[The American Funds Logo]
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The Growth Fund
of America
Prospectus
NOVEMBER 1, 1997
<PAGE>
THE GROWTH FUND OF AMERICA
One Market
Steuart Tower, Suite 1800
San Francisco, CA 94105
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Expenses 3
.................................................................
Financial Highlights 4
.................................................................
Investment Policies and Risks 5
.................................................................
Securities and Investment
Techniques 5
.................................................................
Multiple Portfolio Counselor
System 8
Investment Results 10
.................................................................
Dividends, Distributions and
Taxes 11
.................................................................
Fund Organization and
Management 12
.................................................................
Shareholder Services 15
</TABLE>
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The fund's investment objective is growth of capital. The realization of current
income will not be a consideration. The fund strives to accomplish this
objective by investing primarily in common stocks.
This prospectus presents information you should know before investing in the
fund. You should keep it on file for future reference.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. YOUR INVESTMENT IN THE FUND IS NOT A
DEPOSIT OR OBLIGATION OF, OR INSURED OR GUARANTEED BY, ANY ENTITY OR PERSON
INCLUDING THE U.S. GOVERNMENT AND THE FEDERAL DEPOSIT INSURANCE CORPORATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
05-010-1197
<PAGE>
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EXPENSES
The effect of the expenses described below is reflected in the fund's share
price and return.
You may pay certain shareholder transaction expenses when you buy or sell shares
of the fund. Fund operating expenses are paid out of the fund's assets and are
factored into its share price.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum sales charge on purchases
(as a percentage of offering price) 5.75%
................................................................................
</TABLE>
SALES CHARGES ARE REDUCED OR ELIMINATED FOR LARGER PURCHASES. There is no sales
charge on reinvested dividends, and no deferred sales charge or redemption or
exchange fees. A contingent deferred sales charge of 1% applies on certain
redemptions made within 12 months following purchases without a sales charge.
FUND OPERATING EXPENSES
(as a percentage of average net assets)
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<TABLE>
<S> <C>
Management fees 0.36%
................................................................................
12b-1 expenses 0.24%(1)
................................................................................
Other expenses 0.12%
................................................................................
Total fund operating expenses 0.72%
</TABLE>
(1) 12b-1 expenses may not exceed 0.25% of the fund's average net assets
annually.
EXAMPLES
Assuming a hypothetical annual return of 5% and shareholder transaction and
operating expenses as described above, for every $1,000 you invested, you would
pay the following total expenses over the following periods:
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<TABLE>
<S> <C>
One year $ 64
................................................................................
Three years $ 79
................................................................................
Five years $ 95
................................................................................
Ten years $ 142
</TABLE>
THESE EXAMPLES ARE NOT MEANT TO REPRESENT YOUR ACTUAL INVESTMENT RESULTS OR
EXPENSES, WHICH MAY VARY. YOUR EXPENSES WILL BE LESS IF YOU QUALIFY TO PURCHASE
SHARES AT A REDUCED OR NO SALES CHARGE.
THE GROWTH FUND OF AMERICA / PROSPECTUS 3
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FINANCIAL HIGHLIGHTS
The following information has been audited by Deloitte & Touche LLP, independent
auditors. This table should be read together with the financial statements which
are included in the statement of additional information and annual report.
SELECTED PER-SHARE DATA*
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31
...........................
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $15.39 $16.55 $13.81 $13.58 $11.02 $11.21 $9.22 $11.53 $8.71 $10.61
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INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income .13 .13 .13 .07 .07 .12 .21 .28 .27 .14
...............................................................................................................
Net realized and
unrealized gain
(loss) on
investments 5.59 (.01) 3.21 .71 2.63 .40 2.43 (1.29) 3.00 (1.34)
...............................................................................................................
Total income (loss)
from investment
operations 5.72 .12 3.34 .78 2.70 .52 2.64 (1.01) 3.27 (1.20)
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LESS DISTRIBUTIONS:
Distributions from
net investment
income (.11) (.14) (.08) (.06) (.09) (.17) (.24) (.31) (.15) (.15)
...............................................................................................................
Distributions from
net realized gains (.86) (1.14) (.52) (.49) (.05) (.54) (.41) (.99) (.30) (.55)
...............................................................................................................
Total distributions (.97) (1.28) (.60) (.55) (.14) (.71) (.65) (1.30) (.45) (.70)
...............................................................................................................
Net asset value, end
of year $20.14 $15.39 $16.55 $13.81 $13.58 $11.02 $11.21 $9.22 $11.53 $8.71
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Total return(1) 38.54% .90% 25.56% 5.98% 24.64% 4.91% 30.55% (9.76%) 39.35% (10.73%)
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RATIOS/SUPPLEMENTAL
DATA:
Net assets,
end of year
(in millions) $11,646 $ 8,511 $ 7,525 $ 5,427 $ 5,018 $ 3,700 $ 2,903 $ 1,912 $ 1,686 $ 1,038
...............................................................................................................
Ratio of expenses to
average net assets .72% .74% .75% .78% .77% .79% .83% .79% .78% .71%
...............................................................................................................
Ratio of net income
to average net
assets .73% .82% .90% .49% .56% 1.11% 2.13% 2.67% 2.82% 1.56%
...............................................................................................................
Average commissions
paid per share(2) 5.01c 5.62c 5.94c 6.05c 6.82c 6.94c 7.23c 7.13c 7.00c 6.64c
...............................................................................................................
Portfolio turnover
rate 34.10% 27.95% 26.90% 24.77% 25.23% 10.64% 18.92% 17.69% 30.28% 18.33%
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</TABLE>
* All per share data reflect the 100% stock dividend effected on December 13,
1996.
(1) Excludes maximum sales charge of 5.75%.
(2) 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.
4 THE GROWTH FUND OF AMERICA / PROSPECTUS
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INVESTMENT POLICIES AND RISKS
The fund aims to provide you with growth of capital.
The fund's investment objective is growth of capital. The realization of current
income will not be a consideration. The fund seeks to achieve its objective by
investing in a diversified portfolio consisting primarily of common stocks.
However, assets may also be held in securities convertible into common stocks,
cash or cash equivalents, straight debt securities (including U.S. Government
securities), or nonconvertible preferred stocks. The fund will maintain at least
65% of the value of its assets in growth-type securities under normal market
conditions.
The fund will attempt to take prompt advantage of market conditions and as a
result may at times have a high rate of portfolio turnover relative to many
other mutual funds. The fund may dispose of any security at any time, and it is
the fund's intention to take either short- or long-term profits or losses
consistent with its objective and sound investment practice, and when such
action would not impair the fund's tax status. Limits on the fund's investment
policies are determined at the time of purchase and are based on the fund's net
assets, unless otherwise stated. The fund's fundamental investment restrictions
(described in the statement of additional information) and objective may not be
changed without shareholder approval. MORE INFORMATION ON THE FUND'S INVESTMENT
POLICIES IS CONTAINED IN ITS STATEMENT OF ADDITIONAL INFORMATION.
THE FUND MAY NOT ACHIEVE ITS INVESTMENT OBJECTIVE DUE TO MARKET CONDITIONS AND
OTHER FACTORS. IN ADDITION, THE FUND MAY EXPERIENCE DIFFICULTY LIQUIDATING
CERTAIN PORTFOLIO SECURITIES DURING SIGNIFICANT MARKET DECLINES OR PERIODS OF
HEAVY REDEMPTIONS.
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SECURITIES AND INVESTMENT TECHNIQUES
EQUITY SECURITIES
Equity securities represent an ownership position in a company. These securities
may include common stocks and securities with equity conversion or purchase
rights. The prices of equity securities fluctuate based on changes in the
financial condition of their issuers and on market and economic conditions. The
fund's results will be related to the overall market for these securities. The
growth-oriented, equity-type securities generally purchased by the fund may
involve large price swings and potential for loss, particularly in the case of
smaller capitalization stocks.
THE GROWTH FUND OF AMERICA / PROSPECTUS 5
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DEBT SECURITIES
Bonds and other debt securities are used by issuers to borrow money. Issuers pay
investors interest and generally must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current interest,
but are purchased at a discount from their face values. The prices of debt
securities fluctuate depending on such factors as interest rates, credit quality
and maturity. In general their prices decline when interest rates rise and vice
versa.
The fund may invest up to 10% of its assets in debt securities rated Ba and BB
or below by Moody's Investors Service, Inc. or Standard & Poor's Corporation or
in unrated securities that are determined to be of equivalent quality. These
securities are commonly known as "high-yield, high-risk" or "junk" bonds and may
have characteristics similar to the equity securities eligible for purchase by
the fund. High-yield, high-risk bonds are described by the rating agencies as
speculative and involve greater risk of default or price changes due to changes
in the issuer's creditworthiness than higher rated bonds, or they may already be
in default. The market prices of these securities may fluctuate more than higher
quality securities and may decline significantly in periods of general economic
difficulty. It may be more difficult to dispose of, or to determine the value
of, high-yield, high-risk bonds. The fund's high-yield, high-risk securities may
be rated as low as C by Moody's or D by S&P which are described by the rating
agencies as "having extremely poor prospects of ever attaining any real
investment standing" or "in default and payment of interest and/or repayment of
principal is in arrears." See the statement of additional information for a
complete description of the bond ratings.
Capital Research and Management Company attempts to reduce the risks described
above through diversification of the portfolio and by credit analysis of each
issuer as well as by monitoring broad economic trends and corporate and
legislative developments.
During the previous fiscal year, the fund did not hold any fixed-income
securities with maturities greater than one year or convertible instruments.
Money market instruments and cash made up an average of 15.52% of the fund's
portfolio.
OTHER SECURITIES
The fund may also invest in securities that have a combination of equity and
debt characteristics such as non-convertible preferred stocks and convertible
securities. These securities may at times resemble equity more than debt and
vice versa. Non-convertible preferred stocks are similar to debt in that they
have a stated dividend rate akin to the coupon of a bond or note even though
they are
6 THE GROWTH FUND OF AMERICA / PROSPECTUS
<PAGE>
often classified as equity securities. The prices and yields of non-convertible
preferred stocks generally move with changes in interest rates and the issuer's
credit quality, similar to the factors affecting debt securities.
Bonds, preferred stocks, and other securities may sometimes be converted into
shares of common stock or other securities at a stated exchange ratio. These
securities prior to conversion pay a fixed rate of interest or a dividend.
Because convertible securities have both debt and equity characteristics their
value varies in response to many factors, including the value of the underlying
equity, general market and economic conditions, convertible market valuations,
as well as changes in interest rates, credit spreads, and the credit quality of
the issuer.
PRIVATE PLACEMENTS
Normally, securities acquired in private placements are subject to contractual
restrictions on resale. Any such securities will be considered illiquid unless
they have been specifically determined to be liquid under procedures adopted by
the fund's board of directors, taking into account factors such as the frequency
and volume of trading, the commitment of dealers to make markets and the
availability of qualified investors, all of which can change from time to time.
The fund may incur certain additional costs in disposing of securities that are
illiquid.
INVESTING IN VARIOUS COUNTRIES
The fund may invest up to 10% of its assets in securities of issuers domiciled
outside the U.S. and not included in the Standard & Poor's 500 Composite Index.
Investing outside the U.S. involves special risks, particularly in certain
developing countries, caused by, among other things: fluctuating currency
values; different accounting, auditing, and financial reporting regulations and
practices in some countries; changing local and regional economic, political,
and social conditions; greater market volatility; differing securities market
structures; and various administrative difficulties such as delays in clearing
and settling portfolio transactions or in receiving payment of dividends.
However, in the opinion of Capital Research and Management Company, investing
outside the U.S. also can reduce certain portfolio risks due to greater
diversification opportunities.
