THE GROWTH FUND OF AMERICA
Annual Report for the Year Ended August 31, 1997
[background photo: hourglass]
[photos: Horace Holden, Jr., Mike, Pat and Jim Thurman, Reverend Burtoon
Carley]
[The American Funds Group(R)]
THE GROWTH FUND OF AMERICA(R) invests in a wide range of companies that appear
to offer superior opportunities for growth of capital.
[watermark: face of a clock]
The Growth Fund of America is one of the 28 mutual funds in The American Funds
Group,(R) managed by Capital Research and Management Company. Since 1931,
Capital has invested with a long-term focus based on thorough research and
attention to risk.
On our cover:
Time is an especially important consideration when you're investing for growth.
Beginning on page 4, we take a look at the importance of long-term thinking,
and offer several shareholder points of view.
A QUICK LOOK AT THE FUND'S RESULTS
Over the long haul, The Growth Fund of America has proved to be an excellent
investment. But as this summary illustrates, results have varied considerably
from one year to the next.
[bar chart]
The fund's total returns for fiscal periods ended August 31
Average annual compound return +17.0%
<TABLE>
<CAPTION>
Date Total Value Annual Return
<S> <C> <C>
12/1/73* $10,000
8/31/74 8,362 -16.4%
8/31/75 10,399 24.4%
8/31/76 11,857 14.0%
8/31/77 13,145 10.9%
8/31/78 21,385 62.7%
8/31/79 25,058 17.2%
8/31/80 33,450 33.5%
8/31/81 37,578 12.3%
8/31/82 40,990 9.1%
8/31/83 59,879 46.1%
8/31/84 60,329 0.8%
8/31/85 68,494 13.5%
8/31/86 88,108 28.6%
8/31/87 116,538 32.3%
8/31/88 104,039 -10.7%
8/31/89 144,976 39.3%
8/31/90 130,825 -9.8%
8/31/91 170,791 30.5%
8/31/92 179,169 4.9%
8/31/93 223,312 24.6%
8/31/94 236,677 6.0%
8/31/95 297,170 25.6%
8/31/96 299,837 0.9%
8/31/97 415,387 38.5%
</TABLE>
*Since 12/1/73, when Capital Research and Management Company became the fund's
investment adviser.
[end chart]
Fund results in this report were computed without a sales charge, unless
otherwise indicated. Here are the fund's average annual compound returns with
all distributions reinvested for periods ended September 30, 1997 (the most
recent calendar quarter), assuming payment of the 5.75% maximum sales charge at
the beginning of the stated periods:
10 years: +13.63%
5 years: +17.81%
1 year: +30.25%
Sales charges are lower for accounts of $50,000 or more.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
[top border: hourglass]
FELLOW SHAREHOLDERS:
Fiscal 1997, which ended August 31, was, in absolute terms, a remarkable year
for The Growth Fund of America <UNDEF> the fourth-best in its history.
The value of your investment grew 38.5% if you reinvested the dividend of
11 cents a share and capital gain distribution of 86 cents a share, both paid
in December. Meanwhile, Standard & Poor's 500 Composite Index, driven by a
short list of large companies, was up 40.7% on a reinvested basis.
The index, of course, is an unmanaged measure including the stocks of 500
relatively large companies, weighted by size. The U.S. market, overall,
consists of more than 9,000 stocks listed on various exchanges or traded in the
over-the-counter market. The Growth Fund of America can and does take advantage
of many opportunities in that wider universe, emphasizing companies of any size
with long-term growth potential.
The fund's results over the year were quite gratifying, especially since
they were achieved with roughly 15% of assets cautiously held in cash and
equivalents, rather than stocks. As the table below illustrates, similar
portfolios including growth funds and capital appreciation funds did not do as
well, on average.
<TABLE>
<CAPTION>
TOTAL AVERAGE ANNUAL
RETURNS, COMPOUND
FISCAL 1997 RETURNS, LIFETIME
9/1/96-8/31/97 12/1/73-8/31/97
<S> <C> <C>
S&P 500 +40.7% +14.3%
Lipper Growth Fund Index +34.5 +13.2
Lipper Capital Appreciation +24.9 +14.3
Fund Index
The Growth Fund of America +38.5 +17.0
</TABLE>
RENEWED VIGOR IN CABLE TELEVISION STOCKS
Last year at this time we noted that our emphasis on media and technology
companies had been out of step with the market, putting a damper on the fund's
results. This year we are pleased to report that a number of these companies
made strong gains and were among our most rewarding.
Our cable television holdings are good cases in point. They have emerged
from a period when government regulation caused rate reductions. The industry's
program to rebuild its infrastructure is nearly complete and new products such
as cable modems and digital set-top boxes are creating growth potential.
Satellite systems and other competitors have not proved to be the threats some
feared.
[pull quote]
The value of your investment grew 38.5% if you reinvested December's dividend
and capital gain distribution.
[end pull quote]
STRENGTH IN TECHNOLOGY
Technology companies - generally defined as those that make computers and
produce software or related equipment - also tended to bounce back strongly,
and we added to a number of our positions during the year.
Computer capabilities have continued to move ahead rapidly, while computer
prices have continued to fall. Global demand is growing for new products and
for upgrades enabling users to make the most of software and the ever-expanding
resources of cyberspace. Especially in the U.S. and other countries where
computer usage is well-established, electronic information storage needs should
keep manufacturers of disk drives and similar devices busy.
Another segment that did especially well was oil service, where our
holdings continued to benefit from increasing demand for exploration and
drilling equipment.
VAST MAJORITY OF HOLDINGS DID WELL
[watermark: hourglass]
In all, 96 of the 114 companies we held throughout the fiscal year gained
ground. The short list of losers included a smattering of media companies,
health care companies and pharmaceutical manufacturers. Several, we feel, are
likely to be among our future winners.
As a result of the considerable appreciation of several stocks we sold
during fiscal 1997, we expect to pay a larger-than-usual capital gain in
December of 8% to 9% of net asset value (as of September 30). The new tax law
has created several new rates and holding periods for capital gains applicable
to the current year. We will advise shareholders about the details of this
capital gain distribution at a later date.
LOOKING AHEAD
It is worth reiterating that fiscal 1997 was an extraordinary year, one not
likely to be repeated any time soon.
It has been nearly seven years since the last correction of 10% or more by
the S&P 500 - the longest interval in at least 60 years. While we believe that
many stocks are still fairly priced, most will probably be dragged down
temporarily if the overall market stumbles. We are confident, however, that the
real value of good companies will always be recognized and rewarded over the
long haul - and that our emphasis on thorough investment research gives us an
edge identifying good companies.
Patience is frequently the key to making the most of opportunities. In the
feature article beginning on page 4, we take a look at the role of long-term
thinking in how the fund is managed and in its importance to you as an
investor. We will also introduce you to several shareholders who illustrate the
difference that "hanging in there" has made in their lives and their
investments.
