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, Trustee, 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.
The financial statements included herein have been taken from the
records of the Trust without examination of the independent
auditors.
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
- --------------------------------------------------------------------------------
1997 Semiannual Report
Centennial
Government
Trust
December 31, 1997
- --------------------------------------------------------------------------------
RS0170.001.1297 {LOGO} Printed on recycled paper
<PAGE>
Dear Shareholder:
Compared to the volatility in world stock markets during the past few months,
short-term interest rates have remained relatively calm. As is often the case,
U.S. money market instruments became a safe haven in times of stress.
In addition to safety and liquidity, money market fund investors also enjoyed a
modest increase in yields during the six-month period which ended December 31,
1997. One reason: the Federal Reserve Board raised short-term interest rates by
0.25 percentage points in late March of 1997. This new interest rate was in
place for the period covered by this report. It's important to remember that an
investment in the Trust is neither insured nor guaranteed by the U.S.
government, and there is no assurance that the Trust will maintain a stable
$1.00 share price in the future.
For the six months ended December 31, 1997, Centennial Government Trust's
compounded annualized yield was 4.86%. Without com pounding, the corresponding
yield was 4.75%. The seven-day annualized yields with and without compounding on
December 31, 1997 were 5.05% and 4.93%, respectively.(1)
Typically, long-term and short-term interest rates move in the same direction.
During the past few months, long-term rates have fallen sharply. That's because
investors worldwide increasingly invested in U.S. Treasury bonds of all
maturities when they liquidated their Asia equity positions. Generally, when the
demand for bonds rises, bond prices increase, and issuers can pay lower yields
to attract the same number of investors.
However, while long-term interest rates have been falling, U.S. money market
yields have actually been rising in recent weeks. The main reason is that Japan,
the world's second largest issuer of short-term debt, continues to have
financial difficulties. Japan's economic plight was worsened by the financial
crisis in Southeast Asia, since Japan's banks are major lenders to those
countries. Because investors perceive a lowered credit quality in the region,
Japanese issuers have been required to pay higher interest rates to compensate
for the additional risk. To compete, American issuers have been forced to also
raise their short-term rates.
All things considered, the U.S. economy is the envy of the world. Inflation is
virtually non-existent, long-term interest rates have fallen below 6%, the
federal budget is nearly balanced, unemployment is under 5% and economic growth
continues strong. True, Asia's devalued currencies and uncertain business
environment will slow our economy somewhat, because our exports to the Far East
will be curtailed. However, our economy was beginning to overheat in 1997 and
had the events in Asia not taken place, the Federal Reserve Board might have
intervened by raising short-term interest rates to slow down the economy.
- ----------
1. Compounded yields assume reinvestment of dividends. Past performance is not
indicative of future results.
<PAGE>
As we have seen, world events can have a dramatic impact on interest rates as
well as the investment markets. However, we don't try to predict the future
course of interest rates and use those predictions to set our investment
strategy. Instead, we "ladder" the portfolio with some securities maturing in a
few days, some maturing in a month, some maturing in two months and so on. With
a relatively broad maturity spectrum, the portfolio is widely diversified and
able to take advantage of a variety of market conditions.
Money market yields are often compared with the rate of inflation to determine a
"real" rate of return. The real rate of return equals the stated money market
yield minus the rate of inflation. With inflation currently negligible, the real
rate of return from money market funds continues to be quite high. At the same
time, money market funds provide a strong combination of liquidity and safety of
principal during times of volatility in other markets.
Thank you for your confidence in Centennial Government Trust. We look forward to
helping you reach your investment goals in the future.
