - - 24.22
Year ended 8/31/2003 (.03) - (.03) 22.37
Period from 3/1/2002 to 8/31/2002 - - - 18.55
CLASS 529-F:
Year ended 8/31/2004 (.02) - (.02) 24.34
Period from 9/16/2002 to 8/31/2003 (.03) - (.03) 22.45
FINANCIAL HIGHLIGHTS (1) (continued)
Dividends and distributions
Dividends
(from net Distributions Total Net asset
investment (from capital dividends and value, end
income) gains) distributions of period
CLASS R-1:
Year ended 8/31/2004 - - - $24.02
Year ended 8/31/2003 (.01) - (.01) 22.28
Period from 6/6/2002 to 8/31/2002 - - - 18.53
CLASS R-2:
Year ended 8/31/2004 - - - 24.01
Year ended 8/31/2003 (.03) - (.03) 22.26
Period from 5/21/2002 to 8/31/2002 - - - 18.53
CLASS R-3:
Year ended 8/31/2004 (.02) - (.02) 24.18
Year ended 8/31/2003 (.04) - (.04) 22.35
Period from 5/21/2002 to 8/31/2002 - - - 18.55
CLASS R-4:
Year ended 8/31/2004 (.04) - (.04) 24.35
Year ended 8/31/2003 (.05) - (.05) 22.44
Period from 5/28/2002 to 8/31/2002 - - - 18.57
CLASS R-5:
Year ended 8/31/2004 (.05) - (.05) 24.50
Year ended 8/31/2003 (.06) - (.06) 22.52
Period from 5/15/2002 to 8/31/2002 - - - 18.58
FINANCIAL HIGHLIGHTS (1)
Ratio of expenses Ratio of expenses Ratio of
Net assets, to average net to average net net income (loss)
Total end of period assets before assets after to average
return (3) (in millions) reimbursement reimbursement(4) net assets
CLASS A:
Year ended 8/31/2004 8.65% $52,432 .70% .70% .20%
Year ended 8/31/2003 21.23 41,267 .76 .76 .28
Year ended 8/31/2002 (19.80) 30,644 .75 .75 .18
Year ended 8/31/2001 (25.28) 34,312 .71 .71 .56
Year ended 8/31/2000 53.51 40,671 .70 .70 .58
CLASS B:
Year ended 8/31/2004 7.86 4,788 1.44 1.44 (.55)
Year ended 8/31/2003 20.35 3,490 1.53 1.53 (.49)
Year ended 8/31/2002 (20.45) 2,170 1.52 1.52 (.60)
Year ended 8/31/2001 (25.83) 1,437 1.48 1.48 (.29)
Period from 3/15/2000 to 8/31/2000 10.33 424 .66 .66 (.01)
CLASS C:
Year ended 8/31/2004 7.83 4,814 1.50 1.50 (.60)
Year ended 8/31/2003 20.26 2,762 1.55 1.55 (.52)
Year ended 8/31/2002 (20.44) 1,370 1.55 1.55 (.63)
Period from 3/15/2001 to 8/31/2001 (3.49) 385 .80 .80 (.34)
CLASS F:
Year ended 8/31/2004 8.66 7,237 .72 .72 .17
Year ended 8/31/2003 21.22 3,721 .75 .75 .28
Year ended 8/31/2002 (19.83) 1,576 .77 .77 .15
Period from 3/15/2001 to 8/31/2001 (3.05) 350 .38 .38 .08
CLASS 529-A:
Year ended 8/31/2004 8.63 815 .74 .74 .16
Year ended 8/31/2003 21.35 409 .67 .67 .36
Period from 2/15/2002 to 8/31/2002 (17.95) 144 .86 (6) .86 (6) .07 (6)
CLASS 529-B:
Year ended 8/31/2004 7.70 219 1.62 1.62 (.72)
Year ended 8/31/2003 20.13 120 1.66 1.66 (.63)
Period from 2/15/2002 to 8/31/2002 (18.30) 39 1.66 (6) 1.66 (6) (.74)(6)
CLASS 529-C:
Year ended 8/31/2004 7.65 273 1.61 1.61 (.71)
Year ended 8/31/2003 20.18 136 1.65 1.65 (.61)
Period from 2/15/2002 to 8/31/2002 (18.30) 45 1.64 (6) 1.64 (6) (.72)(6)
CLASS 529-E:
Year ended 8/31/2004 8.27 44 1.09 1.09 (.19)
Year ended 8/31/2003 20.78 23 1.11 1.11 (.08)
Period from 3/1/2002 to 8/31/2002 (19.17) 6 .56 .56 (.10)
CLASS 529-F:
Year ended 8/31/2004 8.53 16 .84 .84 .07
Period from 9/16/2002 to 8/31/2003 22.27 5 .86 (6) .86 (6) .16 (6)
FINANCIAL HIGHLIGHTS (1) (continued)
Ratio of expenses Ratio of expenses Ratio of
Net assets, to average net to average net net income (loss)
Total end of period assets before assets after to average
return (in millions) reimbursement reimbursement(4) net assets
CLASS R-1:
Year ended 8/31/2004 7.81% $57 1.51% 1.51% -.61%
Year ended 8/31/2003 20.29 23 1.59 1.53 (.53)
Period from 6/6/2002 to 8/31/2002 (12.10) 1 .46 .36 (.16)
CLASS R-2:
Year ended 8/31/2004 7.86 857 1.60 1.48 (.57)
Year ended 8/31/2003 20.29 305 1.82 1.49 (.49)
Period from 5/21/2002 to 8/31/2002 (16.19) 8 .49 .42 (.17)
CLASS R-3:
Year ended 8/31/2004 8.28 3,148 1.05 1.05 (.14)
Year ended 8/31/2003 20.75 743 1.11 1.11 (.11)
Period from 5/21/2002 to 8/31/2002 (16.10) 11 .33 .31 (.06)
CLASS R-4:
Year ended 8/31/2004 8.70 3,320 .71 .71 .20
Year ended 8/31/2003 21.19 401 .74 .74 .26
Period from 5/28/2002 to 8/31/2002 (15.63) 3 .25 .20 .05
CLASS R-5:
Year ended 8/31/2004 9.02 1,179 .41 .41 .50
Year ended 8/31/2003 21.61 297 .43 .43 .56
Period from 5/15/2002 to 8/31/2002 (17.05) 95 .13 .13 .14
Year ended August 31
2004 2003 2002 2001 2000
Portfolio turnover rate for all classes of shares 19% 25% 30% 36% 47%
(1) Based on operations for the period shown (unless otherwise noted) and,
accordingly, may not be representative of a full year.