Cordially,
[/s/ Walter P. Stern] [/s/ James F. Rothenberg]
Walter P. Stern James F. Rothenberg
Chairman of the Board President
October 17, 1997
HOW A $10,000 INVESTMENT HAS GROWN
December 1, 1973 through August 31, 1997
[begin chart]
$10,000 original investment /1/
<TABLE>
<CAPTION>
Year The Growth Fund Standard & Consumer
Ended of America Poor's 500 Price Index
August 31 Composite Index
<S> <C> <C> <C>
12/01/73 $9,425 $10,000 $10,000
1974 7,874 7,737 10,893
1975 9,792 9,769 11,830
1976 11,165 12,040 12,505
1977 12,377 11,823 13,333
1978 20,136 13,292 14,379
1979 23,595 14,849 16,078
1980 31,496 17,539 18,148
1981 35,383 18,469 20,109
1982 38,595 19,034 21,285
1983 56,382 27,501 21,830
1984 56,805 29,185 22,767
1985 64,493 34,516 23,529
1986 82,962 48,055 23,900
1987 109,730 64,672 24,924
1988 97,962 53,072 25,926
1989 136,507 73,928 27,146
1990 123,184 70,156 28,671
1991 160,815 89,046 29,760
1992 168,703 96,145 30,697
1993 210,268 110,784 31,547
1994 222,852 116,826 32,462
1995 279,811 141,884 33,312
1996 282,323 168,467 34,270
1997 391,123 /1/ /2/ 237,076 /3/ 35,033 /4/
</TABLE>
AVERAGE ANNUAL COMPOUND RETURNS*
(for periods ended August 31,1997)
10 years: +12.88%
5 years: +16.93
1 year: +30.56
*Assumes reinvestment of all distributions and payment of the 5.75% sales
charge at the beginning of the stated periods.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Year ended August 31 1974# 1975 1976 1977
TOTAL VALUE
Dividends reinvested - $362 283 -
Value at year-end/1/ $7,874 9,792 11,165 12,377
GFA TOTAL RETURN (21.3) 24.4 14.0 10.9
Year ended August 31 1978 1979 1980 1981
TOTAL VALUE
Dividends reinvested 254 - 307 546
Value at year-end/1/ 20,136 23,595 31,496 35,383
GFA TOTAL RETURN 62.7 17.2 33.5 12.3
Year ended August 31 1982 1983 1984 1985
TOTAL VALUE
Dividends reinvested 1,673 2,290 1,643 1,249
Value at year-end/1/ 38,595 56,382 56,805 64,493
GFA TOTAL RETURN 9.1 46.1 0.8 13.5
Year ended August 31 1986 1987 1988 1989
TOTAL VALUE
Dividends reinvested 979 1,354 1,502 1,743
Value at year-end/1/ 82,962 109,730 97,962 136,507
GFA TOTAL RETURN 28.6 32.3 (10.7) 39.3
Year ended August 31 1990 1991 1992 1993
TOTAL VALUE
Dividends reinvested 3,611 3,208 2,510 1,454
Value at year-end/1/ 123,184 160,815 168,703 210,268
GFA TOTAL RETURN (9.8) 30.5 4.9 24.6
Year ended August 31 1994 1995 1996 1997
TOTAL VALUE
Dividends reinvested 929 1,372 2,452 2,019
Value at year-end/1/ 222,852 279,811 282,323 391,123
GFA TOTAL RETURN 6.0 25.6 0.9 38.5
</TABLE>
Average annual compound return for 23 3/4 years 16.7% /1/
Past results are not predictive of future results. The indexes are unmanaged
and do not reflect sales charges, commissions or expenses.
# For the period December 1, 1973 (when Capital Research and Management Company
became the fund's investment adviser) through August 31, 1974.
/1/ These figures, unlike those shown earlier in this report, reflect payment
of the maximum sales charge of 5.75% on the $10,000 investment. Thus, the net
amount invested was $9,425. As outlined in the prospectus, the sales charge is
reduced for larger investments. 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 invested in additional shares. Results shown do not take
into account income or capital gain taxes.
/2/ Includes reinvested dividends of $31,740 and reinvested capital gain
distributions of $94,860.
/3/ Includes reinvested dividends of $41,516.
/4/ Computed from data supplied by the U.S. Department of Labor, Bureau of
Labor Statistics.
[end chart]
THE VALUE OF THINKING LONG-TERM
It's important not only in investing, but also in... ...combating social
tension ...coping with weather extremes...and battling unpredictable currents
[watermark: face of a clock]
[photo: death of Martin Luther King, Jr. on balcony]
[photo: snowstorm]
[photo: whitewater river rafting]
Fiscal 1997 was a great year, but The Growth Fund of America is NOT a
short-term investment. Portfolios of stocks, by their very nature, are
volatile. Returns can vary dramatically from year to year. Your fund is
certainly no exception, as the graph on the inside front cover shows.
Investing for growth is, after all, attempting to profit from change.
Some changes come quickly, while some do not. Time and time again, we have
found that long-term changes, not short-term events, tend to be the most
meaningful and the most rewarding.
Consider how the world has changed since 1973, when Capital Research and
Management Company became The Growth Fund of America's investment adviser.
Personal computers, compact discs and videocassettes didn't exist.
Long-distance calls, restaurant meals and airplane trips were "events." Today
we take all these things for granted. But each became commonplace gradually.
The progress of the companies that make personal computers, for instance,
has hardly been smooth, but patience has been well rewarded. We have held
shares in microchip manufacturer Intel and electronics component maker Texas
Instruments since 1984, and they have often been among our leading investments.
Those two companies are far from being the only stocks we have held for
more than a decade. The list also includes Pitney Bowes (1979), Time Warner,
Federal National Mortgage Association, Pharmacia & Upjohn (all 1984), PNC Bank
and Electronic Data Systems (1985), Federal Express (1986) and Delta Air Lines
(1987).
"In each instance, our ongoing investment research has repeatedly
indicated that there is still room to grow, notes Don O'Neal, one of the fund's
portfolio counselors.
You might think it's unusual for a growth fund to hold stocks for such a
long time. You'd be right. Our portfolio turnover rate has averaged 25% a year
- - which means we hold stocks for an average of about four years. As the
following table illustrates, the average turnover rate for similar funds is 83%
a year, meaning stocks are seldom held for much more than a single year. Low
turnover keeps costs down, to your benefit, and allows the fund to benefit from
a company's continued growth.
Low turnover also helps the fund minimize short-term capital gain
distributions, which are taxed as ordinary income. The tax reforms passed by
Congress earlier this year lowered the maximum capital gains rate on sales of
securities held for more than 18 months from 28% to 20%. So from a tax
perspective, it's even more important than before to think long-term.
"We have always managed the fund for long-term results, but the widening
gap between taxes on ordinary income and taxes on capital gains suggests we now
need to be especially confident that taking a short-term gain makes sense,"
says Jim Rothenberg, president of the fund.
Here's further evidence of our commitment to thinking long-term: The
fund's portfolio counselors and research analysts are compensated, in part,
based on the investment results they achieve over longer periods (usually four
years), not single-year results.
On the following pages we'll introduce you to some long-time shareholders
with a keen sense of the importance of time, both in their lives and their
investments. They include a Memphis minister who has helped that city make
great strides against racism over the past 20 years; a man whose many years of
training earned him a place in the 1996 Olympics; and a family that regularly
endures some of the nation's roughest weather, knowing the sun will always
return.
We hope you enjoy meeting them.
LOW PORTFOLIO TURNOVER ILLUSTRATES OUR LONG-TERM APPROACH
THE GROWTH FUND OF AMERICA'S TURNOVER RATE
<TABLE>
<CAPTION>
<S> <C>
1975 47%
1976 22
1977 15
1978 27
1979 18
1980 15
1981 40
1982 33
1983 26
1984 19
1985 24
1986 24
1987 20
1988 18
1989 30
1990 18
1991 19
1992 11
1993 25
1994 25
1995 27
1996 28
1997 34
</TABLE>
Figures prior to 1985 do not include long-term U.S. government securities.
