AMERICAN CAPITAL MUNICIPAL BOND FUND INC, N-30D, 1995-05-24

AMERICAN CAPITAL MUNICIPAL BOND FUND INC
N-30D, 1995-05-24

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<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders...................... 1
Performance Results......................... 3
Portfolio Management Review................. 4
Portfolio of Investments.................... 6
Statement of Assets and Liabilities......... 18
Statement of Operations..................... 19
Statement of Changes in Net Assets.......... 20
Financial Highlights........................ 21
Notes to Financial Statements............... 23
</TABLE>

MUNI SAR 5/95

<PAGE>

LETTER TO SHAREHOLDERS

DON G. POWELL
May 5, 1995

Dear Shareholder:
During the six-month period covered by this report, October 1, 1994 through
March 31, 1995, we saw the close of a challenging and difficult year in the fi-
nancial markets--and the beginning of a new year, with renewed optimism and
strength on many fronts.

MARKET OVERVIEW
In an effort to moderate economic growth and keep inflation under control,
the Federal Reserve Board (the "Fed") raised the federal funds rate (the rate
banks charge each other for overnight loans) seven times since February 1994.
As a result, the fed funds rate doubled from 3 percent to 6 percent, its high-
est level in three years. Intermediate- and long-term interest rates quickly
followed the Fed's lead and moved significantly higher as well. The yield on
30-year Treasury securities, for example, began 1994 at 6.35 percent and in-
creased to a high of 8.16 percent, before retreating to 7.89 percent at the end
of the year. However, since yields and prices move in opposite directions, this
had a negative impact on prices of fixed-income securities, including municipal
bonds.
Stock market investors did not fare much better during this rising interest
rate environment, despite the robust economy and stronger corporate earnings.
Concerned that higher interest rates and the prospect for continued rate hikes
might altogether extinguish the economic expansion, the equity market sputtered
for most of 1994. The S&P 500 Index, for example, produced a 1.36 percent total
return for 1994, while the average share price change for the year for all
stocks listed on the New York Stock Exchange was down 9.22 percent.
In contrast, 1995 began more positively as the bond market got a boost from
growing sentiment that the Fed had stabilized economic growth while keeping in-
flation under control, and that it may be near the end of its tightening cycle.
Subsequently, the yield on 30-year Treasury securities fell to 7.43 percent at
the end of March--down nearly three quarters of a percentage point--from its
November 1994 high of 8.16 percent. The stock market responded in late February
with the Dow Jones Industrial Average breaking through the 4000 mark, setting a
new record high and raising expectations for a stronger market in 1995. At the
same time, almost all other major stock indexes rose, including the S&P 500 In-
dex, the New York Stock Exchange Composite Index, and the Nasdaq Composite In-
dex. The first quarter ended with the Dow Jones Industrial Average up 8.4
percent year-to-date, and the S&P 500 and Nasdaq Composite Indexes gaining 9
percent and 8.7 percent, respectively.
Additionally, at the end of March, the Van Kampen American Capital Index of
Investor Intentions reached 431 among self-described "knowledgeable" investors,
an increase of 5
percent over the previous month of 411. The index, computed from an indepen-
dently conducted survey and published by Van Kampen American Capital, measures
the investment climate (investors' confidence) by asking 1,000 investors about
what they intend to do with

(Continued on page two)

1
<PAGE>

their money over the next 60-90 days. Among "knowledgeable" investors, a total
of 56.6 percent said the next 60-90 days would be a "good" time to invest.
"Knowledgeable" investors are those respondents who rate their investment
knowledge at five or higher on a seven-point scale, and who own stocks, bonds,
or mutual funds.
On the following pages, you can read about your Fund's performance during
the past six months, as well as portfolio management's outlook for 1995. We
hope that you will find the information contained in the question-and-answer
section helpful.
Additionally, we are pleased to announce the addition of David C. Johnson to
the portfolio management team of the Municipal Bond Fund effective April 3,
1995. Mr. Johnson has more than 12 years of management experience in the tax-
free fixed-income sector, and will be primarily responsible for the day-to-day
management of the Fund's investment portfolio. You can be assured that the
Fund's portfolio management team remains committed to seeking high current in-
come and preservation of capital.

CORPORATE NEWS
As you may have already noticed, we have adopted a new design for our share-
holder reports that reflects our new identity as Van Kampen American Capital.
Going forward, we will continue to look for new ways to improve upon the pre-
sentation of information in your Fund's report.
In addition, we have developed a new corporate ad campaign introducing Van
Kampen American Capital. Full page ads appeared in The Wall Street Journal in
the first quarter of 1995--watch for more advertising throughout the year.
We look forward to communicating with you on a regular basis, providing in-
formation about your Fund's performance, new investment opportunities, and our
newly created company. We appreciate your continued confidence in your Fund
and Van Kampen American Capital.

Sincerely,

LOGO
Don G. Powell
President
Van Kampen American Capital
Asset Management, Inc.

2
<PAGE>

PERFORMANCE RESULTS FOR THE PERIOD ENDED MARCH 31, 1995

AMERICAN CAPITAL MUNICIPAL BOND FUND

<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES

TOTAL RETURNS
<S> <C> <C> <C>
Six-month total return based on NAV1................ 4.76% 4.25% 4.25%
Six-month total return2............................. (0.22%) 0.25% 3.25%
One-year total return2.............................. 1.03% 1.14% 4.14%
Five-year average annual total return2.............. 6.88% N/A N/A
Ten-year average annual total return2............... 8.62% N/A N/A
Life-of-Fund average annual total return2........... 6.63% 4.18% 1.92%
Commencement Date................................... 12/06/76 09/29/92 08/30/93

DISTRIBUTION RATES AND YIELD
Distribution Rate3.................................. 5.73% 5.29% 5.29%
Taxable Equivalent Distribution Rate4............... 8.95% 8.27% 8.27%
SEC Yield5.......................................... 4.98% 4.39% 4.38%
</TABLE>

N/A = Not Applicable

1Assumes reinvestment of all distributions for the period ended March 31, 1995,
and does not include payment of the maximum sales charge (4.75% for A shares)
or contingent deferred sales charge (4% for B shares and 1% for C shares).

2Standardized total return for the period ended March 31, 1995.

3Distribution Rate (based on maximum sales charge) represents the monthly
annualized distributions of the Fund at the end of March 1995, and not the
earnings of the Fund.

4Taxable equivalent calculations reflect a federal income tax rate of 36%. A
portion of the interest income may be subject to the federal alternative
minimum tax (AMT).

5SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio should
theoretically generate for the 30-day period ending March 31, 1995.

See the Fund Performance section of the current prospectus. Past performance
does not guarantee future results. Investment return and net asset value will
fluctuate with market conditions. Investor's shares, when redeemed, may be
worth more or less than their original cost.

3
<PAGE>

PORTFOLIO MANAGEMENT REVIEW

AMERICAN CAPITAL MUNICIPAL BOND FUND
The following is an interview with the management team of American Capital
Municipal Bond Fund. The team is led by David C. Johnson, portfolio manager,
and Dennis J. McDonnell, vice president of the Fund.

Q. WHAT MARKET CONDITIONS HAD THE GREATEST IMPACT ON THE FUND'S PERFORMANCE
DURING THE SIX MONTHS ENDED MARCH 31, 1995?

A. As the Federal Reserve Board (the "Fed") continued to raise short-term
interest rates throughout 1994, the fixed-income market continued to suf-
fer. Consequently, municipal bond funds experienced an average loss of nearly
6 percent for the year. But by the start of 1995, the bond market began to
show significant signs of recovery. The yield on the Bond Buyer Index, an un-
managed municipal bond index, for example, fell from its high of 7.37 percent
in November to 6.37 percent at the end of March. Because bond yields and
prices move in opposite directions, falling yields provided a boost for bond
prices.

The bond market rally was led by a general sentiment that the Fed, through
several interest rate hikes, had succeeded in moderating economic growth and
suppressing inflation. Orders for durable-goods, such as appliances and auto-
mobiles, were down for February-- their first decline in four months. Durable-
goods orders are typically considered a key indicator of the economy's general
direction because they affect production and employment levels.

Additionally, the municipal market was positively impacted by the supply and
demand relationship at the start of 1995. January, typically a big month for
refundings and call dates among bond issuers, placed additional investment
money into the hands of investors. Subsequently, demand for municipal bonds by
investors seeking to reinvest their money into newly issued municipal bonds
exceeded supply. The lower supply compounded with increased demand helped
prices on municipal bonds to appreciate.

Q. HOW DID YOU POSITION THE FUND IN RESPONSE TO THESE EVENTS?

A. In staying consistent with the Fund's investment objective of seeking
high current income and preservation of capital, we continued to focus on
long-term bonds with high coupon rates and bonds that would provide relative
stability to the portfolio. As a result, we did not reposition the portfolio
in any major way.

PORTFOLIO COMPOSITION BY CREDIT QUALITY AS OF MARCH 31, 1995

<S> <C>
AAA 20%
AA 17%
A 28%
BAA 11%
BA & B 2%
NON-RATED 18%
CASH & EQUIVALENTS 4%
</TABLE>

4
<PAGE>

The Fund's portfolio continues to hold the majority of its rated securities
in single A-rated municipal bonds, which have historically provided good value
in terms of overall investment return.

