<PAGE> 1
1998 ANNUAL REPORT
CENTENNIAL
GOVERNMENT
TRUST
JUNE 30, 1998
<PAGE> 2
Dear Shareholder:
In a year of excitement and volatility for stock markets here and abroad, money
market funds, such as Centennial Government Trust, generally continued to
provide stable returns. Yields moved in a very narrow range, as the Federal
Reserve Board, which raises and lowers short-term interest rates based on its
view of inflation, stayed on the sidelines for the entire fiscal year.
Two opposing forces have kept the Fed from raising or lowering rates. On one
hand, the U.S. economy continues to grow at a strong pace, with the unemployment
rate at just 4.5% and consumer confidence soaring. On the other hand, the Asian
financial crisis shows no signs of easing, which has weakened global demand for
goods and services. Since the United States is a major exporter to Asia,
slackening demand and devalued currencies in the Far East have created a
dampening effect on inflation. Remarkably, seven years into an economic
expansion, U.S. inflation is now trending below 2%.
For the fiscal year ended June 30, 1998, Centennial Government Trust produced a
compounded annual yield of 4.94%. Without compounding, the corresponding yield
was 4.83%. The seven-day annualized yields, with and without compounding, on
June 30, 1998 were 4.93% and 4.81%, respectively.(1) It is 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.
During the period, the Asian crisis boosted worldwide demand for U.S. Treasury
bills, as investors sought safety and liquidity for their money. That extra
demand boosted T-bill prices and reduced their yields. As a result, yields on
U.S. government agency securities were often significantly higher than those of
T-bills. To achieve greater yield without incurring additional credit risk, most
of the portfolio was invested in agency securities, which offered a slightly
higher yield than T-bills.
When the difference between T-bill yields and U.S. government agency yields
narrowed, we purchased more T-bills. Since T-bills are much more liquid than
government agency securities, they are quite attractive to us as money market
fund managers. In addition, because of the unusual fluctuation in T-bill yields
arising from the Asian crisis, it was possible to buy T-bills, watch them
closely, and then sell them at a substantial gain after only a few weeks or
months.
1. Compounded yields assume reinvestment of dividends. Past performance is not
indicative of future results.
<PAGE> 3
During the rest of 1998 and beyond, we plan to continue monitoring global events
so that we can position the portfolio accordingly. We will also continue to
invest conservatively, always keeping in mind your objectives of safety and
liquidity.
Thank you for your confidence in Centennial Government Trust. We look forward to
helping you reach your investment goals, part of our commitment to you as The
Right Way to Invest.
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, 1998
2
<PAGE> 4
STATEMENT OF INVESTMENTS June 30, 1998
Centennial Government Trust
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
----------- -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES--80.9%
Federal Farm Credit Bank:
5.432%, 7/1/98(1) ..................$10,000,000 $ 9,998,140
5.455%, 7/1/98(1) .................. 15,500,000 15,494,484
5.54%, 8/25/98(1) .................. 10,000,000 9,996,792
Federal Home Loan Bank:
5.40%, 8/3/98 ...................... 25,000,000 24,989,687
5.426%, 7/6/98-7/23/98(1) .......... 15,000,000 14,998,914
5.432%, 7/17/98(1) ................. 10,000,000 9,999,093
5.481%, 8/26/98-9/10/98(1) ......... 25,000,000 24,985,207
5.566%, 7/1/98(1) .................. 10,000,000 9,995,871
5.579%, 1/27/99 .................... 5,000,000 5,000,000
5.605%, 1/29/99 .................... 5,000,000 5,000,000
5.72%, 7/7/98 ...................... 15,000,000 15,000,355
5.765%, 7/8/98 ..................... 15,000,000 15,000,233
Federal Home Loan Mortgage Corp.:
5.35%, 9/4/98 ...................... 19,922,000 19,728,559
5.40%, 7/30/98-8/3/98 .............. 54,540,000 54,284,427
5.405%, 7/31/98 .................... 22,570,000 22,468,341
5.41%, 8/11/98 ..................... 10,000,000 9,938,386
5.42%, 7/15/98-9/25/98 ............. 42,500,000 42,078,067
5.43%, 9/10/98 ..................... 10,000,000 9,892,928
5.435%, 9/8/98 ..................... 30,000,000 29,686,912
5.45%, 8/31/98 ..................... 10,000,000 9,907,568
5.50%, 9/22/98 ..................... 15,000,000 14,993,005
13%, 8/4/98 ........................ 20,000,000 20,129,582
Federal National Mortgage Assn.:
