<PAGE> 1
1999 ANNUAL REPORT
CENTENNIAL
GOVERNMENT
TRUST
<PAGE> 2
DEAR SHAREHOLDER:
The fiscal year that ended June 30, 1999, encompassed two very different
economic pictures. The first picture included the fear of global recession and
deflation, which began with the Asian financial crisis in 1997 and intensified
in the summer of 1998. The crisis then spread to Russia, which was forced to
devalue its currency. These circumstances combined to produce a surge in demand
for the safety and liquidity of U.S. government securities. The Federal Reserve
Board lowered short-term interest rates last fall in an attempt to insulate the
U.S. economy from the crisis. (A lower interest-rate environment stimulates the
economy because it makes it more cost-effective for companies to borrow money to
finance their operations.) Central banks in Europe, Asia and Latin America
followed suit, and much of the world avoided a recession.
The second picture began to form in early 1999. While the rest of the world
struggled to generate economic growth, the U.S. economy remained strong.
However, too much economic growth can lead to inflation. So, with the Asian
economic crisis receding into the background and oil prices rebounding,
inflation fears were rekindled and in June, the Fed raised short-term interest
rates. Money market yields rose about 10 basis points to reflect the new
environment.
Centennial Government Trust, which invests in a mixture of U.S. Treasury bills
and government agency securities, also produced returns that reflected this
economic environment. During the second half of 1998, yields fell as the global
demand for U.S. government securities surged. During the first half of 1999,
yields rose to reflect the booming economy and the potential return of
inflation.
For the fiscal year that ended June 30, 1999, Centennial Government Trust
produced a compounded annual yield of 4.47%. Without compounding, the
corresponding yield was 4.38%. The seven-day annualized yields, with and without
compounding, on June 30, 1999, were 4.26% and 4.17%, 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 $1.00 share price in the future.
Our investment strategy for the Trust is to manage maturity by "laddering" the
portfolio, rather than trying to predict the direction of interest rates. That
is, we diversify the Trust by investing in securities of various maturities that
are less than 397 days. By creating a laddered portfolio, regardless of the
direction that interest rates move, we
1. Compounded yields assume reinvestment of dividends. Past performance is not
indicative of future results.
<PAGE> 3
would own a significant number of securities that could benefit from virtually
any economic environment.
We have also earned higher yields for the Trust by investing in a new money
market security issued by the Federal National Mortgage Association (Fannie
Mae). In fact, we are constantly looking at new issuers and new types of
securities that come to the market to see whether they are appropriate in the
context of the Trust's objectives.
Thank you for your continuing confidence in Centennial Government Trust. We look
forward to helping you reach your investment goals of safety and liquidity of
your investment.
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, 1999
2
<PAGE> 4
STATEMENT OF INVESTMENTS June 30, 1999
Centennial Government Trust
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
------------ ------------
<S> <C> <C>
REPURCHASE AGREEMENTS--8.6%
Repurchase agreement with PaineWebber, Inc., 4.80%, dated 6/30/99, to be
repurchased at $104,014,098 on 7/1/99, collateralized by Federal National
Mortgage Assn., 6%-6.50%, 7/1/06-5/1/29, with a value of $79,757,574 and
Federal Home Loan Mortgage Corp., 7%, 6/1/29, with a value of $27,060,081........... $104,000,000 $104,000,000
------------
U.S. GOVERNMENT AGENCIES--92.1%
Federal Farm Credit Bank:
4.861%, 9/1/99(1) .................................................................. 10,000,000 9,999,501
5.55%, 7/1/99 ...................................................................... 4,000,000 4,000,000
Federal Home Loan Bank:
4.83%, 7/1/99 ...................................................................... 10,600,000 10,600,000
4.85%, 7/14/99 ..................................................................... 10,000,000 9,982,486
4.86%, 1/14/00 ..................................................................... 19,875,000 19,864,042
4.87%, 7/23/99 ..................................................................... 10,000,000 9,970,239
4.90%, 1/14/00 ..................................................................... 16,480,000 16,477,882
4.91%, 7/13/99(1) .................................................................. 25,000,000 25,000,691
4.935%, 1/19/00 .................................................................... 5,875,000 5,875,080
4.94%, 10/26/99 .................................................................... 25,000,000 25,000,000
5%, 7/23/99-1/11/00 ................................................................ 60,780,000 60,720,823
5.03%, 10/29/99 .................................................................... 9,000,000 9,000,000