The fund 's average 25%
The average for growth funds* 83%
*Source: Lipper Analytical Services, for year ended 8/31/97
[watermark: hourglass]
THE REVEREND BURTON CARLEY
Initial Investment: December 27, 1976
[watermark: hourglass]
The Reverend Burton Carley is a Unitarian minister at The Church of the River
in Memphis, a city he feels "holds tremendous potential for healing the racial
tensions of our country. Things have changed dramatically since Dr. Martin
Luther King was assassinated here. We have an African-American mayor now. But
there's still a long way to go."
Burton's church, predominantly white in a city that is predominantly
African-American, has long participated in Shelby County Interfaith, a group of
approximately 50 congregations, black and white, that come together to learn
about each other, talk about issues, and try to make a difference.
"We all recognize that we have something in common," Burton says.
"Regardless of ethnic origins or religion, we're all citizens of the same city.
We all want to wipe out crime. We all want eyesore properties to be condemned.
We all want quality public education. And we all know building for the future
is critical."
[photo: death of Martin Luther King, Jr. on balcony]
The minister takes that last sentiment to heart with his own finances.
"One doesn't enter the ministry with the thought of becoming wealthy," he says.
"But I want to be able to retire. So about 20 years ago I started investing in
The Growth Fund of America, and I've been adding $100 a month ever since. It
doesn't seem like a lot, but it's really added up."
He opened his account in the final week of 1976 - just before the market
took a nasty tumble, with the S&P 500 losing more than 10% in 1977. "It was a
little unnerving, but a good lesson," Burton says. The lesson served him
especially well on October 19, 1987. "We were in the middle of a pledge
drive," he remembers, "and the headlines made people feel poor. It seemed to be
a lousy time for a pledge drive, but a pretty good time to add to my
investment, I thought."
It turned out to be one of the very best. "I found that I like those down
days a lot," Burton says. "My money buys more shares. I don't worry about
short-term declines, because I know where the fund invests and I have
confidence in the ingenuity of America."
[photo: The Reverend Burton Carley]
[photo caption]
At left, the Reverend Burton Carley is shown visiting the National Civil Rights
Museum, which eloquently symbolizes the power of perseverance. The museum is
located in the Lorraine Motel, where Dr. Martin Luther King was assassinated in
1968.
[end photo caption]
[pull quote]
Over time, getting to know people different from you provides the framework for
social change.
[end pull quote]
A $10,000 investment in the fund on December 27, 1976 would have grown to
$319,266* through August 31, 1997.
*Reflects payment of the maximum sales charge of 5.75%.
HORACE HOLDEN, JR.
Initial Investment : August 12, 1982
[watermark: face of a clock]
Horace Holden, Jr. was paddling a canoe even before he knew how to walk. A few
decades later he paddled his way into the 1996 Summer Olympics, where he
competed in a whitewater canoeing slalom event. He didn't win, but making it
all the way to the games capped a 24-year dream.
Horace still gets wet pretty much every day as a water sports instructor
at the Nantahala Outdoor Center. The center started as a roadside outpost where
the Appalachian Trail crosses a relatively obscure North Carolina highway in
the Great Smoky Mountains. In the early 1970s Horace's father and a partner
bought the property and began to take advantage of its location on the banks of
the turbulent Nantahala River. The center was the first rafting company in the
area. Now it's the largest of 20 - and among the largest in the country -
employing more than 500 people who provide meals, accommodations, gear and
lessons for as many as 2,000 whitewater enthusiasts a day.
"The river's different every minute of every day," Horace says. "It's a
dynamic playing field. If you're patient and learn to work with the water,
rather than worrying about being exactly on course, you'll be a lot more
efficient and ultimately get where you're going a lot faster."
He is quick to observe that the principle also applies to investing. His
late grandfather opened accounts for Horace and his three brothers in 1982. At
the time, the nation was mired in the worst recession in 40 years and investors
worried that a genuine depression was next. The stock market, as measured by
the Dow Jones Industrial Average, was down nearly 20% from where it had stood a
decade earlier.
"My grandfather told me, $Don't worry about the dips. Be patient. Leave
this alone for a long time and you'll really benefit.'" As it turned out, the
timing couldn't have been much better. The day that the investment was made
marked the beginning of the bull market that recently roared past its 15th
birthday.
Some of Horace's gains came in handy paying the bills while he was
training for the Olympics full time. "Many countries provide all the support
for their elite athletes," he notes. "Here that doesn't really happen, so the
fund money came in handy. But I took as little as I could, because I'd already
seen plenty of evidence that my grandfather was right about the difference time
could make."
[photo: Horace Holden, Jr.]
[photo caption]
1996 Olympic whitewater canoeist Horace Holden hasn't yet decided whether to
compete in the year 2000.
[end photo caption]
[pull quote]
You're not going to make gains every day out here on the river, but if you hang
in you'll see the benefits.
[end pull quote]
A $10,000 investment in the fund on August 12, 1982 would have grown to
$105,442* through August 31, 1997.
*Reflects payment of the maximum sales charge of 5.75%.
MIKE, PAT AND JIM THURMAN
Initial Investment: October 19, 1987
[watermark: face of a clock]
The Thurmans know a lot about extremes. They live in North Pole, Alaska - a few
miles southeast of Fairbanks and only 100 miles or so from the Arctic Circle.
In winter the sun appears just three hours a day and the mercury is usually
well below zero, while in summer the locals play midnight baseball without long
sleeves or lights.
"A lot of people say Fairbanks has the best weather in the world," Pat
Thurman insists, noting that she doesn't tend to agree. "There are some really
nice things about being here: the international ice-carving competition,
sled-dog races, spectacular northern lights. We see moose all the time. There
aren't many places you can say that about," says Pat, a retired librarian who
now works as an assistant bailiff, volunteers for her church and surfs the
Internet.
One of the other nice things about living in Alaska is that every year the
state sends "Permanent Fund" checks - in effect, distributions of oil profits -
to all residents. The Thurmans used their 1987 checks to establish a college
fund for son Jim. "We told our broker that we didn't want to stick our necks
out, and he suggested The Growth Fund of America," says Mike, a retired
industrial arts teacher who worked on the Alaska Pipeline project as a
carpenter.
The day they invested was noteworthy: October 19, 1987, the day of the
single largest stock market decline in history. The market was thrown into
chaos and nobody was sure when - or even if - it would open from day to day. In
the next six weeks, the Thurmans watched the value of their investment fall
more than 10%.
Jim now lives in Kansas City, where he's working as a carpenter while
adding to his fund account and establishing residency in order to attend a
state university. He's considering a career "that's related to the financial
industries." His parents are delighted. They were Kansas residents when they
met in 1965, before moving to Alaska in 1969 when they were hired over the
phone at twice their former salaries. And they say one of their motivations for
opening Jim's account was to teach him respect for the potential of money.
Jim says he doesn't really miss North Pole much, but admits it was
interesting to grow up near the local tourist attraction that claims to be the
home of you-know-who. "I guess I stopped believing in Santa when I was about
seven or so," he says. "But I wasn't really sure for a while, because he lived
right down the road!"