4.875%, 10/15/98 ................... 8,500,000 8,480,911
5.05%, 11/10/98 .................... 5,000,000 4,988,452
5.35%, 8/12/98 ..................... 10,000,000 9,995,477
5.37%, 8/12/98 ..................... 15,000,000 14,994,617
5.39%, 7/24/98 ..................... 29,000,000 28,900,135
5.40%, 8/24/98 ..................... 24,375,000 24,177,239
5.41%, 8/27/98 ..................... 15,000,000 14,871,513
5.42%, 7/27/98 ..................... 15,000,000 14,941,283
5.43%, 9/21/98 ..................... 10,000,000 9,876,317
5.435%, 9/25/98 .................... 10,000,000 9,870,164
5.438%, 7/1/98(1) .................. 10,000,000 9,999,075
5.521%, 9/3/98(1) .................. 25,000,000 24,981,098
5.55%, 9/8/98 ...................... 10,000,000 9,997,342
5.601%, 7/9/98(1) .................. 10,000,000 9,996,910
7%, 7/13/98 ........................ 20,000,000 20,008,621
</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)
Overseas Private Investment Corp.:
5.725%, 7/20/98(1)(3) ............................................................ $ 3,777,655 $ 3,818,274
5.75%, 7/20/98(1)(3) ............................................................. 4,500,000 4,523,138
Student Loan Marketing Assn.:
5.321%, 8/11/98(1) ............................................................... 26,000,000 25,970,999
5.331%, 8/21/98(1) ............................................................... 5,000,000 4,994,452
5.341%, 8/11/98(1) ............................................................... 16,900,000 16,878,750
5.381%, 8/7/98(1) ................................................................ 10,000,000 9,992,857
5.431%, 8/20/98(1) ............................................................... 8,000,000 7,996,529
5.571%, 7/1/98(1) ................................................................ 5,000,000 4,998,551
5.631%, 7/28/98(1) ............................................................... 10,000,000 9,999,055
guaranteeing commercial paper of:
Kirksville College of Osteopathic Medicine, Inc., Education Loan Revenue Nts.,
Series A, 5.48%, 8/5/98 ...................................................... 10,167,000 10,112,832
NEBHELP, Inc.:
5.49%, 7/15/98(2) ............................................................ 25,000,000 24,946,625
5.51%, 7/23/98-7/24/98(2) .................................................... 35,319,000 35,196,440
5.53%, 7/10/98(2) ............................................................ 26,000,000 25,964,055
5.54%, 7/27/98(2) ............................................................ 49,000,000 48,803,946
New Hampshire Higher Education Loan Corp., Commercial Paper Nts.,
Series 1995A, 5.48%, 7/29/98-8/3/98 .......................................... 58,777,000 58,509,042
USA Group Secondary Market Services, Inc., Education Loan Revenue Nts.,
Series A, 5.48%, 7/17/98 ..................................................... 13,800,000 13,766,389
------------
Total U.S. Government Agencies ..................................................... 916,117,639
------------
U.S. GOVERNMENT OBLIGATIONS--0.9%
U.S. Treasury Bills, 5.06%, 11/12/98 ............................................... 10,000,000 9,812,214
------------
</TABLE>
4
<PAGE> 6
STATEMENT OF INVESTMENTS (Continued)
Centennial Government Trust
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
------------ --------------
<S> <C> <C>
REPURCHASE AGREEMENTS--17.7%
Repurchase agreement with PaineWebber, Inc., 6.10%, dated 6/30/98,
to be repurchased at $201,034,058 on 7/1/98, collateralized by
Government National Mortgage Assn. Participation Nts., 6.50%-7.50%,
1/15/23-1/15/28, with a value of $128,334,275, and Federal National
Mortgage Assn. Participation Nts., 6.50%-7.50%, 8/1/11-2/1/28,
with a value of $77,014,649..........................................................$201,000,000 $ 201,000,000
--------------
Total Investments, at Value.......................................................... 99.5% 1,126,929,853
--------------
Other Assets Net of Liabilities...................................................... 0.5 5,413,822
----- --------------
Net Assets........................................................................... 100.0% $1,132,343,675
===== ==============
</TABLE>
Short-term notes 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 the 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 June 30, 1998. 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. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $134,911,066, or 11.91% of the
Trust's net assets, and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.
