<PAGE> 1
AMERICAN CAPITAL MUNICIPAL BOND FUND, INC.
SUPPLEMENT DATED MAY 12, 1995 TO PROSPECTUS DATED
JANUARY 31, 1995
On May 11, 1995, the Board of Directors of American Capital Municipal Bond
Fund, Inc. (the "American Capital Fund") approved an Agreement and Plan of
Reorganization between the American Capital Fund and the Van Kampen Merritt
Municipal Income Fund, a sub-trust of the Van Kampen Merritt Tax Free Fund (the
"Van Kampen Fund"), a fund advised by Van Kampen American Capital Investment
Advisory Corp., providing for the transfer of assets and liabilities of the
American Capital Fund to the Van Kampen Fund in exchange for shares of
beneficial interest of the Van Kampen Fund at its net asset value per share (the
"Reorganization").
Van Kampen American Capital Investment Advisory Corp. and Van Kampen American
Capital Asset Management, Inc., the investment adviser to the American Capital
Fund, are wholly owned subsidiaries of Van Kampen American Capital, Inc., which
is a wholly owned subsidiary of VK/AC Holding, Inc.
The Reorganization is subject to approval by the holders of a majority of the
outstanding shares of the American Capital Fund. Further details of the proposed
Reorganization will be contained in the proxy statement/prospectus expected to
be mailed to shareholders in July, 1995.
The Van Kampen Fund had assets of $691.9 million on March 31, 1995. Its
objective is to seek to provide high current income exempt from federal income
tax consistent with preservation of capital by investing at least 80% of its
assets in a diversified portfolio of tax-exempt municipal securities rated
investment grade at the time of investment. The American Capital Fund and the
Van Kampen Fund have similar investment objectives and follow generally similar
investment policies although the Van Kampen Fund has greater flexibility to
invest in municipal bonds rated below A by Moody's Investors Service ("Moody's")
and Standard & Poor's Corporation ("S&P"). In addition, the Van Kampen Fund has
greater flexibility to utilize options and futures, as well as interest rate
transactions such as swaps, caps, floors or collars. The Van Kampen Fund may
invest a substantial portion of its assets in municipal securities that pay
interest that is subject to the federal alternative minimum tax, while the
American Capital Fund may only invest up to 20% of its assets in such
securities.
The American Capital Fund will continue its normal operations prior to the
Reorganization.