(2) Based on average shares outstanding.
(3) Total returns exclude all sales charges, including contingent deferred
sales charges.
(4) The ratios in this column reflect the impact, if any, of certain
reimbursements and payments from CRMC. During the start-up period for the
retirement plan share classes (except Class R-5), CRMC voluntarily agreed
to pay a portion of the fees related to transfer agent services.
(5) Amount less than one cent.
(6) Annualized.
See Notes to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS 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 investment portfolio,
as of August 31, 2004, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 2004, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the 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, 2004, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Los Angeles, California
October 13, 2004
TAX INFORMATION (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of certain distributions received by
shareholders during such fiscal year. The information below is provided for the
fund's fiscal year ending August 31, 2004.
Individual shareholders are eligible for reduced tax rates on qualified dividend
income. For purposes of computing the dividends eligible for reduced tax rates,
all of the dividends paid by the fund from ordinary income earned during the
fiscal year are considered qualified dividend income. In addition, all of the
dividends paid by the fund from ordinary income earned during the prior fiscal
year are considered qualified dividend income.
Corporate shareholders may exclude up to 70% of qualifying dividends. For
purposes of computing this exclusion, all of the dividends paid by the fund from
ordinary income earned during the fiscal year represent qualifying dividends.
Certain states may exempt from income taxation that portion of dividends paid by
the fund from ordinary income that was derived from direct U.S. government
obligations. For purposes of computing this exclusion, $3,606,000 of the
dividends paid by the fund from ordinary income earned during the fiscal year
were derived from interest on direct U.S. government obligations.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many retirement plan trusts may need this information for their annual
information reporting.
SINCE THE INFORMATION ABOVE IS REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION WHICH WILL BE MAILED IN JANUARY 2005 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 2004 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
EXPENSE EXAMPLE
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs such as initial sales charges on purchase payments and contingent deferred
sales charges on redemptions (loads); and (2) ongoing costs, including
management fees; distribution and service (12b-1) fees; and other expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the fund so you can compare these costs with the ongoing costs of
investing in other mutual funds. The example is based on an investment of $1,000
invested at the beginning of the period and held for the entire period (March 1,
2004 through August 31, 2004).
ACTUAL EXPENSES:
The first line of each share class in the table on the next page provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses paid during period" to estimate the expenses you paid on your account
during this period. There are some account fees that are charged to certain
types of accounts, such as Individual Retirement Accounts and CollegeAmerica
Accounts (generally, a $10 fee is charged to set up the account and an
additional $10 fee is charged to the account annually) that would increase the
amount of expenses paid on your account. In addition, retirement plan
participants may be subject to certain fees charged by the plan sponsor, and
Class F and Class 529-F shareholders may be subject to fees charged by financial
intermediaries, typically ranging from 0.50% to 3.00% of assets annually
depending on services offered. You may use the information in the table on the
next page to estimate the impact of these fees by adding the amount of the fees
to the number in the first line for your share class under the heading entitled
"Expenses paid during period," and subtracting the amount of the fees from the
number in that first line under the heading entitled "Ending account value."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES:
The second line of each share class in the table on the next page provides
information about hypothetical account values and hypothetical expenses based on
the actual expense ratio for the share class and an assumed rate of return of
5.00% per year before expenses, which is not the actual return of the share
class. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the fund and
other funds. To do so, compare this 5.00% hypothetical example with the 5.00%
hypothetical examples that appear in the shareholder reports of the other funds.
There are some account fees that are charged to certain shareholders, such as
Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee
is charged to set up the account and an additional $10 fee is charged to the
account annually) that would increase the amount of expenses paid on your
account. In addition, retirement plan participants may be subject to certain
fees charged by the plan sponsor, and Class F shareholders may be subject to
fees charged by financial intermediaries, typically ranging from 0.50% to 3.00%
of assets annually depending on services offered. You may use the information in
the table on the next page to estimate the impact of these fees by adding the
amount of the fees to the number in the second line for your share class under
the heading entitled "Expenses paid during period," and subtracting the amount
of the fees from the number in that second line under the heading entitled
"Ending account value."
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of each share class in the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
Beginning account Ending account Expenses paid Annualized
value 3/1/2004 value 8/31/2004 during period(1) expense ratio
Class A -- actual return $ 1,000.00 $ 952.06 $ 3.39 .69%
Class A -- assumed 5% return 1,000.00 1021.73 3.52 .69
Class B -- actual return 1,000.00 948.44 7.02 1.43
Class B -- assumed 5% return 1,000.00 1018.00 7.27 1.43
Class C -- actual return 1,000.00 948.34 7.32 1.49
Class C -- assumed 5% return 1,000.00 1017.69 7.58 1.49
Class F -- actual return 1,000.00 952.25 3.49 .71
Class F -- assumed 5% return 1,000.00 1021.63 3.62 .71
Class 529-A -- actual return 1,000.00 952.36 3.49 .71
Class 529-A -- assumed 5% return 1,000.00 1021.63 3.62 .71
Class 529-B -- actual return 1,000.00 948.06 7.91 1.61
Class 529-B -- assumed 5% return 1,000.00 1017.09 8.19 1.61
Class 529-C -- actual return 1,000.00 947.67 7.85 1.60
Class 529-C -- assumed 5% return 1,000.00 1017.14 8.13 1.60
Class 529-E -- actual return 1,000.00 950.54 5.31 1.08
Class 529-E -- assumed 5% return 1,000.00 1019.76 5.50 1.08
Class 529-F -- actual return 1,000.00 951.52 4.08 .83
Class 529-F -- assumed 5% return 1,000.00 1021.02 4.23 .83
Class R-1 -- actual return 1,000.00 948.29 7.37 1.50
Class R-1 -- assumed 5% return 1,000.00 1017.64 7.63 1.50
Class R-2 -- actual return 1,000.00 948.25 7.22 1.47
Class R-2 -- assumed 5% return 1,000.00 1017.80 7.48 1.47
Class R-3 -- actual return 1,000.00 950.47 5.06 1.03
Class R-3 -- assumed 5% return 1,000.00 1020.01 5.24 1.03
Class R-4 -- actual return 1,000.00 952.28 3.49 .71
Class R-4 -- assumed 5% return 1,000.00 1021.63 3.62 .71
Class R-5 -- actual return 1,000.00 953.69 2.02 .41
Class R-5 -- assumed 5% return 1,000.00 1023.14 2.09 .41
(1) Expenses are equal to the annualized expense ratio, multiplied by the
average account value over the period, multiplied by the number of days in
the period (184), and divided by 365 (to reflect the one-half year period).