Q. HOW DID THE FUND PERFORM DURING THE SIX-MONTHS ENDED MARCH 31, 1995?

A. At its current annualized dividend level of $0.600 per share, the Fund
provides shareholders with a tax-free distribution rate of 5.73 per-
cent/3/ (Class A Shares) as of March 31, 1995. At this distribution rate, the
Fund provides shareholders in the 36 percent federal income tax bracket with a
yield equivalent to a taxable investment earning 8.95 percent/4/.

For the six-month period ended March 31, 1995, the Fund produced a total re-
turn of 4.76 percent/1/ (for Class A Shares based on net asset value). This
performance compares less favorably to the Lehman Brothers Municipal Bond In-
dex which earned a total return of 5.54 percent over the same period. The Leh-
man Index is a broad-based unmanaged index of municipal bonds and does not
reflect any commissions or fees that would be paid by an investor purchasing
the securities it represents. On a longer-term basis, the Fund generated an
average annual total return of 9.15 percent/1/ (for Class A Shares based on
net asset value) for the ten-year period ended March 31, 1995 (please refer to
the chart on page three for additional Fund performance results).

Q. WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET IN 1995 AND, MORE
SPECIFICALLY, FOR THE FUND?

A. We believe the supply and demand dynamics for the municipal market will
continue to favorably influence municipal bond prices. The volume of
newly issued municipal bonds for the first quarter of 1995 was down 47 percent
compared to the same time period in 1994. A decline in supply combined with
steady demand should produce price stability.

Later this year, we may see interest rates edge up a bit if the Fed feels
there is still too much strength in the economy, and is compelled to raise in-
terest rates once again. But, we do not anticipate the same level of volatil-
ity from a rate hike that we saw in the municipal market last year. Going
forward, we remain comfortable with how the Fund is currently positioned and
believe the Fund continues to provide shareholders with long-term value. More-
over, we believe the expertise of the Fund's management team and extensive re-
search capabilities enables the Fund to take advantage of a variety of
investment opportunities.

[Signature of Dennis J. McDonnell]
Dennis J. McDonnell [Signature of David C. Johnson]
Vice President David C. Johnson
American Capital Municipal Bond Fund Portfolio Manager

Please see footnotes on page three.

5
<PAGE>

See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS

March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 95.6%
EDUCATION 4.6%
$ 1,000 Broward County, Florida,
Educational Facilities Authority
Rev. (Nova University Project),
G.O............................... 8.500% 04/01/10 $ 1,143,070
625 Clear Creek, Texas, Independent
School District, G.O.............. 6.250 02/01/11 660,175
1,000 Cook County, Illinois, Community
College, District #508,
Certificates of Participation,
FGIC.............................. 8.750 01/01/07 1,252,580
1,150 Florida State Board of Education,
Capital Outlay, Series A.......... 7.250 06/01/23 1,266,722
1,000 Illinois Educational Facilities
Authority Rev., G.O.
Lake First College, FSA........... 6.750 10/01/21 1,041,270
1,000 Illinois Educational Facilities
Authority Rev., G.O., Northwestern
University, Series 1985........... 6.900 12/01/21 1,113,650
2,000 New Hampshire Higher Education &
Daniel Webster College Issue,
G.O............................... 7.625 07/01/16 1,960,540
1,000 New York City, New York,
Industrial Development Agency,
Civil Facility Rev. (Marymount
Manhattan College Project), G.O... 7.000 07/01/23 1,009,310
1,000 New York State Dormitory Authority
Rev. City University (Prerefunded
@ 7/1/97)......................... 8.125 07/01/17 1,091,920
3,250 New York State Dormitory Authority
Rev., State University Education
Facility, Series 1990-A........... 7.700 05/15/12 3,705,130
500 Pennsylvania State Higher
Educational Facilities Authority
Rev. Hahnemann University Project,
MBIA, G.O......................... 7.200 07/01/19 533,815
250 Pennsylvania State Higher
Educational Facilities Authority
Rev., Pennsylvania Medical
College, Series A, G.O............ 7.500 03/01/14 257,635
500 University of the Virgin Islands,
Series A.......................... 7.500 10/01/09 521,130
500 University of the Virgin Islands,
Series A.......................... 7.650 10/01/14 518,185
--------------
TOTAL EDUCATION................... 16,075,132
--------------
HEALTH CARE 1.7%
500 Colorado Health Facilities
Authority Rev. (Cleo Wallace
Center Project)................... 7.000 08/01/15 502,435
1,500 Colorado Health Facilities
Authority Rev. (PSL Healthcare
System Project), Series 1991-A,
FSA............................... 6.250 02/15/21 1,518,435
1,000 Cuyahoga County, Ohio, Health Care
Facilities Rev. (Jenning Hall).... 7.300 11/15/23 947,300
1,000 Lebanon County, Pennsylvania,
Health Facilities Authority Health
Center Rev. (UTD Church of Christ
Homes Project).................... 6.750 10/01/10 1,004,600
700 Massachusetts State, Industrial
Finance Rev....................... 7.100 11/15/18 672,875
230 Pina County, Arizona, Industrial
Development Authority (Casa Grande
Regional Medical Center Project).. 9.000 12/01/13 238,425
1,000 St. Petersburg, Florida, Health
Facilities Authority Rev.
(Allegany Health Systems)......... 7.750 12/01/15 1,130,330
--------------
TOTAL HEALTH CARE................. 6,014,400
--------------
</TABLE>

6
<PAGE>

See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)

March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HOSPITAL 15.5%
$ 500 Bexar County, Texas, Health
Facilities Development Rev.
(St. Lukes Lutheran Hospital
Project).......................... 7.000% 05/01/21 $ 509,830
1,500 Bexar County, Texas, Health
Facilities Development Rev.
(St. Lukes Lutheran Hospital
Project).......................... 7.900 05/01/18 1,762,245
1,000 Boston Massachusetts, Rev. (Boston
City Hospital), FHA............... 7.625 02/15/21 1,133,810
500 Boulder County, Colorado,
Industrial Development Rev.
(Boulder Medical Center Project).. 8.875 01/01/17 518,565
1,000 Charlotte County, Florida,
Hospital Authority Rev. (Bon
Secours Health System)............ 8.250 08/15/18 1,120,860
500 Clarksville, Tennessee, Hospital
Rev., Refunding & Improvement
(Clarskville Memorial Project).... 6.250 07/01/13 477,960
995 Clearfield, Pennsylvania, Hospital
Authority Rev. (Clearfield
Hospital Project), Series-94...... 6.875 06/01/16 995,587
800 Colorado Health Facilities
Authority Rev. (Rocky Mountain
Adventist)........................ 6.625 02/01/13 779,520
2,000 Delaware State Economic
Development Authority Rev.
(Osteopathic Hospital Association
of Delaware), Series A............ 6.900 01/01/18 1,835,120
500 Erie County, Pennsylvania,
Hospital Authority Rev. (Metro
Health Center), Series 1992....... 7.250 07/01/12 514,150
1,000 Harris County, Texas, Health
Facilities Development Corp.
(Memorial Hospital System
Project).......................... 7.125 06/01/15 1,057,750
1,000 Illinois Health Facilities
Authority Rev. Elmhurst Memorial
Hospital, Series 87-A............. 8.125 01/01/13 1,073,910
1,000 Illinois Health Facilities
Authority Rev. Improvement Swedish
Covenant, Series A................ 6.300 08/01/13 933,080
2,000 Illinois Health Facilities
Authority Rev. Lutheran Health
System, Series B, MBIA............ 6.000 04/01/18 1,922,940
1,000 Illinois Health Facilities
Authority Rev. Masonic Medical
Center, Series 1989-B............. 7.700 10/01/19 1,124,910
1,000 Illinois Health Facilities
Authority Rev., Memorial Hospital. 7.250 05/01/22 1,005,850
500 Illinois Health Facilities
Authority Rev. Mercy Center For
Health Care Services.............. 6.625 10/01/12 500,350
1,000 Illinois Health Facilities
Authority Rev., Northwestern
Memorial Hospital................. 6.750 08/15/11 1,031,460
1,000 Indiana Health Facilities,
Financing Hospital Authority Rev.
(Community Hospital of Indiana),
Series-H, MBIA.................... 6.850 07/01/22 1,044,390
1,160 Jefferson County, Texas, Health
Facility Authority Rev. (Baptist
Health Care Project).............. 8.300 10/01/14 1,263,426
845 Lebanon County, Pennsylvania, Good
Samaritan Hospital Authority Rev.
(Good Samaritan Hospital Project). 5.850 11/15/07 772,279
1,000 Marion County, Indiana, Hospital
Authority, Facility Rev.,
(Methodist Hospital of Indiana)... 6.500 09/01/13 1,006,840
1,000 McKeesport, Pennsylvania, Hospital
Authority Rev. (McKeesport
Hospital Project)................. 6.500 07/01/08 979,910
</TABLE>

7
<PAGE>

See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)

