VAN KAMPEN AMERICAN CAPITAL U S GOVERNMENT TRUST, N-30D, 1997-02-28

VAN KAMPEN AMERICAN CAPITAL U S GOVERNMENT TRUST
N-30D, 1997-02-28

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<PAGE> 1

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Portfolio Highlights............................. 4
Performance in Perspective....................... 5
Portfolio Management Review...................... 6
Portfolio of Investments......................... 8
Statement of Assets and Liabilities.............. 10
Statement of Operations.......................... 11
Statement of Changes in Net Assets............... 12
Financial Highlights............................. 13
Notes to Financial Statements.................... 16
Report of Independent Accountants................ 23
</TABLE>

USGF ANR 2/97
<PAGE> 2

LETTER TO SHAREHOLDERS

January 31, 1997

Dear Shareholder,

We are pleased to report that
the Van Kampen American Capital U.S.
Government Fund has continued to
generate positive investment
performance. As noted in earlier
reports, VK/AC Holding Inc., the parent
company of Van Kampen American Capital,
Inc., was acquired by Morgan Stanley
Group Inc., a world leader in asset [PHOTO]
management and investment banking. The
transaction was completed in October,
and we are excited about the
opportunities it creates for investors.
As part of the acquisition, Van Kampen DENNIS J. MCDONNELL AND DON G. POWELL
American Capital became the distributor
of Morgan Stanley retail funds on
January 2, 1997.

ECONOMIC REVIEW

The U.S. economy experienced moderate growth and low inflation during the
reporting period. At the beginning of 1996, economists were concerned that the
tepid economic pace of late 1995 might continue, possibly leading to a recession
by year end. That assumption soon came into question, however, when non-farm
payrolls increased by a stunning 705,000 in February, the biggest one-month jump
in 13 years. Then, a larger-than-expected 4.7 percent rate in real GDP (the
nation's gross domestic product, adjusted for inflation) during the second
quarter confirmed that the economy was back in a strong-growth mode. By summer,
earlier talk of recession and rate cuts had changed to concerns about economic
overheating and the possibility of interest rate hikes.

Despite mounting evidence of inflation, the Federal Reserve held to a
stable monetary policy, believing the supply-and-demand imbalances in the
commodity markets were temporary and that burdensome consumer debt loads would
eventually slow the economy without the need for higher interest rates. Events
during the second half of 1996 proved the wisdom of Federal Reserve policy; real
GDP growth moderated to 2.0 percent in the third quarter while commodity prices
receded. For the year, core producer prices rose by 0.6 percent, the second-
lowest annual increase on record. Including the volatile food and energy
sectors, however, prices at the retail level rose by 3.3 percent.

MARKET REVIEW

Shifting expectations and modest returns characterized the fixed-income
markets in 1996. The year began with long-term interest rates near their lowest
level since the 1960s, reflecting the view that the U.S. economy was weakening
and that a series of rate cuts by the Fed would be forthcoming. But the Fed's
quarter-percentage point reduction in the federal funds rate on January 31 would
be the only monetary easing during 1996, and long-term rates soon began rising
amid signs of a tightening labor market and stronger-than-expected economic
growth. Fears that the Fed would reverse course and raise short-term rates
became widespread after

Continued on page two

<PAGE> 3

the economy experienced strong growth in the second quarter. By July, the yield
on the Treasury's benchmark 30-year bond had reached 7.2 percent, up from 5.95
percent at the beginning of the year.

The last half of 1996 was spent recovering some of the ground lost over
the first six months. Economic growth moderated, commodity prices declined, and
inflation remained tame. As the Fed held short-term rates steady, long-term
yields gradually fell back to 6.64 percent by year end.

Compared to 1995, when most sectors of the taxable fixed-income market
generated double-digit gains, 1996 was a year of generally lackluster
performance. The Lehman Brothers Aggregate Bond Index returned just 4.16 percent
for the 12-month period ended December 31, 1996, with short- and
intermediate-term bonds outperforming longer-term issues. Lower-rated corporate
bonds also outperformed, as investors felt comfortable enough to stretch for
yield given the better-than-expected economy. For the year, 30-year Treasury
bonds lost approximately one percent on a total-return basis. Treasury bond
losses might have been larger, but heavy foreign buying, especially among
Japanese investors, where low interest rates and a falling yen made high-quality
American bonds an attractive option, helped control losses.

OUTLOOK

We expect interest rates during 1997 to repeat last year's moderate up
and down pattern. Stronger-than-expected U.S. economic growth and faint
rumblings of inflationary pressures over the first half of the year could prompt
a series of modest credit tightenings by the Fed. We anticipate that by the
fourth quarter the economy will moderate enough to discourage any lingering
concerns about inflation and allow interest rates to begin to decline across the
maturity spectrum. Although economic growth could be accompanied by short-term
market fluctuation, we do not believe it will be strong enough to reignite price
pressures. The results of the November elections reinforce this view--the
combination of a Democratic president and a Republican Congress should help
restrain potential spending increases and large tax cuts, and therefore, keep
the budget deficit under control.

While domestic economic fundamentals may keep bond prices relatively
stable, the risk of external shocks to the market is growing. We cannot look at
the U.S. economy in isolation. Monetary policy has been unusually accommodative
in many foreign countries. If these economies gain significant strength in 1997,
the resulting demand for capital could divert buying power from the U.S. credit
market. Since foreigners have become the marginal buyers of U.S. bonds, we
believe that increased competition for the global fixed-income dollar could
exert mild upward pressure on domestic interest rates over the year.

Additional details about your Fund, including a question and answer
section with your portfolio management team, are provided in this report. We
appreciate your continued confidence in your investment with Van Kampen American
Capital.

Sincerely,

[SIG.]

Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.

[SIG.]

Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.