BOARD OF DIRECTORS
"NON-INTERESTED" DIRECTORS
YEAR FIRST
ELECTED
A DIRECTOR
NAME AND AGE OF THE FUND(1) PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
Joseph C. Berenato, 58 2003 Chairman of the Board and CEO, Ducommun Incorporated (aerospace
components manufacturer)
Robert A. Fox, 67 1970 Managing General Partner, Fox Investments LP; former Professor,
University of California; retired President and CEO, Foster Farms
(poultry producer)
Leonade D. Jones, 56 1993 Co-founder, VentureThink LLC (developed and managed e-commerce
businesses) and Versura Inc. (education loan exchange); former
Treasurer, The Washington Post Company
John G. McDonald, 67 1976 The Stanford Investors Professor, Graduate School of Business,
Stanford University
Gail L. Neale, 69 1998 President, The Lovejoy Consulting Group, Inc. (a pro bono consulting
group advising nonprofit organizations)
Henry E. Riggs, 69 1989 President Emeritus, Keck Graduate Institute of Applied Life Sciences
Patricia K. Woolf, Ph.D., 70 1985 Private investor; corporate director; lecturer, Department of
Molecular Biology, Princeton University
"NON-INTERESTED" DIRECTORS
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX(2)
OVERSEEN BY
NAME AND AGE DIRECTOR OTHER DIRECTORSHIPS(3) HELD BY DIRECTOR
Joseph C. Berenato, 58 4 Ducommun Incorporated
Robert A. Fox, 67 7 Crompton Corporation
Leonade D. Jones, 56 6 None
John G. McDonald, 67 8 iStar Financial, Inc.; Plum Creek Timber Co.; Scholastic Corporation;
Varian, Inc.
Gail L. Neale, 69 6 None
Henry E. Riggs, 69 4 None
Patricia K. Woolf, Ph.D., 70 6 Crompton Corporation; First Energy Corporation; National Life Holding
Co.
"INTERESTED" DIRECTORS(4)
YEAR FIRST
ELECTED A
DIRECTOR OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
NAME, AGE AND OFFICER AND POSITIONS HELD WITH AFFILIATED ENTITIES OR THE
POSITION WITH FUND OF THE FUND(1) PRINCIPAL UNDERWRITER OF THE FUND
James F. Rothenberg, 58 1997 President and Director, Capital Research and
Chairman of the Board Management Company; Director, American Funds Distributors, Inc.;(5)
Director, American Funds Service Company;(5) Director, The Capital
Group Companies, Inc.;(5) Director, Capital Group Research, Inc.(5)
Donald D. O'Neal, 44 1995 Senior Vice President, Capital Research and
President Management Company
"INTERESTED" DIRECTORS(4)
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX(2)
NAME, AGE AND OVERSEEN BY
POSITION WITH FUND DIRECTOR OTHER DIRECTORSHIPS(3) HELD BY DIRECTOR
James F. Rothenberg, 58 3 None
Chairman of the Board
Donald D. O'Neal, 44 3 None
President
THE STATEMENT OF ADDITIONAL INFORMATION INCLUDES ADDITIONAL INFORMATION ABOUT
FUND DIRECTORS AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST BY CALLING AMERICAN
FUNDS SERVICE COMPANY AT 800/421-0180. THE ADDRESS FOR ALL DIRECTORS AND
OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET, LOS ANGELES, CA 90071, ATTENTION:
FUND SECRETARY.
(1) Directors and officers of the fund serve until their resignation, removal
or retirement.
(2) Capital Research and Management Company manages the American Funds,
consisting of 29 funds. Capital Research and Management Company also manages
American Funds Insurance Series,(R) which serves as the underlying
investment vehicle for certain variable insurance contracts; and Endowments,
whose shareholders are limited to certain nonprofit organizations.
(3) This includes all directorships (other than those in the American Funds)
that are held by each Director as a director of a public company or a
registered investment company.
(4) "Interested persons" within the meaning of the 1940 Act, 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).
(5) Company affiliated with Capital Research and Management Company.
(6) All of the officers listed, except Messrs. Beleson, Merritt and Vogt, 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.
OTHER OFFICERS
YEAR FIRST
ELECTED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
NAME, AGE AND AN OFFICER AND POSITIONS HELD WITH AFFILIATED ENTITIES OR
POSITION WITH FUND OF THE FUND(1) THE PRINCIPAL UNDERWRITER OF THE FUND
Gordon Crawford, 57 1992 Senior Vice President and Director, Capital
Senior Vice President Research and Management Company
Paul G. Haaga, Jr., 55 1994 Executive Vice President and Director, Capital
Senior Vice President Research and Management Company;
Director, The Capital Group Companies, Inc.(5)
Bradley J. Vogt,(6) 39 1999 President and Director, Capital Research
Senior Vice President Company;5 Director, American Funds Distributors, Inc.(5)
Richard M. Beleson,(6) 50 1992 Senior Vice President, Capital Research Company;(5)
Vice President Director, Capital Research and Management Company
Michael T. Kerr, 45 1998 Senior Vice President, Capital Research Company(5)
Vice President
Mark E. Merritt,(6) 35 2004 Vice President and Director, Capital Research
Vice President Company(5)
Patrick F. Quan, 46 1986-1998 Vice President -- Fund Business Management
Secretary 2000 Group, Capital Research and Management Company
Sheryl F. Johnson, 36 1998 Vice President -- Fund Business Management
Treasurer Group, Capital Research and Management Company
David A. Pritchett, 38 1999 Vice President -- Fund Business Management
Assistant Treasurer Group, Capital Research and Management Company
OFFICE OF THE FUND
One Market
Steuart Tower, Suite 1800
Mailing address: P.O. Box 7650
San Francisco, CA 94120-7650
INVESTMENT ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 25065
Santa Ana, CA 92799-5065
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
CUSTODIAN OF ASSETS
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02105-1713
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street
Los Angeles, CA 90071-2228
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Two California Plaza
350 South Grand Avenue
Los Angeles, CA 90071-3462
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES
AND EXPENSES OF THE AMERICAN FUNDS AND COLLEGEAMERICA. THIS AND OTHER IMPORTANT
INFORMATION IS CONTAINED IN THE FUND'S PROSPECTUS AND THE COLLEGEAMERICA PROGRAM
DESCRIPTION, WHICH CAN BE OBTAINED FROM YOUR FINANCIAL ADVISER AND SHOULD BE
READ CAREFULLY BEFORE INVESTING. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY AT 800/421-0180 OR VISIT THE AMERICAN FUNDS WEBSITE AT
AMERICANFUNDS.COM.