[photo: Mike, Pat and Jim Thurman]
[photo caption]
Pat Thurman says that when the last of the fireweed (foreground in smaller
photo) blossoms in late summer near Fairbanks, snow is only six weeks away.
[end photo caption]
[pull quote]
The worst day, the thermometer said it was 80 below. But no matter how bad it
gets, the snow always melts, eventually.
[end pull quote]
A $10,000 investment in the fund on October 19, 1987 would have grown to
$44,061* through August 31, 1997.
*Reflects payment of the maximum sales charge of 5.75%.
<TABLE>
THE GROWTH FUND OF AMERICA
INVESTMENT PORTFOLIO, August 31, 1997
<S> <C> <C> <C> <C>
Percent
of Net
Assets
----------
Largest Industry Holdings
- -----------------------------
Broadcasting & Publishing 13.95%
Electronic Components 12.19%
Data Processing & Reproduction 11.03%
Business & Public Services 8.50%
Health & Personal Care 5.07%
Other Industries 34.72%
Cash & Equivalents 14.54%
Largest Individual Holdings
- -------------------------------------
Time Warner 4.09%
Federal National Mortgage Assn. 3.06
Philip Morris 2.67
America Online 2.55
Walt Disney 2.04
Intel 1.80
Texas Instruments 1.76
Tele-Communications, TCI Group 1.62
Comcast 1.61
Tele-Communications, Liberty Media Group 1.53
THE GROWTH FUND OF AMERICA
INVESTMENT PORTFOLIO, August 31, 1997
Market Percent
EQUITY SECURITIES Value of Net
(Common & Preferred Stocks) Shares (000) Assets
- ------------------------------------- ----------- -------- ----------
Broadcasting & Publishing - 13.95%
Time Warner Inc. 9,250,750 $476,414 4.09 %
Tele-Communications, Inc., Series A, TCI Group /1/ 10,789,300 188,813 1.62
Comcast Corp., Class A special stock 6,339,762 148,588
Comcast Corp., Class A 1,680,000 39,060 1.61
Tele-Communications, Inc., Series A, Liberty Media Group /1/ 6,752,237 178,090 1.53
Viacom Inc., Class B /1/ 6,000,000 177,750 1.53
News Corp. Ltd. (American Depositary Receipts) (Australia) 5,400,000 97,537
News Corp. Ltd., preferred (American Depositary Receipts) 3,363,750 50,876 1.27
E.W. Scripps Co., Class A 1,660,000 65,259 .56
Cox Communications, Inc., Class A /1/ 2,000,000 54,125 .46
Chris-Craft Industries, Inc. /1/ 1,050,085 51,520 .44
HSN, Inc. /1/ 1,405,000 46,365 .40
CANAL+ (France) 168,089 27,010 .23
US WEST Media Group /1/ 463,300 9,266 .08
BHC Communications, Inc., Class A /1/ 62,840 7,714 .07
Century Communications Corp., Class A /1/ 1,002,550 6,516 .06
Electronic Components - 12.19%
Intel Corp. 2,200,000 202,675
Intel Corp., warrants, expire 1998 /1/ 100,000 7,163 1.80
Texas Instruments Inc. 1,800,000 204,525 1.76
National Semiconductor Corp. /1/ 4,852,930 166,213 1.43
Advanced Micro Devices, Inc. /1/ 3,978,600 148,949 1.28
Quantum Corp. /1/ 3,300,000 115,706 .99
Seagate Technology /1/ 2,500,000 95,469 .82
Bay Networks, Inc. /1/ 2,452,500 86,757 .74
Adapetec, Inc. /1/ 1,650,000 79,200 .68
Analog Devices, Inc. /1/ 2,233,333 73,979 .64
LSI Logic Corp. /1/ 2,250,000 72,422 .62
ADC Telecommunications, Inc. /1/ 1,710,100 63,487 .55
Newbridge Networks Corp. (Canada) /1/ 1,100,000 50,050 .43
Microchip Technology Inc. /1/ 950,000 38,415 .33
Tellabs, Inc. /1/ 235,000 14,027 .12
Data Processing & Reproduction - 11.03%
Netscape Communications Corp. /1/ 4,329,900 172,384 1.48
Silicon Graphics, Inc. /1/ 5,675,500 155,722 1.34
Oracle Corp. /1/ 3,900,000 148,688 1.28
Solectron Corp. /1/ 3,414,100 142,965 1.23
International Business Machines Corp. 800,000 80,700 .69
Computer Associates International, Inc. 1,150,000 76,906 .66
Compaq Computer Corp. /1/ 1,000,000 65,500 .56
Digital Equipment Corp. /1/ 1,500,000 64,500 .55
Data General Corp. /1/ 1,520,000 54,625 .47
Tandem Computers Inc. /1/ 1,540,000 52,360 .45
Sequent Computer Systems, Inc. /1/ 1,500,000 42,281 .36
Intuit Inc. /1/ 1,378,600 36,016 .31
3Com Corp. /1/ 700,000 34,956 .30
Sybase, Inc. /1/ 1,815,000 33,804 .29
Ascend Communications, Inc. /1/ 725,000 30,767 .26
Cisco Systems, Inc. /1/ 400,000 30,150 .26
Lexmark International Group, Inc. /1/ 750,000 26,250 .23
PeopleSoft, Inc. /1/ 200,000 11,250 .10
Danka Business Systems PLC (American Depositary Receipts)
(United Kingdom) 219,000 10,238 .09
Sun Microsystems, Inc. /1/ 174,200 8,362 .07
Mentor Graphics Corp. /1/ 515,000 5,987 .05
Business & Public Services - 8.50%
America Online, Inc. /1/ 4,605,400 297,048 2.55
Columbia/HCA Healthcare Corp. 3,617,590 114,180 .98
Federal Express Corp. /1/ 1,560,000 103,642 .89
Manpower Inc. 1,835,700 78,361 .67
CUC International Inc. /1/ 2,912,500 68,444 .59
Republic Industries, Inc. /1/ 1,550,000 38,072
Republic Industries, Inc. (1,2,3) 1,200,000 29,475 .58
USA Waste Services, Inc. /1/ 1,450,000 60,900 .52
Electronic Data Systems Corp. 1,350,000 51,047 .44
Shared Medical Systems Corp. 747,000 36,603 .31
Corrections Corp. of America /1/ 706,500 26,141 .22
Waste Management Inc. ( formerly WMX Technologies, Inc.) 657,759 21,048 .20
Paychex, Inc. 579,900 19,862 .17
AccuStaff Inc. /1/ 587,000 15,592 .13
Ecolab Inc. 250,000 11,266 .10
Pittston Brink's Group 300,000 10,650 .09
PacifiCare Health Systems, Inc., Class B /1/ 100,000 6,838 .06
Health & Personal Care - 5.07%
United States Surgical Corp. 1,900,000 62,581 .54
Guidant Corp. 700,000 61,469 .53
Gilead Sciences, Inc. /1/ 1,440,000 46,620 .40
Forest Laboratories, Inc. /1/ 1,000,000 41,062 .35
BioChem Pharma Inc. (Canada) /1/ 1,500,000 38,906 .33
Medtronic, Inc. 427,600 38,644 .33
AB Astra, Class A (American Depositary Receipts) (Sweden) 2,400,000 38,400 .33
MedImmune, Inc. /1/ 1,064,000 28,196 .24
Pfizer Inc 500,000 27,688 .24
Agouron Pharmaceuticals, Inc. /1/ 600,000 26,400 .23
Avon Products, Inc. 400,000 25,625 .22
Warner-Lambert Co. 200,000 25,413 .22
Dura Pharmaceuticals, Inc. /1/ 700,000 24,937 .21
Guilford Pharmaceuticals, Inc. /1/ 900,000 24,187 .21
NeXstar Pharmaceuticals, Inc. /1,2/ 1,000,000 15,188
NeXstar Pharmaceuticals, Inc. /1/ 200,000 3,038 .16
Gillette Co. 177,400 14,691 .13
Alza Corp. /1/ 500,000 14,500 .12
Gensia Sicor Inc. (formerly Gensia Pharmaceuticals, Inc.) /1/ 1,332,202 6,994
Gensia Sicor Inc.