2
<PAGE> 4

PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1996

VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT FUND

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
TOTAL RETURNS
One-year total return based on NAV(1)....................... 4.10% 3.24% 3.24%
One-year total return(2).................................... (.87%) (.63%) 2.27%
Five-year average annual total return(2).................... 4.90% N/A N/A
Ten-year average annual total return(2)..................... 7.18% N/A N/A
Life-of-Fund average annual total return(2)................. 9.54% 4.67% 3.95%
Commencement date........................................... 05/31/84 08/24/92 08/13/93

DISTRIBUTION RATE AND YIELD
Distribution rate(3)........................................ 6.92% 6.48% 6.48%
SEC Yield(4)................................................ 9.35% 8.96% 8.96%
</TABLE>

N/A = Not Applicable

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

(2)Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).

(3)Distribution rate represents the monthly annualized distributions of the Fund
at the end of the period and not the earnings of the Fund.

(4)SEC 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 December 30, 1996.

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. Fund shares, when redeemed, may be worth more
or less than their original cost.

3
<PAGE> 5

PORTFOLIO HIGHLIGHTS

VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT FUND

COUPON DISTRIBUTION AS OF DECEMBER 31, 1996

<TABLE>
<CAPTION>
PERCENTAGE OF
COUPON LONG-TERM
RATE INVESTMENTS
<S> <C>
5 or less 0.5%
6-7 7.6%
7-8 31.4%
8-9 18.8%
9-10 28.3%
10 or more 13.4% [graph]
</TABLE>

PORTFOLIO COMPOSITION AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
<S> <C>
GNMA............. 56.2%
FNMA............. 22.6%
Treasury/Agency... 11.7%
FHLMC............ 4.8%
REMIC/CMO........ 4.7% [pie chart]

</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996(1)
<S> <C>
GNMA............. 53.3%
FNMA............. 28.7%
REMIC/CMO........ 8.9%
Treasury/Agency... 4.9%
FHLMC............ 4.2% [pie chart]

</TABLE>

DURATION

<TABLE>
<CAPTION>
As of December 31, 1996(1) As of June 30, 1996(1)
<S> <C> <C>
Duration 4.85 years 4.67 years
</TABLE>

(1)Unaudited

4
<PAGE> 6

PUTTING YOUR FUND'S PERFORMANCE IN PERSPECTIVE

As you evaluate your progress toward achieving your financial goals, it is
important to track your investment portfolio's performance at regular intervals.
A good starting point is a comparison of your investment holdings to an
applicable benchmark, such as a broad-based market index. Such a comparison can:

- Illustrate the general market environment in which your investments are
being managed

- Reflect the impact of favorable market trends or difficult market
conditions

- Help you evaluate the extent to which your Fund's management team has
responded to the opportunities and challenges presented to them over the
period measured

For these reasons, you may find it helpful to review the chart below, which
compares your Fund's performance to that of the Merrill Lynch 1 to 10 year
Treasury Index over time. As a broad-based, unmanaged statistical composite,
this index does not reflect any commissions or fees which would be incurred by
an investor purchasing the securities it represents. Similarly, its performance
does not reflect any sales charges or other costs which would be applicable to
an actively managed portfolio, such as that of the Fund.

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Van Kampen American Capital U.S. Government Fund vs. Merrill Lynch 1 to 10
Year Treasury Index
(December 31, 1986 through December 31, 1996)

Investment Performance Chart

<TABLE>
<CAPTION>
MERRILL LYNCH
VKAC U.S. 1 TO 10 YEAR
GOVERNMENT TREASURY
FUND INDEX
<S> <C> <C>
Dec 1986 9523 10000
Dec 1987 9661 10255
Dec 1988 10385 10861.1
Dec 1989 11826 12231.7
Dec 1990 12963 13406
Dec 1991 15011 15057.6
Dec 1992 15951 16102.6
Dec 1993 17220 17423
Dec 1994 16343 17142.5
Dec 1995 19221 19636.7
Dec 1996 20009 20422.2
</TABLE>

- --------------------------------------
Fund's Total Return
1 Year Avg. Annual = -0.87%
5 Year Avg. Annual = 4.90%
10 Year Avg. Annual = 7.18%
Inception Avg. Annual = 9.54%
- --------------------------------------

The above chart reflects the performance of Class A shares of the Fund. The
performance of Class A shares will differ from that of other share classes of
the Fund because of the difference in sales charges and/or expenses paid by
shareholders investing in the different share classes. The Fund's performance
assumes reinvestment of all distributions and includes payment of the maximum
sales charge (4.75% for A shares).

While past performance is not indicative of future performance, the above
information provides a broader vantage point from which to evaluate the
discussion of the Fund's performance found in the following pages.

5
<PAGE> 7

PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT FUND

We recently spoke with the management team of the Van Kampen American Capital
U.S. Government Fund about the key events and economic forces that shaped the
markets during the past fiscal year. The team includes Jack E. Doyle, portfolio
manager, and Peter W. Hegel, chief investment officer for fixed-income
investments. The following excerpts reflect their views on the Fund's
performance during the 12-month period ended December 31, 1996.

Q HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS ENCOUNTERED BY THE FUND
DURING THE 12-MONTH PERIOD?

A The market was riding a wave of optimism created by the strong
performance in 1995, and encouraged by what appeared to be a
made-to-order economic environment. Inflation remained low and growth
was fairly subdued, suggesting that interest rates would continue to be
generally stable.

As we moved through the first quarter of 1996, economic data
started to show signs of accelerating growth. Higher inflation has generally
accompanied increasing growth, which the market believes could lead to higher
interest rates in the future. The Federal Reserve Board, under Alan Greenspan's
lead, has been persistent in its efforts to keep inflation in check. Thus, it
would not be at all unreasonable for investors to expect the Fed to increase
short-term interest rates if they feel there are inflationary pressures in the
economy.
Inflation concerns triggered a sharp increase in interest rates which began
in February and continued through the second quarter of the year. It was not
until late summer that the market reversed its thinking and began to rally.
Third-quarter gross domestic product (GDP) figures came in much lower than
expected, and the market took that as a further sign that the economy was not
going to overheat after all.

Q HOW WAS THE FUND AFFECTED BY THESE DEVELOPMENTS?