"AMERICAN FUNDS PROXY VOTING GUIDELINES" -- WHICH DESCRIBES HOW WE VOTE PROXIES
RELATING TO PORTFOLIO SECURITIES -- IS AVAILABLE UPON REQUEST, FREE OF CHARGE,
BY CALLING AMERICAN FUNDS SERVICE COMPANY, VISITING THE AMERICAN FUNDS WEBSITE
OR ACCESSING THE U.S. SECURITIES AND EXCHANGE COMMISSION WEBSITE AT WWW.SEC.GOV.
THE FUND'S PROXY VOTING RECORD FOR THE 12 MONTHS ENDED JUNE 30, 2004, IS ALSO
AVAILABLE ON THE AMERICAN FUNDS AND SEC WEBSITES.
A complete portfolio of The Growth Fund of America's investments is available
upon request, free of charge, by calling American Funds Service Company or
accessing the U.S. Securities and Exchange Commission website.
The Growth Fund of America files a complete list of its portfolio holdings with
the U.S. Securities and Exchange Commission for the first and third quarters of
each fiscal year on Form N-Q. Forms N-Q are available free of charge, upon
request, by accessing the U.S. Securities and Exchange Commission website or by
calling American Funds Service Company. You may also review or, for a fee, copy
the forms at the Commission's Public Reference Room in Washington, D.C.
(800/SEC-0330).
This report is for the information of shareholders of The Growth Fund of
America, but it may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the fund. If used as
sales material after December 31, 2004, this report must be accompanied by an
American Funds statistical update for the most recently completed calendar
quarter.
[logo - American Funds(R)]
The right choice for the long term(R)
WHAT MAKES AMERICAN FUNDS DIFFERENT?
For more than 70 years, we have followed a consistent philosophy that we firmly
believe is in our investors' best interests. The range of opportunities offered
by our family of just 29 carefully conceived, broadly diversified funds has
attracted over 25 million shareholder accounts.
Our unique combination of strengths includes these five factors:
o A LONG-TERM, VALUE-ORIENTED APPROACH
Rather than follow fads, we pursue a consistent strategy, focusing on each
investment's long-term potential.
o AN UNPARALLELED GLOBAL RESEARCH EFFORT
American Funds draws on one of the industry's most globally integrated
research networks.
o THE MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Every American Fund is divided among a number of portfolio counselors. Each
takes responsibility for a portion independently, within each fund's
objectives; in most cases, research analysts manage a portion as well. Over
time this method has contributed to a consistency of results and continuity
of management.
o EXPERIENCED INVESTMENT PROFESSIONALS
The recent market decline was not the first for most of the portfolio
counselors who serve the American Funds. More than half of them were in the
investment business before the sharp market decline of 1987.
o A COMMITMENT TO LOW OPERATING EXPENSES
American Funds' operating expenses are among the lowest in the mutual fund
industry. Our portfolio turnover rates are low as well, keeping transaction
costs and tax consequences contained.
29 MUTUAL FUNDS, CONSISTENT PHILOSOPHY, CONSISTENT RESULTS
o GROWTH FUNDS
Emphasis on long-term growth through stocks
AMCAP Fund(R)
EuroPacific Growth Fund(R)
> The Growth Fund of America(R)
The New Economy Fund(R)
New Perspective Fund(R)
New World Fund(SM)
SMALLCAP World Fund(R)
o GROWTH-AND-INCOME FUNDS
Emphasis on long-term growth and dividends through stocks
American Mutual Fund(R)
Capital World Growth and Income Fund(SM)
Fundamental Investors(SM)
The Investment Company of America(R)
Washington Mutual Investors Fund(SM)
o EQUITY-INCOME FUNDS
Emphasis on above-average income and growth through stocks and/or bonds
Capital Income Builder(R)
The Income Fund of America(R)
o BALANCED FUND
Emphasis on long-term growth and current income through stocks and bonds
American Balanced Fund(R)
o BOND FUNDS
Emphasis on current income through bonds
American High-Income Trust(SM)
The Bond Fund of America(SM)
Capital World Bond Fund(R)
Intermediate Bond Fund of America(R)
U.S. Government Securities Fund(SM)
o TAX-EXEMPT BOND FUNDS
Emphasis on tax-free current income through municipal bonds
American High-Income Municipal Bond Fund(R)
Limited Term Tax-Exempt Bond Fund of America(SM)
The Tax-Exempt Bond Fund of America(R)
STATE-SPECIFIC TAX-EXEMPT FUNDS
The Tax-Exempt Fund of California(R)
The Tax-Exempt Fund of Maryland(R)
The Tax-Exempt Fund of Virginia(R)
o MONEY MARKET FUNDS
The Cash Management Trust of America(R)
The Tax-Exempt Money Fund of America(SM)
The U.S. Treasury Money Fund of America(SM)
THE CAPITAL GROUP COMPANIES
American Funds
Capital Research and Management
Capital International
Capital Guardian
Capital Bank and Trust
Lit. No. MFGEAR-905-1004P
Litho in USA AGD/AL/8057-S1909
Printed on recycled paper
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, P.O. Box 7650, San
Francisco, California 94120.