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. The fund may purchase and sell currencies to
facilitate transactions in securities denominated in currencies other than the
U.S. dollar. Brokerage commissions may be higher outside the U.S., and the fund
will bear certain expenses in connection with its currency transactions.
Furthermore, increased custodian costs may be associated with the maintenance of
assets in certain jurisdictions.
THE GROWTH FUND OF AMERICA / PROSPECTUS 7
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MULTIPLE PORTFOLIO COUNSELOR SYSTEM
The basic investment philosophy of Capital Research and Management Company is to
seek fundamental values at reasonable prices, using a system of multiple
portfolio counselors in managing mutual fund assets. Under this system the
portfolio of a fund is divided into segments which are managed by individual
counselors. Counselors decide how their respective segments will be invested
(within the limits provided by a fund's objective(s) and policies and by Capital
Research and Management Company's investment committee). In addition, Capital
Research and Management Company's research professionals may make investment
decisions with respect to a portion of a fund's portfolio. The primary
individual portfolio counselors for the fund are listed on the following page.
8 THE GROWTH FUND OF AMERICA / PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE AS
INVESTMENT PROFESSIONAL
(APPROXIMATE)
........................
YEARS OF EXPERIENCE
AS PORTFOLIO COUNSELOR WITH CAPITAL
PORTFOLIO (AND RESEARCH RESEARCH AND
COUNSELORS PROFESSIONAL, MANAGEMENT
FOR THE GROWTH IF APPLICABLE) FOR THE COMPANY OR
FUND GROWTH FUND OF AMERICA ITS
OF AMERICA PRIMARY TITLE(S) (APPROXIMATE) AFFILIATES TOTAL YEARS
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GORDON CRAWFORD Senior Vice President 6 years (in addition 26 years 26 years
and Director, Capital to 16 years as a
Research and research professional
Management Company prior to becoming a
portfolio counselor
for the fund)
---------------------------------------------------------------------------------------------------
JAMES E. DRASDO Senior Vice President 12 years (in addition 20 years 26 years
of the fund. Senior to 9 years as a
Vice President and research professional
Director, Capital prior to becoming a
Research and portfolio counselor
Management Company for the fund)
---------------------------------------------------------------------------------------------------
WILLIAM C. Senior Partner, The 24 years** 38 years 44 years
NEWTON Capital Group Partners
L.P.*
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DONALD D. O'NEAL Vice President of the 4 years (in addition 12 years 12 years
fund. Vice President, to 6 years as a
Capital Research and research professional
Management Company prior to becoming a
portfolio counselor
for the fund)
---------------------------------------------------------------------------------------------------
JAMES F. President of the fund. 9 years (in addition 27 years 27 years
ROTHENBERG President and to 3 years as a
Director, Capital research professional
Research and prior to becoming a
Management Company portfolio counselor
for the fund)
---------------------------------------------------------------------------------------------------
R. MICHAEL Chairman, Capital 12 years 33 years 33 years
SHANAHAN Research and
Management Company
---------------------------------------------------------------------------------------------------
* Company affiliated with Capital Research and Management Company.
** Since Capital Research and Management Company took over management of the fund in 1973.
</TABLE>
THE GROWTH FUND OF AMERICA / PROSPECTUS 9
<PAGE>
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INVESTMENT RESULTS
The fund may compare investment results to various indices or other mutual
funds. Fund results may be calculated on a total return, yield and/or
distribution rate basis. Results calculated without a sales charge will be
higher.
X TOTAL RETURN is the change in value of an investment in the fund over a given
period, assuming reinvestment of any dividends and capital gain distributions.
X YIELD is computed by dividing the net investment income per share earned by
the fund over a given period of time by the maximum offering price per share
on the last day of the period, according to a formula mandated by the
Securities and Exchange Commission. A yield calculated using this formula may
be different than the income actually paid to shareholders.
X DISTRIBUTION RATE reflects dividends that were paid by the fund. The
distribution rate is calculated by dividing the dividends paid over the last
12 months by the sum of the month-end price and the capital gain distributions
paid over the last 12 months.
INVESTMENT RESULTS
(FOR PERIODS ENDED SEPTEMBER 30, 1997)
<TABLE>
<CAPTION>
THE FUND THE FUND
AT NET AT MAXIMUM
AVERAGE ANNUAL ASSET SALES S&P
TOTAL RETURNS: VALUE(1) CHARGE(1,2) 500(3) CPI(4)
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<S> <C> <C> <C> <C>
One year 38.22% 30.25% 40.40% 2.51%
.........................................................................................
Five years 19.21% 17.81% 20.73% 2.67%
.........................................................................................
Ten years 14.31% 13.63% 14.72% 3.43%
.........................................................................................
Lifetime(5) 17.91% 16.89% 14.47% 5.41%
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</TABLE>
(1) These fund results were calculated according to a standard formula that is
required for all stock and bond funds.
(2) The maximum sales charge has been deducted.
(3) The Standard & Poor's 500 Index represents stocks. This index in unmanaged
and does not reflect sales charges, commissions or expenses.
(4) Consumer Price Index is computed from data supplied by the U.S. Department
of Labor, Bureau of Labor Statistics.
(5) For the period beginning December 1, 1973 (when Capital Research and
Management Company became the fund's investment adviser).
10 THE GROWTH FUND OF AMERICA / PROSPECTUS
<PAGE>
Here are the fund's annual total returns calculated without a sales charge.
This information is being supplied on a calendar year basis.
[Bar Chart]
1986 16.16%
1987 7.32%
1988 18.46%
1989 30.06%
1990 -4.12%
1991 35.79%
1992 7.40%
1993 14.50%
1994 .02%
1995 29.80%
1996 14.84%
[End bar chart]
Past results are not an indication of future results.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Dividends are usually paid in December. Capital gains, if any, are also usually
distributed in December. When a dividend or capital gain is distributed, the net
asset value per share is reduced by the amount of the payment.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash, and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, or the shareholder does
not respond to mailings from American Funds Service Company with regard to
uncashed distribution checks, the shareholder's distribution option will
automatically be converted to having all dividends and other distributions
reinvested in additional shares.
FEDERAL TAXES
In any fiscal year in which the fund qualifies as a regulated investment company
and distributes to shareholders all of its net investment income and net capital
gains, the fund itself is relieved of federal income tax.
THE GROWTH FUND OF AMERICA / PROSPECTUS 11
<PAGE>
Generally, all dividends and capital gains are taxable whether they are
reinvested or received in cash -- unless you are exempt from taxation or
entitled to tax deferral. Early each year, you will be notified as to the amount
and federal tax status of all income distributions paid during the prior year.
Such distributions may also be subject to state or local taxes. The tax
treatment of redemptions from a retirement plan account may differ from
redemptions from an ordinary shareholder account.
YOU MUST PROVIDE THE FUND WITH A CERTIFIED CORRECT TAXPAYER IDENTIFICATION
NUMBER (GENERALLY YOUR SOCIAL SECURITY NUMBER) AND CERTIFY THAT YOU ARE NOT
SUBJECT TO BACKUP WITHHOLDING. IF YOU FAIL TO DO SO THE IRS CAN REQUIRE THE FUND
TO WITHHOLD 31% OF YOUR TAXABLE DISTRIBUTIONS AND REDEMPTIONS. Federal law also
requires the fund to withhold 30% or the applicable tax treaty rate from
dividends paid to certain nonresident alien, non-U.S. partnership and non-U.S.
corporation shareholder accounts.
This is a brief summary of some of the tax laws that affect your investment in
the fund. Please see the statement additional information and your tax adviser
for further information.
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FUND ORGANIZATION AND MANAGEMENT
FUND ORGANIZATION AND VOTING RIGHTS
The fund, an open-end, diversified management investment company, was organized
as a Delaware corporation in 1958 and reorganized as a Maryland corporation in
1983. All fund operations are supervised by the fund's board of directors who
meet periodically and perform duties required by applicable state and federal
laws. Members of the board who are not employed by Capital Research and
Management Company or its affiliates are paid certain fees for services rendered
to the fund as described in the statement of additional information. They may
elect to defer all or a portion of these fees through a deferred compensation
plan in effect for the fund. The fund does not hold annual meetings of
shareholders. However, significant matters which require shareholder approval,
such as certain elections of board members or a change in a fundamental
investment policy, will be presented to shareholders at a meeting called for
such purpose. Shareholders have one vote per share owned. At the request of the
holders of at least 10% of the shares, the fund will hold a meeting at which any
member of the board could be removed by a majority vote.
12 THE GROWTH FUND OF AMERICA / PROSPECTUS
<PAGE>
THE INVESTMENT ADVISER
Capital Research and Management Company, a large and experienced investment
management organization founded in 1931, is the investment adviser to the fund
and other funds, including those in The American Funds Group. Capital Research
and Management Company, a wholly owned subsidiary of The Capital Group
Companies, Inc., is headquartered at 333 South Hope Street, Los Angeles, CA
90071. Capital Research and Management Company manages the investment portfolio
and business affairs of the fund. The management fee paid by the fund to Capital
Research and Management Company may not exceed 0.50% of the fund's average net
assets annually and declines at certain asset levels. The total management fee
paid by the fund, as a percentage of average net assets, for the previous fiscal
year is discussed earlier under "Expenses."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company Institute's
Advisory Group on Personal Investing. This policy has also been incorporated
into the fund's code of ethics.
PLAN OF DISTRIBUTION
The fund has a Plan of Distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the board. The 12b-1 fee paid by the fund,
as a percentage of average net assets, for the previous fiscal year is discussed
earlier under "Expenses."
PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by Capital
Research and Management Company, which strives to obtain the best available
prices, taking into account the costs and quality of executions. Fixed-income
securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. In underwritten offerings,
securities are usually purchased at a fixed price which includes an amount of
compensation to the dealer, generally referred to as a concession or discount.
On occasion, securities may be purchased directly from an issuer, in which case
no commissions or discounts are paid. In the over-the-counter market, purchases
and sales are transacted directly with principal market-makers except in those
circumstances where it appears better prices and executions are available
elsewhere.
THE GROWTH FUND OF AMERICA / PROSPECTUS 13
<PAGE>
Subject to the above policy, when two or more brokers (either directly or
through their correspondent clearing agents) are in a position to offer
comparable prices and executions, preference may be given to brokers who have
sold shares of the fund or have provided investment research, statistical, and
other related services for the benefit of the fund and/or other funds served by
Capital Research and Management Company.
PRINCIPAL UNDERWRITER AND TRANSFER AGENT
American Funds Distributors, Inc. and American Funds Service Company serve as
the principal underwriter and transfer agent for the fund, respectively. They
are headquartered at 333 South Hope Street, Los Angeles, CA 90071 and 135 South
State College Boulevard, Brea, CA 92821, respectively.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
CALL TOLL-FREE FROM ANYWHERE IN THE U.S.
(8 A.M. TO 8 P.M. ET):
800/421-0180
[U.S. TIMEZONE MAP]
<TABLE>
<S> <C> <C> <C>
WESTERN SERVICE WESTERN CENTRAL EASTERN CENTRAL EASTERN SERVICE
CENTER SERVICE CENTER SERVICE CENTER CENTER
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Texas Indianapolis, Indiana Norfolk, Virginia
92822-2205 78265-9522 46206-6007 23501-2280
Fax: 714/671-7080 Fax: 210/530-4050 Fax: 317/735-6620 Fax: 804/670-4773
</TABLE>
14 THE GROWTH FUND OF AMERICA / PROSPECTUS
<PAGE>
SHAREHOLDER SERVICES
The fund offers you a valuable array of services you can use to alter your
investment program as your needs and circumstances change. These services, which
are summarized below, are available only in states where they may be legally
offered and may be terminated or modified at any time upon 60 days' written
notice. A COMPLETE DESCRIPTION OF SHAREHOLDER SERVICES AND ACCOUNT POLICIES IS
CONTAINED IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. In addition, an
easy-to-read guide to owning a fund in The American Funds Group titled "Welcome
to the Family" is sent to new shareholders and is available by writing or
calling American Funds Service Company.