5.327%, 8/12/99(1) ................................................................. 15,000,000 14,998,962
5.349%, 7/7/99(1) .................................................................. 15,000,000 14,995,486
5.379%, 7/14/99(1) ................................................................. 25,000,000 24,996,066
5.545%, 8/18/99 .................................................................... 10,000,000 10,007,783
Federal Home Loan Mortgage Corp.:
4.69%, 7/19/99-8/31/99 ............................................................. 41,391,000 41,209,309
4.70%, 8/6/99-9/8/99 ............................................................... 66,670,000 66,246,109
4.713%, 7/13/99 .................................................................... 30,500,000 30,451,273
4.72%, 7/15/99 ..................................................................... 10,000,000 9,981,644
4.73%, 8/5/99-10/8/99 .............................................................. 63,954,000 63,628,206
4.74%, 8/27/99 ..................................................................... 15,000,000 14,887,425
4.75%, 7/2/99-9/24/99 .............................................................. 149,304,000 149,053,381
4.78%, 8/17/99(1) .................................................................. 10,000,000 9,999,114
4.80%, 8/18/99-8/19/99 ............................................................. 25,000,000 24,838,667
4.825%, 7/19/99(1) ................................................................. 10,000,000 9,992,962
4.87%, 7/29/99 ..................................................................... 20,000,000 19,924,244
4.88%, 9/2/99 ...................................................................... 15,000,000 14,871,900
4.90%, 9/10/99 ..................................................................... 15,000,000 14,855,042
6.13%, 8/19/99 ..................................................................... 4,025,000 4,030,870
</TABLE>
3
<PAGE> 5
STATEMENT OF INVESTMENTS June 30, 1999
Centennial Government Trust
<TABLE>
<CAPTION>
Face Value
Amount See Note 1
----------- --------------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (Continued)
Federal National Mortgage Assn.:
4.70%, 7/22/99-7/26/99 ............................................................. $45,000,000 $ 44,868,617
4.73%, 7/16/99-9/17/99 ............................................................. 25,372,000 25,236,142
4.758%, 7/7/99 ..................................................................... 10,000,000 9,992,070
4.766%, 7/30/99(1) ................................................................. 15,000,000 14,999,064
4.774%, 8/5/99(1) .................................................................. 20,000,000 19,989,502
4.80%, 8/19/99-8/24/99 ............................................................. 45,000,000 44,685,334
4.81%, 8/30/99 ..................................................................... 15,000,000 14,879,750
4.82%, 7/21/99 ..................................................................... 10,000,000 9,973,222
4.87%, 7/19/99 ..................................................................... 15,000,000 14,963,475
4.90%, 9/1/99 ...................................................................... 17,496,000 17,348,353
5.52%, 8/9/99 ...................................................................... 17,000,000 17,010,056
Overseas Private Investment Corp.:
5.096%, 7/20/99(1)(2) .............................................................. 4,000,000 4,018,165
5.121%, 7/20/99(1)(2) .............................................................. 3,088,693 3,120,115
Student Loan Marketing Assn.:
4.91%, 7/20/99(1) .................................................................. 15,000,000 15,000,000
4.93%, 2/8/00 ...................................................................... 15,000,000 14,999,416
4.93%, 8/5/99(1) ................................................................... 15,000,000 14,998,894
4.94%, 7/17/99(1) .................................................................. 30,000,000 29,992,983
5.109%, 8/2/99(1) .................................................................. 10,000,000 9,997,247
Student Loan Marketing Assn., guaranteeing commercial paper of
Nebraska Higher Education Loan Program, 4.84%, 7/12/99(3)........................... 46,600,000 46,531,084
--------------
Total U.S. Government Agencies......................................................... 1,118,062,676
--------------
Total Investments, at Value............................................................ 100.7% 1,222,062,676
--------------
Liabilities in Excess of Other Assets.................................................. (0.7) (8,941,368)
----------- --------------
Net Assets............................................................................. 100.0% $1,213,121,308
=========== ==============
</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 June 30, 1999. 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 $7,138,280, or 0.59% 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 $46,531,084, or
3.84% of the Trust's net assets, and have been determined to be liquid pursuant
to guidelines adopted by the Board of Trustees.