ITEM 3 - Audit Committee Financial Expert
The Registrant's Board has determined that Leonade D. Jones, 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
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
Fees billed by the Registrant's auditors for each of the last two fiscal years,
including 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 a description of the nature of the services comprising the
fees, are listed below:
Registrant:
a) Audit Fees:
2003 $56,000
2004 $57,000
b) Audit- Related Fees:
2003 none
2004 $8,000
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 Auditing Standards Number 70
issued by the American Institute of
Certified Public Accountants.
c) Tax Fees:
2003 $5,000
2004 $6,000
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:
2003 none
2004 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):
b) Audit- Related Fees:
2003 $339,000
2004 $259,000
The audit-related fees consist of assurance
and related services relating to the
examination of the Registrant's transfer
agency and investment adviser conducted in
accordance with Statement on Auditing
Standards Number 70 issued by the American
Institute of Certified Public Accountants.
c) Tax Fees:
2003 none
2004 none
d) All Other Fees:
2003 none
2004 none
The Registrant's Audit Committee will pre-approve all audit and permissible
non-audit services that the Committee considers compatible with maintaining the
auditors' independence. 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 services listed above under paragraphs
b, c and d.
Aggregate non-audit fees paid to the Registrant's auditors, including fees for
all services billed to the Registrant and the adviser and affiliates that
provide ongoing services to the Registrant were $352,000 for fiscal year 2003
and $311,000 for fiscal year 2004. 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.
ITEM 6 - Schedule of Investments
[logo - AMERICAN FUNDS (r)]
THE GROWTH FUND OF AMERICA
Investment portfolio
August 31, 2004
Market value
COMMON STOCKS -- 89.63% Shares (000)
CONSUMER DISCRETIONARY -- 19.68%
Time Warner Inc.(1) 122,900,000 $ 2,009,415
Target Corp. 32,870,000 1,465,345
Lowe's Companies, Inc. 28,320,400 1,407,524
Comcast Corp., Class A(1) 29,041,387 818,096
Comcast Corp., Class A, special nonvoting stock(1) 16,756,000 464,979
IAC/InterActiveCorp(1) 42,750,000 975,127
Carnival Corp., units 16,459,100 753,662
News Corp. Ltd., preferred (ADR) 24,520,367 729,481
Liberty Media Corp., Class A(1) 68,625,000 611,449
Cox Communications, Inc., Class A(1) 16,681,200 548,144
eBay Inc.(1) 6,146,600 531,927
Starbucks Corp.(1) 11,329,200 489,875
Best Buy Co., Inc. 10,530,000 489,856
Limited Brands, Inc. 20,700,000 415,656
Clear Channel Communications, Inc. 9,905,000 331,917
Office Depot, Inc.(1) 15,640,000 250,396
Viacom Inc., Class B, nonvoting 7,025,000 234,003
Viacom Inc., Class A 250,000 8,465
Fox Entertainment Group, Inc., Class A(1) 8,870,000 240,732
Kohl's Corp.(1) 4,575,000 226,371
Harrah's Entertainment, Inc. 4,650,000 224,083
Michaels Stores, Inc. 3,350,000 192,055
Amazon.com, Inc.(1) 4,500,000 171,630
UnitedGlobalCom, Inc., Class A(1) 25,200,000 171,360
Gap, Inc. 9,000,000 168,660
Walt Disney Co. 7,000,000 157,150
Harley-Davidson Motor Co. 2,407,200 146,887
Liberty Media International, Inc., Class A(1) 4,260,016 143,989
A. H. Belo Corp., Class A 4,850,000 111,259
Ross Stores, Inc. 5,225,000 110,509
Toys "R" Us, Inc.(1) 6,000,000 97,440
Dana Corp. 5,000,000 94,350
Magna International Inc., Class A 1,251,000 93,174
Brinker International, Inc.(1) 3,000,000 91,350
International Game Technology 3,000,000 86,550
Big Lots, Inc.(1),(2) 7,000,000 85,330
Interpublic Group of Companies, Inc.(1) 7,700,000 81,235
Outback Steakhouse, Inc. 1,996,700 78,151
TJX Companies, Inc. 3,000,000 63,480
Yamada Denki Co., Ltd. 1,725,000 62,580
MGM Mirage, Inc.(1) 1,386,100 57,301
McDonald's Corp. 1,300,000 35,126
DirecTV Group Inc.(1) 2,000,000 31,740
Circuit City Stores, Inc. 2,300,000 29,831
15,587,640
INFORMATION TECHNOLOGY -- 18.09%
Microsoft Corp. 63,657,125 $ 1,737,840
Texas Instruments Inc. 42,550,000 831,427
Applied Materials, Inc.(1) 49,665,000 789,177
First Data Corp. 18,340,000 774,865
Yahoo! Inc.(1) 26,452,154 754,151
Taiwan Semiconductor Manufacturing Co. Ltd. 520,321,765 722,456
Maxim Integrated Products, Inc.(2) 16,590,000 720,504
Linear Technology Corp. 14,425,000 515,982
Corning Inc.(1) 46,820,000 473,818
Analog Devices, Inc. 11,716,666 406,803
Xilinx, Inc. 14,800,000 405,964
Cisco Systems, Inc.(1) 20,614,500 386,728
Automatic Data Processing, Inc. 8,750,000 347,988
Sun Microsystems, Inc.(1) 83,147,700 319,287
Micron Technology, Inc.(1) 27,510,000 316,640
PeopleSoft, Inc.(1) 18,188,200 316,475
Altera Corp.(1) 15,700,000 297,044
