<PAGE> 1
1996 ANNUAL REPORT
CENTENNIAL
GOVERNMENT
TRUST
JUNE 30, 1996
<PAGE> 2
DEAR SHAREHOLDER:
The twelve months ending June 30, 1996 have been defined by changing beliefs
about the direction of the economy which, in turn, has had both positive and
negative effects on the securities markets.
Toward the end of 1995, most investors expected that the economy would continue
to show signs of slowing. In fact, many were convinced that the economy was
moving toward recession. Given the prevailing sentiment, it wasn't a surprise
when the Federal Reserve lowered interest rates in an effort to prolong the
economic expansion. The goal: a slow but steady and sustainable rate of economic
growth that would diminish the possibility of recession. The impact of lower
interest rates on both the stock and bond markets was profound. The Dow Jones
Industrial Average reached an all time high, while most sectors of the bond
market chalked up double digit returns.
But in mid-February, the federal government issued a report on job growth that
radically altered investor perceptions. Suddenly, investors believed that the
economy was heating up and inflation was around the corner. In the weeks that
followed, the bond market sold off sharply, as long-term interest rates spiked
upward, with the benchmark 30-year Treasury yield moving above seven percent, As
a result the bond market weakened between February and June.
Though this market environment has created some concerns for both stock and bond
investors, rising interest rates are good for investors in short-term
securities: Because the portfolio is structured to capture as much yield as
possible without taking on any additional credit risk, the Trust continues to
invest in short maturity money market securities--especially during the current
market. Although shorter-term securities require us to reinvest the proceeds we
receive upon maturity more often, in a rising rate environment that means moving
into securities issued at higher rates.
For the twelve months ended June 30, 1996, the Trust's compounded annualized
yield was 4.95%. Its seven-day yields with and without compounding for the
twelve-month period ended June 30, 1996 were 4.69% and 4.58%, respectively.(1)
As we move through 1996, the strength of the economy continues to be an
uncertainty. However, with higher gasoline and agricultural prices there could
be some upward pressure on inflation over the next several months. As such, we
continue to look for opportunities to add to the portfolio's yield, while
keeping the Trust's average maturity shorter than other money funds and
remaining alert to the possibility that interest rates may move higher or lower
in the coming months.
<PAGE> 3
We are pleased to be able to maintain a competitive yield, as well as share
price stability, in light of the dramatic changes that have taken place during
the past twelve months. Thank you for your confidence in Centennial Government
Trust. We look forward to helping you reach your financial goals.
Sincerely,
/s/ James C. Swain
James C. Swain
Chairman--Centennial Government Trust
/s/ Bridget A. Macaskill
Bridget A. Macaskill
President--Centennial Government Trust
July 22, 1996
An investment in the Trust is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Trust will be able to maintain
a stable net asset value of $1.00 per share.
1. Compounded yields assume reinvestment of dividends. Past performance is not
indicative of future results.
2
<PAGE> 4
STATEMENT OF INVESTMENTS June 30, 1996
Centennial Government Trust
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
--------- ----------
U.S. GOVERNMENT AGENCIES-91.0%
Federal Farm Credit Bank:
<S> <C> <C>
4.86%, 8/20/96 ............................. $ 5,000,000 $ 4,966,250
5.10%, 8/1/96 .............................. 10,000,000 9,999,468
5.20%, 12/30/96(1) ......................... 10,000,000 9,990,618
5.22%, 12/6/96(1) .......................... 20,000,000 19,986,175
5.33%, 4/1/97(1) ........................... 15,000,000 14,992,199
Federal Home Loan Bank:
4.83%, 7/16/96 ............................. 12,660,000 12,634,563
5.10%, 7/8/96 .............................. 12,000,000 11,999,453
5.25%, 1/3/97(1) ........................... 10,000,000 9,997,244
5.26%, 9/4/96 .............................. 15,000,000 14,857,542
5.27%, 9/23/96(1) .......................... 10,000,000 9,997,997
5.30%, 8/12/96 ............................. 20,035,000 19,911,117