March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000 Michigan State Hospital Finance
Authority Rev. St. Joseph Hospital
Corp., Series A.................... 8.125% 07/01/05 $ 1,045,100
1,000 Michigan State Hospital Finance
Authority Rev., Refunding, Genesys
Health System, Series A............ 7.500 10/01/07 1,010,500
1,000 Missouri State Health & Educational
Facilities Authority (Heartland
Health Systems Project)............ 8.125 10/01/10 1,112,180
1,000 New Hampshire Health & Higher
Educational Facility Authority
Rev................................ 7.500 06/01/05 1,042,440
2,500 New Hampshire Health & Higher
Educational Facility Authority Rev.
(Wentworth Douglass Hospital)...... 8.500 01/01/15 2,700,525
1,000 New York State Medical Care
Facilities Finance Agency Rev.
Columbia Presbyterian Hospital,
Series A, FHA...................... 8.000 02/15/25 1,092,980
1,960 New York State Medical Care
Facilities Finance Agency Rev.,
Montefiore Medical Center.......... 7.250 02/15/09 2,104,080
1,000 New York State Medical Care
Facilities Finance Agency Rev.,
North General Hospital, Series 89-
A.................................. 7.400 02/15/19 1,034,670
1,000 Newton, Kansas, Hospital Rev.,
Newton Health Care Corp., Series-A. 7.750 11/15/24 1,018,260
695 Philadelphia, Pennsylvania,
Hospital & Higher Education
Facilities Authority Rev.
(Roxborough Memorial Hospital),
Series 2........................... 7.250 03/01/24 649,040
1,500 Richardson, Texas, Hospital
Authority, Refunding & Improvement
Rev. (Richardson Medical Center)... 6.750 12/01/23 1,507,740
1,000 Royal Oak, Michigan, Hospital
Finance Authority, Rev. (William
Beaumont Hospital), Series D....... 6.750 01/01/20 1,027,130
1,750 Rusk County, Texas, Health
Facilities Corp., Hospital Rev.
(Henderson Memorial Hospital
Project)........................... 7.750 04/01/13 1,801,450
500 Salem, Oregon, Hospitals Facilities
Authority Rev...................... 7.500 12/01/24 507,295
1,000 Scranton-Lackawanna, Pennsylvania,
Health & Welfare Authority Rev.
(Moses Taylor Hospital Project),
Series A........................... 7.375 07/15/08 1,012,830
500 Scranton-Lackawanna, Pennsylvania,
Health & Welfare Authority Rev.
(Moses Taylor Hospital Project),
Series B........................... 8.250 07/01/09 536,310
1,000 South Dakota State Health &
Educational Facilities Authority
Rev. (Sioux Valley Hospital)....... 7.250 04/01/20 1,003,450
2,000 South Dakota State Health &
Educational Facilities Authority
Rev. (Sioux Valley Hospital)....... 7.625 11/01/13 2,221,598
1,500 St. Joseph County, Indiana,
Hospital Authority Rev. (Memorial
Hospital South Bend Project), MBIA. 6.250 08/15/22 1,504,245
1,000 Tyler, Texas, Health Facilities
Development Corp. (East Texas
Medical Center Regional Health),
Series B........................... 6.750 11/01/25 964,310
1,000 Washington County, Pennsylvania,
Hospital Authority................. 7.350 06/01/13 952,800
1,500 Wells County, Indiana, Hospital
Authority Rev., Refunding (Caylor-
Nickel Medical Center, Inc.)....... 8.500 04/15/03 1,529,550
1,000 Weslaco, Texas, Health Facilities
Development (Knapp Medical Center
Project), Series-A, CONN........... 5.250 06/01/16 885,540
</TABLE>

8
<PAGE>

See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)

March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000 West Virginia State, Hospital
Finance Authority, Refunding &
Improvement (Fairmont General
Hospital), Series A................. 6.750% 03/01/14 $ 969,850
2,000 Wisconsin State Health & Educational
Facilities Rev. (Wheaton Franciscan
Services Inc.)...................... 8.200 08/15/18 2,238,660
--------------
TOTAL HOSPITAL...................... 54,837,275
--------------
HOUSING 5.8%
1,545 Arapahoe County, Colorado, Single
Family Mtg. Rev..................... 8.375 08/01/19 1,618,094
1,000 Austin, Texas, Housing Finance
Corp., Multi-family Rev. (Stassey
Woods Apartment Project)............ 6.750 04/01/19 979,090
410 Bexar County, Texas, Housing Finance
Corp., Rev.......................... 8.200 04/01/22 431,550
420 Bexar County, Texas, Housing Finance
Corp., Rev.,
Series B............................ 9.250 04/01/16 440,534
135 El Paso, Texas, Property Finance
Authority Inc., Single Family Mtg.
Rev., Series A...................... 8.700 12/01/18 145,064
645 Fort Worth, Texas, Housing Finance
Corp., Home Mtg. Rev. Refunding..... 8.500 10/01/11 702,605
735 Harris County, Texas, Housing
Financing Corp., Single Family Mtg.
Rev., Series 1983-A................. 10.125 07/15/03 737,742
670 Houston, Texas, Housing Finance
Corp., Single Family Mgt. Rev....... 10.000 09/15/14 689,309
855 Houston, Texas, Housing Finance
Corp., Single Family Mgt. Rev.,
Series A, FSA....................... 5.950 12/01/10 842,089
1,000 Maricopa County, Arizona, IDR,
Multi-Family Rev., Refunding (Laguna
Point Apartments Project)........... 6.500 07/01/09 1,016,630
1,000 Massachusetts State Housing Finance
Agency, Multi-family Housing
Authority, Series A................. 8.750 08/01/08 1,051,250
550 Massachusetts State Housing Finance
Agency, Residential Housing
Authority, Series A................. 8.400 08/01/21 578,875
910 Minnesota State Housing Finance
Agency, Single Family Mtg. Rev...... 6.750 01/01/26 907,725
1,000 Montgomery County, Pennsylvania,
Industrial Development Authority,
Retirement Community Rev. (GDL Farms
Corp. Project)...................... 6.300 01/01/13 907,690
1,000 Mount Clemens, Michigan, Housing
Corp., Multi-family Rev., Refunding,
Series A............................ 6.600 06/01/13 1,030,480
1,000 North St. Paul, Minnesota, Multi-
family Refunding Housing Rev.
(Cottages North St. Paul)........... 9.250 02/01/22 1,086,250
1,000 Pima County, Arizona, IDR, Single
Family Mtg. Rev..................... 6.625 11/01/14 1,018,000
1,155 Ridgeland, Mississippi, Urban
Renewal (The Orchard, Ltd. Project),
Series A............................ 7.750 12/01/15 1,130,410
2,500 St. Paul, Minnesota Port Authority,
Housing & Redevelopment Authority,
Multi-family Housing Rev., Series J. 9.500 12/01/11 2,396,875
1,000 South Dakota State Housing
Development Authority, Homeowner
Mtg., Series D-1.................... 6.850 05/01/26 1,017,500
1,450 Texas State Veterans Housing
Assistance, MBIA, G.O.,............. 6.800 12/01/23 1,521,616
</TABLE>

9
<PAGE>

See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)

March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 245 Travis County, Texas, Housing Finance
Corp., Single Family Mtg. Rev........ 8.200% 04/01/22 $ 253,134
--------------
TOTAL HOUSING........................ 20,502,512
--------------
LIFE CARE 2.7%
500 Atlantic Beach, Florida, Rev.,
Refunding & Improvement Fleet Landing
Project, Series A.................... 7.500 10/01/02 506,270
500 Atlantic Beach, Florida, Rev.,
Refunding & Improvement Fleet Landing
Project, Series A.................... 7.875 10/01/08 514,430
2,000 Butler County, Pennsylvania,
Industrial Development Authority
Rev., 1st Mgt. Rev. (Sherwood Oaks
Project), Series A................... 8.750 06/01/16 2,099,300
500 Chartiers Valley, Pennsylvania,
Industrial & Commercial Development
Authority (Asbury Health Center
Project)............................. 7.250 12/01/11 503,840
500 Chartiers Valley, Pennsylvania,
Industrial & Commercial Development
Authority (Asbury Health Center
Project)............................. 7.400 12/01/15 494,195
950 Hanover Park, Illinois, 1st Mgt. Rev.
Windsor Park Manor Project........... 9.250 12/01/07 1,029,733
1,000 Massachusetts State Industrial
Finance Agency Rev. 1st Mtg. Reeds
Landing Project...................... 8.625 10/01/23 1,012,350
1,000 Massachusetts State Industrial
Finance Agency, Greater Lynn Mental
Health Association Project........... 8.800 06/01/14 1,105,680
500 Scottsdale, Arizona, Industrial
Development Authority, Refunding, 1st
Mtg. Westminter Village, Series A.... 8.250 06/01/15 528,275
500 Tempe, Arizona, Industrial
Development Authority Rev. Friendship
Village Temple, Series-A............. 6.750 12/01/13 487,020
1,000 Wisconsin State Health & Educational
Facilities Authority Rev., (United
Lutheran Program for the Aging Inc.
Project)............................. 8.500 03/01/19 1,058,750
--------------
TOTAL LIFE CARE...................... 9,339,843
--------------
MISCELLANEOUS 7.6%
500 Berry Creek Metropolitan District,
Colorado, G.O., Refunding and
Improvement.......................... 8.250 12/01/11 534,280
2,000 Compton, California, Certificates of
Participation, Refunding, Series B... 7.500 08/01/15 2,119,320
1,000 Detroit, Michigan, Tax Increment
Bonds (Development Area No. 1
Project) Series 89-A................. 7.600 07/01/10 1,047,270
2,500 District of Columbia Rev. (National
Public Radio), Series A.............. 7.700 01/01/23 2,621,775
1,000 Dove Valley Metropolitan District,
Arapahoe County, Colorado, G.O....... 9.500 12/01/08 1,048,290
1,000 Du Page County, Illinois (Stormwater
Project)............................. 6.550 01/01/21 1,091,860
500 Fort Bend County, Texas, Levee
Improvement District No. 11, G.O..... 8.700 03/01/09 547,735
440 Fort Bend County, Texas, Levee
Improvement District No. 11, G.O..... 8.700 03/01/10 482,007
1,000 Lake Charles, Louisiana, Harbor &
Terminal Facilities Rev. (Trunkline
Liquified Natural Gas Co. Project)... 7.750 08/15/22 1,074,380
1,000 Lehigh County, Pennsylvania, IDR
(Allentown Interstate Motel.......... 8.000 08/01/12 1,022,720
</TABLE>