THE SERVICES DESCRIBED MAY NOT BE AVAILABLE THROUGH SOME RETIREMENT PLANS. IF
YOU ARE INVESTING THROUGH A RETIREMENT PLAN, YOU SHOULD CONTACT YOUR PLAN
ADMINISTRATOR/TRUSTEE ABOUT WHAT SERVICES ARE AVAILABLE AND WITH QUESTIONS ABOUT
YOUR ACCOUNT.
- --------------------------------------------------------------------------------
PURCHASING SHARES
HOW TO PURCHASE SHARES
Generally, you may open an account by contacting any investment dealer
authorized to sell the fund's shares. You may add to your account through your
dealer or directly through American Funds Service Company by mail, computer,
wire, or bank debit. You may also establish or add to your account by exchanging
shares from any of your other accounts in The American Funds Group. The fund and
American Funds Distributions reserve the right to reject any purchase order for
any reason. This includes exchange purchase orders that may place an unfair
burden on other shareholders due to their frequency.
Various purchase options are available as described below subject to certain
investment minimums and limitations described in the statement of additional
information and "Welcome to the Family."
X Automatic Investment Plan
You may invest monthly or quarterly through automatic withdrawals from your
bank account.
X Automatic Reinvestment
You may reinvest your dividends and capital gain distributions into the fund
(with no sales charge). This will be done automatically unless you elect to
have the dividends and/or capital gain distributions paid to you in cash.
THE GROWTH FUND OF AMERICA / PROSPECTUS 15
<PAGE>
X Cross-Reinvestment
You may invest your dividend and capital gain distributions into any other
fund in The American Funds Group.
X Exchange Privilege
You may exchange your shares into other funds in The American Funds Group
generally with no sales charge. Exchanges of shares from the money market
funds that were initially purchased with no sales charge will generally be
subject to the appropriate sales charge. You may also elect to automatically
exchange shares among any of the funds in The American Funds Group. Exchange
requests may be made in writing, by telephone, including American
FundsLine(R), by computer using American FundsLine OnLine(SM) (see below), or
by fax. EXCHANGES HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND
PURCHASES.
X Retirement Plans
You may invest in the fund through various retirement plans. For further
information contact your investment dealer or American Funds Distributors.
SHARE PRICE
The fund's share price, also called net asset value, is determined as of the
close of trading (normally 4:00 p.m., Eastern time) every day the New York Stock
Exchange is open. The fund calculates its net asset value per share, generally
using market prices, by dividing the total value of its assets after subtracting
liabilities by the number of its shares outstanding. Shares are purchased at the
offering price next determined after your investment is received and accepted by
American Funds Service Company. The offering price is the net asset value plus a
sales charge, if applicable.
SHARE CERTIFICATES
Shares are credited to your account and certificates are not issued unless you
request them by writing to American Funds Service Company.
INVESTMENT MINIMUMS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
To establish an account................................... $ 1,000
For a retirement plan account........................ $ 250
For a retirement plan account through payroll $ 25
deduction..........................................
To add to an account...................................... $ 50
For a retirement plan account........................ $ 25
</TABLE>
16 THE GROWTH FUND OF AMERICA / PROSPECTUS
<PAGE>
SALES CHARGES
A sales charge may apply, as described below, when purchasing shares. Sales
charges may be reduced for larger purchases as indicated below.
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF
.................. DEALER
NET CONCESSION AS
OFFERING AMOUNT % OF OFFERING
INVESTMENT PRICE INVESTED PRICE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
.............................................................................
$50,000 but less than $100,000 4.50% 4.71% 3.75%
.............................................................................
$100,000 but less than $250,000 3.50% 3.63% 2.75%
.............................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
.............................................................................
$500,000 but less than $1 million 2.00% 2.04% 1.60%
.............................................................................
$1 million or more and certain
other investments described below see below see below see below
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 100 or more eligible employees are sold
with no initial sales charge. A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE
IMPOSED ON CERTAIN REDEMPTIONS MADE WITHIN ONE YEAR OF PURCHASE BY THESE
ACCOUNTS. Investments by retirement plans, foundations or endowments with $50
million or more in assets may be made with no sales charge and are not subject
to a contingent deferred sales charge. A dealer concession of up to 1% may be
paid by the fund from its Plan of Distribution and/or by American Funds
Distributors on all investments described above. Investments by certain
individuals and entities including employees and other associated persons of
dealers authorized to sell shares of the fund and Capital Research and
Management Company and its affiliated companies are not subject to a sales
charge.
ADDITIONAL DEALER COMPENSATION
In addition to the concessions listed, up to 0.25% of average net assets is paid
annually to qualified dealers for providing certain services pursuant to the
fund's Plan of Distribution. During the current fiscal year, American Funds
Distributors will also provide additional compensation to the top one hundred
dealers who have sold shares of funds in The American Funds Group based on the
pro rata share of a qualifying dealer's sales.
THE GROWTH FUND OF AMERICA / PROSPECTUS 17
<PAGE>
REDUCING YOUR SALES CHARGE
You and your immediate family may combine investments to reduce your costs. You
must let your investment dealer or American Funds Service Company know if you
qualify for a reduction in your sales charge using one or any combination of the
methods described below.
X Aggregation
Investments that may be aggregated include those made by you, your spouse and
your children under the age of 21, if all parties are purchasing shares for
their own account(s), including any business account solely "controlled by,"
as well as any retirement plan or trust account solely for the benefit of,
these individuals. Investments made for multiple employee benefit plans of a
single employer or "affiliated" employers may be aggregated provided they are
not also aggregated with individual accounts. Finally, investments made by a
common trust fund or other diversified pooled account not specifically formed
for the purpose of accumulating fund shares may be aggregated.
Purchases made for nominee or street name accounts will generally not be
aggregated with those made for other accounts unless qualified as described
above.
X Concurrent Purchases
You may combine concurrent purchases of two or more funds in The American
Funds Group, except direct purchases of the money market funds. Shares of the
money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
X Right of Accumulation
You may take into account the current value of your existing holdings in The
American Funds Group to determine your sales charge. Direct purchases of the
money market funds are excluded.
X Statement of Intention
You may enter into a non-binding commitment to invest a certain amount (which,
at your request, may include purchases made during the previous 90 days) in
non-money market fund shares over a 13-month period. A portion of your account
may be held in escrow to cover additional sales charges which may be due if
your total investments over the statement period are insufficient to qualify
for the applicable sales charge reduction.
18 THE GROWTH FUND OF AMERICA / PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
SELLING SHARES
HOW TO SELL SHARES
You may sell (redeem) shares in your account by contacting your investment
dealer or American Funds Service Company. You may also use American FundsLine(R)
or American FundsLine Online(SM) (see below). In addition, you may sell shares
in amounts of $50 or more automatically. If you sell shares through your
investment dealer you may be charged for this service. Shares held for you in
your dealer's street name must be sold through the dealer.
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. Sale requests may be
made in writing, by telephone, including American FundsLine(R), by computer
using American FundsLine Online(SM), or by fax. Sales by telephone, computer, or
fax are limited to $50,000 in accounts registered to individual(s) (including
non-retirement trust accounts). In addition, checks must be made payable to the
registered shareholder(s) and mailed to an address of record that has been used
with the account for at least 10 days.
Proceeds will not be mailed until sufficient time has passed to provide
reasonable assurance that checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may take up to 15 calendar days
from the purchase date). Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and as permissible under the
Investment Company Act of 1940), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.
The fund may, with 60 days' written notice, close your account if due to a sale
of shares the account has a value of less than the minimum required initial
investment.
Generally, written requests to sell shares must be signed by you and must
include any shares you wish to sell that are in certificate form. Your signature
must be guaranteed by a member firm of a domestic stock exchange or the National
Association of Securities Dealers, Inc., that is an eligible guarantor
institution, bank, savings association, or credit union. A signature guarantee
is not currently required for any sale of $50,000 or less provided the check is
made payable to the registered shareholder(s) and is mailed to the address of
record on the account, and provided the address has been used with the account
for at least 10 days. Additional documentation may be required for sale of
shares held in corporate, partnership or fiduciary accounts.
THE GROWTH FUND OF AMERICA / PROSPECTUS 19
<PAGE>
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group within
90 days after the date of the redemption or distribution. Redemption proceeds of
shares representing direct purchases in the money market funds are excluded.
Reinvestment will be at the next calculated net asset value after receipt and
acceptance by American Funds Service Company.
- --------------------------------------------------------------------------------
OTHER IMPORTANT THINGS TO REMEMBER
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(SM)
You may check your share balance, the price of your shares, or your most recent
account transaction, sell shares (up to $50,000 per shareholder each day) or
exchange shares around the clock with American FundsLine(R) or American
FundsLine Online(SM). To use these services, call 800/325-3590 from a
TouchTone(TM) telephone or access The American Funds' Web site on the Internet
at www.americanfunds.com.
TELEPHONE AND COMPUTER PURCHASES, SALES AND EXCHANGES
Unless you opt out of the telephone, computer (including American FundsLine(R)
or American FundsLine Online(SM)) or fax purchase, sale and/or exchange options
(see below), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from any
losses, expenses, cost or liabilities (including attorney fees) which may be
incurred in connection with the exercise of these privileges provided American
Funds Service Company employs reasonable procedures to confirm that the
instructions received from any person with appropriate account information are
genuine. If reasonable procedures are not employed, the fund may be liable for
losses due to unauthorized or fraudulent instructions.
Generally, all shareholders are automatically eligible to use these options.
However, you may elect to opt out of these options by writing American Funds
Service Company. (You may also reinstate them at any time by writing to American
Funds Service Company.)
ACCOUNT STATEMENTS
You will receive regular confirmation statements reflecting transactions in your
account. Dividend and capital gain reinvestments and purchases through automatic
investment plans and certain retirement plans will be confirmed at least
quarterly.
20 THE GROWTH FUND OF AMERICA / PROSPECTUS
<PAGE>
NOTES
THE GROWTH FUND OF AMERICA / PROSPECTUS 21
<PAGE>
NOTES
22 THE GROWTH FUND OF AMERICA / PROSPECTUS
<PAGE>
NOTES
THE GROWTH FUND OF AMERICA / PROSPECTUS 23
<PAGE>
<TABLE>
<S> <C>
FOR SHAREHOLDER SERVICES FOR DEALER SERVICES
American Funds American Funds
Service Company Distributors
800/421-0180 ext. 1 800/421-9900 ext. 11
FOR 24-HOUR INFORMATION
American American Funds
FundsLine(R) Internet Web site
800/325-3590 http://www.americanfunds.com
Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.
---------------------------------------------------------------
MULTIPLE TRANSLATIONS
This prospectus may be translated into other languages. In the
event of any inconsistency or ambiguity as to the meaning of
any word or phrase contained in a translation, the English text
shall prevail.
---------------------------------------------------------------
OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Includes financial statements, detailed performance
information, portfolio holdings, a statement from portfolio
management and the independent auditor's report (in the annual
report).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more detailed information on all aspects of the fund,
including the fund's financial statements.
A current SAI has been filed with the Securities and Exchange
Commission ("SEC"). It is incorporated by reference into this
prospectus and is available along with other related materials
on the SEC's Internet Web site at http://www.sec.gov.
CODE OF ETHICS
Includes a description of the fund's personal investing policy.
To request a free copy of any of the documents above:
Call American Funds or Write to the Secretary
Service Company of the fund
800/421-0180 ext. 1 P.O. Box 7650
San Francisco, CA 94120
</TABLE>
This prospectus has been printed on recycled paper.[RECYCLING ARROWS LOGO]
24 THE GROWTH FUND OF AMERICA / PROSPECTUS
<PAGE>
THE GROWTH FUND OF AMERICA, INC.