(Units consisting of 1 share and 1 warrant ) /1,2,3/ 1,125,000 5,906 .11
Omnicare, Inc. 360,000 10,418 .09
Pharmacia & Upjohn, Inc. 290,000 9,878 .08
Leisure & Tourism - 4.49%
Walt Disney Co. 3,100,000 238,119 2.04
MGM Grand, Inc. /1/ 2,600,000 104,325 .90
King World Productions, Inc. /1/ 1,450,000 57,637 .49
HFS Inc. /1/ 955,000 53,182 .46
Carnival Corp., Class A 900,000 39,431 .34
Harrah's Entertainment, Inc. /1/ 900,000 20,194 .17
Marriott International, Inc. 150,000 9,984 .09
Financial Services - 4.43%
Federal National Mortgage Assn. 8,100,000 356,400 3.06
Capital One Financial Corp. 1,850,000 71,225 .61
SLM Holding Corp. 450,000 60,975 .52
Federal Home Loan Mortgage Corp. 850,400 27,691 .24
Energy Equipment - 4.08%
Diamond Offshore Drilling, Inc. 1,980,000 108,157 .93
Schlumberger Ltd. (Netherlands Antilles) 1,350,000 102,853 .88
Transocean Offshore Inc. 935,967 88,975 .78
Cooper Cameron Corp. /1/ 1,100,000 71,362 .61
Reading & Bates Corp. /1/ 1,500,000 54,469 .47
Dresser Industries, Inc. 562,000 23,464 .20
McDermott International, Inc. 450,000 14,513 .12
BJ Services Co. /1/ 150,000 10,838 .09
Beverages & Tobacco - 2.79%
Philip Morris Companies Inc. 7,125,000 310,828 2.67
PepsiCo, Inc. 400,000 14,400 .12
Merchandising - 2.03%
Limited Inc. 3,400,000 77,350 .66
Cardinal Health, Inc., Class A 625,000 41,406 .36
Circuit City Stores, Inc. - Circuit City Group 900,000 32,063 .28
Payless ShoeSource, Inc. /1/ 500,000 32,063 .28
Boise Cascade Office Products Corp. /1/ 1,015,000 21,378 .18
Intimate Brands, Inc., Class A 800,000 17,600 .15
Sports Authority, Inc. /1/ 725,000 13,503 .12
Telecommunications - 1.90%
AirTouch Communications /1/ 2,401,700 81,207 .70
LCI International, Inc. /1/ 2,250,000 54,000 .46
Telefonos de Mexico, SA de CV, Class L
(American Depositary Receipts) (Mexico) 900,000 41,288 .35
MCI Communications Corp. 1,000,000 28,500 .24
Vodafone Group PLC (American Depositary Receipts)
(United Kingdom) 320,000 16,300 .15
Transportation: Airlines - 1.84%
AMR Corp. /1/ 860,000 86,645 .74
Southwest Airlines Co. 2,956,450 82,781 .72
Delta Air Lines, Inc. 515,000 44,547 .38
Insurance - 1.62%
EXEL Ltd. (Incorporated in Bermuda) 2,680,000 147,065 1.26
Aetna Inc. 300,000 28,631 .25
Everest Reinsurance Holdings, Inc. 350,000 12,666 .11
Recreation & Consumer Products - 1.38%
Mattel, Inc. 4,296,875 143,677 1.23
Electronic Arts /1/ 381,700 11,761 .10
Acclaim Entertainment, Inc. /1/ 1,325,000 5,300 .05
Miscellaneous Materials & Commodities - 1.36%
Pioneer Hi-Bred International, Inc. 1,650,000 141,384 1.21
Potash Corp. of Saskatchewan Inc. (Canada) 225,000 16,636 .15
Banking - 1.29%
Citicorp 800,000 102,100 .88
PNC Bank Corp. 600,000 25,950 .22
BankAmerica Corp. 344,000 22,640 .19
Machinery & Engineering - 0.75%
Thermo Electron Corp. /1/ 2,175,000 87,544 .75
Energy Sources - 0.71%
Talisman Energy Inc. (Canada) /1/ 1,200,000 39,294 .34
Enterprise Oil PLC (United Kingdom) 2,500,000 27,908 .24
Woodside Petroleum Ltd. (Australia) 2,000,000 15,966 .13
Electrical & Electronic Instruments - 0.68%
Telefonaktiebolaget LM Ericsson, Class B
(American Depositary Receipts) (Sweden) 1,150,000 47,941 .41
Nokia Corp., Class A (American Depositary Receipts) (Finland) 400,000 31,000 .27
Transportation: Rail & Road - 0.66%
Wisconsin Central Transportation Corp. /1/ 2,490,900 77,218 .66
Textiles & Apparel - 0.48%
Nine West Group Inc. /1/ 1,325,000 55,981 .48
Utilities: Electric & Gas - 0.46%
K N Energy, Inc. 1,300,000 53,950 .46
Aerospace & Military - 0.45%
Gulfstream Aerospace Corp. /1/ 1,750,000 51,844 .45
Chemicals - 0.44%
A. Schulman, Inc. 1,522,500 33,305 .28
Air Products and Chemicals, Inc. 225,000 18,351 .16
Multi-Industry - 0.17%
U.S. Industries, Inc. 475,000 18,050 .17
Industrial Components - 0.11%
Danaher Corp. 250,000 13,391 .11
Transportation: Shipping - 0.04%
Overseas Shipholding Group, Inc. 200,000 4,912 .04
Other equity securities in initial period of 300,142 2.56
acquisition --------------------------
TOTAL EQUITY SECURITIES (cost: $5,945,138,000) 9,952,521 85.46
--------------- ----------
Principal
Amount
SHORT-TERM SECURITIES (000)
- ------------------------------------- --------
Corporate Short-Term Notes - 10.99%
Warner-Lambert Co. 5.46%-5.48% due 9/17-12/16/97 /2/ 83,700 82,997 .72
Monsanto Co. 5.48%-5.50% due 10/7-11/21/97 53,200 52,684
Monsanto Co. 5.51% due 11/4/97 /2/ 30,000 29,692 .71
Gannett Co., Inc. 5.47%-5.49% due 10/16-10/21/97 /2/ 79,700 79,117 .68
Campbell Soup Co. 5.47%-5.50% due 11/6-11/25/97 50,000 49,410
Campbell Soup Co. 5.47% due 9/16/97 /2/ 25,000 24,939 .63
J. C. Penney Funding Corp. 5.50%-5.58% due 9/4-11/5/97 /2/ 67,100 66,710 .57
International Lease Finance Corp. 5.50%-5.55% due 9/18-11/12/9 65,100 64,596 .56
E.I. du Pont De Nemours and Co. 5.45%-5.51% due 9/3-11/7/97 62,800 62,425 .54
Procter & Gamble Co. 5.47%-5.52% due 9/10-11/3/97 61,900 61,464 .53
Ford Motor Credit Co. 5.49%-5.53% due 9/2-10/8/97 60,300 60,100 .51
PepsiCo, Inc. 5.46%-5.49% due 9/17-10/2/97 59,950 59,771 .51
Xerox Corp. 5.45%-5.49% due 9/12-10/22/97 58,700 58,367 .50
Coca-Cola Co. 5.47% due 10/3/97 /2/ 31,000 30,843
Coca-Cola Co. 5.50% due 9/8/97 20,000 19,976 .44
IBM Credit Corp. 5.48%-5.49% due 10/6-10/23/97 45,000 44,690 .38
American Express Credit Corp. 5.50%-5.52% due 9/12-10/29/97 43,000 42,695 .37
Lucent Technologies Inc. 5.48% due 9/29/97 40,000 39,823 .34
Motorola, Inc. 5.46%-5.47% due 9/23-10/9/97 38,100 37,885 .33
Walt Disney Co. 5.46%-5.52% due 9/8-10/8/97 37,000 36,877 .32
Shell Oil Co. 5.45% due 9/29/97 35,000 34,845 .30
A. I. Credit Corp. 5.47%-5.53% due 9/15-10/10/97 34,000 33,883 .29
Abbott Laboratories 5.48% due 10/6/97 33,000 32,819 .28
Sara Lee Corp. 5.48%-5.50% due 9/25/97 32,700 32,575 .28
Ciesco LP 5.50%-5.55% due 9/9-9/15/97 30,500 30,448 .26
Emerson Electric Co. 5.47% due 9/22/97 30,000 29,902 .26
United Parcel Service of America, Inc. 5.49% due 9/23/97 29,000 28,898 .25
AIG Funding, Inc. 5.50%-5.53% due 9/11-9/15/97 28,800 28,745 .24
Atlantic Richfield Co. 5.53% due 10/2/97 22,600 22,489 .19
--------------------------
1,279,665 10.99
--------------------------
Federal Agency Short-Term Obligations - 3.35%