10
<PAGE>

See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)

March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 630 Mountain Village Metropolitan
District, San Miguel County,
Colorado, Refunding, Series 1992,
G.O................................. 7.950% 12/01/03 $ 652,182
500 Mountain Village Metropolitan
District, San Miguel County,
Colorado, Refunding, Series 1992,
G.O................................. 8.100 12/01/11 525,605
145 Pocahontas, Iowa, Industrial
Development Rev. (Navistar
International Harvester Co.)........ 10.250 10/01/00 150,986
1,000 Port of New Orleans, Louisiana, IDR,
Refunding (Avondale Industries,
Inc.)............................... 8.250 06/01/04 1,063,900
2,330 Somerset County, Pennsylvania,
General Authority, Commonwealth
Lease Rev., FGIC.................... 6.250 10/15/11 2,474,693
1,705 St. Charles, Illinois, Industrial
Development Rev. (Tri-City Center
Project)............................ 7.500 11/01/13 1,707,302
500 Texas General Services, Community
Partner Interests, (Office Building
and Land Acquisition Project)....... 7.000 08/01/19 513,320
500 Texas General Services, Community
Partner Interests, (Office Building
and Land Acquisition Project)....... 7.000 08/01/24 513,320
1,000 Texas State, Refunding
(Superconducting Project), Series C,
G.O. ............................... 5.500 04/01/20 922,340
1,000 Utah State Building Ownership
Authority Lease Rev. (Dept. of
Employment Security)................ 7.800 08/15/10 1,090,020
1,300 Utah State Building Ownership
Authority Lease Rev. (Dept. of
Employment Security)................ 7.800 08/15/11 1,417,026
1,000 Valdez, Alaska, Marine Term Rev.,
Refunding (Sohio Pipeline).......... 7.125 12/01/25 1,073,550
1,250 Virginia, Port of Authority,
Commonwealth........................ 8.200 07/01/08 1,369,200
1,500 Woodward, Oklahoma, Municipal Auto
Sales, Refunding.................... 8.000 11/01/12 1,629,645
--------------
TOTAL MISCELLANEOUS................. 26,692,726
--------------
MUNICIPAL UTILITY DISTRICT
(MUD) 1.2%
500 Eldridge Road, Texas, MUD,
Refunding........................... 6.125 03/01/11 479,860
500 Harris County, Texas, MUD,
Refunding, G.O. .................... 7.300 03/01/14 508,790
1,000 Mills Road, Texas, MUD.............. 6.500 09/01/14 973,090
500 Mission Bend MUD No. 2, Texas....... 10.000 09/01/98 567,845
375 Mission Bend MUD No. 2, Texas....... 10.000 09/01/00 435,878
655 Montgomery County, Texas, MUD No. 4
(Water Works System)................ 8.900 09/01/02 737,117
500 North Mission Glen, Texas, MUD,
Refunding........................... 6.500 09/01/14 482,360
--------------
TOTAL MUD........................... 4,184,940
--------------
NURSING HOMES 1.2%
500 Fairfield, Ohio, Economic
Development Rev., Refunding (Beverly
Enterprises)........................ 8.500 01/01/03 525,595
475 Louisiana Public Facilities
Authority, Industrial Development
Rev., Refunding (Beverly
Enterprises)........................ 8.250 09/01/08 500,740
1,315 Luzerne County, Pennsylvania,
Industrial Development Authority,
1st Mtg. Rev., Refunding (Birchwood
Nursing Center Project), Series-A... 7.875 12/01/13 1,377,620
</TABLE>

11
<PAGE>

See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)

March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,555 New Hampshire Health & Higher
Educational Facility Authority Rev.,
Refunding 1st Mtg. Odd Fellows Home. 8.800% 06/01/09 $ 1,698,635
--------------
TOTAL NURSING HOMES................. 4,102,590
--------------
POLLUTION CONTROL REVENUE (PCR) 5.6%
3,675 Brazos River Authority, Texas, PCR
(Texas Utilities Electric Co.
Project A).......................... 9.875 10/01/17 4,074,031
1,000 Burke County, Georgia, Development
Authority, PCR (Georgia Power Co.).. 9.375 12/01/17 1,115,390
1,000 Burlington, Kansas, PCR, MBIA
(Kansas Gas & Electric Co. Project). 7.000 06/01/31 1,050,940
1,595 Capital Industrial Development
Corp., Texas, PCR (International
Business Machines Corp.)............ 7.400 05/01/12 1,749,683
750 County of Coshocton, Ohio, Solid
Waste Disposal Rev. (Stone Container
Corp. Project), Series 1992......... 7.875 08/01/13 753,022
1,000 Hodge, Louisiana, Utility Rev.
(Stone Container Corp. Project),
Series 1990......................... 9.000 03/01/10 1,063,530
1,240 Mercer County, North Dakota, PCR,
Basin Electric Power, Series E...... 7.000 01/01/19 1,274,174
500 Monroe County, Michigan, PCR
(Detroit Edison Co.), Series A...... 10.500 12/01/16 531,290
1,000 New Hampshire State Industrial
Development Authority, PCR, New
England Power Co. .................. 7.800 04/01/16 1,042,090
1,000 New Hampshire State Industrial
Development Authority, PCR, United
Illuminating Co., Series B.......... 10.750 10/01/12 1,140,690
1,000 Parish of St. Charles, Louisiana,
PCR (Louisiana Power & Light Co.)... 8.250 06/01/14 1,068,750
1,400 Parish of West Feliciana, Louisiana,
PCR (Gulf States Utilities), Series
A................................... 7.500 05/01/15 1,432,634
1,000 Petersburg, Indiana, PCR, Refunding
(Indianapolis Power & Lighting),
Series 1993-A....................... 6.100 01/01/16 981,440
750 Pope County, Arkansas, PCR (Arkansas
Power & Light Project).............. 11.000 12/01/15 792,983
1,350 Sabine River Authority, Texas,
Refunding, PCR (Texas Utilities Co.
Project)............................ 7.750 04/01/16 1,404,338
440 Sabine River Authority, Texas,
Refunding, PCR (Texas Utilities Co.
Project), Series 1986............... 9.000 09/01/07 482,090
--------------
TOTAL PCR........................... 19,957,075
--------------
POOL FINANCING PROGRAMS 2.9%
1,750 Emmaus, Pennsylvania, General
Authority, Local Government Bond
Pool Program, Rev., Series A, BIG... 8.150 05/15/18 1,881,215
2,500 Emmaus, Pennsylvania, General
Authority, Local Government Bond
Pool Program, Rev., Series C, BIG... 7.900 05/15/18 2,669,750
1,000 Indianapolis, Indiana, Local Public
Improvement, Series A............... 6.000 02/01/20 967,350
2,000 Indianapolis, Indiana, Local Public
Improvement, Series C............... 6.700 01/01/17 2,010,220
450 Indianapolis, Indiana, Local Public
Improvement, Series D............... 6.500 02/01/22 450,410
550 Indianapolis, Indiana, Local Public
Improvement, Series D............... 6.750 02/01/14 579,502
1,000 Indianapolis, Indiana, Local Public
Improvement, Series D............... 6.750 02/01/20 1,024,400
</TABLE>

12
<PAGE>

See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)