Part B
Statement of Additional Information
NOVEMBER 1, 1997
This document is not a prospectus but should be read in conjunction with the
current Prospectus of The Growth Fund of America, Inc. (the fund or GFA) dated
November 1, 1997. The Prospectus may be obtained from your investment dealer
or financial planner or by writing to the fund at the following address:
THE GROWTH FUND OF AMERICA, INC.
ATTENTION: SECRETARY
ONE MARKET, STEUART TOWER
P.O. BOX 7650
SAN FRANCISCO, CA 94120
TELEPHONE: (415) 421-9360
Shareholders who purchase shares at net asset value through eligible
retirement plans should note that not all of the services or features described
below may be available to them, and they should contact their employer for
details.
Table of Contents
Item Page No.
DESCRIPTION OF CERTAIN SECURITIES 2
CERTAIN RISK FACTORS RELATING TO BELOW INVESTMENT GRADE BONDS 3
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS 4
FUND OFFICERS AND DIRECTORS 6
MANAGEMENT 10
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 12
PURCHASE OF SHARES 16
REDEEMING SHARES 22
EXECUTION OF PORTFOLIO TRANSACTIONS 25
GENERAL INFORMATION 26
INVESTMENT RESULTS 27
DESCRIPTION OF BOND RATINGS 32
FINANCIAL STATEMENTS ATTACHED
DESCRIPTION OF CERTAIN SECURITIES
The descriptions below are intended to supplement the material in the
prospectus under "Investment Policies and Risks."
U.S. GOVERNMENT SECURITIES - Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury. For these securities, the payment of
principal and interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. Such securities are
subject to variations in market value due to fluctuations in interest rates,
but, if held to maturity, will be paid in full.
Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the
Treasury. However, they generally involve federal sponsorship in one way or
another; some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase certain obligations of the
issuer; others are supported only by the credit of the issuing government
agency or instrumentality. These agencies and instrumentalities include, but
are not limited to, Federal Land Banks, Farmers Home Administration, Central
Bank for Cooperatives, and Federal Intermediate Credit Banks.
CASH AND CASH EQUIVALENTS - These securities include (1) commercial paper
(short-term notes issued by corporations or governmental bodies), (2)
commercial bank obligations (E.G., certificates of deposit (interest bearing
time deposits), and bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity), (3)
savings association and savings bank obligations (E.G., certificates of deposit
issued by savings banks or savings associations), (4) securities of the U.S.
Government, its agencies or instrumentalities that mature at the time of
purchase, or may be redeemed, in one year or less, and (5) corporate bonds and
notes that mature at the time of purchase, or that may be redeemed, in one year
or less.
CURRENCY TRANSACTIONS - Although the fund has no current intention to do so
(at least during the next 12 months) the fund has the ability to hold a portion
of its assets in U.S. dollars and other currencies and to enter into certain
currency contracts (on either a spot or forward basis) in connection with
investing in non-U.S. dollar denominated securities including foreign currency
exchange and forward currency contracts. A foreign exchange contract is used
to facilitate settlement of trades. For example, the fund might purchase a
currency or enter into a foreign exchange contract to preserve the U.S. dollar
price of securities it has contracted to purchase. A forward currency
contract is an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. The
fund will segregate liquid assets which will be marked to market daily to meet
its forward commitments to the extent required by the Securities and Exchange
Commission.
Certain provisions of the Internal Revenue Code may affect the extent to which
the fund may enter into forward contracts. Such transactions may also affect,
for U.S. federal income tax purposes, the character and timing of income, gain
or loss recognized by the fund.
WARRANTS AND RIGHTS - In addition, the fund may purchase warrants, which are
usually issued together with bonds or preferred stocks. Warrants generally
entitle the holder to buy a proportionate amount of common stock at a specified
price, usually higher than the current market price. Warrants may be issued
with an expiration date or in perpetuity. The fund may also invest in rights
to purchase common stocks. Rights are similar to warrants except that they
normally entitle the holder to purchase common stock at a lower price than the
current market price. Rights generally expire in less than four weeks.
CERTAIN RISK FACTORS RELATING TO BELOW INVESTMENT GRADE BONDS
Certain risk factors relating to investing in below investment grade
securities ("high-yield, high-risk bonds") are discussed below. During the
previous fiscal year, the fund held none of its assets in below investment
grade securities.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield, high-risk
bonds can be sensitive to adverse economic changes and political and corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress that
would adversely affect their ability to service their principal and interest
payment obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaults on its obligations to pay interest
or principal or enters into bankruptcy proceedings, the fund may incur losses
or expenses in seeking recovery of amounts owed to it. In addition, periods of
economic uncertainty and changes can be expected to result in increased
volatility of market prices and yields of high-yield, high-risk bonds and the
fund's net asset value. From time to time legislation has been proposed that
would limit the use of high-yield, high-risk bonds in certain instances. The
impact that such legislation if enacted, could have on the market for such
bonds cannot be predicted.
PAYMENT EXPECTATIONS - High-yield, high-risk bonds, like other bonds, may
contain redemption or call provisions. If an issuer exercised these provisions
in a declining interest rate market, the fund would have to replace the
security with a lower yielding security, resulting in a decreased return for
investors. Conversely, a high-yield, high-risk bond's value will decrease in a
rising interest rate market, as will the value of the fund's assets. If the
fund experiences unexpected net redemptions, this may force it to sell
high-yield, high-risk bonds without regard to their investment merits, thereby
decreasing the asset base upon which expenses can be spread and possibly
reducing the fund's rate of return.
LIQUIDITY AND VALUATION - There may be little trading in the secondary market
for particular bonds, which may affect adversely the fund's ability to value
accurately or dispose of such bonds. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
The fund has adopted certain fundamental policies and investment restrictions
which cannot be changed without shareholder approval. Approval requires the
affirmative vote of 67% or more of the voting securities present at a meeting
of shareholders, provided more than 50% of such securities are represented at
the meeting, or the vote of more than 50% of the outstanding voting securities,
whichever is less.
The fund may not:
1. Purchase the securities of any issuer, except the U.S. Government or any
subdivision thereof, if upon such purchase more than 5% of the value of its
total assets would consist of securities of such issuer.
2. Purchase the securities of companies in a particular industry (other than
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities) if thereafter 25% or more of the value of its total assets
would consist of securities issued by companies in that industry.
3. Purchase more than 10% of the voting or non-voting securities of any one
issuer.
4. Invest more than 15% of the value of its assets in securities that are
illiquid.
5. Purchase securities on margin.
6. Purchase any real estate unless necessary for office space for the fund or
for the protection of investments already made.
7. Make loans to anyone (the purchase of a portion of an issue of bonds,
debentures or other securities, whether or not on the original issue of such
securities, is not to be considered the making of a loan).
8. Sell securities or property short or permit any of its officers, directors
or any of its affiliated persons to take short positions on shares of the fund.
9. Purchase the securities of a company which has an officer or director who
is an officer or director of the fund, or an officer or director of its
investment adviser, if, to the knowledge of the fund, one or more of such
persons own beneficially more than 1/2 of 1% of the shares of the company and
in the aggregate more than 5% of the outstanding securities of such company.
10. Borrow more than an amount equal to 5% of the value of its total assets,
determined immediately after the time of the borrowing, and then only from
banks, as a temporary measure for extraordinary or emergency purposes.
11. Invest in the securities of other managed investment companies.
12. Invest in the securities of any issuer for the purpose of exercising
control or management.
13. Deal in commodities or commodity contracts.
14. Act as underwriter of securities issued by other persons.
Notwithstanding Investment Restriction #11, the fund may invest in securities
of other investment companies if deemed advisable by its officers in connection
with the administration of a deferred compensation plan adopted by Directors
pursuant to an exemptive order granted by the Securities and Exchange
Commission. Furthermore, Investment Restriction #13 does not prevent the fund
from engaging in transactions involving forward currency contracts.
FUND OFFICERS AND DIRECTORS
DIRECTORS AND DIRECTOR COMPENSATION
<TABLE>
<CAPTION>
NAME, POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
ADDRESS AND WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
AGE REGISTRANT DURING PAST (INCLUDING (INCLUDING OF
5 YEARS VOLUNTARILY VOLUNTARILY FUND
(POSITIONS DEFERRED DEFERRED BOARDS
WITHIN THE COMPENSATION/1/) COMPENSATION/1/) ON
ORGANIZATIONS FROM THE FUND FROM ALL FUNDS WHICH
LISTED MAY DURING FISCAL MANAGED BY DIRECTOR
HAVE YEAR ENDED CAPITAL RESEARCH SERVES/3/
CHANGED 8/31/97 AND
DURING THIS MANAGEMENT
PERIOD) COMPANY/2/ FOR
THE YEAR ENDED
8/31/97
<S> <C> <C> <C> <C> <C>
Robert A. Director President and $17,000/4/ $84,600/4/ 5
Fox Chief
P.O. Box Executive
457 Officer,
1000 Davis Foster Farms
Street
Livingston,
CA 95334
Age: 60
Roberta L. Director Consultant; $16,400 $46,400 3
Hazard Rear Admiral,
1419 Audmar United States
Drive Navy
McLean, VA (Retired)
22101
Age: 62
Leonade D. Director Former $16,400/4/ $77,600/4/ 5
Jones Treasurer,
1536 Los The
Montes Washington
Drive Post Company
Burlingame,
CA 94010
Age: 49
John G. Director The IBJ $18,500/4/ $145,300/4/ 7
McDonald Professor of
Graduate Finance,
School of Graduate
Business School of
Stanford Business,
University Stanford
Stanford, University
CA 94305
Age: 60
+James W. Director Senior None/5/ None /5/ 8
Ratzlaff Partner, The
P.O. Box Capital Group
7650 Partners L.P.
San
Francisco,
CA 94120
Age: 61
Henry E. Director President, $17,600/4/ $78,800/4/ 5
Riggs Keck Graduate
1263 North Institute of
Dartmouth Applied Life
Claremont, Sciences;
CA 91711 former
Age: 62 President and
Professor of
Engineering,
Harvey Mudd
College
+Walter P. Chairman Chairman, None/5/ None /5/ 8
Stern of Capital Group
630 Fifth the Board International, Inc.; Vice
Avenue Chairman,
New York, Capital
NY 10111 Research
Age: 69 International;
Director, The
Capital Group
Companies,
Inc.;
Chairman,
Capital
International, Inc.;
Director,
Temple-Inland Inc.
(forest products)
Patricia K. Director Private $17,900 $80,500 5
Woolf investor;
506 Quaker Lecturer,
Road Department of
Princeton, Molecular
NJ 08540 Biology,
Age: 63 Princeton
University
</TABLE>
+ "Interested persons" of the fund within the meaning of the Investment Company
Act of 1940 (the 1940 Act) on the basis of their affiliation with the fund's
Investment Adviser, Capital Research and Management Company or the parent
company of the Investment Adviser, The Capital Group Companies, Inc.
/1/ Amounts may be deferred by eligible directors under a non-qualified
deferred compensation plan adopted by the fund in 1993. Deferred amounts
accumulate at an earnings rate determined by the total return of one or more of
the funds in The American Funds Group as designated by the director.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management
Trust of America, Capital Income Builder, Inc., Capital World Growth and Income
Fund, Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America.
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U.S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund, Inc. Capital Research and
Management Company also manages American Variable Insurance Series and Anchor
Pathway Fund which serve as the underlying investment vehicles for certain
variable insurance contracts; and Bond Portfolio for Endowments, Inc. and
Endowments, Inc. whose shares may be owned only by tax-exempt organizations.