3. 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 $8,341,412, or 0.74% 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> 7
STATEMENT OF ASSETS AND LIABILITIES June 30, 1998
Centennial Government Trust
<TABLE>
<S> <C>
ASSETS
Investments, at value (including repurchase agreements of $201,000,000)--
see accompanying statement.................................................. $1,126,929,853
Cash.......................................................................... 1,066,180
Receivables:
Shares of beneficial interest sold.......................................... 11,588,659
Interest.................................................................... 6,671,149
Other......................................................................... 85,160
--------------
Total assets.............................................................. 1,146,341,001
--------------
LIABILITIES
Payables and other liabilities:
Shares of beneficial interest redeemed...................................... 11,871,996
Dividends................................................................... 1,770,196
Transfer and shareholder servicing agent fees............................... 120,402
Service plan fees........................................................... 93,894
Other....................................................................... 140,838
--------------
Total liabilities....................................................... 13,997,326
--------------
NET ASSETS.................................................................... $1,132,343,675
==============
COMPOSITION OF NET ASSETS
Paid-in capital............................................................... $1,133,026,611
Accumulated net realized loss on investment transactions...................... (682,936)
--------------
NET ASSETS--applicable to 1,133,026,611 shares of beneficial
interest outstanding........................................................ $1,132,343,675
==============
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE................ $1.00
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE> 8
STATEMENT OF OPERATIONS For the Year Ended June 30, 1998
Centennial Government Trust
<TABLE>
<S> <C>
INVESTMENT INCOME--Interest ........................... $62,326,374
-----------
EXPENSES
Management fees--Note 3 ............................... 5,092,383
Service plan fees--Note 3 ............................. 2,234,968
Transfer and shareholder servicing agent fees--Note 3.. 703,232
Custodian fees and expenses ........................... 143,155
Shareholder reports ................................... 99,453
Registration and filing fees .......................... 97,299
Legal, auditing and other professional fees ........... 31,404
Trustees' fees and expenses ........................... 18,851
Insurance expenses .................................... 7,225
Other ................................................. 474
-----------
Total expenses ...................................... 8,428,444
-----------
NET INVESTMENT INCOME ................................. 53,897,930
-----------
NET REALIZED GAIN ON INVESTMENTS ...................... 59,323
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $53,957,253
===========
=======================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
OPERATIONS
Net investment income ....................................... $ 53,897,930 $ 47,945,569
Net realized gain (loss) .................................... 59,323 (5,032)
--------------- ---------------
Net increase in net assets resulting from operations ........ 53,957,253 47,940,537
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS ................. (53,897,930) (47,945,569)
--------------- ---------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial interest
transactions--Note 2 .................................... 104,848,437 84,955,146
--------------- ---------------
NET ASSETS
Total increase .............................................. 104,907,760 84,950,114
Beginning of period ......................................... 1,027,435,915 942,485,801
--------------- ---------------
End of period ............................................... $ 1,132,343,675 $ 1,027,435,915
=============== ===============
</TABLE>
See accompanying Notes to Financial Statements.
7
<PAGE> 9
FINANCIAL HIGHLIGHTS
Centennial Government Trust
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- -------- -------- --------
<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 .05 .05 .03
Dividends and distributions to shareholders (.05) (.05) (.05) (.05) (.03)
--------- --------- -------- -------- --------
Net asset value, end of period ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ======== ======== ========
TOTAL RETURN(1) ........................... 4.93% 4.75% 4.91% 4.93% 2.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) ... $ 1,132 $ 1,027 $ 942 $ 893 $ 613
Average net assets (in millions) .......... $ 1,117 $ 1,032 $ 962 $ 719 $ 665
RATIOS TO AVERAGE NET ASSETS
Net investment income ..................... 4.82% 4.65% 4.83% 4.81% 2.79%
Expenses .................................. 0.75% 0.76% 0.77% 0.80% 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 reflect
changes in net investment income only.
See accompanying Notes to Financial Statements.
8
<PAGE> 10
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 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. At June 30, 1998, the Trust had
available for federal income tax purposes an unused capital loss carryover of
approximately $737,000, which expires between 2003 and 2005.
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.
9
<PAGE> 11
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, 1998 Year Ended June 30, 1997
-------------------------------------- --------------------------------------
Shares Amount Shares Amount
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold ...................... 3,253,572,215 $ 3,253,572,215 2,931,272,745 $ 2,931,272,745
Dividends and distributions
reinvested .............. 52,695,140 52,695,140 46,820,017 46,820,017
Redeemed .................. (3,201,418,918) (3,201,418,918) (2,893,137,616) (2,893,137,616)
--------------- --------------- --------------- ---------------
Net increase .............. 104,848,437 $ 104,848,437 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 year ended June 30, 1998, the Trust paid $56,240 to a broker/dealer
affiliated with the Manager as reimbursement for distribution-related expenses.
10
<PAGE> 12
INDEPENDENT AUDITORS' 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,
1998, the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended June 30, 1998 and 1997,
and the financial highlights for the period July 1, 1993 to June 30, 1998. 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 at June 30,
1998 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, 1998, 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, 1998
11
<PAGE> 13
FEDERAL INCOME TAX INFORMATION (Unaudited)
Centennial Government Trust
In early 1999, shareholders will receive information regarding all dividends and
distributions paid to them by the Trust during calendar year 1998. 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,
1998 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.
12
<PAGE> 14
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13
<PAGE> 15
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14
<PAGE> 16
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15
<PAGE> 17
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
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
RA0170.001.0698 [RECYCLE LOGO] Printed on recycled paper