A In managing the Fund, we had moved toward a relatively less volatile
portfolio at the beginning of 1996. Early in the first quarter, we
shortened the Fund's duration to 4.2 years. Duration, which is expressed
in years, is a measure of a bond's price sensitivity to changes in
interest rates. The longer the Fund's duration, the greater the effect of
changes in interest rate movements on the Fund's net asset value (NAV). Funds
with shorter durations typically have performed better in rising rate
environments, while funds with longer durations have outperformed when yields
decline. By the time interest rates began their dramatic rise in February, we
had minimized relative volatility to the extent possible. So, while we still
felt the impact of the market's decline, it was less severe than it might have
otherwise been.

Q WHAT ARE SOME OF THE ADJUSTMENTS MADE TO THE FUND'S PORTFOLIO OVER THE
COURSE OF THE YEAR?

A Maintaining a shorter duration is part of our strategy, as well as
further diversifying assets. We believe this may help minimize risk and
increase the relative stability of the Fund's NAV. Late in the third
quarter, we decreased the Fund's holdings in the U.S. Treasury market
to approximately 5 percent of its assets. In anticipation that this sector
would appreciate in the final months of 1996, we increased our exposure and
ended the reporting period at approximately 12 percent. The sector performed
well in the fourth quarter, and the current allocation aligns us with a more
typical portfolio mix of approximately 10 percent Treasuries and 90 percent
mortgage-backed securities. If the market shows the potential for lower rates,
we will add further to our Treasury holdings, perhaps allocating as much as 20
percent of net assets to Treasuries and 80 percent to mortgage-backed
securities. For additional Fund portfolio highlights, refer to page four.

6
<PAGE> 8

Q HOW DID THE FUND PERFORM OVER THE COURSE OF THE YEAR?

A The Fund generated a total return of 4.10 percent(1) (Class A
shares at NAV) for the 12-month period ended December 31, 1996. Despite
the dividend reduction of one-quarter cent for Class A share, which
went into effect July 1, 1996, the Fund continued to provide
shareholders with a competitive level of current income, as reflected by its
distribution rate of 6.92 percent(3) as of December 31, 1996 based on a monthly
dividend of $.0875 per share and a maximum public offering price of $15.18 per
share.
By comparison, the Merrill Lynch 1- to 10-year Treasury Index generated a
total return of 4.00 percent. Additionally, the Lehman Brothers Mortgage Index
returned 5.35 percent. Keep in mind that these are broad-based, unmanaged
indices which reflect general performance of Treasury bonds and mortgage-backed
securities, respectively. Neither index reflects any commissions or fees that
would be paid by an investor purchasing the securities they represent. Please
refer to the chart on page three for additional Fund performance results.

Q WHAT IS YOUR OUTLOOK FOR THE FUND AND THE MARKET IN THE MONTHS AHEAD?

A For the most part, we are starting 1997 on a cautious note. The
economic data we saw in the latter part of 1996 suggests the
possibility of a strengthening economy, which could carry over into the
first quarter of this year. Unless conditions change drastically, we
have no reason to expect a dramatic change in the current interest rate
environment. We believe the prospects are good for a continuation of the
moderate economic growth and low inflation that have been the rule rather than
the exception in recent years. With Fed Chairman Alan Greenspan entrenched for
another term, we know what to expect in terms of monetary policy, and have no
reason to believe the Fed will stray from the conservative approach it has
pursued during Greenspan's tenure.
While there are several factors that could positively impact the market, we
believe in the short term that it is more likely that interest rates will
increase, rather than decline. We are confident that the Fund will provide
regular dividend income. While our expectation is that most fixed-income
products will have relatively uneventful price performance over the year, the
Fund's position is fairly defensive at this point, with relatively broad
diversification, a shorter-than-average duration, and reduced exposure to
Treasury securities. We expect to maintain this posture until the market finds a
clearer direction.

[SIG]

Peter W. Hegel
Chief Investment Officer
Fixed Income Investments

[SIG]