/3/ Includes funds managed by Capital Research and Management Company and
affiliates.
/4/ Since the plan's adoption, the total amounts of deferred compensation
accrued by the fund (plus earnings thereon) for participating Directors are as
follows: Robert A. Fox ($129,367), Leonade D. Jones ($50,710) John G. McDonald
($64,572) and Henry E. Riggs ($86,907). Amounts deferred and accumulated
earnings thereon are not funded and are general unsecured liabilities of the
fund until paid to the Director.
/5/ James W. Ratzlaff and Walter P. Stern are affiliated with the Investment
Adviser and, accordingly, receive no compensation from the fund.
OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING
WITH REGISTRANT PAST 5 YEARS
<S> <C> <C> <C>
James F. Rothenberg 51 President President and Director, Capital
333 South Hope Street Research and Management Company
Los Angeles, CA 90071
James E. Drasdo 52 Senior Vice Senior Vice President and
333 South Hope Street President Director, Capital Research and
Los Angeles, CA 90071 Management Company
Paul G. Haaga, Jr. 48 Senior Vice Executive Vice President and
333 South Hope Street President Director, Capital Research and
Los Angeles, CA 90071 Management Company; Director,
American Funds Service Company;
Director, American Funds
Distributors, Inc.
Richard M. Beleson 43 Vice President Senior Vice President and
P.O. Box 7650 Director
San Francisco, CA 94120
Donald D. O'Neal 37 Vice President Vice President, Capital
P.O. Box 7650 Research and Management Company
San Francisco, CA 94120
Patrick F. Quan 39 Secretary Vice President - Fund Business
P.O. Box 7650 Management Group, Capital
San Francisco, CA 94120 Research and Management Company
Mary C. Hall 39 Treasurer Senior Vice President - Fund
135 South State College Business Management Group,
Boulevard Capital Research and Management
Brea, CA 92821 Company
R. Marcia Gould 43 Assistant Treasurer Vice President - Fund Business
135 South State College Management Group, Capital
Boulevard Research and Management Company
Brea, CA 92821
</TABLE>
All of the directors and officers are also officers and/or directors and/or
trustees of one or more of the other funds for which Capital Research and
Management Company serves as Investment Adviser. No compensation is paid by
the fund to any officer or director who is a director, officer or employee of
the Investment Adviser or affiliated companies. The fund pays fees of $12,000
per annum to directors who are not affiliated with the Investment Adviser, plus
$700 for each Board of Directors meeting attended, plus $300 for each meeting
attended as a member of a committee of the Board of Directors. The directors
may elect, on a voluntary basis, to defer all or a portion of these fees
through a deferred compensation plan in effect for the fund. The fund also
reimburses certain expenses of the unaffiliated directors. As of August 31,
1997 the officers and directors of the fund and their families, as a group,
owned beneficially or of record less than 1% of the outstanding shares.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad (Los Angeles, San Francisco, New
York, Washington D.C., London, Geneva, Singapore, Hong Kong and Tokyo), with a
staff of professionals, many of whom have a number of years of investment
experience. The Investment Adviser is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South College Boulevard, Brea, Ca 92821. The
Investment Adviser's research professionals travel several million miles a
year, making more than 5,000 research visits in more than 50 countries around
the world. The Investment Adviser believes that it is able to attract and
retain quality personnel.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for managing more than $175 billion of
stocks, bonds and money market instruments and serves over eight million
investors of all types. These investors include privately owned businesses and
large corporations as well as schools, colleges, foundations and other
non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and
Service Agreement (the Agreement) between the fund and the Investment Adviser,
dated January 1, 1994, and approved by the shareholders on December 14, 1993,
was amended by the Board of Directors effective on November 1, 1997. Its
renewal was approved by the unanimous vote of the Board of Directors of the
fund on October 22, 1997. The Agreement shall be in effect until the close of
business on August 31, 1998 and may be renewed from year to year thereafter,
provided that any such renewal has been specifically approved at least annually
by (i) the Board of Directors of the fund, or by the vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the fund, and
(ii) the vote of a majority of directors who are not parties to the Agreement
or interested persons (as defined in said Act) of any such party, cast in
person, at a meeting called for the purpose of voting on such approval. The
Agreement also provides that either party has the right to terminate it without
penalty, upon 60 days' written notice to the other party, and that the
Agreement automatically terminates in the event of its assignment (as defined
in said Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, and provides suitable office space, necessary small office equipment
and utilities, as well as general purpose accounting forms, supplies, and
postage to be used at the offices of the fund relating to the services
furnished by the Investment Adviser. The fund pays all expenses not
specifically assumed by the Investment Adviser, including, but not limited to,
custodian, stock transfer and dividend disbursing fees and expenses; costs of
designing, printing and mailing reports, prospectuses, proxy statements, and
notices to shareholders; taxes; expenses of the issuance and redemption of
shares of the fund (including stock certificates, registration and
qualification fees and expenses); expenses pursuant to the fund's Plan of
Distribution (described below); legal and auditing expenses; compensation,
fees, and expenses paid to directors unaffiliated with the Investment Adviser;
association dues; costs of stationery and forms prepared exclusively for the
fund; and costs of assembling and storing shareholder account data.
Capital Research and Management Company receives a management fee at the
annual rates of 0.50% on the first $1 billion of the fund's net assets, 0.40%
on net assets in excess of $1 billion but not exceeding $2 billion, 0.37% on
net assets in excess of $2 billion but not exceeding $3 billion, 0.35% on net
assets in excess of $3 billion but not exceeding $5 billion, 0.33% on net
assets in excess of $5 billion but not exceeding $8 billion, 0.315% on net
assets in excess of $8 billion but not exceeding $13 billion, 0.30% on net
assets in excess of $13 billion but not exceeding $21 billion and 0.29% on net
assets in excess of $21 billion.
The Agreement provides that the Investment Adviser shall reduce the fee
payable by the fund the amount, if any, by which the total expenses of the fund
for any fiscal year (excluding interest, taxes and extraordinary expenses)
exceed 1.5% of the first $30 million of average net assets of the fund for such
fiscal year, plus 1% of such average net assets in excess thereof. Expenses
which are not subject to this limitation are interest, taxes, and extraordinary
expenses. Expenditures, including costs incurred in connection with the
purchase or sale of portfolio securities, which are capitalized in accordance
with generally accepted accounting principles applicable to investment
companies, are accounted for as capital items and not as expenses.
For the fiscal years ended August 31, 1997, 1996, and 1995, the Investment
Adviser received advisory fees of $36,531,000, $30,625,000, and $22,942,000,
respectively.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the Principal
Underwriter) is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 8000 IH-10 West, San Antonio, TX
78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240, and 5300
Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the Plan), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plan (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers. Commissions retained by
the Principal Underwriter on sales of fund shares during the fiscal year ended
August 31, 1997 amounted to $4,855,000 after allowance of $24,257,000 to
dealers. During the fiscal years ended 1996 and 1995, the Principal
Underwriter received $7,465,000 and $4,384,000, after allowance of $38,496,000
and $22,595,000 to dealers, respectively.
As required by rule 12b-1 and the 1940 Act, the Plan (together with the
Principal Underwriting Agreement) has been approved by the full Board of
Directors, and separately by a majority of the directors who are not interested
persons of the fund and who have no direct or indirect financial interest in
the operation of the Plan or the Principal Underwriting Agreement, and the Plan
has been approved by the vote of a majority of the outstanding voting
securities of the fund. The officers and directors who are "interested"
persons of the fund may be considered to have a direct or indirect financial
interest in the operation of the Plan due to present or past affiliations with
the Investment Adviser and related companies. Potential benefits of the Plan
to the fund include improved shareholder services, savings to the fund in
transfer agency costs, savings to the fund in advisory fees and other expenses,
benefits to the investment process from growth or stability of assets and
maintenance of a financially healthy management organization. The selection
and nomination of directors who are not "interested persons" of the fund are
committed to the discretion of the directors who are not interested persons
during the existence of the Plan. The Plan is reviewed quarterly and must be
renewed annually by the Board of Directors.
Under the Plan the fund may expend up to 0.25% of its net assets annually to
finance any activity which is primarily intended to result in the sale of fund
shares, provided the fund's Board of Directors has approved the category of
expenses for which payment is being made. These include service fees for
qualified dealers and dealer commissions and wholesaler compensation on sales
of shares exceeding $1 million (including purchases by any employer-sponsored
403(b) plan or by any defined contribution plan qualified under Section 401(a)
of the Internal Revenue Code including a "401(k)" plan with 100 or more
eligible employees). Since these fees are paid out of the fund's assets on an
ongoing basis, over time these fees will increase the cost of an investment and
may cost the investor more than paying other types of sales loads. During the
fiscal year ended August 31, 1997, the fund paid or accrued $24,147,000 for
compensation to dealers under the Plan.
The Glass-Steagall Act and other applicable laws, among other things,
generally prohibit commercial banks from engaging in the business of
underwriting, selling or distributing securities, but permit banks to make
shares of mutual funds available to their customers and to perform
administrative and shareholder servicing functions. However, judicial or
administrative decisions or interpretations of such laws, as well as changes in
either federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries or affiliates, could prevent a bank
from continuing to perform all or a part of its servicing activities. If a
bank were prohibited from so acting, shareholder clients of such bank would be
permitted to remain shareholders of the fund and alternate means for continuing
the servicing of such shareholders would be sought. In such event, changes in
the operation of the fund might occur and shareholders serviced by such bank
may no longer be able to avail themselves of any automatic investment or other
services then being provided by such bank. It is not expected that
shareholders would suffer adverse financial consequences as a result of any of
these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The fund intends to meet all the requirements, and has elected the tax status
of a "regulated investment company," under the provisions of Subchapter M of
the Internal Revenue Code of 1986, as amended, (the Code). Under Subchapter M,
if the fund distributes within specified times at least 90% of its investment
company taxable income, it will be taxed only on that portion of such
investment company taxable income that it retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, and
gains from the sale or other disposition of stock, securities, currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; and (b) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the market value of the fund's assets
is represented by cash, cash items, U.S. Government securities, securities of
other regulated investment companies, and other securities which must be
limited, in respect of any one issuer, to an amount not greater than 5% of the
fund's assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. Government securities or the securities of
other regulated investment companies), or in two or more issuers which the fund
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income for the calendar year, (ii) 98% of
capital gains (both long-term and short-term) for the one-year period ending on
October 31 (as though the one-year period ending on October 31 were the
regulated investment company's taxable year), and (iii) the sum of any untaxed,
undistributed net investment income and net capital gains of the regulated
investment company for prior periods. The term "distributed amount" generally
means the sum of (i) amounts actually distributed by the fund from its current
year's ordinary income and capital gain net income and (ii) any amount on which
the fund pays income tax for the year. The fund intends to distribute net
investment income and net capital gains so as to minimize or avoid excise tax
liability.
The amount of any realized gain or loss on closing out a futures contract such
as a forward commitment for the purchase or sale of foreign currency will
generally result in a realized capital gain or loss for tax purposes. Futures
contracts held by the fund at the end of each fiscal year will be required to
be "marked to market" for federal income tax purposes, that is, deemed to have
been sold at market value. Sixty percent (60%) of any net gain or loss
recognized on these deemed sales and sixty percent (60%) of any net realized
gain or loss from any actual sales will be treated as long-term capital gain or
loss, and the remainder will be treated as short-term capital gain or loss.
Currency transactions that are not subject to Section 1256 of the Code may be
subject to Section 988 of the Code, in which case the 60%/40%
long-term/short-term capital gain or loss rule of Section 1256 would not apply.
Rather, each Section 988 foreign currency gain or loss would generally be
computed separately and treated as ordinary income or loss. The fund will
attempt to monitor Section 988 transactions to avoid an adverse tax impact.