Sincerely,
/s/ James C. Swain
James C. Swain
Chairman
Centennial Government Trust
/s/ Bridget A. Macaskill
Bridget A. Macaskill
President
Centennial Government Trust
January 23, 1998
2
<PAGE>
Statement of Investments December 31, 1997 (Unaudited)
Centennial Government Trust
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
------------ --------------
<S> <C> <C>
U.S. Government Obligations-87.4%
Federal Farm Credit Bank:
5.468%, 10/1/98(1) ................................................ $ 10,000,000 $ 9,994,482
5.504%, 5/28/98(1) ................................................ 10,000,000 9,999,223
5.533%, 1/2/98(1) ................................................. 20,750,000 20,749,952
5.55%, 2/3/98(1) .................................................. 10,000,000 9,999,398
5.583%, 9/1/98(1) ................................................. 15,500,000 15,478,382
5.65%, 2/2/98 ..................................................... 10,000,000 9,996,646
Federal Home Loan Bank:
5.38%, 1/7/98 ..................................................... 9,260,000 9,251,697
5.468%, 8/18/98(1) ................................................ 10,000,000 9,995,674
5.49%, 2/13/98 .................................................... 10,000,000 9,934,425
5.60%, 1/21/98 .................................................... 25,000,000 24,922,222
5.639%, 5/28/98(1) ................................................ 5,000,000 5,000,000
5.80%, 4/14/98(1) ................................................. 5,000,000 4,998,960
5.849%, 5/5/98(1) ................................................. 12,000,000 11,999,178
6.70%, 1/2/98 ..................................................... 25,000,000 24,995,347
Federal Home Loan Mortgage Corp.:
5.37%, 1/2/98 ..................................................... 12,542,000 12,540,129
5.42%, 1/6/98 ..................................................... 7,000,000 6,994,731
5.43%, 1/30/98 .................................................... 27,510,000 27,388,820
5.44%, 1/15/98 .................................................... 10,000,000 9,978,844
5.52%, 2/17/98 .................................................... 22,000,000 21,841,453
5.53%, 2/23/98 .................................................... 5,000,000 4,959,293
5.605%, 1/28/98 ................................................... 20,000,000 19,915,925
5.62%, 1/16/98 .................................................... 10,000,000 9,976,583
5.65%, 1/23/98 .................................................... 10,000,000 9,965,503
5.66%, 2/13/98 .................................................... 10,000,000 9,932,394
5.66%, 2/23/98 .................................................... 8,194,000 8,125,721
5.70%, 1/14/98 .................................................... 25,000,000 24,948,542
5.715%, 3/17/98 ................................................... 20,000,000 19,996,821
5.72%, 1/15/98 .................................................... 30,000,000 29,933,111
Federal National Mortgage Assn.:
5.373%, 1/24/98 ................................................... 5,000,000 4,982,836
5.40%, 3/17/98 .................................................... 2,200,000 2,175,250
5.40%, 3/23/98 .................................................... 2,000,000 1,975,700
5.44%, 1/9/98 ..................................................... 2,850,000 2,846,555
5.46%, 1/21/98 .................................................... 8,000,000 7,975,667
5.48%, 1/30/98 .................................................... 13,000,000 12,942,564
5.48%, 2/10/98 .................................................... 10,000,000 9,939,111
</TABLE>
3
<PAGE>
Statement of Investments December 31, 1997 (Unaudited) (Continued)
Centennial Government Trust
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
------------ --------------
<S> <C> <C>
U.S. Government Obligations (Continued)
Federal National Mortgage Assn.: (Continued)
5.48%, 2/25/98 .................................................... $ 7,000,000 $ 6,941,394
5.48%, 2/5/98 ..................................................... 10,000,000 9,946,722
5.48%, 3/20/98 .................................................... 5,000,000 4,940,633
5.49%, 2/13/98 .................................................... 10,000,000 9,934,425
5.50%, 2/18/98 .................................................... 20,000,000 19,851,333
5.52%, 2/19/98 .................................................... 10,000,000 9,924,867
5.52%, 3/24/98 .................................................... 10,000,000 9,874,267
5.52%, 4/7/98 ..................................................... 5,695,000 5,611,170
5.528%, 2/13/98(1) ................................................ 25,000,000 25,000,000
5.53%, 2/20/98 .................................................... 10,000,000 9,923,194
5.53%, 2/6/98 ..................................................... 10,000,000 9,944,700
5.54%, 1/21/98 .................................................... 25,500,000 25,421,283
5.54%, 3/12/98 .................................................... 5,000,000 4,997,882