Microchip Technology Inc. 10,225,000 269,838
Intuit Inc.(1) 6,334,900 267,903
KLA-Tencor Corp.(1) 6,475,000 241,906
International Business Machines Corp. 2,615,000 221,464
CDW Corp. 3,500,000 204,750
EMC Corp.(1) 17,700,000 190,629
Flextronics International Ltd.(1) 14,075,000 174,671
Sabre Holdings Corp., Class A(2) 7,062,811 162,445
Cadence Design Systems, Inc.(1) 12,400,000 154,132
T-Online International AG(1) 16,000,000 153,358
QUALCOMM Inc. 4,000,000 152,200
Fujitsu Ltd. 22,260,000 138,614
Advanced Micro Devices, Inc.(1) 12,000,000 137,160
Ceridian Corp.(1) 7,240,900 133,884
Solectron Corp.(1) 25,120,600 129,622
ASML Holding NV (New York registered)(1) 9,625,000 124,548
Hirose Electric Co., Ltd. 1,265,000 123,038
Murata Manufacturing Co., Ltd. 2,244,000 111,911
Hoya Corp. 1,051,000 101,837
Samsung Electronics Co., Ltd. 257,770 100,941
Hewlett-Packard Co. 5,138,500 91,928
Nortel Networks Corp.(1) 22,300,000 83,848
Rohm Co., Ltd. 782,000 81,518
Teradyne, Inc.(1) 6,250,000 80,438
Hon Hai Precision Industry Co., Ltd. 22,884,974 75,382
Paychex, Inc. 2,273,019 67,440
National Instruments Corp. 2,250,000 58,657
Compuware Corp.(1) 12,054,100 54,605
SINA Corp.(1),(2) 2,552,000 53,158
Oracle Corp.(1) 4,475,000 44,616
Dell Inc.(1) 1,080,000 37,627
VIA Technologies, Inc. 49,411,000 34,157
Jabil Circuit, Inc.(1) 1,640,000 33,833
Sanmina-SCI Corp.(1) 4,570,000 31,624
Agere Systems Inc., Class A(1) 22,166,247 26,821
Electronic Data Systems Corp. 1,200,000 23,064
Motorola, Inc. 1,276,500 20,615
Homestore, Inc.(1) 4,100,000 8,938
Cypress Semiconductor Corp.(1) 300,000 2,928
14,323,197
HEALTH CARE -- 12.35%
Sanofi-Aventis 17,990,129 $1,279,554
Biogen Idec Inc.(1) 15,911,000 944,000
Forest Laboratories, Inc.(1),(2) 20,311,800 931,296
AstraZeneca PLC (Sweden) 10,818,000 501,409
AstraZeneca PLC (ADR) 2,797,000 130,144
AstraZeneca PLC 2,800,000 129,087
Eli Lilly and Co. 10,700,000 678,915
Amgen Inc.(1) 11,160,000 661,676
Guidant Corp. 10,062,200 601,720
Elan Corp., PLC (ADR)(1) 17,266,400 390,739
Gilead Sciences, Inc.(1) 4,750,000 328,367
Genentech, Inc.(1) 6,500,000 317,070
Express Scripts, Inc.(1),(2) 4,710,000 297,672
Medtronic, Inc. 5,580,000 277,605
Anthem, Inc.(1) 2,892,400 234,979
Sepracor Inc.(1) 4,250,000 210,842
Allergan, Inc. 2,725,000 203,421
Aetna Inc. 2,020,000 187,153
St. Jude Medical, Inc.(1) 2,125,000 142,906
HCA Inc. 3,220,000 124,968
Celgene Corp.(1) 2,200,000 124,850
American Pharmaceutical Partners, Inc.(1),(2) 3,800,000 115,558
Novo Nordisk A/S, Class B 2,000,000 106,852
Pfizer Inc 3,125,000 102,094
OSI Pharmaceuticals, Inc.(1) 1,500,000 89,385
Amylin Pharmaceuticals, Inc.(1) 4,500,000 89,055
Applera Corp. -- Applied Biosystems Group 4,100,000 78,064
Applera Corp. -- Celera Genomics Group(1) 528,800 5,695
Caremark Rx, Inc.(1) 2,700,000 77,490
Lincare Holdings Inc.(1) 2,200,000 70,708
Roche Holding AG 625,000 60,652
Affymetrix, Inc.(1) 2,000,000 55,600
Andrx Group(1) 2,720,000 54,835
ImClone Systems Inc.(1) 1,000,000 53,280
Millennium Pharmaceuticals, Inc.(1) 4,000,000 47,560
IDEXX Laboratories, Inc.(1) 946,700 46,114
ICOS Corp.(1) 1,000,000 26,090
Schering-Plough Corp. 278,200 5,136
9,782,541
ENERGY -- 9.34%
Schlumberger Ltd. 14,198,300 877,455
Burlington Resources Inc.(2) 19,760,000 715,905
Devon Energy Corp. 7,695,000 498,713
LUKoil Holding (ADR) 3,750,000 442,500
Transocean Sedco Forex Inc.(1) 12,649,900 388,352
Suncor Energy Inc. 13,303,862 369,394
EOG Resources, Inc.(2) 6,200,000 358,174
Halliburton Co. 11,905,000 347,269
Petro-Canada 6,034,700 282,403
Noble Corp.(1) 6,675,000 268,468
BG Group PLC 40,291,737 249,006
ENSCO International Inc.(2) 8,235,000 240,133
Nexen Inc. 6,225,646 221,938
Canadian Natural Resources, Ltd. 6,200,000 201,493
Diamond Offshore Drilling, Inc. 6,425,000 163,323
Pogo Producing Co.(2) 3,644,400 160,281
Baker Hughes Inc. 4,000,000 157,320
Rowan Companies, Inc.(1),(2) 6,450,000 156,864
Occidental Petroleum Corp. 3,000,000 154,950
Shell Canada Ltd. 2,980,000 147,889
BJ Services Co. 3,000,000 144,150
Apache Corp. 3,145,060 140,553
Weatherford International Ltd.(1) 3,000,000 139,020
Cross Timbers Oil Co. 4,600,000 128,984
Norsk Hydro ASA (ADR) 1,567,800 98,081
Premcor Inc.(1) 2,814,200 94,360
Imperial Oil Ltd. 2,007,577 94,024
Exxon Mobil Corp. 1,900,000 87,590
Murphy Oil Corp. 878,000 66,298
7,394,890
INDUSTRIALS -- 8.44%
Tyco International Ltd. 32,675,000 1,023,381
General Electric Co. 23,740,000 778,435
FedEx Corp. 6,822,300 559,360
Illinois Tool Works Inc. 5,950,000 543,176
Boeing Co. 10,200,000 532,644
Southwest Airlines Co. 35,079,877 519,884
United Parcel Service, Inc., Class B 7,078,300 517,070
General Dynamics Corp. 5,120,700 499,985
3M Co. 3,940,000 324,498
Northrop Grumman Corp. 5,900,200 304,745
