<PAGE> 1
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.
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
RS0170.001.1298 [RECYCLE LOGO] Printed on recycled paper
1998 SEMIANNUAL REPORT
CENTENNIAL
GOVERNMENT
TRUST
DECEMBER 31, 1998
<PAGE> 2
DEAR SHAREHOLDER:
When international markets become unsteady, investors around the world look to
U.S. government securities for safety and security. That clearly took place in
the latter half of 1998, as Asia's financial crisis continued to form a backdrop
to the global economy. At various times during the year, demand for Treasury
bills surged, boosting prices and reducing yields, particularly in late summer
as Russia's economy weakened.
With a global recession looming, the Federal Reserve Board went into action. In
the fall, the Fed cut short-term interest rates three times to stimulate the
economy, and dozens of central banks around the world followed suit. While these
actions invigorated the U.S. stock market in particular, money market
instruments tended to offer lower yields as a result.
Nevertheless, Centennial Government Trust, which invests in a mixture of U.S.
Treasury bills and government agency securities, continued to seek to produce
stable returns. For the six months that ended December 31, 1998, Centennial
Government Trust produced a compounded annualized yield of 4.69%. Without
compounding, the corresponding yield was 4.59%. The seven-day annualized yields,
with and without compounding, on December 31, 1998, were 4.47% and 4.38%,
respectively.1 It is important to remember that an investment in the Fund is
neither insured nor guaranteed by the U.S. government, and there is no assurance
that the Fund will be able to maintain a stable $1.00 share price in the future.
By focusing on government agency securities, Centennial Government Trust was
able to achieve a higher yield than that offered by Treasury bills--with
virtually no additional risk. Instead of buying agencies' securities, global
investors tend to prefer T-bills due to their relatively plentiful supply and
ease of trading. To attract investors, government agency securities, which are
"backed" by the U.S. government, had to offer significantly higher yields than
T-bills. Government agency securities help provide funding for the nation's
farmers, homebuyers and students.
Even though government agency yields compared favorably to T-bills, yields in
general have been trending downward. While the Fed was able to stimulate
economic growth here in America, much of Europe is sluggish, while most of Asia
remains in a
1. Compounded yields assume reinvestment of dividends. Past performance is not
indicative of future results.
<PAGE> 3
recession. With inflation throughout the world extremely low by historical
standards, interest rates are likely to decline further. As we move into 1999,
we will continue to monitor global events so that we can position the portfolio
accordingly. We will continue to search for yield, always keeping in mind your
objectives.
Thank you for your confidence in Centennial Government Trust. We look forward
to helping you reach your investment goals of safety, liquidity and attractive
yield.
Sincerely,
/s/ JAMES C. SWAIN
James C. Swain
Chairman
Centennial Government Trust
/s/ BRIDGET A. MACASKILL
Bridget A. Macaskill
President
Centennial Government Trust
January 25, 1999
2
<PAGE> 4
STATEMENT OF INVESTMENTS December 31, 1998 (Unaudited)
Centennial Government Trust
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
---------- ----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES--96.6%
Federal Farm Credit Bank:
4.79%, 2/25/99(1)......................................... $ 10,000,000 $ 9,999,262
5.071%, 3/1/99(1)......................................... 10,000,000 9,998,044
5.50%, 2/1/99............................................. 6,235,000 6,236,401
Federal Home Loan Bank:
4.80%, 1/13/99(1)......................................... 25,000,000 25,001,893
4.93%, 10/26/99........................................... 25,000,000 25,000,000
4.94%, 10/26/99........................................... 25,000,000 25,000,000
4.988%, 3/1/99-3/10/99(1)................................. 25,000,000 24,996,066
5%, 10/27/99-11/4/99...................................... 36,780,000 36,770,593
5.03%, 10/29/99........................................... 9,000,000 9,000,000
5.073%, 1/2/99(1)......................................... 10,000,000 9,998,644
5.076%, 2/14/99(1)........................................ 15,000,000 14,994,487
5.09%, 11/5/99............................................ 50,000,000 50,000,000
Federal Home Loan Mortgage Corp.:
4.50%, 1/4/99............................................. 50,000,000 49,973,958
4.81%, 3/19/99............................................ 10,000,000 9,897,119
4.88%, 4/9/99............................................. 19,213,000 18,957,766
4.90%, 3/2/99............................................. 20,000,000 19,836,667
4.95%, 3/17/99-3/30/99.................................... 32,510,000 32,147,928
4.96%, 3/22/99............................................ 10,000,000 9,889,778