If the fund purchases shares in certain foreign investment entities, called
"passive foreign investment companies" (PFIC), the fund may be subject to U.S.
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such shares even if such income is distributed as a taxable
dividend by the fund to its shareholders. Additional charges in the nature of
interest may be imposed on either the fund or its shareholders in respect of
deferred taxes arising from such distributions or gains. If the fund were to
invest in a PFIC and elected to treat the PFIC as a "qualified electing fund"
under the Code, in lieu of the foregoing requirements, the fund might be
required to include in income each year a portion of the ordinary earnings and
net capital gains of the qualified electing fund, even if not distributed to
the fund, and such amounts would be subject to the 90% and calendar year
distribution requirements described above.
The fund also intends to continue distributing to shareholders all of the
excess of net long-term capital gain over net short-term capital loss on sales
of securities. If the net asset value of shares of the fund should, by reason
of a distribution of realized capital gains, be reduced below a shareholder's
cost, such distribution would to that extent be a return of capital to that
shareholder even though taxable to the shareholder, and a sale of shares by a
shareholder at net asset value at that time would establish a capital loss for
federal tax purposes.
Dividends generally are taxable to shareholders at the time they are paid.
However, dividends declared in October, November and December and made payable
to shareholders of record in such a month are treated as paid and are thereby
taxable as of December 31, provided that the fund pays the dividend no later
than the end of January of the following year.
Corporate shareholders of the fund may be eligible for the dividends-received
deduction on the dividends (excluding the net capital gain distributions) paid
by the fund to the extent that the fund's income is derived from dividends
(which if received directly, would qualify for such deduction) received from
domestic corporations. In order to qualify for the dividends-received
deduction, a corporate shareholder must hold the fund shares paying the
dividends upon which the deduction is based for at least 46 days.
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
The fund may be required to pay withholding and other taxes imposed by foreign
countries generally at rates from 10% to 40% which would reduce the fund's
investment income. Tax conventions between certain countries and the U.S. may
reduce or eliminate such taxes. Not more than 50% of the total assets of the
fund are expected to consist of securities of foreign issuers. Therefore, the
fund will not be eligible to elect to "pass through" foreign tax credits to
shareholders and, to the extent the fund does pay foreign withholding or other
foreign taxes on investments in foreign securities, shareholders will not be
able to deduct their pro rata share of such taxes in computing their taxable
income and will not be able to take their share of such taxes as a credit
against their U.S. income taxes.
Under the Code, distributions of net investment income by the fund to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation or foreign
partnership (a foreign shareholder) will be subject to U.S. withholding tax (at
a rate of 30% or lower treaty rate). Withholding will not apply if a dividend
paid by the fund to a foreign shareholder is "effectively connected" with a
U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding, but in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year.
As of the date of this statement of additional information, the maximum
federal individual stated tax rate applicable to ordinary income is 39.6%
(effective tax rates may be higher for some individuals due to phase out of
exemptions and elimination of deductions); the maximum individual tax rate
applicable to net capital gains on assets held more than eighteen months is
20%, and on assets held more than one year and not more than eighteen months is
28%; and the maximum corporate tax applicable to ordinary income and net
capital gains is 35%. However, to eliminate the benefit of lower marginal
corporate income tax rates, corporations which have taxable income in excess of
$100,000 for a taxable year will be required to pay an additional amount of tax
of up to $11,750 and corporations which have taxable income in excess of
$15,000,000 for a taxable year will be required to pay an additional amount of
tax of up to $100,000. Naturally, the amount of tax payable by a shareholder
with respect to either distributions from the fund or disposition of fund
shares will be affected by a combination of tax law rules covering, E.G.,
deductions, credits, deferrals, exemptions, sources of income and other
matters. Under the Code, an individual is entitled to establish an IRA each
year (prior to the tax return filing deadline for the year) whereby earnings on
investments are tax-deferred. In addition, in some cases, the IRA contribution
itself may be deductible.
The foregoing is limited to a summary of federal taxation and should not be
viewed as a comprehensive discussion of all provisions of the Code relevant to
investors. Dividends and capital gain distributions may also be subject to
state or local taxes. Investors are urged to consult their tax advisers with
specific reference to their own tax situations.
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment Minimums and $50 minimum (except where a lower
Fund Numbers" for initial minimum is noted under
investment minimums. "Investment Minimums and Fund
Numbers").
By contacting Visit any investment dealer Mail directly to your investment
your who is registered in the dealer's address printed on your
investment state where the purchase is account statement.
dealer made and who has a sales
agreement with American Funds
Distributors.
By mail Make your check payable to Fill out the account additions
the fund and mail to the form at the bottom of a recent
address indicated on the account statement, make your
account application. Please check payable to the fund, write
indicate an investment dealer your account number on your
on the account application. check, and mail the check and
form in the envelope provided
with your account statement.
By telephone Please contact your Complete the "Investments by
investment dealer to open Phone" section on the account
account, then follow the application or American FundsLink
procedures for additional Authorization Form. Once you
investments. establish the privilege, you,
your financial advisor or any
person with your account
information can call American
FundsLine(r) and make investments
by telephone (subject to
conditions noted in "Telephone
and Computer Purchases, Redemptions and Exchanges" below).
By computer Please contact your Complete the American FundsLink
investment dealer to open Authorization Form. Once you
account, then follow the establish the privilege, you,
procedures for additional your financial advisor or any
investments. person with your account
information may access American
FundsLine OnLine(sm) on the
Internet and make investments by
computer (subject to conditions
noted in "Telephone and Computer
Purchases, Redemptions and
Exchanges" below).
By wire Call 800/421-0180 to obtain Your bank should wire your
your account number(s), if additional investments in the
necessary. Please indicate same manner as described under
an investment dealer on the "Initial Investment."
account. Instruct your bank
to wire funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco, CA 94106
(ABA #121000248)
For credit to the account of:
American Funds Service
Company
a/c #4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE
ORDER.
</TABLE>
INVESTMENT MINIMUMS AND FUND NUMBERS - Here are the minimum initial
investments required by the funds in The American Funds Group along with fund
numbers for use with our automated phone line, American FundsLine(r) (see
description below):
<TABLE>
<CAPTION>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(r) 02
$1,000
American Balanced Fund(r) 11
500
American Mutual Fund(r) 03
250
Capital Income Builder(r) 12
1,000
Capital World Growth and Income Fund(sm) 33
1,000
EuroPacific Growth Fund(r) 16
250
Fundamental Investors(sm) 10
250
The Growth Fund of America(r) 05
1,000
The Income Fund of America(r) 06
1,000
The Investment Company of America(r) 04
250
The New Economy Fund(r) 14
1,000
New Perspective Fund(r) 07
250
SMALLCAP World Fund(r) 35
1,000
Washington Mutual Investors Fund(sm) 01
250
BOND FUNDS
American High-Income Municipal Bond Fund(r) 40
1,000
American High-Income Trust(sm) 21
1,000
The Bond Fund of America(sm) 08
1,000
Capital World Bond Fund(r) 31
1,000
Intermediate Bond Fund of America(sm) 23
1,000
Limited Term Tax-Exempt Bond Fund of America(sm) 43
1,000
The Tax-Exempt Bond Fund of America(r) 19
1,000
The Tax-Exempt Fund of California(r)* 20
1,000
The Tax-Exempt Fund of Maryland(r)* 24
1,000
The Tax-Exempt Fund of Virginia(r)* 25
1,000
U.S. Government Securities Fund(sm) 22
1,000
MONEY MARKET FUNDS
The Cash Management Trust of America(r) 09
2,500
The Tax-Exempt Money Fund of America(sm) 39
2,500
The U.S. Treasury Money Fund of America(sm) 49
2,500
___________
*Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for individual retirement accounts
(IRAs). Minimums are reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds) or to $25 for purchases
by retirement plans through payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds Group. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
DEALER COMMISSIONS - The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $50,000 6.10%
5.75% 5.00%
$50,000 but less than $100,000 4.71
4.50 3.75
BOND FUNDS
Less than $25,000 4.99
4.75 4.00
$25,000 but less than $50,000 4.71
4.50 3.75
$50,000 but less than $100,000 4.17
4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000 3.63
3.50 2.75
$250,000 but less than $500,000 2.56
2.50 2.00
$500,000 but less than $1,000,000 2.04
2.00 1.60
$1,000,000 or more none (see below)
none
</TABLE>
Commissions of up to 1% will be paid to dealers who initiate and are
responsible for purchases of $1 million or more, for purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $50 million or more: 1.00% on amounts of $1 million
to $2 million, 0.80% on amounts over $2 million to $3 million, 0.50% on amounts
over $3 million to $50 million, 0.25% on amounts over $50 million to $100
million, and 0.15% on amounts over $100 million. The level of dealer
commissions will be determined based on sales made over a 12-month period
commencing from the date of the first sale at net asset value.
American Funds Distributors, at its expense (from a designated percentage of
its income), will, during calendar year 1998, provide additional compensation
to dealers. Currently these payments are limited to the top one hundred dealers
who have sold shares of the fund or other funds in The American Funds Group.
These payments will be based on a pro rata share of a qualifying dealer's
sales. American Funds Distributors will, on an annual basis, determine the
advisability of continuing these payments.
Any employer-sponsored 403(b) plan or defined contribution plan qualified
under Section 401(a) of the Internal Revenue Code including a "401(k)" plan
with 100 or more eligible employees or any other purchaser investing at least
$1 million in shares of the fund (or in combination with shares of other funds
in The American Funds Group other than the money market funds) may purchase
shares at net asset value; however, a contingent deferred sales charge of 1% is
imposed on certain redemptions made within twelve months of the purchase. (See
"Redeeming Shares--Contingent Deferred Sales Charge.") Investments by
retirement plans, foundations or endowments with $50 million or more in assets
may be made with no sales charge and are not subject to a contingent deferred
sales charge.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
NET ASSET VALUE PURCHASES - The stock, stock/bond and bond funds may sell
shares at net asset value to: (1) current or retired directors, trustees,
officers and advisory board members of the funds managed by Capital Research
and Management Company, employees of Washington Management Corporation,
employees and partners of The Capital Group Companies, Inc. and its affiliated
companies, certain family members of the above persons, and trusts or plans
primarily for such persons; (2) current registered representatives, retired
registered representatives with respect to accounts established while active,
or full-time employees (and their spouses, parents, and children) of dealers
who have sales agreements with American Funds Distributors (or who clear
transactions through such dealers) and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer; (4) trustees or other fiduciaries purchasing shares for
certain retirement plans of organizations with retirement plan assets of $50
million or more; (5) insurance company separate accounts; (6) accounts managed
by subsidiaries of The Capital Group Companies, Inc.; and (7) The Capital Group
Companies, Inc., its affiliated companies and Washington Management
Corporation. Shares are offered at net asset value to these persons and
organizations due to anticipated economies in sales effort and expense.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the Prospectus apply to purchases of $50,000 or more made within a
13-month period subject to the following statement of intention (the Statement)
terms. The Statement is not a binding obligation to purchase the indicated
amount. When a shareholder elects to utilize the Statement in order to qualify
for a reduced sales charge, shares equal to 5% of the dollar amount specified
in the Statement will be held in escrow in the shareholder's account out of the
initial purchase (or subsequent purchases, if necessary) by the Transfer Agent.