Jack E. Doyle
Portfolio Manager

Please see footnotes on page three

7
<PAGE> 9

PORTFOLIO OF INVESTMENTS

December 31, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par Market
Amount Value
(000) Description Coupon Maturity (000)
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MORTGAGE BACKED SECURITIES 87.8%
$ 4,668 FHLMC (Seasoned)............................................ 8.500% 01/01/16 $ 4,862
41,367 FHLMC....................................................... 8.500 02/01/17 42,647
9,784 FHLMC....................................................... 10.000 12/01/08 10,591
1,002 FHLMC (Seasoned)............................................ 10.250 11/01/09 1,074
28,251 FHLMC....................................................... 11.000 07/01/15 31,579
193 FHLMC (Seasoned)............................................ 11.250 09/01/15 217
31,095 FHLMC Gold.................................................. 6.500 12/01/25 29,790
18,865 FHLMC Gold.................................................. 10.000 06/01/19 20,533
32,708 FHLMC REMIC #79C PAC (b).................................... 8.600 10/15/05 33,733
11,089 FHLMC REMIC #89D (b)........................................ 9.000 02/15/21 11,755
11,677 FHLMC REMIC #97G PAC (b).................................... 9.250 11/15/05 12,027
15,061 FHLMC REMIC #106G PAC (b)................................... 8.250 12/15/20 15,835
18,272 FHLMC REMIC #170F PAC (b)................................... 8.000 01/15/21 18,707
112,703 FNMA........................................................ 6.500 12/01/23 to 05/01/26 108,007
27,073 FNMA (Seasoned)............................................. 6.500 04/01/24 to 05/01/24 26,024
393,196 FNMA (b).................................................... 7.000 09/01/22 to 10/01/25 385,835
38,199 FNMA........................................................ 7.500 12/01/22 38,199
53,859 FNMA........................................................ 8.000 06/01/25 54,886
9,766 FNMA........................................................ 8.500 06/01/25 10,133
6,078 FNMA (Seasoned)............................................. 8.500 07/01/19 6,377
9,443 FNMA (Seasoned)............................................. 9.000 05/01/09 10,051
5,764 FNMA........................................................ 9.000 02/01/20 6,081
2,658 FNMA (Seasoned)............................................. 9.500 05/01/20 2,874
8,667 FNMA........................................................ 10.500 08/01/16 9,601
8,783 FNMA........................................................ 11.000 05/01/17 9,903
1,706 FNMA........................................................ 11.500 11/01/09 1,938
48 FNMA (Seasoned)............................................. 12.500 03/01/15 55
2,176 FNMA (Seasoned)............................................. 13.000 06/01/15 2,514
3,521 FNMA REMIC #89-85D PAC (b).................................. 7.600 05/25/18 3,538
11,900 FNMA REMIC #89-94G PAC (b).................................. 7.500 12/25/19 12,010
18,085 FNMA REMIC #90-12G PAC (b).................................. 4.500 02/25/20 15,704
15,000 FNMA REMIC #93-4HB PAC (b).................................. 11.000 01/25/19 16,563
45,310 GNMA........................................................ 7.000 11/15/22 to 05/15/23 44,536
416,343 GNMA........................................................ 7.500 12/15/22 to 11/15/25 418,313
244,535 GNMA........................................................ 8.000 11/15/21 251,030
30,977 GNMA........................................................ 8.000 07/15/22 31,615
55,778 GNMA........................................................ 8.500 12/15/17 to 06/15/23 57,819
197,727 GNMA (Seasoned) (b)......................................... 9.000 05/15/16 211,877
491,504 GNMA (b).................................................... 9.000 08/15/16 to 06/15/18 522,967
57,651 GNMA........................................................ 9.500 08/15/13 62,281
13,685 GNMA........................................................ 10.000 08/15/16 15,011
19,588 GNMA........................................................ 10.500 02/15/17 21,730
2,188 GNMA........................................................ 11.000 11/15/15 2,461
3,493 GNMA........................................................ 11.500 06/15/15 3,972
2,318 GNMA........................................................ 12.000 12/15/15 2,669
2,278 GNMA........................................................ 12.500 12/15/14 2,646
1,496 GNMA........................................................ 13.000 05/15/15 1,747
</TABLE>

See Notes to Financial Statements

8
<PAGE> 10

PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

MORTGAGE BACKED SECURITIES (CONTINUED)
$ 855 GNMA GPM.................................................... 12.250% 05/15/15 $ 989
209 GNMA II..................................................... 8.500 05/20/02 216
7,303 GNMA II..................................................... 10.500 02/20/19 8,001
4,420 GNMA II..................................................... 11.000 10/20/13 4,911
1,949 GNMA II..................................................... 11.500 09/20/13 2,189
1,929 GNMA II..................................................... 12.000 12/20/13 2,194
1,135 GNMA II..................................................... 12.500 09/20/13 1,302
----------
2,624,119
----------
U.S. TREASURY SECURITIES 11.6%
15,000 U.S. T-Bonds................................................ 13.125 05/15/01 18,958
5,000 U.S. T-Bonds................................................ 13.750 08/15/04 7,192
55,000 U.S. T-Bonds................................................ 14.000 11/15/11 84,578
43,500 U.S. T-Bonds................................................ 10.375 11/15/12 56,025
40,000 U.S. T-Bonds................................................ 12.000 08/15/13 57,214
27,500 U.S. T-Bonds................................................ 8.000 11/15/21 31,534
61,000 U.S. T-Notes................................................ 6.625 07/31/01 62,008
28,500 U.S. T-Notes................................................ 7.875 11/15/04 31,081
----------
348,590
----------
TOTAL LONG-TERM INVESTMENTS 99.4%
(Cost $2,940,422,951) (a)........................................................................... 2,972,709
REPURCHASE AGREEMENT 0.3%
UBS Securities (U.S. T-Note, $6,673,000 par, 7.875% coupon, due 02/15/21, dated 12/31/96, to be sold
on 01/02/97 at $7,680,559)............................................................................ 7,678
OTHER ASSETS IN EXCESS OF LIABILITIES 0.3%........................................................... 8,793
----------
NET ASSETS 100.0%.................................................................................... $2,989,181
==========
</TABLE>

(a) At December 31, 1996, for federal income tax purposes cost is
$2,940,422,951; the aggregate gross unrealized appreciation is $57,107,017
and the aggregate gross unrealized depreciation is $28,121,190, resulting in
net unrealized appreciation including forward commitments of $28,985,827.

(b) All or a portion of these assets segregated as collateral for forward
commitment transactions.

See Notes to Financial Statements

9
<PAGE> 11

STATEMENT OF ASSETS AND LIABILITIES

December 31, 1996
All amounts, except for Maximum Offering Price information,
reported in thousands
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $2,940,423)
(Note 1).................................................. $2,972,709
Short-Term Investments (Note 1)............................. 7,678
Cash........................................................ 1
Receivables:
Securities Sold........................................... 4,574
Interest.................................................. 25,633
Fund Shares Sold.......................................... 393
Other....................................................... 246
----------
Total Assets............................................ 3,011,234
----------
LIABILITIES:
Payables:
Forward Commitments (Note 6).............................. 5,551
Income Distributions...................................... 9,035
Fund Shares Repurchased................................... 3,479
Distributor and Affiliates (Notes 2 and 8)................ 1,675
Investment Advisory Fee (Note 2).......................... 1,309
Accrued Expenses............................................ 912
Deferred Compensation and Retirement Plans (Note 2)......... 92
----------
Total Liabilities....................................... 22,053
----------
NET ASSETS.................................................. $2,989,181
==========
NET ASSETS CONSIST OF:
Capital (Note 3)............................................ $3,256,402
Net Unrealized Appreciation on Securities................... 28,986
Accumulated Undistributed Net Investment Income............. 6,188
Accumulated Net Realized Loss on Securities................. (302,395)
----------
NET ASSETS.................................................. $2,989,181
==========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $2,560,058,763 and 177,061,820 shares of
beneficial interest issued and outstanding)............. $ 14.46
Maximum sales charge (4.75%* of offering price)......... .72
----------
Maximum offering price to public........................ $ 15.18
==========
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $414,772,573 and 28,710,235 shares of
beneficial interest issued and outstanding)............. $ 14.45
==========
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $14,349,774 and 993,209 shares of
beneficial interest issued and outstanding)............. $ 14.45
==========
</TABLE>

* On sales of $100,000 or more, the sales charge will be reduced.