Ryanair Holdings PLC (ADR)(1) 6,835,000 212,227
Robert Half International Inc. 6,610,000 161,945
Burlington Northern Santa Fe Corp. 3,950,000 141,410
Allied Waste Industries, Inc.(1) 13,500,000 138,240
Monster Worldwide, Inc.(1) 5,775,000 116,828
Manpower Inc. 2,400,000 101,352
Deere & Co. 1,200,000 75,924
Raytheon Co. 2,100,000 72,933
Bombardier Inc., Class B 13,271,050 30,598
United Rentals, Inc.(1) 1,927,600 28,316
6,682,951
FINANCIALS -- 8.12%
American International Group, Inc. 27,480,200 1,957,689
Freddie Mac 15,306,600 1,027,379
Fannie Mae 13,423,200 999,357
XL Capital Ltd., Class A 4,665,000 327,483
Bank of New York Co., Inc. 10,695,000 318,711
Mitsubishi Estate Co., Ltd. 26,500,000 299,610
Capital One Financial Corp. 2,500,000 169,400
Berkshire Hathaway Inc., Class A(1) 1,850 160,950
Wells Fargo & Co. 2,730,000 160,387
Citigroup Inc. 2,660,000 123,903
Mizuho Financial Group, Inc. 30,000 121,785
Marsh & McLennan Companies, Inc. 2,475,900 110,648
Sumitomo Realty & Development Co., Ltd. 10,000,000 109,938
SunTrust Banks, Inc. 1,500,000 102,150
Chubb Corp. 1,500,000 102,015
American Express Co. 1,700,000 85,034
Aon Corp. 3,218,600 83,523
Mitsui Sumitomo Insurance Co., Ltd. 8,000,000 71,124
Protective Life Corp. 1,500,000 58,695
City National Corp. 675,000 44,537
6,434,318
CONSUMER STAPLES -- 5.29%
Altria Group, Inc. 26,700,000 $ 1,306,965
Walgreen Co. 23,560,000 858,762
PepsiCo, Inc. 6,275,000 313,750
Anheuser-Busch Companies, Inc. 5,930,000 313,104
Coca-Cola Co. 6,965,000 311,405
Procter & Gamble Co. 3,520,000 197,014
Kerry Group PLC, Class A 8,230,668 171,413
Unilever NV (New York registered) 2,800,000 168,168
Wal-Mart Stores, Inc. 3,050,000 160,644
Avon Products, Inc. 3,200,000 141,376
Wm. Wrigley Jr. Co. 1,330,000 82,500
Whole Foods Market, Inc. 974,800 75,771
General Mills, Inc. 1,235,000 58,354
SYSCO Corp. 1,000,000 32,140
4,191,366
TELECOMMUNICATION SERVICES -- 3.29%
Vodafone Group PLC (ADR) 33,010,000 755,929
Vodafone Group PLC 68,465,000 155,967
AT&T Wireless Services, Inc.(1) 42,672,500 623,872
Sprint Corp. 24,545,350 483,053
Telefonica, SA (ADR) 5,000,000 214,600
KDDI Corp. 30,000 144,930
China Unicom Ltd. 150,000,000 110,578
Deutsche Telekom AG(1) 5,000,000 87,263
AT&T Corp. 2,000,000 29,560
2,605,752
MATERIALS -- 2.58%
Freeport-McMoRan Copper & Gold Inc., Class B 8,011,100 301,458
Inco Ltd.(1) 7,000,000 238,980
Newmont Mining Corp. 4,700,000 208,633
Phelps Dodge Corp. 2,500,000 203,900
BHP Billiton Ltd. 19,516,661 181,069
Rio Tinto PLC 7,000,000 174,179
CONSOL Energy Inc.(3) 3,700,000 118,696
CONSOL Energy Inc. 800,000 25,664
CRH PLC 5,969,432 135,661
Dow Chemical Co. 2,606,600 111,588
Potash Corp. of Saskatchewan Inc. 1,904,000 105,710
Nitto Denko Corp. 2,111,000 93,064
Sealed Air Corp.(1) 1,580,000 77,610
Barrick Gold Corp. 3,400,000 68,000
2,044,212
UTILITIES -- 0.13%
Questar Corp. 2,475,000 100,683
MISCELLANEOUS -- 2.32%
Other common stock securities in initial period of acquisition 1,839,893
TOTAL COMMON STOCKS (cost: $63,967,460,000) 70,987,443
Market value
RIGHTS AND WARRANTS -- 0.00% Shares (000)
TELECOMMUNICATION SERVICES -- 0.00%
Broadview Networks Holdings, Inc., Series E, warrants, expire 2012 (3),(4) 634,116 $ 1,325
Broadview Networks Holdings, Inc., Series E, warrants, expire 2012 (3),(4) 96,812 202
1,527
CONSUMER DISCRETIONARY -- 0.00%
NTL Inc., Series A, warrants, expire 2011 40,425 197
TOTAL RIGHTS AND WARRANTS (cost: $20,166,000) 1,724
CONVERTIBLE SECURITIES -- 0.12%
FINANCIALS -- 0.11%
SMFG Finance (Cayman) Ltd. 2.25% mandatorily exchangeable preferred 2005, units 4,572,000,000 88,866
TELECOMMUNICATION SERVICES -- 0.01%
Broadview Networks Holdings, Inc., Series E, convertible preferred (1),(3),(4) 1,588,972 3,337
INFORMATION TECHNOLOGY -- 0.00%
ProAct Technologies Corp., Series C, convertible preferred (1),(3),(4) 6,500,000 2,665
TOTAL CONVERTIBLE SECURITIES (cost: $89,044,000) 94,868
Principal amount
BONDS AND NOTES -- 0.02% (000)
CONSUMER DISCRETIONARY -- 0.02%
AOL Time Warner Inc. 5.625% 2005 10,795 11,036
TOTAL BONDS AND NOTES (cost: $10,582,000) 11,036
SHORT-TERM SECURITIES -- 10.09%
U.S. Treasury Bills 0.963%-1.517% due 9/2-11/18/2004 2,825,200 2,821,493
Federal Home Loan Bank 1.33%-1.625% due 9/8-11/19/2004 252,762 252,258
Freddie Mac 1.32%-1.685% due 9/1-11/23/2004 225,000 224,561
Wells Fargo & Co. 1.40%-1.60% due 9/21-10/19/2004 200,000 199,998
State Street Bank & Trust 1.35%-1.62% due 9/8-11/1/2004 200,000 199,997
J.P. Morgan Chase & Co. 1.42%-1.50% due 9/22-9/27/2004 125,000 124,876
Park Avenue Receivables Co. LLC 1.39%-1.56% due 9/3-10/4/2004(3) 75,000 74,958
DuPont (E.I.) de Nemours & Co. 1.33%-1.55% due 9/10-10/19/2004 200,000 199,758
Proctor & Gamble Co. 1.34%-1.61% due 9/9-11/17/2004(3) 200,000 199,717