Federal National Mortgage Assn. 5.35%-5.485% due 9/8-11/24/97 192,500 190,683 1.64
Federal Home Loan Mortgage Corp. 5.40%-5.45% due 9/5-10/31/97 128,420 127,670 1.09
Federal Home Loan Banks 5.39%-5.42% due 10/31-11/21/97 73,000 72,176 .62
--------------------------
390,529 3.35
--------------------------
TOTAL SHORT-TERM SECURITIES (cost: $1,670,306,000) 1,670,194 14.34
--------------------------
TOTAL INVESTMENT SECURITIES (cost: $7,615,444,000) 11,622,715 99.80
--------------------------
Excess of cash and receivables over payables 23,638 .20
--------------------------
NET ASSETS 11,646,353 100.00%
========== =======
/1/ Non-income-producing securities
/2/ Purchased in a private placement transaction; resale to the
public may require registration or sale only to qualified
institutional investors.
/3/ Valued under procedures approved
by the Board of Directors.
See Notes to Financial Statements
The descriptions of the companies shown in the portfolio, which were
obtained from published reports and other sources believed to be
reliable, are supplemental and are not covered by the Independent
Auditors' Report.
- -----------------------------
Equity securities
appearing in the portfolio
since February 28, 1997
- -----------------------------
AccuStaff
Aetna
Agouron Pharmaceuticals
Ascend Communications
Avon Products
BJ Services
BioChem Pharma
Boise Cascade Office Products
CANAL+
Cooper Cameron
Corrections Corp. of America
Cox Communications
Danka Business Systems
Dura Pharmaceuticals
Guilford Pharmaceuticals
Gulfstream Aerospace
HFS
LCI International
Lexmark International Group
McDermott International
Medtronic
Microchip Technology
Netscape Communications
Paychex
Payless ShoeSource
PeopleSoft
Reading & Bates
Sun Microsystems
Talisman Energy
United States Surgical
Warner-Lambert
Woodside Petroleum
- -------------------------------
Equity securities
eliminated from the portfolio
since February 28, 1997
- -------------------------------
Adobe Systems
Applied Materials
ASM Lithography Holding
AT&T
Caterpillar
CNA Financial
Columbia Gas System
Commerce Bancshares
CompuServe
First Security
H.B. Fuller
General Instrument
Hasbro
Hewlett-Packard
Kimberly-Clark
KLA Instruments
Linear Technology
Lucent Technologies
NAC Re
Nellcor Puritan Bennett
NGC
Norsk Hydro
Oxford Health Plans
PanEnergy
TCI Satellite Entertainment
Teradyne
United HealthCare
Value Health
Wal-Mart Stores
</TABLE>
<TABLE>
The Growth Fund of America
Financial Statements
- ---------------------------------------------- --------------------------------
Statement of Assets and Liabilities (dollars in
at August 31, 1997 thousands)
- ---------------------------------------------- --------------------------------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $7,615,444) $11,622,715
Cash 734
Receivables for-
Sales of investments $29,114
Sales of fund's shares 12,769
Dividends and accrued interest 2,597 44,480
--------------------------------
11,667,929
Liabilities:
Payables for-
Purchases of investments 3,258
Repurchases of fund's shares 8,352
Management services 3,554
Accrued expenses 6,412 21,576
--------------------------------
Net Assets at August 31, 1997-
Equivalent to $20.14 per share on
578,153,047 shares of $0.10 par value
capital stock outstanding (authorized
capital stock--800,000,000 shares) $11,646,353
================
- ---------------------------------------------- --------------------------------
Statement of Operations (dollars in
for the year ended August 31, 1997 thousands)
- ---------------------------------------------- --------------------------------
Investment Income:
Income:
Dividends $ 61,028
Interest 85,075 $ 146,103
----------------
Expenses:
Management services fee 36,531
Distribution expenses 24,147
Transfer agent fee 8,588
Reports to shareholders 714
Registration statement and prospectus 821
Postage, stationery and supplies 1,113
Directors' fees 126
Auditing and legal fees 48
Custodian fee 248
Taxes other than federal income tax 5
Other expenses 137 72,478
--------------------------------
Net investment income 73,625
----------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 1,086,444
Net increase in unrealized appreciation
on investments 2,094,086
----------------
Net realized gain and unrealized appreciation
on investments 3,180,530
----------------
Net Increase in Net Assets Resulting
from Operations $3,254,155
================
- ---------------------------------------------- --------------------------------
Statement of Changes in Net Assets Year ended August 31
(dollars in thousands) 1997 1996
- ---------------------------------------------- --------------------------------
Operations:
Net investment income $ 73,625 $ 67,802
Net realized gain on investments 1,086,444 583,665
Net increase (decrease) in unrealized
appreciation on investments 2,094,086 (602,963)
--------------------------------
Net increase in net assets
resulting from operations 3,254,155 48,504
--------------------------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (60,737) (68,664)
Distributions from net realized gain on
investments (474,852) (537,427)
--------------------------------
Total dividends and distributions (535,589) (606,091)
--------------------------------
Capital Share Transactions:
Proceeds from shares sold: 96,996,524
and 176,126,588* shares, respectively 2,011,945 2,814,262
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 30,970,137 and 38,568,448*
shares, respectively 515,288 580,427
Cost of shares repurchased: 102,494,003
and 116,291,020* shares, respectively (2,110,158) (1,851,280)
--------------------------------
Net increase in net assets resulting from
capital share transactions 417,075 1,543,409
--------------------------------
Total Increase in Net Assets 3,135,641 985,822
Net Assets:
Beginning of year 8,510,712 7,524,890
--------------------------------
End of year (including undistributed
net investment income: $51,497
and $38,609, respectively) $11,646,353 $8,510,712
================================
* Adjusted to reflect the 100% share dividend
effective at the close of business on
December 12, 1996.
