NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
American Capital Bond Fund (the "Fund") is registered under the Investment Company Act of 1940, as
amended, as a diversified closed-end management in- vestment 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-Securities listed or traded on a national securities exchange are valued at
the last sale price. Unlisted securities and listed se- curities for which the last sale price is not available are valued
at the mean between the last reported bid and asked price.
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.
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 distri- butions of capital gains will be made until tax basis
capital loss carryforwards expire or are offset by future net realized capital gains.
For federal income tax purposes, the net realized capital loss carryforward of approximately $32.4 million at June
30, 1995, may be utilized to offset fu- ture capital gains of which $28 million expires in 1998 and the remainder
ex- pires in 1999 and 2000.
C. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transactions
are accounted for on the trade date. Realized gains and losses on investments are determined on the basis of