See Notes to Financial Statements

10
<PAGE> 12

STATEMENT OF OPERATIONS

For the Year Ended December 31, 1996
All amounts reported in thousands
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 253,377
Fee Income (Note 1)......................................... 10,476
---------
Total Income............................................ 263,853
---------
EXPENSES:
Investment Advisory Fee (Note 2)............................ 16,225
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $4,773, $4,379 and $145, respectively) (Note
8)........................................................ 9,297
Shareholder Services (Note 2)............................... 4,508
Custody..................................................... 850
Legal (Note 2).............................................. 250
Trustees Fees and Expenses (Note 2)......................... 48
Other....................................................... 1,147
---------
Total Operating Expenses................................ 32,325
Interest Expense (Note 1)............................... 692
---------
Total Expenses.......................................... 33,017
Less Expenses Reimbursed (Note 2)....................... 10
---------
Net Expenses............................................ 33,007
---------
NET INVESTMENT INCOME....................................... $ 230,846
=========
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments............................................... $ 15,564
Forward Commitments (Note 6).............................. (13,064)
Options................................................... (8,220)
Futures................................................... (52)
---------
Net Realized Loss on Securities............................. (5,772)
---------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period................................... 137,484
---------
End of the Period:
Investments............................................. 32,286
Forward Commitments (Note 6)............................ (3,300)
---------
28,986
---------
Net Unrealized Depreciation on Securities During the
Period.................................................... (108,498)
---------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES.............. $(114,270)
=========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 116,576
=========
</TABLE>

See Notes to Financial Statements

11
<PAGE> 13

STATEMENT OF CHANGES IN NET ASSETS

For the Years Ended December 31, 1996 and 1995
All amounts reported in thousands
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income....................................... $ 230,846 $ 260,233
Net Realized Loss on Securities............................. (5,772) (3,772)
Net Unrealized Appreciation/Depreciation on Securities
During the Period......................................... (108,498) 299,945
--------- ---------
Change in Net Assets from Operations........................ 116,576 556,406
Distributions from Net Investment Income:
Class A Shares............................................ (200,824) (224,640)
Class B Shares............................................ (28,928) (30,640)
Class C Shares............................................ (960) (786)
--------- ---------
Total Distributions..................................... (230,712) (256,066)
--------- ---------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... (114,136) 300,340
--------- ---------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................................... 93,780 114,233
Net Asset Value of Shares Issued Through Dividend
Reinvestment.............................................. 113,310 125,466
Cost of Shares Repurchased.................................. (546,580) (469,431)
--------- ---------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... (339,490) (229,732)
--------- ---------
TOTAL INCREASE/DECREASE IN NET ASSETS....................... (453,626) 70,608
NET ASSETS:
Beginning of the Period..................................... 3,442,807 3,372,199
--------- ---------
End of the Period (Including accumulated undistributed net
investment income of $6,188 and $4,934, respectively)..... $2,989,181 $3,442,807
========= =========
</TABLE>

See Notes to Financial Statements

12
<PAGE> 14

FINANCIAL HIGHLIGHTS

The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
Class A Shares 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................... $ 14.950 $ 13.698 $ 15.662 $ 15.720 $ 16.130
-------- -------- -------- -------- --------
Net Investment Income..................................... 1.069 1.111 1.177 1.286 1.365
Net Realized and Unrealized Gain/Loss on Securities....... (.495) 1.233 (1.965) (.060) (.407)
-------- -------- -------- -------- --------
Total from Investment Operations............................ .574 2.344 (.788) 1.226 .958
Less Distributions from and in Excess of Net Investment
Income.................................................... 1.065 1.092 1.176 1.284 1.368
-------- -------- -------- -------- --------
Net Asset Value, End of the Period.......................... $ 14.459 $ 14.950 $ 13.698 $ 15.662 $ 15.720
======== ======== ======== ======== ========
Total Return (a)............................................ 4.10% 17.61% (5.10%) 7.95% 6.27%
Net Assets at End of the Period (In millions)............... $2,560.1 $2,962.9 $2,924.4 $3,653.6 $3,571.7
Ratio of Operating Expenses to Average Net Assets (b)....... .90% .93% .92% .87% .77%
Ratio of Interest Expense to Average Net Assets (Note 1).... .02% .27% .08% N/A N/A
Ratio of Net Investment Income to Average Net Assets (b).... 7.38% 7.68% 8.13% 8.08% 8.64%
Portfolio Turnover (Excluding Dollar Rolls and Forward
Commitment Transactions).................................. 59% 63% 44% 67% 11%
</TABLE>

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of certain expenses was less than
0.01%.

N/A = Prior to 1994, interest expense was immaterial and subsequently netted
against interest income.

See Notes to Financial Statements

13
<PAGE> 15

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
August 24, 1992
Year Ended December 31, (Commencement of
------------------------------------- Distribution) to
Class B Shares 1996 1995 1994 1993 December 31, 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

Net Asset Value, Beginning of the Period.................. $14.948 $13.694 $15.643 $15.709 $15.983
------ ------ ------ ------ ------
Net Investment Income................................... .947 .991 1.055 1.149 .425
Net Realized and Unrealized Gain/Loss on Securities..... (.494) 1.241 (1.964) (.063) (.263)
------ ------ ------ ------ ------
Total from Investment Operations.......................... .453 2.232 (.909) 1.086 .162
Less Distributions from and in Excess of Net Investment
Income.................................................. .954 .978 1.040 1.152 .436
------ ------ ------ ------ ------
Net Asset Value, End of the Period........................ $14.447 $14.948 $13.694 $15.643 $15.709
------ ------ ------ ------ ------
Total Return (a).......................................... 3.24% 16.78% (5.93%) 7.01% 1.64%*
Net Assets at End of the Period (In millions)............. $414.8 $466.7 $436.3 $474.7 $ 103.1
Ratio of Operating Expenses to Average Net Assets (b)..... 1.73% 1.75% 1.74% 1.73% 1.61%
Ratio of Interest Expense to Average Net Assets (Note
1)...................................................... .02% .27% .09% N/A N/A
Ratio of Net Investment Income to Average Net
Assets (b).............................................. 6.55% 6.85% 7.29% 7.00% 6.16%
Portfolio Turnover (Excluding Dollar Rolls and Forward
Commitment Transactions)................................ 59% 63% 44% 67% 111%
</TABLE>

* Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of certain expenses was less than
0.01%.