All dividends and any capital gain distributions on shares held in escrow will
be credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the specified
13-month period, the purchaser will remit to the Principal Underwriter the
difference between the sales charge actually paid and the sales charge which
would have been paid if the total of such purchases had been made at a single
time. If the difference is not paid within 45 days after written request by
the Principal Underwriter or the investment dealer, the appropriate number of
shares held in escrow will be redeemed to pay such difference. If the proceeds
from this redemption are inadequate, the purchaser will be liable to the
Principal Underwriter for the balance still outstanding. The Statement may be
revised upward at any time during the 13-month period, and such a revision will
be treated as a new Statement, except that the 13-month period during which the
purchase must be made will remain unchanged and there will be no retroactive
reduction of the sales charges paid on prior purchases. Existing holdings
eligible for rights of accumulation (see the prospectus and account
application) may be credited toward satisfying the statement. During the
statement period reinvested dividends and capital gain distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
In the case of purchase orders by the trustees of certain retirement plans by
payroll deduction, the sales charge for the investments made during the
13-month period will be handled as follows: The regular monthly payroll
deduction investment will be multiplied by 13 and then multiplied by 1.5. The
current value of existing American Funds investments (other than money market
fund investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. On the first investment and all other investments
made pursuant to the statement of intention, a sales charge will be assessed
according to the sales charge breakpoint thus determined. There will be no
retroactive adjustments in sales charges on investments previously made during
the 13-month period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the 1940 Act, again excluding employee benefit plans described
above, or (3) for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund shares.
Purchases made for nominee or street name accounts (securities held in the name
of an investment dealer or another nominee such as a bank trust department
instead of the customer) may not be aggregated with those made for other
accounts and may not be aggregated with other nominee or street name accounts
unless otherwise qualified as described above.
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company; this offering price is effective for orders received prior to
the time of determination of the net asset value and, in the case of orders
placed with dealers, accepted by the Principal Underwriter prior to its close
of business. In case of orders sent directly to the fund or American Funds
Service Company, an investment dealer must be indicated. The dealer is
responsible for promptly transmitting purchase orders to the Principal
Underwriter. Orders received by the investment dealer, the Transfer Agent, or
the fund after the time of the determination of the net asset value will be
entered at the next calculated offering price. Prices which appear in the
newspaper are not always indicative of prices at which you will be purchasing
and redeeming shares of the fund, since such prices generally reflect the
previous day's closing price whereas purchases and redemptions are made at the
next calculated price.
The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at the close of trading
(currently 4:00 p.m., New York time) each day the New York Stock Exchange is
open. The New York Stock Exchange is currently closed on weekends and on the
following holidays: New Year's Day, Martin Luther King Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas Day.
All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined, as follows:
1. 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. Forward currency contracts are valued at the mean
of representative quoted bid and asked prices.
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 the fund's Board; The fair value of all other assets is
added to the value of securities at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly
or indirectly to any person or entity, where, after the sale, such person or
entity would own beneficially directly or indirectly more than 4.5% of the
outstanding shares of the fund without the consent of a majority of the fund's
directors.
REDEEMING SHARES
<TABLE>
<CAPTION>
<S> <C>
By writing to American Funds Send a letter of instruction specifying the name of the
Service Company (at the appropriate fund, the number of shares or dollar amount to be sold,
address indicated under "Principal your name and account number. You should also enclose
Underwriter and Transfer Agent" in any share certificates you wish to redeem. For
the prospectus) redemptions over $50,000 and for certain redemptions of
$50,000 or less (see below), your signature must be
guaranteed by a member firm of a domestic stock
exchange or the National Association of Securities
Dealers, Inc. that is an eligible guarantor
institution, bank, savings association, or credit
union. You should verify with the institution that it
is an eligible guarantor prior to signing. Additional
documentation may be required for redemption of shares
held in corporate, partnership or fiduciary accounts.
Notarization by a Notary Public is not an acceptable
signature guarantee.
By contacting your investment If you redeem shares through your investment dealer,
dealer you may be charged for this service. SHARES HELD FOR
YOU IN YOUR INVESTMENT DEALER'S STREET NAME MUST BE
REDEEMED THROUGH THE DEALER.
You may have a redemption check You may use this option, provided the account is
sent to you by using American registered in the name of an individual(s), a UGMA/UTMA
FundsLine(r) or American FundsLine custodian, or a non-retirement plan trust. These
Online(sm) or by telephoning, redemptions may not exceed $50,000 per shareholder each
faxing, or telegraphing American day and the check must be made payable to the
Funds Service Company (subject to shareholder(s) of record and be sent to the address of
the conditions noted in this record provided the address has been used with the
section and in "Telephone and account for at least 10 days. See "Principal
Computer Purchases, Sales and Underwriter and Transfer Agent" in the prospectus and
Exchanges" in the prospectus) "Exchange Privilege" below for the appropriate
telephone or fax number.
In the case of the money market Upon request (use the account application for the money
funds, you may have redemptions market funds) you may establish telephone redemption
wired to your bank privileges (which will enable you to have a redemption
by telephoning American Funds sent to your bank account) and/or
Service Company ($1,000 or more) check writing privileges. If you
or by writing a check ($250 or more) request check writing privileges, you will be provided
with checks that you may use to draw
against your account. These checks may be made payable to anyone you designate and must be
signed by the authorized number of registered shareholders exactly as indicated on your
checking account signature card.
</TABLE>
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY REDEMPTION OF $50,000
OR LESS PROVIDED THE REDEMPTION CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S) AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE ADDRESS HAS
BEEN USED WITH THE ACCOUNT FOR AT LEAST 15 DAYS.
CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more and on any investment made with no initial
sales charge by any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares. Shares held
for the longest period are assumed to be redeemed first for purposes of
calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer-sponsored
retirement plan; for distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 591/2; for tax-free returns of excess
contributions to IRAs; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge;
and for redemptions in connection with loans made by qualified retirement
plans.
REDEMPTION OF SHARES - The fund's Articles of Incorporation permits the fund
to direct the Transfer Agent to redeem the shares of any shareholder for their
then current net asset value per share if at such time the shareholder owns of
record, shares having an aggregate net asset value of less than the minimum
initial investment amount required of new shareholders as set forth in the
fund's current registration statement under the 1940 Act, and subject to such
further terms and conditions as the Board of Directors of the fund may from
time to time adopt.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the dates you select. Bank accounts will be
charged on the day or a few days before investments are credited, depending on
the bank's capabilities, and shareholders will receive a confirmation statement
at least quarterly. Participation in the plan will begin within 30 days after
receipt of the account application. If the shareholder's bank account cannot
be charged due to insufficient funds, a stop-payment order or the closing of
the account, the plan may be terminated and the related investment reversed.
The shareholder may change the amount of the investment or discontinue the plan
at any time by writing to the Transfer Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the paying fund) into any other fund in The
American Funds Group (the receiving fund) subject to the following conditions:
(I) the aggregate value of the shareholder's account(s) in the paying fund(s)
must equal or exceed $5,000 (this condition is waived if the value of the
account in the receiving fund equals or exceeds that fund's minimum initial
investment requirement), (ii) as long as the value of the account in the
receiving fund is below that fund's minimum initial investment requirement,
dividends and capital gain distributions paid by the receiving fund must be
automatically reinvested in the receiving fund, and (iii) if this privilege is
discontinued with respect to a particular receiving fund, the value of the
account in that fund must equal or exceed the fund's minimum initial investment
requirement or the fund shall have the right, if the shareholder fails to
increase the value of the account to such minimum within 90 days after being
notified of the deficiency, to automatically redeem the account and send the
proceeds to the shareholder. These cross-reinvestments of dividends and
capital gain distributions will be at net asset value (without sales charge).
EXCHANGE PRIVILEGE - You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(r) or American FundsLine OnLine(sm) (see "American FundsLine(r) and
American FundsLine OnLine(sm)" below), or by telephoning 800/421-0180
toll-free, faxing (see "Principal Underwriter and Transfer Agent" in the
prospectus for the appropriate fax numbers) or telegraphing American Funds
Service Company. (See "Telephone and Computer Purchases, Redemptions and
Exchanges" below.) Shares held in corporate-type retirement plans for which
Capital Guardian Trust Company serves as trustee may not be exchanged by
telephone, fax or telegraph. Exchange redemptions and purchases are processed
simultaneously at the share prices next determined after the exchange order is
received. (See "Purchase of Shares--Price of Shares.") THESE TRANSACTIONS HAVE
THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS - Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments will be reflected on regular confirmation statements from American
Funds Service Company. Dividend and capital gain reinvestments and purchases
through automatic investment plans and certain retirement plans will be
confirmed at least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(SM) - You may check your
share balance, the price of your shares, or your most recent account
transaction, redeem shares (up to $50,000 per shareholder each day), or
exchange shares around the clock with American FundsLine(r) or American
FundsLine OnLine(sm). To use this service, call 800/325-3590 from a
TouchTone(tm)lephone or access the American Funds Web site on the Internet at
www.americanfunds.com. Redemptions and exchanges through American FundsLine(r)
and American FundsLine OnLine(sm) are subject to the conditions noted above and
in "Shareholder Account Services and Privileges--Telephone and Computer
Purchases, Redemptions and Exchanges" below. You will need your fund number
(see the list of funds in The American Funds Group under "Purchase of
Shares--Investment Minimums and Fund Numbers"), personal identification number
(the last four digits of your Social Security number or other tax
identification number associated with your account) and account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone or computer (including American FundsLine(r) or American FundsLine
OnLine(sm)), fax or telegraph redemption and/or exchange options, you agree to
hold the fund, American Funds Service Company, any of its affiliates or mutual
funds managed by such affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from any losses, expenses,
costs or liability (including attorney fees) which may be incurred in
connection with the exercise of these privileges. Generally, all shareholders
are automatically eligible to use these options. However, you may elect to opt
out of these options by writing American Funds Service Company (you may also
reinstate them at any time by writing American Funds Service Company). If
American Funds Service Company does not employ reasonable procedures to confirm
that the instructions received from any person with appropriate account
information are genuine, the fund may be liable for losses due to unauthorized
or fraudulent instructions. In the event that shareholders are unable to reach
the fund by telephone because of technical difficulties, market conditions, or
a natural disaster, redemption and exchange requests may be made in writing
only.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker (either directly or through their
correspondent clearing agents) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a
broker who has provided investment research, statistical, or other related
services to the Investment Adviser or has sold shares of the fund or other
funds served by the Investment Adviser. The fund does not consider that it has
an obligation to obtain the lowest available commission rate to the exclusion
of price, service and qualitative considerations.
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The fund will not pay a mark-up for
research in principal transactions.
Brokerage commissions paid on portfolio transactions during the fiscal years
ended August 31, 1997, 1996 and 1995, amounted to $5,577,000, $5,390,000, and
$3,385,000, respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including
proceeds from the sale of shares of the fund and of securities in the fund's
portfolio, are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York, NY 10081, as Custodian. Non-U.S. securities may be held by the Custodian
pursuant to sub-custodial arrangements in non-U.S. banks or foreign branches of
U.S. banks.
TRANSFER AGENT - American Funds Service Company, a wholly-owned subsidiary of
the Investment Adviser, maintains the record of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $8,588,000 for the fiscal year ended August 31, 1997.
INDEPENDENT AUDITORS - Deloitte & Touche LLP located at 1000 Wilshire
Boulevard, Los Angeles, CA 90017, serves as the fund's independent auditors
providing audit services, preparation of tax returns and review of certain
documents of the fund to be filed with the Securities and Exchange Commission.
The financial statements incorporated in this Statement of Additional
Information have been so included in reliance on the report of Deloitte &
Touche LLP given on the authority of said firm as experts in accounting and
auditing.
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on August 31.
Shareholders are provided at least semi-annually with reports showing the
investment portfolio, financial statements and other information. The annual
financial statements are audited by the fund's independent auditors, Deloitte &
Touche LLP, whose selection is determined annually by the Board of Directors.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods on personal investing for certain investment
personnel; ban on short-term trading profits for investment personnel;
limitations on service as a director of publicly traded companies; and
disclosure of personal securities transactions.