See Notes to Financial Statements
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. 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 following paragraphs
summarize the significant accounting policies consistently followed by the fund
in the preparation of its financial statements:
Equity securities, including depositary receipts, are valued at 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. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or
less to maturity are amortized to maturity based on their cost if acquired
within 60 days of maturity or, if already held on the 60th day, based on the
value determined on the 61st day.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith under
policies approved by a committee appointed by the Board of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend and interest income is reported on the accrual basis. Discounts
and premiums on securities purchased are amortized over the life of the
respective securities. Dividends and distributions paid to shareholders are
recorded on the ex-dividend date. The effects of changes in foreign currency
exchange rates on investment securities are included with the net realized and
unrealized gain or loss on investment securities.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of August 31, 1997, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $4,007,271,000, of which
$4,274,962,000 related to appreciated securities and $267,691,000 related to
depreciated securities. There was no difference between book and tax realized
gains on securities transactions for the year ended August 31, 1997. The cost
of portfolio securities for book and federal income tax purposes was
$7,615,444,000 at August 31, 1997.
3. The fee of $36,531,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.50% of the first $1 billion of average net assets; 0.40%
of such assets in excess of $1 billion but not exceeding $2 billion; 0.37% of
such assets in excess of $2 billion but not exceeding $3 billion; 0.35% of such
assets in excess of $3 billion but not exceeding $5 billion; 0.335% of such
assets in excess of $5 billion but not exceeding $8 billion; and 0.325% of such
assets in excess of $8 billion.
Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended August 31, 1997,
distribution expenses under the Plan were $24,147,000. As of August 31, 1997,
accrued and unpaid distribution expenses were $6,033,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $8,588,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $4,855,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's shares. Such sales charges are not an expense of the fund and,
hence, are not reflected in the accompanying statement of operations.
Directors who are unaffiliated with CRMC may elect to defer part or all of
the fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the fund. As of August 31,
1997, aggregate amounts deferred and earnings thereon were $332,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No such
persons received any remuneration directly from the fund.
4. As of August 31, 1997, accumulated undistributed net realized gain on
investments and currency transactions was $983,815,000 and additional paid-in
capital was $6,545,962,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $2,890,954,000 and
$3,240,493,000, respectively, during the year ended
August 31, 1997.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $248,000 includes $31,000 that was paid by these credits
rather than in cash.
Net realized currency gains on dividends were $21,000 for the year ended
August 31, 1997.
5. Effective at the close of business on December 12, 1996, the Board of
Directors declared a 100% share dividend, which, in effect, is a 2-for-1 share
split, of 276,083,697 shares. Net assets were not affected by this share
dividend.
<TABLE>
Per-Share Data and Ratios A29/1/
<S> <C> <C> <C> <C> <C>
Year ended August 31
1997 1996 1995 1994 1993
------- ------------------------------
Net Asset Value, Beginning of Year $15.39 $16.55 $13.81 $13.58 $11.02
------- ------------------------------
Income from Investment Operations:
Net investment income .13 .13 .13 .07 .07
Net realized and unrealized gain (loss)
on investments 5.59 (.01) 3.21 .71 2.63
------- ------------------------------
Total income from
investment operations 5.72 .12 3.34 .78 2.70
------- ------------------------------
Less Distributions:
Dividends from net investment income (.11) (.14) (.08) (.06) (.09)
Distributions from net realized gains (.86) (1.14) (.52) (.49) (.05)
------- ------------------------------
Total distributions (.97) (1.28) (.60) (.55) (.14)
------- ------------------------------
Net Asset Value, End of Year $20.14 $15.39 $16.55 $13.81 $13.58
======= ==============================
Total Return /2/ 38.54% .90% 25.56% 5.98% 24.64%
Ratios/Supplemental Data:
Net assets, end of year (in millions) $11,646 $8,511 $7,525 $5,427 $5,018
Ratio of expenses to average net
assets .72% .74% .75% .78% .77%
Ratio of net income to average net
assets .73% .82% .90% .49% .56%
Average commissions paid per share /3/ 5.01c 5.62c 5.94c 6.05c 6.82c
Portfolio turnover rate 34.10% 27.95% 26.90% 24.77% 25.23%
/1/ Adjusted to reflect the 100% share dividend
effective at the close of business on
December 12, 1996.
/2/ Calculated without
deducting a sales charge. The
maximum sales charge is 5.75% of
the fund's offering price.
/3/ Brokerage commissions paid on
portfolio transactions increase
the cost of securities purchased
or reduce the proceeds of securities
sold and are not separately reflected in the
fund's statement of operations.
Shares traded on a principal basis (without commissions),
such as most over-the-counter and fixed-income transactions,
are excluded. Generally, non-U.S.
commissions are lower than
U.S. commissions when
expressed as cents per
share but higher when
expressed as a percentage
of transactions because of the lower
per-share prices of many non-U.S. securities.
</TABLE>
Independent Auditors' Report
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 schedule of
portfolio investments, as of August 31, 1997, 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 per-share data and
ratios for each of the five years in the period then ended. These financial
statements and per-share data and ratios are the responsibility of the fund's
management. Our responsibility is to express an opinion on these financial
statements and per-share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per-share data
and ratios 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, 1997, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other 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 per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of The Growth Fund of America, Inc. as of August 31, 1997, 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 per-share data and
ratios for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Los Angeles, California
September 26, 1997
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 distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
Dividends and Distributions per Share
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
To Payment Date From Net From Net From Net
Shareholders Investment Realized Realized
of Record Income Short-Term Long-term
Gains Gains
December 13, December 16, $.11 $.16 $.70
1996 1996
</TABLE>
Corporate shareholders may deduct up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 15% of the
dividends paid by the fund from net investment income represents qualifying
dividends.
Dividends received by retirement plans such as IRAs, Keogh-type plans, and
403(b) plans need not be reported as taxable income. However, many plan
retirement trusts may need this information for their annual information
reporting.
SINCE THE AMOUNTS ABOVE ARE 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 1998 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR RESPECTIVE 1997 TAX RETURNS. SHAREHOLDERS
SHOULD CONSULT THEIR TAX ADVISERS.
BOARD OF DIRECTORS
ROBERT A. FOX
Livingston, California
President and Chief Executive Officer,
Foster Farms Inc.
ROBERTA L. HAZARD
McLean, Virginia
Consultant; Rear Admiral,
U.S. Navy (Retired)
LEONADE D. JONES
Burlingame, California
Former Treasurer, The Washington
Post Company
JOHN G. MCDONALD
Stanford, California
The IBJ Professor of Finance,
Graduate School of Business,
Stanford University
JAMES W. RATZLAFF
San Francisco, California
Senior Partner, The Capital Group
Partners L.P.