March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 670 Tampa, Florida, Capital Improvement
Program Rev., Series A.............. 8.250% 10/01/18 $ 700,237
--------------
TOTAL POOL FINANCING PROGRAMS....... 10,283,084
--------------
RESOURCE RECOVERY 2.7%
1,760 Broward County, Florida, Resource
Recovery Rev., North Project........ 7.950 12/01/08 1,920,389
2,295 Broward County, Florida, Resource
Recovery Rev., South Project........ 7.950 12/01/08 2,501,206
1,000 Camden County, New Jersey, PCR,
Solid Waste Resource Recovery Rev.,
Series B............................ 7.500 12/01/09 960,440
1,500 Delaware County, Pennsylvania,
Industrial Development Authority
Rev. (Resource Recovery Project).... 8.100 12/01/13 1,588,005
1,000 El Centro, California, Certificates
of Participation.................... 7.000 06/01/19 975,990
1,000 Montgomery County, Pennsylvania,
Industrial Development Authority
Rev., Resource Recovery............. 7.500 01/01/12 1,054,390
500 Rockdale County, Georgia,
Development Authority Rev. Solid
Waste Disposal (Visy Paper, Inc.
Project)............................ 7.500 01/01/26 504,685
--------------
TOTAL RESOURCE RECOVERY............. 9,505,105
--------------
SALES TAX REVENUE 1.5%
1,000 Crestwood, Illinois, Tax Increment
Rev., Refunding..................... 7.250 12/01/08 986,250
1,000 Edgewater, Colorado, Redevelopment
Rev................................. 6.750 12/01/08 1,009,710
1,000 Orange County, Florida, Tourist
Development Tax Rev., AMBAC......... 6.000 10/01/16 1,000,930
865 Round Lake Beach, Illinois, Tax
Increment Rev., Series 1993......... 7.200 12/01/04 858,954
500 Round Lake Beach, Illinois, Tax
Increment Rev., Series 1993......... 7.500 12/01/13 448,390
975 St. Louis, Missouri, Tax Increment
Rev. (Scullin Redevelopment Area),
Series A............................ 10.000 08/01/10 1,144,367
--------------
TOTAL SALES TAX REVENUE............. 5,448,601
--------------
TRANSPORTATION 9.7%
3,000 Atlanta, Georgia, Airport Facilities
Rev. (Atlanta International
Airport), Series 1990............... 6.250 01/01/21 2,946,900
1,000 Chicago, Illinois, O'Hare
International Airport Rev.,
Series A............................ 6.000 01/01/18 940,910
1,000 Chicago, Illinois, O'Hare
International Airport Rev.,
Series B............................ 6.000 01/01/18 940,910
500 Cleveland, Ohio, Parking Facilities
Improvement Rev..................... 8.000 09/15/12 523,230
940 Dallas-Fort Worth, Texas,
International Airport Facility Rev.,
(American Airlines, Inc.)........... 7.500 11/01/25 955,623
2,500 Greater Orlando Aviation Authority,
Florida, Airport Facilities Rev..... 8.375 10/01/16 2,746,558
500 Hawaii State Harbor Capital
Improvement Rev., MBIA.............. 7.000 07/01/17 525,685
2,000 Indiana Transportation Finance
Authority, Airport Facilities Lease
Rev., Series A...................... 6.250 11/01/16 1,962,720
1,000 Kentucky State Turnpike Authority,
Toll Road Rev., Refunding Series A.. 5.500 07/01/07 967,900
</TABLE>

13
<PAGE>

See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)

March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 8,000 Kentucky State Turnpike Authority,
Toll Road Rev., Refunding Series
1987-A.............................. 5.000% 07/01/08 $ 7,261,520
2,000 Los Angeles, California, Regional
Airport Facility Improvement Corp.,
Lease Rev........................... 11.250 11/01/25 2,138,200
1,500 Metropolitan Transportation
Authority, New York Transportation
Facilities, Rev., Series G, MBIA.... 5.500 07/01/15 1,419,315
1,000 New Hampshire State Turnpike System,
Rev., Refunding Series A, FGIC...... 6.750 11/01/11 1,087,400
3,200 New Jersey State Turnpike Authority,
Series C............................ 6.500 01/01/16 3,372,416
1,000 Port Authority of New York and New
Jersey, Consolidated Board, 95th
Series.............................. 6.125 07/15/22 997,250
915 Philadelphia, Pennsylvania,
Industrial Development Authority
Rev. (Parking Garage II Project).... 6.125 02/15/03 907,049
1,000 St. Louis, Missouri, Parking
Facilities Rev...................... 6.625 12/15/21 1,007,690
1,000 Triborough Bridge & Tunnel
Authority, New York, Rev............ 7.875 01/01/18 1,093,430
1,000 Tulsa, Oklahoma, Municipal Airport
Trust, Rev.......................... 7.600 12/01/30 986,530
800 Tulsa, Oklahoma, Municipal Airport
Trust, Rev. (American Airlines)..... 9.500 06/01/20 832,968
785 Virgin Islands Port Authority,
Marine Division Rev. (Marine
Terminal), Series A................. 10.125 11/01/05 811,737
--------------
TOTAL TRANSPORTATION................ 34,425,941
--------------
UTILITIES--COMBINATION ELECTRIC, GAS
AND/OR WATER 9.7%
1,250 Austin, Texas, Utility System Rev.,
FGIC................................ 7.750 11/15/06 1,316,662
2,280 Austin, Texas, Utility System Rev.,
Refunding........................... 6.000 05/15/15 2,258,796
1,000 Austin, Texas, Utility System Rev.,
Series A............................ 7.800 11/15/12 1,112,940
2,380 Austin, Texas, Utility System Rev.,
Series B............................ 7.800 11/15/12 2,631,209
1,000 Chicago, Illinois, Gas Supply Rev.
(People's
Gas Lighting and Coke Co.), Series
A................................... 8.100 05/01/20 1,103,260
1,000 Chicago, Illinois, Metropolitan
Water District, G.O................. 7.000 01/01/11 1,122,700
700 Citronelle, Alabama, Utilities
Board, Water, Sewer & Gas Rev....... 9.000 05/01/13 752,171
10,950 Jefferson County, Kentucky, Capital
Project Lease Rev. Waste Water
Treatment Plant..................... * 08/15/14 2,931,315
750 Jefferson, Wisconsin, Sewer System,
Waterworks.......................... 7.400 07/01/16 840,397
2,000 Los Angeles, California, Dept. of
Water & Power, Electric Plant Rev... 5.375 09/01/23 1,776,940
2,000 Massachusetts State Water Resource
Authority, Series A................. 7.500 04/01/16 2,243,440
1,000 New Hampshire State Business Finance
Authority, Electric Facilities Rev.
(Plymouth Cogeneration Light Power). 7.750 06/01/14 1,006,120
1,000 New York City Municipal Water
Finance Authority, New York, Water &
Sewer Rev., Series A................ 7.625 06/15/16 1,075,680
3,000 New York City Municipal Water
Finance Authority, New York, Water &
Sewer Rev., Series A, MBIA.......... 7.250 06/15/15 3,352,200
</TABLE>

14
<PAGE>

See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)

March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 4,100 New York City Municipal Water
Finance Authority, New York, Water &
Sewer Rev., Series B................ 5.000% 06/15/17 $ 3,510,584
1,000 New York State Environment
Facilities Corp., Water Facilities
Rev. (Long Island Water Corp.)...... 10.000 10/01/17 1,108,110
500 NORCO, California, Sewer and Water
Rev., Refunding..................... 6.700 10/01/13 489,130
500 NORCO, California, Sewer and Water
Rev., Refunding..................... 7.200 10/01/19 493,770
750 Northwest Harris County, Texas,
Municipal Utility, Waterworks and
Sewer System Combination Tax........ 8.100 10/01/15 809,610
2,000 Orlando, Florida, Utilities
Commission, Water & Electric Rev.
Refunding (Prerefunded @ 10/1/95)... 8.625 10/01/05 2,081,240
500 Willow Fork, Texas, Drainage
District, G.O....................... 7.000 03/01/12 517,080
500 Willow Fork, Texas, Drainage
District, G.O....................... 7.000 03/01/13 514,270
1,000 Winters, Texas, Water Works & Sewer
Rev................................. 8.500 08/01/17 1,219,240
--------------
TOTAL UTILITIES--COMBINATION
ELECTRIC,
GAS AND/OR WATER.................... 34,266,864
--------------
UTILITIES--ELECTRIC 23.2%
2,500 Alaska Energy Authority Power Rev.,
First Series (Bradley Lake
Hydroelectric Project), BIG......... 6.250 07/01/21 2,502,475
850 Georgia State Municipal Electric
Authority, Power Rev................ 6.000 01/01/20 817,114
2,000 Georgia State Municipal Electric
Authority, Power Rev., Series A
(Prerefunded 1/1/96)................ 7.875 01/01/18 2,086,560
1,750 Georgia State Municipal Electric
Authority, Power Rev., Series Q
(Prerefunded 1/1/98)................ 8.375 01/01/16 1,927,730
1,250 Georgia State Municipal Electric
Authority, Power Rev., Series O..... 8.125 01/01/17 1,358,250
9,685 Grand River Dam Authority, Oklahoma,
Rev. Series 1987.................... 5.000 06/01/12 8,598,052
1,850 Intermountain Power Agency, Utah,
Power Supply Authority Rev., 1st
Crossover Series.................... 5.000 07/01/16 1,597,419
1,000 Intermountain Power Agency, Utah,
Power Supply Authority Rev., Series
A................................... 6.000 07/01/23 965,630
2,400 Intermountain Power Agency, Utah,
Power Supply Authority Rev., Series
A................................... 7.750 07/01/17 2,536,824
3,650 Intermountain Power Agency, Utah,
Power Supply Authority Rev., Series
B................................... 7.750 07/01/20 3,917,070
2,000 Intermountain Power Agency, Utah,
Power Supply Authority Rev.,
Series H............................ 6.000 07/01/21 1,920,740
2,000 Intermountain Power Agency, Utah,
Power Supply Authority Rev.,
Series I............................ 6.000 07/01/21 1,920,740
1,000 Lewis County, Washington, Public
Utility District No. 1 Rev. (Cowlitz
Falls Hydroelectric Project)........ 6.000 10/01/24 966,510
750 Michigan Public Power Agency, Rev.,
Refunding (Belle River Project)..... 7.000 01/01/18 770,467
3,000 Muscatine, Iowa, Electric Authority
Rev................................. 5.000 01/01/08 2,700,330
2,500 New York State Power Authority,
Rev., Series T...................... 7.375 01/01/18 2,601,950
300 Northern California, Public Power
Agency, Rev......................... 5.000 07/01/09 260,835
</TABLE>