The financial statements including the investment portfolio and the report of
Independent Auditors contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
DETERMINATION OF NET ASSET VALUE,
REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE--AUGUST 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $ 20.14
Maximum offering price per share
(100/94.25 of net asset value per share
which takes into account the fund's current
maximum sales charge) $ 21.37
</TABLE>
REMOVAL OF DIRECTORS BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors. The fund has made an undertaking, at the request of the
staff of the Securities and Exchange Commission, to apply the provisions of
section 16(c) of the 1940 Act with respect to the removal of directors as
though the fund were a common-law trust. Accordingly, the directors of the
fund shall promptly call a meeting of shareholders for the purpose of voting
upon the question of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding shares.
INVESTMENT RESULTS
The fund's yield is 0.54% based on a 30-day (or one month) period ended August
31, 1997, computed by dividing the net investment income per share earned
during the period by the maximum offering price per share on the last day of
the period, according to the following formula:
YIELD = 2[(a-b/cd+1)/6/-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund's average annual total returns for the one, five and ten-year periods
ended on August 31, 1997 were +30.56%, +16.93% and +12.88%, respectively. The
average annual total return (T) is computed by using the value at the end of
the period (ERV) of a hypothetical initial investment of $1,000 (P) over a
period of years (n) according to the following formula as required by the
Securities and Exchange Commission: P(1+T)/n/ = ERV.
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) deduction of the maximum sales load of
5.75% from the $1,000 initial investment; (2) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated.
To calculate total return, an initial investment is divided by the offering
price (which includes the sales charge) as of the first day of the period in
order to determine the initial number of shares purchased. Subsequent
dividends and capital gain distributions are then reinvested at net asset value
on the reinvestment date determined by the Board of Directors. The sum of the
initial shares purchased and shares acquired through reinvestment is multiplied
by the net asset value per share as of the end of the period in order to
determine ending value. The difference between the ending value and the
initial investment divided by the initial investment converted to a percentage
equals total return. The resulting percentage indicates the positive or
negative investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in share price
during the period. Total return may be calculated for one year, five years,
ten years and for other periods of years. The average annual total return over
periods greater than one year also may be computed by utilizing ending values
as determined above.
The fund may also calculate a distribution rate on a taxable and tax
equivalent basis. The distribution rate is computed by dividing the dividends
paid by the fund over the last 12 months by the sum of the month-end net asset
value or maximum offering price and the capital gains paid over the last 12
months. The distribution rate may differ from the yield.
The fund may include information on its investment results and/or comparisons
of its investment results to various unmanaged indices (such as The Dow Jones
Average of 30 Industrial Stocks and The Standard & Poor's 500 Stock Composite
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
The fund may refer to results compiled by organizations such as CDA Investment
Services, Ibbotson Associates, Lipper Analytical Services and Morningstar, Inc.
and by the U.S. Department of Commerce. Additionally, the fund may, from time
to time, refer to results published in various newspapers or periodicals,
including Barrons, Forbes, Fortune, Institutional Investor, Kiplinger's
Personal Finance Magazine, Money, U.S. News and World Report and The Wall
Street Journal.
The fund may, from time to time, illustrate the benefits of tax-deferral by
comparing taxable investments to investments made through tax-deferred
retirement plans.
The fund may, from time to time, compare its investment results with the
Consumer Price Index, which is a measure of the average change in prices over
time in a fixed market basket of goods and services (E.G. food, clothing, and
fuels, transportation, and other goods and services that people buy for
day-to-day living).
GFA vs. Various Unmanaged Indices
<TABLE>
<CAPTION>
10-Year Average
Periods Savings
9/1 - 8/31 GFA DJIA/1/ S&P 500/2/ Account/3/
<S> <C> <C> <C> <C>
1987 - 1997
+236% +290% +267% + 56%
1986 - 1996
+221 +309 +251 + 60
1985 - 1995
+309 +386 +311 + 66
1984 - 1994
+270 +359 +300 + 75
1983 - 1993
+251 +340 +303 + 86
1982 - 1992
+312 +441 +405 + 98
1981 - 1991
+328 +435 +382 +110
1980 - 1990
+269 +344 +300 +118
1979 - 1989
+445 +400 +398 +122
1978 - 1988
+358 +283 +299 +123
1977 - 1987
+735 +422 +447 +124
1976 - 1986
+600 +234 +299 +124
1975 - 1985
+521 +173 +253 +121
1974 - 1984
+579 +211 +277 +116
1973#- 1983
+464 +151 +175 +106
</TABLE>
_________________
# From December 1, 1973
/1/ The Dow Jones Average of 30 Industrial Stocks is comprised of 30 industrial
companies such as General Motors and General Electric.
/2/ The Standard & Poor's 500 Stock Composite Index is comprised of industrial,
transportation, public utilities and financial stocks and represents a large
portion of the value of issues traded on the New York Stock Exchange. Selected
issues traded on the American Stock Exchange are also included.
/3/ Based on figures supplied by the U.S. League of Savings Institutions and
the Federal Reserve Board which reflect all kinds of savings deposits,
including longer-term certificates. Savings accounts offer a guaranteed return
of principal, but no opportunity for capital growth. During a portion of the
period, the maximum rates paid on some savings deposits were fixed by law.
<TABLE>
<CAPTION>
If you are considering GFA for an
Individual Retirement Account. . .
Here's how much you would have if you had invested $2,000 a year
on September 1
of each year in GFA over the past 3, 5 and 10 years:
<S> <C> <C>
3 years 5 years 10 years
(9/1/94-8/31/97) (9/1/92-8/31/97) (9/1/87-8/31/97)
$8,554 $16,431 $46,649
</TABLE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
. . . and had taken
all dividends and
capital gain
distributions
in shares, your
If you had investment would
invested $10,000 have been worth
in GFA this many this much at
years ago . . . 8/31/97
| |
Number Periods
of Years 9/1 - 8/31 Value
<S> <C> <C>
1 1996 - 1997 $13,056
2 1995 - 1997 13,174
3 1994 - 1997 16,539
4 1993 - 1997 17,529
5 1992 - 1997 21,855
6 1991 - 1997 22,921
7 1990 - 1997 29,932
8 1989 - 1997 27,001
9 1988 - 1997 37,636
10 1987 - 1997 33,600
11 1986 - 1997 44,425
12 1985 - 1997 57,174
13 1984 - 1997 64,916
14 1983 - 1997 65,371
15 1982 - 1997 95,539
16 1981 - 1997 104,208
17 1980 - 1997 117,034
18 1979 - 1997 156,266
19 1978 - 1997 183,060
20 1977 - 1997 297,777
21 1976 - 1997 330,158
22 1975 - 1997 376,785
23 1974 - 1997 467,600
30 1973#- 1997 391,123
</TABLE>
__________________
#From December 1, 1973
Illustration of a $10,000 investment in GFA with
dividends reinvested and capital gain distributions taken in shares
(for the period December 1, 1973 through August 31, 1997)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES
Year Total From From From
Ended Annual Dividends Investment Initial Capital
August 31 Dividends (cumulative) Cost Investment Gains Dividends Total
Reinvested Reinvested Value
<S> <C> <C> <C> <C> <C> <C> <C>
1974# - - $10,000 $ 7,874 - - $ 7,874
1975 $ 362 $ 362 10,362 9,322 - $ 470 9,792
1976 283 645 10,645 10,327 - 838 11,165
1977 - 645 10,645 11,449 - 928 12,377
1978 254 899 10,899 18,364 - 1,772 20,136
1979 - 899 10,899 21,519 - 2,076 23,595
1980 307 1,206 11,206 28,318 - 3,178 31,496
1981 546 1,752 11,752 31,304 - 4,079 35,383
1982 1,673 3,425 13,425 32,507 - 6,088 38,595
1983 2,290 5,715 15,715 44,886 - 11,496 56,382
1984 1,643 7,358 17,358 43,120 $ 1,064 12,621 56,805
1985 1,249 8,607 18,607 47,370 1,744 15,379 64,493
1986 979 9,586 19,586 56,066 7,355 19,541 82,962
1987 1,354 10,940 20,940 69,339 14,360 26,031 109,730
1988 1,502 12,442 22,442 56,949 18,289 22,724 97,962
1989 1,743 14,185 24,185 75,387 28,688 32,432 136,507
1990 3,611 17,796 27,796 60,251 33,708 29,225 123,184
1991 3,208 21,004 31,004 73,295 47,920 39,600 160,815
1992 2,510 23,514 33,514 72,052 55,106 41,545 168,703
1993 1,454 24,968 34,968 88,758 68,670 52,840 210,268
1994 929 25,897 35,897 90,294 77,818 54,740 222,852
1995 1,372 27,269 37,269 108,176 104,252 67,383 279,811
1996 2,452 29,721 39,721 100,592 116,565 65,166 282,323
1997 2,019 31,740 41,740 131,682 171,693 87,748 391,123
</TABLE>
The dollar amount of capital gain distributions during the period was $94,860.
#From December 1, 1973
EXPERIENCE OF INVESTMENT ADVISER - Capital Research and Management Company
manages nine common stock funds that are at least 10 years old. In the rolling
10-year periods since January 1, 1967 (127 in all), those funds have had better
total returns than the Standard & Poor's 500 Composite Stock Index in 91 of the
127 periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
DESCRIPTION OF BOND RATINGS
Corporate Debt Securities
MOODY'S INVESTORS SERVICE, INC. rates the long-term debt securities issued by
various entities from "Aaa" to "C" according to quality.
"AAA -- Best quality. These securities carry the smallest degree of investment
risk and are generally referred to as 'gilt edge.' Interest payments are
protected by a large, or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues."
"AA -- High quality by all standards. They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat greater."
"A -- Upper medium grade obligations. These bonds possess many favorable
investment attributes. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future."
"BAA -- Medium grade obligations. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well."
"BA -- Have speculative elements; future cannot be considered as well assured.
The protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Bonds in this class are characterized by uncertainty of position."
"B -- Generally lack characteristics of the desirable investment; assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small."
"CAA -- Of poor standing. Issues may be in default or there may be present
elements of danger with respect to principal or interest."
"CA -- Speculative in a high degree; often in default or have other marked
shortcomings."
"C -- Lowest rated class of bonds; can be regarded as having extremely poor
prospects of ever attaining any real investment standing."
Moody's supplies numerical indicators 1, 2 and 3 to rating categories. The
modifier 1 indicates that the obligation ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and 3 indicates
a ranking toward the lower end of that generic rating category.
STANDARD & POOR'S CORPORATION rates the long-term securities debt of various
entities in categories ranging from "AAA" to "D" according to quality.
"AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong."
"AA -- High grade. Very strong capacity to pay interest and repay principal.
Generally, these bonds differ from AAA issues only in a small degree."
"A -- Have a strong capacity to pay interest and repay principal, although they
are somewhat more susceptible to the adverse effects of change in circumstances
and economic conditions, than debt in higher rated categories."
"BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal than for debt in
higher rated categories."
"BB, B, CCC, CC, C -- Regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and C
the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions."
"C1 -- Reserved for income bonds on which no interest is being paid."
"D -- In default and payment of interest and/or repayment of principal is in
arrears."
Standard & Poor's applies indicators "+", no character and "-" to its rating
categories. The indicators show relative standing within the major rating
categories.
Subsequent to its purchase by the fund, the rating of an issue of bonds may be
changed from the rating required for its purchase, or in the case of an unrated
issue of bonds, its credit quality may become equivalent to an issue of bonds
ineligible for purchase by the fund. Neither event requires the elimination of
such an obligation from the fund's portfolio, but Capital Research and
Management Company (the Investment Adviser) will consider such an event in
determining whether the fund should continue to hold such an obligation in its
portfolio.
<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.