5.30%, 9/26/96(1) .......................... 10,000,000 9,995,050
5.65%, 7/8/96(1) ........................... 10,000,000 9,999,940
6.13%, 8/5/96 .............................. 5,605,000 5,608,353
8%, 7/25/96 ................................ 6,325,000 6,335,428
Federal Home Loan Mortgage Corp.:
5.22%, 7/9/96-7/15/96 ...................... 59,793,000 59,681,079
5.26%, 7/8/96-9/10/96 ...................... 60,530,000 60,203,533
5.27%, 7/1/96-7/5/96 ....................... 89,430,000 89,410,131
5.29%, 7/18/96 ............................. 25,000,000 24,937,608
5.30%, 8/12/96-8/20/96 ..................... 103,000,000 102,306,736
Federal National Mortgage Assn.:
4.82%, 8/9/96 .............................. 11,500,000 11,439,155
4.85%, 7/24/96 ............................. 45,000,000 44,852,033
4.93%, 7/25/96 ............................. 23,500,000 23,422,763
5.25%, 8/8/96-10/11/96(1) .................. 35,000,000 34,993,301
5.26%, 7/2/96 .............................. 2,600,000 2,599,620
5.27%, 7/5/96(1) ........................... 2,000,000 2,000,000
5.30%, 8/13/96 ............................. 5,000,000 4,968,347
5.35%, 8/16/96(1) .......................... 6,000,000 5,999,584
5.47%, 6/20/97(1) .......................... 10,000,000 9,990,421
5.59%, 7/1/96 .............................. 15,000,000 15,000,000
5.62%, 7/2/96 .............................. 28,300,000 28,300,057
5.64%, 9/9/96 .............................. 15,000,000 15,035,100
5.76%, 9/3/96 .............................. 10,585,000 10,588,492
5.84%, 2/18/97(1) .......................... 15,000,000 15,047,133
5.85%, 2/14/97(1) .......................... 15,000,000 15,042,618
8%, 7/10/96 ................................ 2,770,000 2,771,714
14%, 9/25/96 ............................... 5,000,000 5,099,069
</TABLE>
3
<PAGE> 5
STATEMENT OF INVESTMENTS (Continued)
Centennial Government Trust
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
--------- ----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (Continued)
Student Loan Marketing Assn., guaranteeing commercial paper of
Secondary Market Services, Inc., Education Loan Revenue Nts. Services:
5.27%, 7/8/96 ................................................................ $ 23,232,000 $ 23,208,194
5.30%, 7/17/96-8/30/96 ....................................................... 24,720,000 24,591,280
5.36%, 10/10/96(1) ........................................................... 5,000,000 4,998,910
5.39%, 7/19/96(1) ............................................................ 20,115,000 20,113,665
5.44%, 8/8/96(1) ............................................................. 10,000,000 9,999,047
5.45%, 12/20/96(1) ........................................................... 15,325,000 15,320,566
------------
Total U.S. Government Agencies (Cost $853,191,553) .............................. 853,191,553
------------
U.S. GOVERNMENT OBLIGATION-0.1%
U.S. Treasury Bills, 4.87%, 8/15/96 (Cost $4,969,594) ........................... 5,000,000 4,969,594
------------
REPURCHASE AGREEMENT-9.5%
Repurchase agreement with PaineWebber, Inc., 5.55%, dated 6/28/96, to be
repurchased at $89,641,440 on 7/1/96, collateralized by Federal National
Mortgage Assn. Participation Nts., 6.50%-7.50%, 3/1/09-3/1/26, with a value
of $85,088,094, and Federal Home Loan Mortgage Corp. Participation Nts., 7%,
12/1/22, with a value of $6,472,191 (Cost $89,600,000) ....................... 89,600,000 89,600,000
------------
Total Investments, at Value ..................................................... 100.6% 947,761,147
Liabilities in Excess of Other Assets ........................................... (0.6) (5,275,346)
------------ ------------
Net Assets ...................................................................... 100.0% $942,485,801
============ ============
</TABLE>
1. Floating or variable rate obligation maturing in more than one year. The
interest rate, which is based on specific, or an index of, market interest
rates, is subject to change periodically and is the effective rate on June
30, 1996. This instrument may also have a demand feature which allows the
recovery of principal at any time, or at specified intervals not exceeding
one year, on up to 30 days' notice. Maturity date shown represents effective
maturity based on variable rate and, if applicable, demand feature.
See accompanying Notes to Financial Statements.