HENRY E. RIGGS
Claremont, California
President, Keck Graduate Institute
of Applied Life Sciences
WALTER P. STERN
New York, New York
Chairman of the Board of the fund
Chairman of the Board,
Capital Group International, Inc.
PATRICIA K. WOOLF
Princeton, New Jersey
Private investor; lecturer,
Department of Molecular Biology, Princeton University
Theodore D. Nierenberg retired from the Board of Directors effective May 31,
1997. He had been a Director of the fund since 1972.
Richard H.M. Holmes retired from the Board of Directors effective December 31,
1996. He had been a Director of the fund since 1982 and was President of the
fund from 1976 to 1985.
Steven N. Kearsley retired as an officer of the fund effective May 20, 1997. He
had been an officer since 1973.
The Directors thank these three individuals for their many contributions to the
fund.
OTHER OFFICERS
JAMES F. ROTHENBERG
Los Angeles, California
President of the fund
President and Director,
Capital Research and
Management Company
JAMES E. DRASDO
Los Angeles, California
Senior Vice President of the fund
Senior Vice President and Director,
Capital Research and
Management Company
PAUL G. HAAGA, JR.
Los Angeles, California
Senior Vice President of the fund
Executive Vice President and Director,
Capital Research and
Management Company
RICHARD M. BELESON
San Francisco, California
Vice President of the fund
Senior Vice President,
Capital Research Company
DONALD D. O'NEAL
San Francisco, California
Vice President of the fund
Vice President,
Capital Research and
Management Company
PATRICK F. QUAN
San Francisco, California
Secretary of the fund
Vice President-Fund Business
Management Group,
Capital Research and
Management Company
MARY C. HALL
Brea, California
Treasurer of the fund
Senior Vice President-Fund Business
Management Group,
Capital Research and
Management Company
R. MARCIA GOULD
Brea, California
Assistant Treasurer of the fund
Vice President-Fund Business
Management Group,
Capital Research and
Management Company
THE AMERICAN FUNDS GROUP(R)
SHAREHOLDER SERVICES
ARE YOU AWARE OF YOUR RIGHTS?
Did you know you may be eligible for a sales charge discount when you buy
shares of most American Funds? The discounts begin when your investments total
$25,000 for bond funds or $50,000 for stock and stock/bond funds - and the good
news is you don't have to invest the whole amount at one time.
Through your right of accumulation, when you purchase additional shares
you can add the purchase amount to the value of shares you already own - in any
of our eligible funds* - in order to qualify for a sales charge discount on the
new investment. Sales charges are reduced on a sliding scale as the value of
your investments increases.
You'll find a detailed breakdown of all discounts in your fund's
prospectus, which you can obtain from your financial adviser or by calling a
Shareholder Services Representative.
OTHER WAYS TO REDUCE SALES CHARGES
You can establish a statement of intention that allows you to invest at a
reduced sales charge immediately, based on purchases you intend to make over a
13-month period.* (If, over the 13 months, you don't invest the intended
amount, you will pay the sales charge applicable to the amount invested.) Or
you can aggregate accounts by adding your purchase amount to the total value of
accounts you, your spouse and your children under the age of 21 have with The
American Funds Group. Call a Shareholder Services Representative for details
and restrictions.
Whether you accumulate, aggregate or establish a statement of intention,
it all adds up - to more purchasing power for you.
INVESTING WITH STYLE
Our many free services are designed to help you meet your needs quickly,
effortlessly and efficiently.
AMERICAN FUNDSLINE (R) AND FUNDSLINE ONLINESM - Handle transactions using your
computer or phone 24 hours a day. Obtain current prices and investment returns,
exchange shares between funds, redeem shares, check your share balances and
confirm your most recent transaction. Request a prospectus (Web site only),
duplicate statements and order checks (phone only). All on your timetable. Just
call 800/325-3590 or visit our Web site at www.americanfunds.com.
AMERICAN FUNDSLINKSM - Link your American Funds accounts with your bank
account. You can have fund dividends or automatic fund withdrawals deposited
directly into your bank account. Or you can invest money directly from your
bank account into your fund account on either a systematic or on-demand basis.
OTHER AUTOMATIC TRANSACTIONS - You can reinvest dividends into the same fund or
another fund, make withdrawals, and exchange shares between funds - quarterly,
monthly or during the months you specify.
DIVIDEND AND CAPITAL GAIN OPTIONS - Use your dividend and capital gain
distributions to meet your changing needs. You may:
* Automatically reinvest distributions back into the fund at no sales charge.
* Cross-reinvest dividends into another fund at no sales charge. (Certain
restrictions apply.)
* Have dividends mailed or sent electronically to you or to someone else.
EXCHANGE PRIVILEGES - When you and your investment adviser feel it's time to
adjust your portfolio to meet your changing investment goals, you can easily
exchange shares from one American Fund to another - without paying a sales
charge.* If you are opening an account in a different fund, you must meet that
fund's minimum investment requirement. An exchange generally constitutes a sale
and purchase for tax purposes. Please read the prospectus before you exchange
shares.
OTHER SERVICES - Stay on top of your investments with account statements that
keep you abreast of the activity in your account, consolidated quarterly
statements to reduce paperwork if you have multiple accounts and year-end tax
reports that show the dividends and capital gain distributions paid to you
during the year.
*Investments in our money market funds - The Cash Management Trust of America,
The Tax-Exempt Money Fund of America and The U.S. Treasury Money Fund of
America - which are purchased without a sales charge, generally do not apply
when determining your sales charges unless the shares were originally purchased
in another American Fund that required a sales charge, then later exchanged
into our money market funds.
For more information about these services or about any of the American Funds,
including charges and expenses, please obtain a prospectus from your financial
adviser or American Funds Service Company and read it carefully before you
invest or send money. These services are subject to change or termination.
Your financial adviser will be happy to explain these services in greater
detail. Or, to talk to a Shareholder Services Representative at American Funds,
call toll-free (8 a.m. to 8 p.m. ET) from anywhere in the U.S.: 800/421-0180.
Visit us at www.americanfunds.com on the World Wide Web.
[begin sidebar]
[map of United States broken out into regions]
Your financial adviser will be happy to explain these services to you in
greater detail. Or, to talk to a Shareholder Services Representative at
American Funds, call toll-free (8 a.m. to 8 p.m. ET) from anywhere in the U.S.:
800/421-0180. Visit us at www.americanfunds.com on the World Wide Web.
WESTERN
SERVICE CENTER
American Funds
Service Company
P.O. Box 2205
Brea, California
92822-2205
WEST CENTRAL
SERVICE CENTER
American Funds
Service Company
P.O. Box 659522
San Antonio, Texas
78265-9522
EAST CENTRAL
SERVICE CENTER
American Funds
Service Company
P.O. Box 6007
Indianapolis, Indiana
46206-6007
EASTERN
SERVICE CENTER
American Funds
Service Company
P.O. Box 2280
Norfolk, Virginia
23501-2280
Printed on recycled paper
Litho in USA CD/AL/3208
Lit. No. GFA-011-1097
[The American Funds Group(r)]
OFFICE OF THE FUND
One Market
Steuart Tower, Suite 1800
Mailing address: P.O. Box 7650
San Francisco, California 94120-7650
INVESTMENT ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Fund Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071-2371
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90017-2472
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
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, 1997, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