15
<PAGE>

See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)

March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 335 North Carolina Eastern Municipal
Power Agency, Power System Rev...... 8.000% 01/01/21 $ 367,971
2,665 North Carolina Eastern Municipal
Power Agency, Power System Rev.
(Prerefunded @ 1/1/98).............. 8.000 01/01/21 2,927,289
7,695 North Carolina Eastern Municipal
Power Agency, Power System Rev.,
Series A............................ 4.500 01/01/24 6,140,379
1,000 North Carolina Municipal Power
Agency No. 1, Catawba Electric Rev.. 6.000 01/01/20 948,150
2,850 North Carolina Municipal Power
Agency No. 1, Catawba Electric Rev.. 7.875 01/01/19 3,121,064
1,070 Piedmont Municipal Power Agency,
South Carolina, Rev................. 5.000 01/01/25 870,552
5,290 Salt River Project, Arizona
Agricultural Improvement & Power
District Electric System Rev........ 7.875 01/01/28 5,785,938
1,000 Sam Rayburn, Texas, Municipal Power
Agency, Refunding, Series A......... 6.250 10/01/17 864,160
1,000 Sam Rayburn, Texas, Municipal Power
Agency, Refunding, Series A......... 6.750 10/01/14 942,280
1,000 South Carolina, Public Service
Authority (Prerefunded @ 1/1/96).... 7.875 07/01/21 1,036,228
2,000 Southern Minnesota Municipal Power
Agency, Power Supply System Rev.,
Series A............................ 5.000 01/01/16 1,730,140
1,250 Southern Minnesota Municipal Power
Agency, Power Supply System Rev.,
Series C............................ 5.000 01/01/17 1,077,400
8,565 Texas Municipal Power Agency Rev.... 5.500 09/01/13 7,990,289
1,250 Washington State Public Power Supply
System Rev., Nuclear Project No. 1,
Series B............................ 7.125 07/01/16 1,350,525
445 Washington State Public Power Supply
System Rev., Nuclear Project No. 1,
Series D............................ 15.000 07/01/17 513,294
2,500 Washington State Public Power Supply
System Rev., Nuclear Project No. 2,
Series B............................ 7.000 07/01/12 2,589,975
1,000 Washington State Public Power Supply
System Rev., Nuclear Project No. 2,
Series B............................ 7.375 07/01/12 1,120,120
2,000 Washington State Public Power Supply
System Rev., Nuclear Project No. 2,
Series 1990-C....................... 7.625 07/01/10 2,276,020
3,000 Washington State Public Power Supply
System Rev., Nuclear Project No. 3,
MBIA................................ 5.600 07/01/17 2,773,770
--------------
TOTAL UTILITIES--ELECTRIC........... 81,874,240
--------------
TOTAL MUNICIPAL BONDS (Cost
$316,710,927)....................... 337,510,328
--------------
MUNICIPAL VARIABLE RATE DEMAND
NOTES+ 2.9%
540 Anchorage, Alaska, Higher Education
Rev................................. 4.200 07/01/17 540,000
2,100 District Columbia, Series A-4....... 4.750 10/01/07 2,100,000
2,000 District Columbia, Series A-6....... 4.750 10/01/07 2,000,000
300 Illinois Health Facilities Authority
Rev., La Grand Memorial Health
System.............................. 4.600 12/01/16 300,000
900 Illinois Development Finance
Authority Rev....................... 4.200 04/01/07 900,000
</TABLE>

16
<PAGE>

See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS (CONTINUED)

March 31, 1995 (Unaudited)

*Zero Coupon bond Insurers:
+Interest rates are as of March 31, 1995 AMBAC--AMBAC Indemnity Corp.
FHA--Federal Housing Administration BIG--Bond Investors Guranty
G.O.--General obligation bond Insurance Co.
Rev.--Revenue bond CONN--Connie Lee
IDR--Industrial Revenue Bond FGIC--Financial Guaranty Insurance
Corp.
FSA--Financial Security Assurance
Inc.
MBIA--Municipal Bond Investor's
Assurance Corp.

17
<PAGE>

See Notes to Financial Statements
STATEMENT OF ASSETS AND LIABILITIES

March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at market value (Cost $326,930,927)............... $ 347,730,328
Cash........................................................... 63,719
Interest receivable............................................ 6,874,209
Receivable for Fund shares sold................................ 409,773
Receivable for investments sold................................ 160,463
Other assets................................................... 2,683
--------------
Total Assets.................................................. 355,241,175
--------------
LIABILITIES
Payable for Fund shares redeemed............................... 923,890
Dividends payable.............................................. 763,698
Due to Distributor............................................. 217,909
Due to Adviser................................................. 147,435
Deferred Director compensation................................. 25,079
Accrued expenses............................................... 133,378
--------------
Total Liabilities............................................. 2,211,389
--------------
NET ASSETS, equivalent to $9.98 per share for Class A shares,
$9.98 per share for Class B shares and $9.99 per share for
Class C shares................................................ $ 353,029,786
--------------
NET ASSETS WERE COMPRISED OF:
Capital stock, at par; 30,671,176 Class A, 3,922,453 Class B
and 794,623 Class C shares outstanding........................ $ 353,883
Capital surplus................................................ 342,630,860
Accumulated net realized loss on securities.................... (9,875,520)
Net unrealized appreciation of investments..................... 20,799,401
Accumulated deficit............................................ (878,838)
--------------
NET ASSETS at March 31, 1995................................... $ 353,029,786
--------------
</TABLE>

18
<PAGE>

See Notes to Financial Statements
STATEMENT OF OPERATIONS

Six Months Ended March 31, 1995 (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest....................................................... $ 12,361,124
--------------
EXPENSES
Management fees................................................ 865,032
Service fees--Class A.......................................... 299,675
Distribution and service fees--Class B......................... 186,720
Distribution and service fees--Class C......................... 38,876
Shareholder service agent's fees and expenses.................. 212,684
Accounting services............................................ 66,960
Registration and filing fees................................... 51,672
Reports to shareholders........................................ 32,076
Custodian fees................................................. 10,669
Audit fees..................................................... 10,350
Directors' fees and expenses................................... 9,682
Legal fees..................................................... 1,807
Miscellaneous.................................................. 6,781
--------------
Total expenses................................................ 1,792,984
--------------
NET INVESTMENT INCOME.......................................... 10,568,140
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
Net realized loss on securities................................ (406,001)
Net unrealized appreciation of securities during the period.... 5,430,649
--------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES................. 5,024,648
--------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $ 15,592,788
--------------
</TABLE>

19
<PAGE>

See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS

(Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1995 September 30, 1994
--------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period.......... $354,257,068 $355,682,180
------------ ------------
Operations
Net investment income................... 10,568,140 20,505,507
Net realized loss on securities......... (406,001) (2,005,680)
Net unrealized appreciation (deprecia-
tion) of securities during the period.. 5,430,649 (23,803,245)
------------ ------------
Increase (decrease) in net assets re-
sulting from operations................ 15,592,788 (5,303,418)
------------ ------------
Distributions to shareholders from net
investment income
Class A................................. (9,121,444) (18,227,557)
Class B................................. (992,532) (1,534,981)
Class C................................. (205,815) (276,302)
------------ ------------
(10,319,791) (20,038,840)
------------ ------------
Net equalization debits (Note 1F)........ -- (20,289)
------------ ------------
Capital transactions
Proceeds from shares sold
Class A................................. 14,727,341 49,766,921
Class B................................. 5,982,935 25,694,674
Class C................................. 1,089,358 9,071,276
------------ ------------
21,799,634 84,532,871
------------ ------------
Proceeds from shares issued for
distributions reinvested
Class A................................. 5,388,284 10,485,166
Class B................................. 608,782 958,506
Class C................................. 134,811 183,364
------------ ------------
6,131,877 11,627,036
------------ ------------
Cost of shares redeemed
Class A................................. (27,714,382) (60,814,520)
Class B................................. (5,310,821) (9,282,719)
Class C................................. (1,406,587) (2,125,233)
------------ ------------
(34,431,790) (72,222,472)
------------ ------------
Increase (decrease) in net assets
resulting from capital transactions..... (6,500,279) 23,937,435
------------ ------------
DECREASE IN NET ASSETS................... (1,227,282) (1,425,112)
------------ ------------
NET ASSETS, end of period................ $353,029,786 $354,257,068
------------ ------------
</TABLE>

20
<PAGE>

See Notes to Financial Statements
FINANCIAL HIGHLIGHTS

Selected data for a share of capital stock outstanding throughout each of the
periods indicated (Unaudited).