4
<PAGE> 6
STATEMENT OF ASSETS AND LIABILITIES June 30, 1996
Centennial Government Trust
<TABLE>
<S> <C>
ASSETS:
Investments, at value (including repurchase agreement of $89,600,000)-
see accompanying statement ........................................ $ 947,761,147
Cash ................................................................. 897,973
Receivables:
Interest .......................................................... 4,441,886
Shares of beneficial interest sold ................................ 3,985,643
Other ............................................................. 13,178
-------------
Total assets ................................................... 957,099,827
-------------
LIABILITIES:
Payables and other liabilities:
Shares of beneficial interest redeemed ............................ 13,214,156
Dividends ......................................................... 1,199,823
Service plan fees ................................................. 65,537
Shareholder reports ............................................... 64,980
Transfer and shareholder servicing agent fees ..................... 38,160
Other ............................................................. 31,370
-------------
Total liabilities .............................................. 14,614,026
-------------
NET ASSETS ........................................................... $ 942,485,801
=============
COMPOSITION OF NET ASSETS
Paid-in capital ...................................................... $ 943,223,028
Accumulated net realized gain on investment transactions ............. (737,227)
-------------
NET ASSETS-applicable to 943,223,028 shares of beneficial
interest outstanding .............................................. $ 942,485,801
=============
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE ....... $ 1.00
=============
</TABLE>
See accompanying Notes to Financial Statements.
5
<PAGE> 7
STATEMENT OF OPERATIONS For the Year Ended June 30, 1996
Centennial Government Trust
<TABLE>
<S> <C>
INVESTMENT INCOME-Interest ................................. $53,846,379
-----------
EXPENSES:
Management fees-Note 3 ..................................... 4,468,617
Service plan fees-Note 3 ................................... 1,929,551
Transfer and shareholder servicing agent fees-Note 3 ....... 502,256
Registration and filing fees ............................... 227,526
Custodian fees and expenses ................................ 133,690
Shareholder reports ........................................ 68,460
Legal and auditing fees .................................... 27,070
Insurance expenses ......................................... 13,348
Trustees' fees and expenses ................................ 7,844
Other ...................................................... 1,792
-----------
Total expenses .......................................... 7,380,154
-----------
NET INVESTMENT INCOME ...................................... 46,466,225
NET REALIZED GAIN ON INVESTMENTS ........................... 25,445
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $46,491,670
===========
</TABLE>
===============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
Centennial Government Trust
<TABLE>
<CAPTION>
Year Ended June 30,
1996 1995
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ....................................... $ 46,466,225 $ 34,584,382
Net realized gain (loss) .................................... 25,445 (757,217)
------------- -------------
Net increase in net assets resulting from operations ........ 46,491,670 33,827,165
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS ................. (46,466,225) (34,750,614)
BENEFICIAL INTEREST TRANSACTIONS:
Net increase in net assets resulting from beneficial interest
transactions-Note 2 ...................................... 49,276,111 280,665,192
------------- -------------
NET ASSETS:
Total increase .............................................. 49,301,556 279,741,743
Beginning of period ......................................... 893,184,245 613,442,502
------------- -------------
End of period ............................................... $ 942,485,801 $ 893,184,245
============= =============
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE> 8
FINANCIAL HIGHLIGHTS
Centennial Government Trust
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations-net investment
income and net realized gain ........ .05 .05 .03 .04 .04
Dividends and distributions
to shareholders ..................... (.05) (.05) (.03) (.04) (.04)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
TOTAL RETURN, AT
NET ASSET VALUE(1) .................. 4.91% 4.93% 2.84% 2.98% 4.75%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 942,486 $ 893,184 $ 613,443 $ 637,102 $ 574,717
Average net assets (in thousands) ...... $ 962,325 $ 718,681 $ 665,494 $ 633,017 $ 581,563
RATIOS TO AVERAGE NET ASSETS:
Net investment income .................. 4.83% 4.81% 2.79% 2.81% 4.38%
Expenses ............................... 0.77% 0.80% 0.79% 0.79% 0.78%
</TABLE>
1. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends reinvested in additional
shares on the reinvestment date, and redemption at the net asset value
calculated on the last business day of the fiscal period. Total returns are
not annualized for periods of less than one full year. Total returns reflect
changes in net investment income only.
See accompanying Notes to Financial Statements.
7
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS
Centennial Government Trust
1. SIGNIFICANT ACCOUNTING POLICIES
Centennial Government Trust (the Trust) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust's investment objective is to seek a high current
level of income consistent with preservation of capital and the maintenance of
liquidity, through investment in a diversified portfolio of short-term debt
instruments issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and maturing in, or having been called for redemption in, one
year or less. The Trust's investment advisor is Centennial Asset Management
Corporation (the Manager), a subsidiary of OppenheimerFunds, Inc. (OFI). The
following is a summary of significant accounting policies consistently followed
by the Trust.
Investment Valuation-Portfolio securities are valued on the basis of amortized
cost, which approximates market value.
Repurchase Agreements-The Trust requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Trust may be delayed or limited.
Federal Taxes-The Trust intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income or excise tax provision is required. At June 30, 1996, the Fund had
available for federal income tax purposes an unused capital loss carryover of
approximately $720,000, expiring in 2003 and 2004.