N/A = Prior to 1994, interest expense was immaterial and subsequently netted
against interest income.

See Notes to Financial Statements

14
<PAGE> 16

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
August 13, 1993
Year Ended December 31, (Commencement of
--------------------------- Distribution) to
Class C Shares 1996 1995 1994 December 31, 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................... $14.948 $13.693 $15.626 $16.000
------- ------- ------- -------
Net Investment Income..................................... .943 .996 1.063 .433
Net Realized and Unrealized Gain/Loss on Securities....... (.489) 1.237 (1.956) (.364)
------- ------- ------- -------
Total from Investment Operations............................ .454 2.233 (.893) .069
Less Distributions from and in Excess of Net Investment
Income.................................................... .954 .978 1.040 .443
------- ------- ------- ------
Net Asset Value, End of the Period.......................... $14.448 $14.948 $13.693 $15.626
======= ======= ======= ======
Total Return (a)............................................ 3.24% 16.78% (5.86%) .46%*
Net Assets at End of the Period (In millions)............... $ 14.3 $ 13.3 $ 11.4 $ 9.6
Ratio of Operating Expenses to Average Net Assets (b)....... 1.72% 1.75% 1.74% 1.71%
Ratio of Interest Expense to Average Net Assets (Note 1).... .02% .27% .10% N/A
Ratio of Net Investment Income to Average Net Assets (b).... 6.55% 6.86% 7.29% 6.42%
Portfolio Turnover (Excluding Dollar Rolls and Forward
Commitment Transactions).................................. 59% 63% 44% 67%
</TABLE>

* Non-Annualized

(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.

(b) The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of certain expenses was less than
0.01%.

N/A = Prior to 1994, interest expense was immaterial and subsequently netted
against interest income.

See Notes to Financial Statements

15
<PAGE> 17

NOTES TO FINANCIAL STATEMENTS

December 31, 1996
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen American Capital U.S. Government Fund (the "Fund") is organized as a
series of Van Kampen American Capital U.S. Government Trust (the "Trust"), a
Delaware business trust and is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to provide a high level of current income, with
liquidity and safety of principal. The Fund commenced investment operations on
May 31, 1984. The distribution of the Fund's Class B and Class C shares
commenced on August 24, 1992 and August 13, 1993, respectively. On May 2, 1995,
all Class D shareholders redeemed their shares and the class was eliminated. The
Fund will no longer offer Class D shares.

The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

A. SECURITY VALUATION--Investments are stated at value using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.

B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.

The Fund invests in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital Investment Advisory, Inc. (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are fully collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.

The Fund trades certain securities under the terms of forward
commitments, whereby the settlement for payment and delivery occurs at a
specified future date. Forward commitments are privately negotiated transactions
between the Fund and dealers. Upon executing a forward commitment and during the
period of obligation, the Fund maintains collateral of cash or securities in a
segregated account with its custodian in an amount sufficient to relieve the
obligation. If the intent of the Fund is to accept delivery of a security traded
under a forward purchase commitment, the commitment is recorded as a long-term
purchase. For forward purchase commitments for which security settlement is not
intended by the Fund, changes in the value of the commitment are recognized by
marking the commitment to market on a daily basis. During the term of the
commitment, the Fund may resell the forward commitment and enter into a new
forward commitment, the effect of which is to extend the settlement date. In
connection with this extension, the Fund receives a fee, which is included in
fee income on the date of the extension. In addition, the Fund may occasionally
close such forward commitments prior to delivery.

The Fund may also invest in reverse repurchase agreements. In a reverse
repurchase agreement, the Fund sells securities and agrees to repurchase them at
a mutually agreed upon date and price. During the reverse

16
<PAGE> 18

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

repurchase agreement period, the Fund continues to receive principal and
interest payments on these securities but pays interest to the counter-party
based upon a short-term interest rate. The average daily balance of reverse
repurchase agreements during the period was approximately $14.0 million with an
average interest rate of 4.94%. At December 31, 1996, there were no reverse
repurchase agreements outstanding.

C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Original
issue discount is amortized over the expected life of each applicable security.

D. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.

The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of loss and offset such losses against any future realized capital gains.
At December 31, 1996, the Fund had an accumulated capital loss carryforward for
tax purposes of $302,395,602 which will expire between December 31, 1997 and
December 31, 2004. Of this amount, $50,594,574 will expire on December 31, 1997.

E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains, which are included as ordinary income for
tax purposes.

Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the 1996 fiscal year have been identified and appropriately reclassified.
Permanent book and tax differences relating to the recognition of certain
expenses which are not deductible for tax purposes totaling $1,119,607 have been
reclassified from accumulated undistributed net investment income to capital.
Additionally during the year, $157,069,719 of the Fund's capital loss
carryforward expired, resulting in a permanent book and tax basis difference
which was reclassified from accumulated net realized loss on securities to Class
A share capital.

2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:

<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ------------------------------------------------------------------------
<S> <C>
First $500 million.......................................... .550 of 1%
Next $500 million........................................... .525 of 1%
Next $2 billion............................................. .500 of 1%
Next $2 billion............................................. .475 of 1%
Next $2 billion............................................. .450 of 1%
Next $2 billion............................................. .425 of 1%
Thereafter.................................................. .400 of 1%
</TABLE>

During the year ended December 31, 1996, the Adviser reimbursed the Fund for
certain trustees' compensation in connection with the July, 1995 increase in the
number of trustees of the Fund.