Edison Asset Securitization LLC 1.39%-1.63% due 9/17-10/27/2004(3) 100,000 99,818
General Electric Capital Services Inc. 1.40% due 9/20/2004 50,000 49,960
General Electric Capital Corp. 1.42%-1.58% due 9/27-10/15/2004 50,000 49,922
Wal-Mart Stores Inc. 1.34%-1.60% due 9/8-11/9/2004(3) 200,000 199,680
Fannie Mae 1.32%-1.62% due 9/13-11/3/2004 200,000 199,672
Pfizer Inc.1.33%-1.62% due 9/7-11/16/2004(3) 200,000 199,592
CAFCO, LLC 1.50%-1.63% due 9/24-11/5/2004(3) 150,000 149,673
Ciesco LLC 1.52%-1.60% due 10/8-10/22/2004 50,000 49,902
Bank of America Corp. 1.51%-1.62% due 10/15-11/1/2004 150,000 149,611
Receivables Capital Corp. 1.51%-1.52% due 9/3-10/12/2004(3) 50,000 49,943
Coca-Cola Co. 1.50%-1.60% due 10/22-11/8/2004 200,000 199,494
Variable Funding Capital Corp. 1.40%-1.51% due 9/10-9/21/2004(3) 150,000 149,895
Gannett Co. 1.41%-1.49% due 9/14-9/24/2004(3) 150,000 149,880
International Bank for Reconstruction and Development 1.23%-1.595% due
9/8-11/15/2004 150,000 149,763
Exxon Asset Management Co. 1.50% due 10/8-10/18/2004(3) 150,000 149,739
New Center Asset Trust 1.40%-1.63% due 9/24-11/8/2004 150,000 149,725
Abbott Laboratories Inc. 1.34%-1.50% due 9/14-10/19/2004(3) 140,000 139,815
Three Pillars Funding Corp. 1.48%-1.56% due 9/1-9/27/2004(3) 125,000 124,937
Private Export Funding Corp. 1.49%-1.50% due 9/27-10/12/2004(3) 125,000 124,826
Federal Farm Credit Banks 1.39%-1.64% due 9/22-11/29/2004 125,000 124,793
FCAR Owner Trust I 1.53%-1.61% due 10/4-10/25/2004 125,000 124,755
AIG Funding, Inc. 1.26%-1.52% due 9/7-10/13/2004 100,000 99,923
American General Finance Corp. 1.38%-1.51%% due 9/13/2004 20,000 19,990
Triple-A One Funding Corp. 1.45%-1.57% due 9/2-10/4/2004(3) 120,000 119,888
Tennessee Valley Authority 1.30%-1.39% due 9/9-9/16/2004 100,000 99,955
ChevronTexaco Corp. 1.48%-1.50% due 9/28-10/15/2004 100,000 99,848
IBM Credit Corp. 1.53%-1.54%% due 11/2/2004 100,000 99,718
Caterpillar Financial Services Corp. 1.34%-1.60% due 9/1-11/3/2004 75,000 74,888
Netjets Inc. 1.51%-1.61% due 10/6-10/26/2004(3) 75,000 74,847
American Express Credit Corp. 1.29.% due 9/1/2004 50,000 49,998
Verizon Network Funding Corp. 1.36%-1.50% due 9/3-9/20/2004 50,000 49,980
Household Finance Corp. 1.39%-1.54% due 9/1-10/5/2004 50,000 49,962
Eli Lilly and Co. 1.45%-1.56% due 9/10-10/29/2004(3) 50,000 49,891
Anheuser-Busch Cos. Inc. 1.32% due 9/10/2004(3) 20,000 19,992
TOTAL SHORT-TERM SECURITIES (cost: $7,991,915,000) 7,991,891
TOTAL INVESTMENT SECURITIES (cost: $72,079,167,000) 79,086,962
New Taiwanese Dollar (cost: $9,522,000) $NT 9,522 9,494
Other assets less liabilities 102,416
NET ASSETS $79,198,872
(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) Purchased in a private placement transaction; resale may be limited to
qualified institutional buyers; resale to the public may require
registration. The total value of all such restriced securities was
$2,203,316, which represented 2.78% of the net assets of the fund.
(4) Valued under fair value procedures adopted by authority of the Board of
Directors.
ADR = American Depositary Receipts
See Notes to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON DETAILED SCHEDULE OF
INVESTMENTS
To the Shareholders and
Board of Directors of
The Growth Fund of America, Inc.:
We have audited, in accordance with 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, 2004, and for the year then ended
and have issued our report thereon dated October 13, 2004, 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, 2004 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
October 13, 2004
Los Angeles, California
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 - 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 9 - 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 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 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 committee.
ITEM 10 - 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 last fiscal half-year (the
Registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 11 - Exhibits
(a) The Code of Ethics that is the subject of the disclosure required by Item 2
is attached as an exhibit hereto.
(b) The certifications required by Rule 30a-2 of the Investment Company Act of
1940, as amended, 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/ James F. Rothenberg
-------------------------------------------
James F. Rothenberg, Chairman and PEO
Date: November 8, 2004
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/ James F. Rothenberg
- -------------------------------------------
James F. Rothenberg, Chairman and PEO
Date: November 8, 2004
By /s/ Sheryl F. Johnson
- -------------------------------------------
Sheryl F. Johnson, Treasurer and PFO
Date: November 8, 2004