4.97%, 3/31/99............................................ 15,000,000 14,815,696
4.975%, 3/8/99............................................ 25,000,000 24,771,704
4.98%, 3/9/99............................................. 25,000,000 24,768,292
5%, 1/26/99-3/15/99....................................... 65,000,000 64,476,303
5.02%, 1/15/99-1/29/99.................................... 233,633,000 232,956,865
5.03%, 1/11/99-1/14/99.................................... 40,000,000 39,933,632
5.07%, 2/26/99............................................ 25,000,000 24,802,833
5.08%, 2/25/99............................................ 15,000,000 14,883,583
5.10%, 2/12/99............................................ 25,000,000 24,851,250
5.468%, 8/17/99(1)........................................ 10,000,000 9,995,702
</TABLE>
3
<PAGE> 5
STATEMENT OF INVESTMENTS December 31, 1998 (Unaudited) (Continued)
Centennial Government Trust
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
--------- ----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (Continued)
Federal National Mortgage Assn.:
4.797%, 1/2/99(1)....................................................... $15,375,000 $ 15,364,449
4.81%, 3/23/99.......................................................... 10,000,000 9,891,775
4.95%, 3/26/99-3/29/99.................................................. 49,226,000 48,647,127
4.97%, 3/10/99.......................................................... 15,000,000 14,859,183
4.975%, 3/11/99......................................................... 10,000,000 9,904,646
4.981%, 3/15/99(1)...................................................... 10,000,000 9,996,278
4.99%, 1/29/99(1)....................................................... 15,000,000 14,993,222
5%, 2/23/99............................................................. 11,732,000 11,645,639
5.028%, 3/3/99(1)....................................................... 25,000,000 24,995,294
5.04%, 1/7/99........................................................... 25,000,000 24,979,000
5.05%, 3/18/99.......................................................... 5,050,000 5,063,830
5.06%, 1/8/99........................................................... 15,000,000 14,985,242
5.07%, 1/8/99........................................................... 10,000,000 9,990,142
5.08%, 2/18/99.......................................................... 15,000,000 14,898,400
5.108%, 1/11/99(1)...................................................... 10,000,000 9,998,926
5.36%, 2/19/99.......................................................... 15,000,000 15,003,204
Overseas Private Investment Corp.:
5.85%, 1/20/99(1)(2).................................................... 3,600,034 3,637,692
5.875%, 1/20/99(1)(2)................................................... 4,250,000 4,270,566
Student Loan Marketing Assn.:
4.80%, 1/20/99(1)....................................................... 15,000,000 15,000,000
4.838%, 2/24/99(1)...................................................... 5,000,000 4,998,778
4.848%, 2/8/99(1)....................................................... 16,900,000 16,896,363
4.858%, 2/2/99(1)....................................................... 10,000,000 9,981,678
5.078%, 1/2/99(1)....................................................... 5,000,000 4,999,524
5.308%, 2/24/99(1)...................................................... 24,000,000 24,000,000
Student Loan Marketing Assn., guaranteeing commercial paper of:
Nebraska Higher Education Loan Program, 6.25%, 1/5/99(3)................ 7,500,000 7,494,792
USA Group Secondary Market Services, Inc., Education Loan
Revenue Nts., Series A, 5%, 1/14/99................................... 25,300,000 25,254,319
--------------
Total U.S. Government Agencies ............................................. 1,235,704,535
--------------
</TABLE>
4
<PAGE> 6
STATEMENT OF INVESTMENTS December 31, 1998 (Unaudited) (Continued)
Centennial Government Trust
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
--------- ----------
<S> <C> <C>
REPURCHASE AGREEMENTS--2.5%
Repurchase agreement with PaineWebber, Inc., 6.25%, dated 12/31/98, to be
repurchased at $32,422,500 on 1/4/99, collateralized by Federal National
Mortgage Participation Nts., 6%, 12/1/13, with a value of $33,109,458 ................ $32,400,000 $ 32,400,000
---------------
Total Investments, at Value........................................................... 99.1% 1,268,104,535
Other Assets Net of Liabilities....................................................... 0.9 11,986,841
----- ---------------
Net Assets............................................................................ 100.0% $ 1,280,091,376
===== ===============
</TABLE>
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, 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. 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 $7,908,258, or 0.62% 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.
3. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $7,494,792, or 0.59% of the
Trust's net assets, and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.
See accompanying Notes to Financial Statements.