Distributions to Shareholders-The Trust intends to declare dividends from net
investment income each day the New York Stock Exchange is open for business and
pay such dividends monthly. To effect its policy of maintaining a net asset
value of $1.00 per share, the Trust may withhold dividends or make distributions
of net realized gains.
Other-Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Realized gains and losses on investments are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
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 income and expenses during the reporting period. Actual
results could differ from those estimates.
8
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS(Continued)
Centennial Government Trust
2. SHARES OF BENEFICIAL INTEREST
The Trust has authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Year Ended June 30, 1996 Year Ended June 30, 1995
---------------------------------- ----------------------------------
Shares Amount Shares Amount
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold ...................... 2,840,678,875 $ 2,840,678,875 2,655,164,842 $ 2,655,164,842
Dividends and distributions
reinvested ................ 46,248,970 46,248,970 33,137,329 33,137,329
Redeemed .................. (2,837,651,734) $(2,837,651,734) (2,407,636,979) (2,407,636,979)
--------------- --------------- --------------- ---------------
Net increase .............. 49,276,111 $ 49,276,111 280,665,192 $ 280,665,192
=============== =============== =============== ===============
</TABLE>
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Trust which provides for a fee of 0.50% on the first
$250 million of average annual net assets with a reduction of 0.025% on each
$250 million thereafter, to 0.40% on net assets in excess of $1 billion. The
Manager has agreed to reimburse the Trust if aggregate expenses (with specified
exceptions) exceed the lesser of 1.50% of the first $30 million of average
annual net assets of the Trust, plus 1% of average annual net assets in excess
of $30 million; or 25% of the total annual investment income of the Trust.
Shareholder Services, Inc. (SSI), a subsidiary of OFI, is the transfer and
shareholder servicing agent for the Trust, and for other registered investment
companies. SSI's total costs of providing such services are allocated ratably to
these companies.
Under an approved plan of distribution, the Trust may expend up to 0.20% of its
net assets annually to reimburse certain securities dealers and other financial
institutions and organizations for costs incurred in distributing Trust shares.
During the year ended June 30, 1996 the Trust paid $43,452 to a broker/dealer
affiliated with the Manager as reimbursement for distribution-related expenses.
9
<PAGE> 11
INDEPENDENT AUDITOR'S REPORT
Centennial Government Trust
The Board of Trustees and Shareholders of Centennial Government Trust:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Centennial Government Trust as of June 30,
1996, the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended June 30, 1996 and 1995,
and the financial highlights for the period July 1, 1991 to June 30, 1996. These
financial statements and financial highlights are the responsibility of the
Trust'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 at June 30,
1996 by correspondence with the custodian. 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Centennial
Government Trust at June 30, 1996, the results of its operations, the changes in
its net assets, and the financial highlights for the respective stated periods,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
July 22, 1996
10
<PAGE> 12
FEDERAL INCOME TAX INFORMATION(Unaudited)
Centennial Government Trust
In early 1997, shareholders will receive information regarding all dividends and
distributions paid to them by the Trust during calendar year 1996. Regulations
of the U.S. Treasury Department require the Trust to report this information to
the Internal Revenue Service.
None of the dividends paid by the Trust during the fiscal year ended June 30,
1996 are eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Trust to the Internal Revenue Service. Because
of the complexity of the federal regulations which may affect your individual
tax return and the many variations in state and local tax regulations, we
recommend that you consult your tax advisor for specific guidance.
11
<PAGE> 13
CENTENNIAL GOVERNMENT TRUST
Officers and Trustees
James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, Trustee and President
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
George C. Bowen, Vice President, Treasurer
and Assistant Secretary
Andrew J. Donohue, Vice President and Secretary
Dorothy G. Warmack, Vice President
Carol E. Wolf, Vice President
Arthur J. Zimmer, Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
Investment Advisor and Distributor
Centennial Asset Management Corporation
Transfer and Shareholder Servicing Agent
Shareholder Services, Inc.
Custodian of Portfolio Securities
Citibank, N.A.
Independent Auditors
Deloitte & Touche LLP
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of Centennial
Government Trust. This report must be preceded or accompanied by
a Prospectus of Centennial Government Trust. For material
information concerning the Trust, see the Prospectus.
For shareholder servicing, call:
1-800-525-9310 (in U.S.)
303-671-3200 (outside U.S.)
Or write:
Shareholder Services, Inc.
P.O. Box 5143
Denver, CO 80217-5143
[LOGO]Printed on recycled paper.