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A(/1/)
---------------------------------------------------
Six Months
Ended Year Ended September 30
March 31, ----------------------------------------
1995 1994 1993(/2/) 1992 1991 1990
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning
of period................. $ 9.82 $10.53 $ 9.98 $ 9.64 $ 9.13 $ 9.33
------ ------ ------ ------ ------ ------
Income from investment
operations:
Investment income........ .35 .68 .69 .705 .71 .72
Expenses................. (.05) (.09) (.094) (.09) (.08) (.08)
------ ------ ------ ------ ------ ------
Net investment income..... .30 .59 .596 .615 .63 .64
Net realized and
unrealized gains or losses
on securities............ .1555 (.7255) .558 .349 .5198 (.195)
------ ------ ------ ------ ------ ------
Total from investment
operations................ .4555 (.1355) 1.154 .964 1.1498 .445
------ ------ ------ ------ ------ ------
Less distributions from:
Net investment income.... (.2955) (.5745) (.596) (.624) (.6398) (.645)
Excess of book-basis net
investment
income.................. -- -- (.008) -- -- --
------ ------ ------ ------ ------ ------
Total distributions....... (.2955) (.5745) (.604) (.624) (.6398) (.645)
------ ------ ------ ------ ------ ------
Net asset value, end of
period.................... $ 9.98 $ 9.82 $10.53 $ 9.98 $ 9.64 $ 9.13
------ ------ ------ ------ ------ ------
TOTAL RETURN (/3/)........ 4.76% (1.33%) 11.91% 10.31% 12.98% 4.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions)................ $306.0 $309.0 $332.3 $292.3 $266.9 $237.4
Average net assets
(millions)................ $300.9 $324.2 $313.0 $278.6 $253.2 $241.2
Ratios to average net
assets (annualized):
Expenses................. .93% .93% .91% .90% .89% .86%
Net investment income.... 6.23% 5.76% 5.82% 6.29% 6.71% 6.84%
Portfolio turnover rate... 2% 6% 3% 6% 10% 17%
</TABLE>
(1) Per share amounts for 1990 and 1991 are adjusted to reflect a 2 for 1 stock
split effected July 26, 1991. Additionally, in 1991, the Fund adopted for
financial reporting purposes a method of accounting for debt discounts and
premiums which is the same as is used for federal income tax reporting. The
effect of the change, on a pro forma basis, would have been to increase net
investment income with a corresponding decrease in net realized and
unrealized gains or losses in the amount of $.01 for 1990. Similarly, the
ratio of net investment income to average net assets would have been 6.94%.
(2) Per share amounts based on average month-end shares outstanding.
(3) Total return for a period of less than one full year is not annualized.
Total return does not consider the effect of sales charges.

21
<PAGE>

See Notes to Financial Statements
FINANCIAL HIGHLIGHTS

Selected data for a share of capital stock outstanding throughout each of the
periods indicated (Unaudited).

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B(/1/) Class C
----------------------------------- ----------------------------------------------
August 30,
Six Months Year Ended Six Months 1993(/4/)
Ended September 30 Ended Year Ended through
March 31, ------------------ March 31, September 30, September 30,
1995 1994 1993(/2/) 1995 1994(/2/) 1993(/2/)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, begin-
ning of
period.................. $9.83 $10.53 $9.98 $9.83 $10.54 $10.53
------ ------ ------ ------ ------ ------
Income from investment
operations:
Investment income....... .35 .68 .685 .35 .69 .05
Expenses................ (.09) (.17) (.175) (.09) (.18) (.015)
------ ------ ------ ------ ------ ------
Net investment Income.... .26 .51 .51 .26 .51 .035
Net realized and
unrealized gains or
losses on securities.... .1485 (.7195) .564 .1585 (.7295) .061
------ ------ ------ ------ ------ ------
Total from investment
operations.............. .4085 (.2095) 1.074 .4185 (.2195) .096
------ ------ ------ ------ ------ ------
Less Distributions from:
Net investment income... (.2585) (.4905) (.501) (.2585) (.4905) (.007)
Excess of book-basis net
investment income ..... -- -- (.023) -- -- (.079)
------ ------ ------ ------ ------ ------
Total distributions...... (.2585) (.4905) (.524) (.2585) (.4905) (.086)
------ ------ ------ ------ ------ ------
Net asset value, end of
period.................. $9.98 $9.83 $10.53 $9.99 $9.83 $10.54
------ ------ ------ ------ ------ ------
TOTAL RETURN (/3/)....... 4.25% (2.13%) 11.15% 4.25% (2.03%) .91%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of the
period
(millions).............. $39.1 $37.2 $22.1 $7.9 $8.0 $1.3
Average net assets
(millions).............. $37.3 $31.2 $10.0 $7.8 $5.4 $0.4
Ratios to average net
assets
Expenses................ 1.74%(/5/) 1.72% 1.71% 1.74%(/5/) 1.72% 1.69%(/5/)
Net investment income... 5.42%(/5/) 5.00% 4.96% 5.42%(/5/) 5.03% 4.25%(/5/)
Portfolio turnover rate.. 2% 6% 3% 2% 6% 3%
</TABLE>
(1) Sales of Class B commenced September 29, 1992 at a net asset value of
$10.00 per share. At September 30, 1992, there were 50 Class B shares
outstanding with a per share net asset value of $9.98. The decrease in net
asset value was due principally to a dividend of $.052 per share. Other
financial highlights for Class B shares for this short period (September
29, 1992 to September 30, 1992) are not presented as they are not
meaningful.
(2) Per share amounts based on average month-end shares outstanding.
(3) Total return for periods of less than one full year are not annualized.
Total return does not consider the effect of sales charges.
(4) Commencement of offering of sales.
(5) Annualized

22
<PAGE>

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

--------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
American Capital Municipal Bond Fund (the "Fund") is registered under the In-
vestment Company Act of 1940, as amended, as a diversified open-end management
investment company. The following is a summary of significant accounting poli-
cies consistently followed by the Fund in the preparation of its financial
statements.

A. INVESTMENT VALUATIONS-Investments in municipal bonds are valued at the most
recently quoted bid prices or at bid prices based on a matrix system (which
considers such factors as security prices, yields, maturities and ratings) fur-
nished by dealers and an independent pricing service. Municipal variable rate
demand notes are valued at par; periodic rate changes reflect current market
conditions.
Short-term investments with a maturity of 60 days or less when purchased are
valued at amortized cost, which approximates market value. Short-term invest-
ments with a maturity of more than 60 days when purchased are valued based on
market quotations until the remaining days to maturity becomes less than 61
days. From such time, until maturity, the investments are valued at amortized
cost.
Issuers of certain securities owned by the Fund have obtained insurance guar-
anteeing their timely payment of principal and interest at maturity. The insur-
ance reduces financial risk but not market risk of the security.
Fund investments include lower rated debt securities which may be more sus-
ceptible to adverse economic conditions than other investment grade holdings.
These securities are often subordinated to the prior claims of other senior
lenders and uncertainties exist as to an issuer's ability to meet principal and
interest payments. At March 31, 1995, debt securities rated below investment
grade and comparable unrated securities represented approximately 20% of the
investment portfolio.

B. FEDERAL INCOME TAXES-No provision for federal income taxes is required be-
cause the Fund has elected to be taxed as a "regulated investment company" un-
der the Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investment income and taxable net
realized capital gains to its shareholders. It is anticipated that no distribu-
tions of net realized capital gains will be made until tax basis capital loss
carryforwards expire or are offset by net realized capital gains.
The net realized capital loss carryforward for federal income tax purposes of
approximately $9.4 million at September 30, 1994 may be utilized to offset cur-
rent or future gains until expiration in 1996 through 2002.

23
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

--------------------------------------------------------------------------------

C. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transac-
tions are accounted for on the trade date. Realized gains and losses on invest-
ments are determined on the basis of identified cost. Interest income is
accrued daily.

D. DIVIDENDS AND DISTRIBUTIONS-Dividends and distributions to shareholders are
recorded on the record date. The Fund distributes tax basis earnings in accor-
dance with the minimum distribution requirements of the Internal Revenue Code,
which may differ from generally accepted accounting principles. Such dividends
or distributions may exceed financial statement earnings.

E. DEBT DISCOUNT AND PREMIUM-The Fund accounts for debt discounts and premiums
on the same basis as is followed for federal income tax reporting. Accordingly,
original issue discounts and all premiums are amortized over the life of the
security. Market discounts are recognized at the time of sale as realized gains
for book purposes and ordinary income for tax purposes.

F. EQUALIZATION-At September 30, 1994, the Fund discontinued the accounting
practice of equalization, which it had used since its inception. Equalization
is a practice whereby a portion of the proceeds from sales and costs of redemp-
tions of Fund shares, equivalent on a per-share basis to the amount of the un-
distributed net investment income, is charged or credited to undistributed net
investment income.