5.56%, 5/22/98(1) ................................................. 10,000,000 9,998,115
5.58%, 3/27/98 .................................................... 5,000,000 4,934,125
5.59%, 1/15/98(1) ................................................. 5,000,000 4,999,906
5.61%, 3/27/98 .................................................... 25,000,000 24,668,854
5.62%, 1/14/98 .................................................... 8,000,000 7,983,764
5.64%, 1/16/98 .................................................... 35,000,000 34,919,833
5.65%, 2/11/98 .................................................... 10,000,000 9,935,653
5.669%, 6/24/98(1) ................................................ 10,000,000 9,997,625
5.69%, 3/13/98 .................................................... 12,777,000 12,774,303
5.71%, 1/21/98 .................................................... 10,000,000 9,968,278
5.77%, 1/23/98 .................................................... 11,580,000 11,539,168
6%, 4/17/98 ....................................................... 10,350,000 10,358,380
6.81%, 3/17/98 .................................................... 7,000,000 7,016,830
7.93%, 1/20/98 .................................................... 5,000,000 5,005,561
Overseas Private Investment Corp.:
5.936%, 1/2/98(1)(2) .............................................. 4,000,000 4,044,158
5.961%, 1/2/98(1)(2) .............................................. 4,750,000 4,775,838
Student Loan Marketing Assn.:
5.619%, 11/10/98(1) ............................................... 26,000,000 25,931,232
5.634%, 2/5/98(1) ................................................. 20,000,000 19,998,714
5.729%, 8/20/98(1) ................................................ 8,000,000 7,983,966
5.82%, 1/23/98 .................................................... 10,000,000 9,999,910
5.929%, 10/28/98(1) ............................................... 10,000,000 9,997,616
</TABLE>
4
<PAGE>
Statement of Investments December 31, 1997 (Unaudited) (Continued)
Centennial Government Trust
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
------------ --------------
<S> <C> <C>
U.S. Government Obligations (Continued)
Student Loan Marketing Assn.: (Continued)
guaranteeing commercial paper of:
Nebraska Higher Education Loan Program, 6.10%, 1/23/98 .......... $ 59,884,000 $ 59,661,812
New Hampshire Higher Education Loan Corp., 5.75%, 1/29/98 ....... 7,800,000 7,765,117
New Hampshire Higher Education Loan Corp., 5.79%, 1/26/98 ....... 10,000,000 9,959,792
USA Group Secondary Market Services, Inc., 5.65%, 1/22/98 ....... 8,300,000 8,272,645
USA Group Secondary Market Services, Inc., 5.68%, 1/9/98 ........ 3,731,000 3,726,291
USA Group Secondary Market Services, Inc., 5.70%, 1/28/98 ....... 10,138,000 10,094,660
USA Group Secondary Market Services, Inc., 5.70%, 1/29/98 ....... 24,000,000 23,893,600
USA Group Secondary Market Services, Inc., 5.75%, 1/26/98 ....... 18,629,000 18,554,739
Tennessee Valley Authority, 5.48%, 2/10/98 ........................... 9,500,000 9,442,156
--------------
Total U.S. Government Obligations (Cost $987,165,650) ................ 987,165,650
--------------
Repurchase Agreements-12.2%
Repurchase agreement with PaineWebber, Inc., 6.80%, dated
12/31/97, to be repurchased at $137,752,020 on 1/2/98,
collateralized by Government National Mortgage Assn.
Participation Nts., 7.50%, 10/15/27, with a value of
$64,295,466, and Federal Home Loan Mortgage Corp.
Participation Nts., 7%, 8/1/27, with a value of
$77,360,960 (Cost $137,700,000) ................................... 137,700,000 137,700,000
------------ --------------
Total Investments, at Value .......................................... 99.6% 1,124,865,650
Other Assets Net of Liabilities ...................................... 0.4 4,388,266
------------ --------------
Net Assets ........................................................... 100.0% $1,129,253,916
============ ==============
</TABLE>
Short-term notes, bankers' acceptances, direct bank obligations and letters of
credit are generally traded on a discount basis; the interest rate is the
discount rate received by the Trust at the time of purchase. Other securities
normally bear interest at the rates shown.
1. Floating or variable rate obligation. 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 December 31, 1997. This instrument may
also have a demand feature which allows, on up to 30 days' notice, the recovery
of principal at any time, or at specified intervals not exceeding one year.
Maturity date shown represents effective maturity based on variable rate and, if
applicable, demand feature.
2. Represents a restricted security which is considered illiquid, by virtue of
the absence of a readily available market or because of legal or contractual
restrictions on resale. Such securities amount to $8,819,996, or 0.78% of the
Trust's net assets. The Trust may not invest more than 10% of its net assets
(determined at the time of purchase) in illiquid securities.
See accompanying Notes to Financial Statements.