5
<PAGE> 7
STATEMENT OF ASSETS AND LIABILITIES December 31, 1998 (Unaudited)
Centennial Government Trust
<TABLE>
<S> <C>
ASSETS
Investments, at value--see accompanying statement........................................... $1,268,104,535
Cash........................................................................................ 1,171,955
Receivables and other assets:
Shares of beneficial interest sold..................................................... 16,391,172
Interest............................................................................... 3,815,409
Other.................................................................................. 46,334
--------------
Total assets...................................................................... 1,289,529,405
--------------
LIABILITIES
Payables and other liabilities:
Shares of beneficial interest redeemed................................................. 9,148,021
Service plan fees...................................................................... 116,404
Transfer and shareholder servicing agent fees.......................................... 34,317
Other.................................................................................. 139,287
--------------
Total liabilities................................................................. 9,438,029
--------------
NET ASSETS.................................................................................. $1,280,091,376
==============
COMPOSITION OF NET ASSETS
Paid-in capital............................................................................. $1,280,734,651
Accumulated net realized loss on investment transactions.................................... (643,275)
--------------
NET ASSETS--applicable to 1,280,734,651 shares of
beneficial interest outstanding........................................................ $1,280,091,376
==============
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 Six Months Ended December 31, 1998 (Unaudited)
Centennial Government Trust
<TABLE>
<S> <C>
INVESTMENT INCOME--Interest ............................................................ $32,500,949
-----------
EXPENSES
Management fees--Note 3 ................................................................ 2,754,789
Service plan fees--Note 3 .............................................................. 1,219,914
Transfer and shareholder servicing agent fees--Note 3 .................................. 305,973
Registration and filing fees ........................................................... 91,371
Custodian fees and expenses ............................................................ 54,580
Shareholder reports .................................................................... 40,525
Legal, auditing and other professional fees ............................................ 16,024
Trustees' fees and expenses ............................................................ 10,398
Other .................................................................................. 7,368
-----------
Total expenses ...................................................................... 4,500,942
-----------
NET INVESTMENT INCOME .................................................................. 28,000,007
-----------
NET REALIZED GAIN ON INVESTMENTS ....................................................... 39,661
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................... $28,039,668
===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Year Ended
(Unaudited) June 30, 1998
----------------- ----------------
<S> <C> <C>
OPERATIONS
Net investment income ....................................... $ 28,000,007 $ 53,897,930
Net realized gain ........................................... 39,661 59,323
--------------- ---------------
Net increase in net assets resulting from operations ........ 28,039,668 53,957,253
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS ................. (28,000,007) (53,897,930)
--------------- ---------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial interest
transactions--Note 2 .................................... 147,708,040 104,848,437
--------------- ---------------
NET ASSETS
Total increase .............................................. 147,747,701 104,907,760
Beginning of period ......................................... 1,132,343,675 1,027,435,915
--------------- ---------------
End of period ............................................... $ 1,280,091,376 $ 1,132,343,675
=============== ===============
</TABLE>
See accompanying Notes to Financial Statements.
7
<PAGE> 9
FINANCIAL HIGHLIGHTS
Centennial Government Trust
<TABLE>
<CAPTION>
Six Months
Ended Year Ended June 30,
December 31, -------------------------------------------------
1998 (Unaudited) 1998 1997 1996 1995 1994
---------------- ---- ---- ---- ---- ----
PER SHARE OPERATING DATA
<S> <C> <C> <C> <C> <C> <C>
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 .05 .03
Dividends and distributions to shareholders......... (.02) (.05) (.05) (.05) (.05) (.03)
----- ----- ----- ----- ----- -----
Net asset value, end of period...................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
TOTAL RETURN(1)..................................... 2.38% 4.93% 4.75% 4.91% 4.93% 2.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)............. $1,280 $1,132 $1,027 $942 $893 $613
Average net assets (in millions).................... $1,211 $1,117 $1,032 $962 $719 $665
RATIOS TO AVERAGE NET ASSETS
Net investment income............................... 4.59%(2) 4.82% 4.65% 4.83% 4.81% 2.79%
Expenses............................................ 0.74%(2) 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 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.
8
<PAGE> 10
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. As of 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 (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, 1998 Year Ended June 30, 1998
------------------------------------ ------------------------------------
Shares Amount Shares Amount
--------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold........................................ 1,717,175,890 $ 1,717,175,890 3,253,572,215 $ 3,253,572,215
Dividends and distributions
reinvested.................................. 29,286,432 29,286,432 52,695,140 52,695,140
Redeemed.................................... (1,598,754,282) (1,598,754,282) (3,201,418,918) (3,201,418,918)
--------------- ----------------- --------------- ---------------
Net increase................................ 147,708,040 $ 147,708,040 104,848,437 $ 104,848,437
=============== ================= =============== ===============
</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. Effective January 1, 1999, the
following breakpoints were added: 0.375% on average net assets over $1.25
billion to $1.5 billion and 0.35% on average net assets over $1.5 billion. The
Trust's management fee for the six months ended December 31, 1998 was 0.45% of
the average annual net assets of the Trust.
Shareholder Services, Inc. (SSI), a subsidiary of OFI, is the transfer and
shareholder servicing agent for the Trust and for other Oppenheimer funds. SSI's
total costs of providing such services are allocated ratably to these funds.
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 six months ended December 31, 1998, the Trust paid $43,419 to a
broker/ dealer affiliated with the Manager as reimbursement for
distribution-related expenses.
10
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11
<PAGE> 13
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