17
<PAGE> 19

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.

For the year ended December 31, 1996, the Fund recognized expenses of
approximately $180,700 representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting,
cash management and legal services to the Fund.

ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Fund. For the year ended
December 31, 1996, the Fund recognized expenses of approximately $3,400,800,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.

Additionally, for the year ended December 31, 1996, the Fund reimbursed VKAC
approximately $716,100 related to the direct cost of consolidating the VKAC
open-end fund complex. Payment was contingent upon the realization by the Fund
of cost efficiencies in certain expense categories resulting from the
consolidation.

Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.

The Fund has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC.

3. CAPITAL TRANSACTIONS

The Fund has outstanding three classes of shares of beneficial interest, Classes
A, B and C, each with a par value of $.01 per share. There are an unlimited
number of shares of each class authorized. At December 31, 1996, capital
aggregated $2,778,287,184, $462,643,924 and $15,470,402 for Class A, B and C,
respectively. For the year ended December 31, 1996, transactions were as
follows:

<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................................... 3,306,701 $ 47,964,099
Class B................................................... 2,702,553 39,213,360
Class C................................................... 454,440 6,602,052
---------- ------------
Total Sales................................................. 6,463,694 $ 93,779,511
========== ============
Dividend Reinvestment:
Class A................................................... 6,852,774 $ 98,957,199
Class B................................................... 956,499 13,802,832
Class C................................................... 38,150 550,108
---------- ------------
Total Dividend Reinvestment................................. 7,847,423 $ 113,310,139
========== ============
Repurchases:
Class A................................................... (31,284,344) $(451,949,019)
Class B................................................... (6,167,203) (89,031,089)
Class C................................................... (387,463) (5,599,852)
---------- ------------
Total Repurchases........................................... (37,839,010) $(546,579,960)
========== ============
</TABLE>

18
<PAGE> 20

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

At December 31, 1995, capital aggregated $3,241,403,229, $498,757,767 and
$13,921,150 for Classes A, B and C, respectively. For the year ended December
31, 1995, transactions were as follows:

<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................................... 4,450,487 $ 64,561,951
Class B................................................... 3,196,962 46,404,360
Class C................................................... 223,253 3,266,997
Class D................................................... -0- -0-
---------- ------------
Total Sales................................................. 7,870,702 $ 114,233,308
========== ============
Dividend Reinvestment:
Class A................................................... 7,595,317 $ 110,358,313
Class B................................................... 1,006,560 14,629,660
Class C................................................... 32,914 478,345
Class D................................................... -0- 4
---------- ------------
Total Dividend Reinvestment................................. 8,634,791 $ 125,466,322
========== ============
Repurchases:
Class A................................................... (27,345,845) $(396,421,409)
Class B................................................... (4,846,397) (70,074,798)
Class C................................................... (202,889) (2,933,194)
Class D................................................... (114) (1,717)
---------- ------------
Total Repurchases........................................... (32,395,245) $(469,431,118)
========== ============
</TABLE>

Class B and C shares are offered without a front end sales charge, but
are subject to a contingent deferred sales charge (CDSC). The CDSC will be
imposed on most redemptions made within six years of the purchase for Class B
and one year of the purchase for Class C as detailed in the following schedule.
The Class B and C shares bear the expense of their respective deferred sales
arrangements, including higher distribution and service fees and incremental
transfer agency costs.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- -------------------------------------------------------------------------------------
<S> <C> <C>
First....................................................... 4.00% 1.00%
Second...................................................... 3.75% None
Third....................................................... 3.50% None
Fourth...................................................... 2.50% None
Fifth....................................................... 1.00% None
Sixth....................................................... 1.00% None
Seventh and Thereafter...................................... None None
</TABLE>

19
<PAGE> 21

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

For the year ended December 31, 1996, VKAC, as Distributor for the Fund,
received commissions on sales of the Fund's Class A shares of approximately
$158,100 and CDSC on redeemed shares of approximately $1,520,000. Sales charges
do not represent expenses of the Fund.

4. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales on investments,
including principal paydowns, excluding forward commitment transactions and
short-term investments, for the year ended December 31, 1996, were
$2,177,562,489 and $2,653,639,913, respectively.

5. DERIVATIVE FINANCIAL INSTRUMENTS

A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.

The Fund has a variety of reasons to use derivative instruments, such as
to attempt to protect the Fund against possible changes in the market value of
its portfolio and to manage the portfolio's effective yield, maturity and
duration. All of the Fund's portfolio holdings, including derivative
instruments, are marked to market each day with the change in value reflected in
the unrealized appreciation/depreciation on securities. Upon disposition, a
realized gain or loss is recognized accordingly, except when exercising an
option contract or taking delivery of a security underlying a futures contract
or forward commitment. In these instances the recognition of gain or loss is
postponed until the disposal of the security underlying the option or futures
contract.

Summarized below are the specific types of derivative financial
instruments used by the Fund.

A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period.

Transactions in options for the year ended December 31, 1996, were as
follows:

<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- -------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1995............................ 2,000 $(1,926,233)
Options Written and Purchased (Net)......................... 51,880 (34,556,383)
Options Terminated in Closing Transactions (Net)............ (43,880) 33,802,159
Options Expired (Net)....................................... (10,000) 2,680,457
-------- ----------
Outstanding at December 31, 1996............................ 0 $ 0
======== ==========
</TABLE>

B. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in exchange traded futures on U.S. Treasury Bonds and
typically closes the contract prior to the delivery date.

Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin).

20
<PAGE> 22

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

Transactions in futures contracts for the year ended December 31, 1996,
were as follows:

<TABLE>
<CAPTION>
CONTRACTS
- -----------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1995............................ -0-
Futures Opened.............................................. 2,667
Futures Closed.............................................. (2,667)
-----
Outstanding at December 31, 1996............................ -0-
=====
</TABLE>

6. FORWARD COMMITMENTS

The Fund trades certain securities under the terms of forward commitments, as
described in Note 1. The following forward purchase commitments were outstanding
as of December 31, 1996. The change in value of these items is reflected as a
component of unrealized appreciation/depreciation on forwards commitments. The
Fund has segregated assets for these open commitments totaling $893.3 million.