5
<PAGE>
Statement of Assets and Liabilities December 31, 1997 (Unaudited)
Centennial Government Trust
<TABLE>
<S> <C>
ASSETS:
Investments, at value (including repurchase agreement of $137,700,000)
-see accompanying statement ....................................................... $1,124,865,650
Cash ................................................................................ 108,869
Receivables:
Shares of beneficial interest sold ................................................ 12,073,143
Interest .......................................................................... 3,428,461
Other ............................................................................... 68,996
--------------
Total assets .................................................................... 1,140,545,119
--------------
LIABILITIES:
Payables and other liabilities:
Shares of beneficial interest redeemed ............................................ 10,960,955
Transfer and shareholder servicing agent fees ..................................... 110,755
Service plan fees ................................................................. 90,158
Trustees' fees .................................................................... 1,528
Other ............................................................................. 127,807
--------------
Total liabilities ............................................................... 11,291,203
--------------
NET ASSETS .......................................................................... $1,129,253,916
==============
COMPOSITION OF NET ASSETS:
Paid-in capital ..................................................................... $1,129,966,356
Accumulated net realized loss on investment transactions ............................ (712,440)
--------------
NET ASSETS-applicable to 1,129,966,356 shares of beneficial interest outstanding .... $1,129,253,916
==============
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE ...................... $1.00
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE>
Statement of Operations For the Six Months Ended December 31, 1997 (Unaudited)
Centennial Government Trust
INVESTMENT INCOME-Interest ..................................... $30,858,725
-----------
EXPENSES:
Management fees-Note 3 ......................................... 2,528,098
Service plan fees-Note 3 ....................................... 1,102,739
Transfer and shareholder servicing agent fees-Note 3 ........... 373,451
Custodian fees and expenses .................................... 112,219
Shareholder reports ............................................ 40,904
Legal and auditing fees ........................................ 13,489
Trustees' fees and expenses .................................... 10,527
Registration and filing fees ................................... 2,563
Insurance expenses ............................................. 812
Other .......................................................... 415
-----------
Total expenses ............................................... 4,185,217
-----------
NET INVESTMENT INCOME .......................................... 26,673,508
NET REALIZED GAIN ON INVESTMENTS ............................... 29,819
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $26,703,327
===========
See accompanying Notes to Financial Statements.
7
<PAGE>
Statements of Changes in Net Assets
Centennial Government Trust
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended
(Unaudited) June 30, 1997
----------------- ----------------
<S> <C> <C>
OPERATIONS
Net investment income ....................................... $ 26,673,508 $ 47,945,569
Net realized gain (loss) .................................... 29,819 (5,032)
--------------- ---------------
Net increase in net assets resulting from operations ........ 26,703,327 47,940,537
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS ................. (26,673,508) (47,945,569)
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial interest
transactions-Note 2 ....................................... 101,788,182 84,955,146
--------------- ---------------
NET ASSETS
Total increase .............................................. 101,818,001 84,950,114
Beginning of period ......................................... 1,027,435,915 942,485,801
--------------- ---------------
End of period ............................................... $ 1,129,253,916 $ 1,027,435,915
=============== ===============
</TABLE>
See accompanying Notes to Financial Statements.
8
<PAGE>
Financial Highlights
Centennial Government Trust
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1997 ---------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
----------- ------ ------ ------ ------ ------
<S> <C> <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 $1.00
Income from investment operations-
net investment income and net
realized gain .............................. .02 .05 .05 .05 .03 .04
Dividends and distributions to shareholders .. (.02) (.05) (.05) (.05) (.03) (.04)
------ ------ ------ ------ ------ ------
Net asset value, end of period ............... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ======
TOTAL RETURN, AT NET ASSET VALUE(1) .......... 2.47% 4.75% 4.91% 4.93% 2.84% 2.85%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) ...... $1,127 $1,027 $942 $893 $613 $637
Average net assets (in millions) ............. $1,098 $1,032 $962 $719 $665 $633
Ratios to average net assets:
Net investment income ........................ 4.82%(2) 4.65% 4.83% 4.81% 2.79% 2.81%
Expenses ..................................... 0.76%(2) 0.76% 0.77% 0.80% 0.79% 0.79%
</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.
2. Annualized.
See accompanying Notes to Financial Statements.
9
<PAGE>
Notes to Financial Statements (Unaudited)
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
level of current 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. 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.
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.
10
<PAGE>
Notes to Financial Statements (Unaudited) (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>
Six Months Ended December 31, 1997 Year Ended June 30, 1997
------------------------------------ -------------------------------
Shares Amount Shares Amount
---------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
Sold ...................... 1,622,674,762 $ 1,622,674,762 2,931,272,745 $ 2,931,272,745
Dividends and distributions
reinvested .............. 27,694,712 27,694,712 46,820,017 46,820,017
Redeemed .................. (1,548,581,292) (1,548,581,292) (2,893,137,616) (2,893,137,616)
-------------- --------------- -------------- ---------------
Net increase .............. 101,788,182 $ 101,788,182 84,955,146 $ 84,955,146
============== =============== ============== ===============
</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% of the
first $250 million of net assets; 0.475% of the next $250 million of net
assets; 0.45% of the next $250 million of net assets; 0.425% of the next
$250 million of net assets; and 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 period ended December 31, 1997 the
Trust paid $16,935 to a broker/dealer affiliated with the Manager as
reimbursement for distribution-related expenses.
11