G. WHEN-ISSUED SECURITIES-Delivery and payment for securities purchased on a
when- issued basis may take place up to 45 days after the date of the transac-
tion. The securities purchased are subject to market fluctuation during this
period. To meet the payment obligation, sufficient cash or liquid securities
equal to the amount that will be due are set aside with the custodian.

NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Van Kampen American Capital Asset Management, Inc. (the "Adviser") serves as
investment manager of the Fund. Management fees are paid monthly, based on the
rate of .50% per annum of the average daily net assets of the Fund.
Accounting services include the salaries and overhead expenses of the Fund's
Treasurer and the personnel operating under his direction. Charges are allo-
cated among investment companies advised or sub-advised by the Adviser. For the
period March 31, 1995, these

24
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

-------------------------------------------------------------------------------
charges included $5,384 as the Fund's share of the employee costs attributable
to the Fund's accounting officers. A portion of the accounting services ex-
pense was paid to the Adviser in reimbursement of personnel, facilities and
equipment costs attributable to the provision of accounting services to the
Fund. The services provided by the Adviser are at cost.
ACCESS Investor Services, Inc., an affiliate of the Adviser, serves as
shareholder service agent. These services are provided at cost plus a profit.
For the period ended March 31, 1995, the fees for such services were $147,187.
The Fund has been advised that Van Kampen American Capital Distributors,
Inc. (the "Distributor") and Advantage Capital Corp. (the "Retailer Dealer")
both affiliates of the Adviser, received $27,527 and $30,555, respectively, as
their portion of the commissions charged on sales of Fund shares during the
period.
Under the Distribution Plans, the Fund pays up to .25% per annum of its av-
erage net assets to reimburse the Distributor for expenses and service fees
incurred. Class B shares and Class C shares pay an additional fee of up to
.75% per annum of their average daily net assets to reimburse the Distributor
for its distribution expenses. Actual distribution expenses incurred by the
Distributor for Class B shares and Class C shares may exceed the amounts reim-
bursed to the Distributor by the Fund. At March 31, 1995, the unreimbursed ex-
penses incurred by the Distributor under the Class B and Class C plans
aggregated approximately $1.5 million and $110,000, respectively, and may be
carried forward and reimbursed through either the collection of the contingent
deferred sales charges from share redemptions or, subject to the annual re-
newal of the plans, future Fund reimbursements of distribution fees.
Legal fees were for services rendered by O'Melveny & Myers, counsel for the
Fund. Lawrence J. Sheehan, of counsel to that firm, is a director of the Fund.
Certain officers and directors of the Fund are officers and directors of the
Adviser, the Distributor, the Retail Dealer and the shareholder services
agent.

NOTE 3--INVESTMENT ACTIVITY
During the period, the cost of purchases and proceeds from sales of invest-
ments, excluding short-term investments, were $8,215,930 and $12,451,313, re-
spectively.
For federal income tax purposes, the identified cost of investments owned at
March 31, 1995 was $326,964,141. Net unrealized appreciation of investments
aggregated $20,766,187, gross unrealized appreciation of investments aggre-
gated $23,399,469, and gross unrealized depreciation of investments aggregated
$2,633,282.

25
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

--------------------------------------------------------------------------------

NOTE 4--DIRECTOR COMPENSATION
Fund directors who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $1,250 plus a fee of $30 per day for Board and Com-
mittee meetings attended. The Chairman receives additional fees from the Fund
at the annual rate of $470. During the period, such fees aggregated $7,453.
The directors may participate in a voluntary Deferred Compensation Plan (the
"Plan"). The Plan is not funded, and obligations under the Plan will be paid
solely out of the Fund's general accounts. The Fund will not reserve or set
aside funds for the payment of its obligations under the Plan by any form of
trust or escrow. Each director covered by the Plan elects to be credited with
an earnings component on amounts deferred equal to the income earned by the
Fund on its short-term investments or equal to the total return of the Fund.

NOTE 5--CAPITAL
The Fund offers three classes of shares at their respective net asset values
per share, plus a sales charge which is imposed either at the time of purchase
(the Class A shares) or at the time of redemption on a contingent deferred ba-
sis (the Class B shares and Class C shares). All classes of shares have the
same rights, except that Class B shares and Class C shares bear the cost of
distribution fees and certain other class specific expenses. Realized and
unrealized gains or losses, investment income and expenses (other than class
specific expenses) are allocated daily to each class of shares based upon the
relative proportion of net assets of each class. Class B shares and Class C
shares automatically convert to Class A shares six years and ten years after
purchase, respectively, subject to certain conditions.

26
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

--------------------------------------------------------------------------------
The Fund has 200 million shares of each class of shares of $.01 par value of
capital stock authorized. Transactions in shares of capital stock were as fol-
lows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30,
1995 1994
--------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A............................................. 1,519,426 4,883,618
Class B............................................. 617,796 2,518,998
Class C............................................. 110,152 884,668
---------- ----------
2,247,374 8,287,284
---------- ----------
Shares issued for distributions reinvested
Class A............................................. 554,575 1,032,887
Class B............................................. 62,597 94,773
Class C............................................. 13,854 18,175
---------- ----------
631,026 1,145,835
---------- ----------
Shares redeemed
Class A............................................. (2,866,089) (6,004,203)
Class B............................................. (549,554) (915,403)
Class C............................................. (143,583) (210,194)
---------- ----------
(3,559,226) (7,129,800)
---------- ----------
Increase (decrease) in shares outstanding............ (680,826) 2,303,319
---------- ----------
</TABLE>

NOTE 6--SUBSEQUENT DIVIDENDS
The Board of Directors of the Fund declared a dividend of $.05 per share for
Class A shares, $.044 per share for Class B and Class C shares from net invest-
ment income, payable May 15, 1995 to shareholders of record on April 28, 1995.

27
<PAGE>

FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL

GLOBAL AND INTERNATIONAL
Govett Emerging Markets Fund
AC Global Equity Fund
Govett Global Government Income Fund
AC Global Government Securities
AC Global Managed Assets Fund
Govett International Equity Fund
Govett Latin America Fund
Govett Pacific Strategy Fund

EQUITY
Growth
AC Emerging Growth Fund
AC Enterprise Fund
AC Pace Fund
Govett Smaller Companies Fund
Growth & Income
VKM Balanced Fund
AC Comstock Fund
AC Equity Income Fund
AC Growth and Income Fund
VKM Growth and Income Fund
AC Harbor Fund
AC Real Estate Securities Fund
VKM Utility Fund
AC Utilities Income Fund

FIXED INCOME
VKM Adjustable Rate U.S. Government Fund
AC Corporate Bond Fund
AC Federal Mortgage Trust
AC Government Securities
VKM High Yield Fund
AC High Yield Investments
VKM Money Market Fund
VKM Prime Rate Income Trust
AC Reserve Fund
VKM Short-Term Global Income Fund
VKM Strategic Income Fund
VKM U.S. Government Fund
AC U.S. Government Trust for Income

TAX-FREE
VKM California Insured Tax Free Fund
VKM Florida Insured Tax Free Income Fund
VKM Insured Tax Free Income Fund
VKM Limited Term Municipal Income Fund
AC Municipal Bond Fund
VKM Municipal Income Fund
VKM New Jersey Tax Free Income Fund
VKM New York Tax Free Income Fund
VKM Pennsylvania Tax Free Income Fund
AC Tax-Exempt Trust
--High Yield Municipal Portfolio
--Insured Municipal Portfolio
VKM Tax Free High Income Fund
VKM Tax Free Money Fund
AC Texas Municipal Securities

Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.

28
<PAGE>

AMERICAN CAPITAL MUNICIPAL BOND FUND INC.

BOARD OF DIRECTORS
J. MILES BRANAGAN
RICHARD E. CARUSO
ROGER HILSMAN
DON G. POWELL
DAVID REES
LAWRENCE J. SHEEHAN
FERNANDO SISTO*
WILLIAM S. WOODSIDE
*Chairman of the Board

OFFICERS
DON G. POWELL
President

CURTIS W. MORELL
Vice President and Treasurer

DENNIS J. MCDONNELL
RONALD A. NYBERG
ROBERT C. PECK, JR.
PAUL R. WOLKENBERG
Vice Presidents

TANYA M. LODEN
Controller and Vice President

NORI L. GABERT
Vice President and Secretary

J. DAVID WISE
Vice President and Assistant Secretary

PERRY F. FARRELL
M. ROBERT SULLIVAN
Assistant Treasurers

HUEY P. FALGOUT, JR.
Assistant Secretary
INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
2800 Post Oak Blvd. Houston, Texas 77056

DISTRIBUTOR

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
2800 Post Oak Blvd. Houston, Texas 77056

SHAREHOLDER SERVICE AGENT

ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256 Kansas City, Missouri 64141-9256

CUSTODIAN

STATE STREET BANK AND TRUST CO.
225 Franklin Street Boston, Massachusetts 02110

COUNSEL

O'MELVENY & MYERS
400 South Hope Street Los Angeles, California 90071

This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund
which contains additional information on how to purchase shares, the sales
charge, and other pertinent data.