<TABLE>
<CAPTION>
UNREALIZED
PAR AMOUNT APPRECIATION
(000) DESCRIPTION EXPIRATION PURCHASE PRICE CURRENT VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
$100,000 FHLMC Gold, 8.00% 05/13/97 $101,062,500 $102,001,000 $ 938,500
coupon
250,000 FNMA, 7.50% coupon 02/18/97 255,039,063 253,595,000 (1,444,063)
100,000 FNMA, 8.00% coupon 02/13/97 102,718,750 101,906,000 (812,750)
200,000 FNMA, 8.50% coupon 02/13/97 207,406,250 207,500,000 93,750
100,000 GNMA, 8.00% coupon 02/19/97 103,031,250 102,062,000 (969,250)
100,000 GNMA, 7.50% coupon 02/19/97 101,343,750 100,237,000 (1,106,750)
----------- ----------- ----------
$870,601,563 $867,301,000 $(3,300,563)
=========== =========== ==========
</TABLE>

At December 31, 1996, the Fund had realized losses on closed but
unsettled forward commitments of $2,250,000.

7. MORTGAGE BACKED SECURITIES

A Mortgage Backed Security (MBS) is a pass-through security created by pooling
mortgages and selling participations in the principal and interest payments
received from borrowers. Most of these securities are guaranteed by federally
sponsored agencies--Government National Mortgage Association (GNMA), Federal
National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation
(FHLMC).

A Collateralized Mortgage Obligation (CMO) is a bond which is
collateralized by a pool of MBS's. The Fund also invests in REMIC's (Real Estate
Mortgage Investment Conduit) which are simply another form of CMO. These MBS
pools are divided into classes or tranches with each class having its own
characteristics. For instance, a PAC (Planned Amortization Class) is a specific
class of mortgages which over its life will generally have the most stable cash
flows and the lowest prepayment risk. A GPM (Graduated Payment Mortgage) is a
negative amortization mortgage where the payment amount gradually increases over
the life of the mortgage. The early

21
<PAGE> 23

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1996
- --------------------------------------------------------------------------------

payment amounts are not sufficient to cover the interest due and, therefore, the
unpaid interest is added to the principal, thus increasing the borrower's
mortgage balance.

These MBS pools are divided into classes or tranches with each class having its
own characteristics. For instance, a PAC (Planned Amortization Class) is a
specific class of mortgages which over its life will generally have the most
stable cash flows and the lowest prepayment risk. A GPM (Graduated Payment
Mortgage) is a negative amortization mortgage where the payment amount gradually
increases over the life of the mortgage. The early payment amounts are not
sufficient to cover the interest due and, therefore, the unpaid interest is
added to the principal, thus increasing the borrower's mortgage balance.

8. DISTRIBUTION AND SERVICE PLANS

The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.

Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the year ended December 31, 1996, are payments to VKAC of approximately
$3,370,900.

22
<PAGE> 24

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Trustees and Shareholders of
Van Kampen American Capital U.S. Government Fund:

We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital U.S. Government Fund (the "Fund"), including the
portfolio of investments, as of December 31, 1996, 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 financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
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 financial
highlights 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
December 31, 1996, by correspondence with the custodian and brokers. 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 financial highlights
referred to above present fairly, in all material respects, the financial
position of Van Kampen American Capital U.S. Government Fund as of December 31,
1996, 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 financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
January 30, 1997

23
<PAGE> 25

FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL

GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund

EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund

FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income

TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund

MORGAN STANLEY FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
Worldwide High Income Fund

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 weekdays from 7:00 a.m. to 7:00
p.m. Central time at 1-800-341-2911 for Van Kampen American Capital funds, or
1-800-282-4404 for Morgan Stanley retail funds.

24
<PAGE> 26

VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT FUND

BOARD OF TRUSTEES

J. MILES BRANAGAN

LINDA HUTTON HEAGY

R. CRAIG KENNEDY

DENNIS J. MCDONNELL*

JACK E. NELSON

JEROME L. ROBINSON

FERNANDO SISTO

WAYNE W. WHALEN* - Chairman

OFFICERS

DENNIS J. MCDONNELL*
President

RONALD A. NYBERG*
Vice President and Secretary

EDWARD C. WOOD, III*
Vice President and Chief Financial Officer

CURTIS W. MORELL*
Vice President and Chief Accounting Officer

JOHN L. SULLIVAN*
Treasurer

TANYA M. LODEN*
Controller

PETER W. HEGEL*

ALAN T. SACHTLEBEN*

PAUL R. WOLKENBERG*
Vice Presidents

INVESTMENT ADVISER

VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

DISTRIBUTOR

VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

SHAREHOLDER SERVICING AGENT

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

CUSTODIAN

STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

LEGAL COUNSEL

SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT ACCOUNTANTS

KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60501

* "Interested" persons of the Fund, as defined in
the Investment Company Act of 1940.

(SM) denotes a service mark of
Van Kampen American Capital Distributors, Inc.

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.

RESULTS OF SHAREHOLDER VOTES

A Special Meeting of Shareholders of the Fund was held on October 25, 1996 where
shareholders voted on a new investment advisory agreement, changes to investment
policies and the ratification of KPMG Peat Marwick LLP as independent public
accountants. With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Investment Advisory Corp. and the Fund,
135,806,672 shares voted for the proposal, 3,524,256 shares voted against and
12,023,061 shares abstained. With regard to the approval of certain changes to
the Fund's fundamental investment policies with respect to investment in other
investment companies, 110,575,420 shares voted for the proposal, 4,623,339
shares voted against and 12,214,244 shares abstained. With regard to the
ratification of KPMG Peat Marwick LLP as independent public accountants for the
Fund, 138,087,529 shares voted for the proposal, 1,923,968 shares voted against
and 11,342,493 shares abstained.