4
<PAGE> 6
STATEMENT OF ASSETS AND LIABILITIES June 30, 1999
Centennial Government Trust
<TABLE>
<S> <C>
ASSETS
Investments, at value--see accompanying statement ................................................ $1,222,062,676
Cash ............................................................................................. 1,121,707
Receivables and other assets:
Interest ....................................................................................... 6,299,173
Shares of beneficial interest sold.............................................................. 6,118,343
Other .......................................................................................... 43,922
--------------
Total assets.................................................................................. 1,235,645,821
--------------
LIABILITIES
Payables and other liabilities:
Shares of beneficial interest redeemed ......................................................... 20,354,863
Dividends ...................................................................................... 1,818,848
Service plan fees .............................................................................. 105,572
Transfer and shareholder servicing agent fees................................................... 89,336
Shareholder reports ............................................................................ 87,617
Custodian fees ................................................................................. 6,011
Trustees' compensation ......................................................................... 1,081
Other .......................................................................................... 61,185
--------------
Total liabilities............................................................................. 22,524,513
--------------
NET ASSETS ....................................................................................... $1,213,121,308
==============
COMPOSITION OF NET ASSETS
Paid-in capital .................................................................................. $1,213,683,060
Accumulated net realized loss on investment transactions ......................................... (561,752)
--------------
NET ASSETS--applicable to 1,213,683,060 shares of
beneficial interest outstanding ................................................................ $1,213,121,308
==============
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, 1999
Centennial Government Trust
<TABLE>
<S> <C>
INVESTMENT INCOME--Interest ...................................................................... $63,612,544
-----------
EXPENSES
Management fees--Note 3 .......................................................................... 5,601,294
Service plan fees--Note 3 ........................................................................ 2,485,301
Transfer and shareholder servicing agent fees--Note 3 ............................................ 732,187
Registration and filing fees ..................................................................... 132,831
Shareholder reports .............................................................................. 99,326
Custodian fees and expenses ...................................................................... 86,675
Legal, auditing and other professional fees ...................................................... 35,110
Trustees' compensation ........................................................................... 17,932
Insurance expenses ............................................................................... 10,185
Other ............................................................................................ 9,591
-----------
Total expenses ................................................................................. 9,210,432
Less expenses paid indirectly--Note 1 ............................................................ (14,298)
-----------
Net expenses ..................................................................................... 9,196,134
-----------
NET INVESTMENT INCOME ............................................................................ 54,416,410
-----------
NET REALIZED GAIN ON INVESTMENTS ................................................................. 121,184
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................................. $54,537,594
===========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------
1999 1998
---------------- --------------
<S> <C> <C>
OPERATIONS
Net investment income .................................................... $ 54,416,410 $ 53,897,930
Net realized gain ........................................................ 121,184 59,323
---------------- --------------
Net increase in net assets resulting from operations ..................... 54,537,594 53,957,253
---------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS .............................. (54,416,410) (53,897,930)
---------------- --------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial interest
transactions--Note 2 .................................................. 80,656,449 104,848,437
---------------- --------------
NET ASSETS
Total increase ........................................................... 80,777,633 104,907,760
Beginning of period ...................................................... 1,132,343,675 1,027,435,915
---------------- --------------
End of period ............................................................ $1,213,121,308 $1,132,343,675
================ ==============
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE> 8
FINANCIAL HIGHLIGHTS
Centennial Government Trust
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<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 ............................................ .04 .05 .05 .05 .05
Dividends and distributions to shareholders ..................... (.04) (.05) (.05) (.05) (.05)
------ ------ ------ ------ ------
Net asset value, end of period .................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
TOTAL RETURN(1) ................................................. 4.47% 4.93% 4.75% 4.91% 4.93%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) ......................... $1,213 $1,132 $1,027 $ 942 $ 893
Average net assets (in millions) ................................ $1,245 $1,117 $1,032 $ 962 $ 719
Ratios to average net assets:(2)
Net investment income ........................................... 4.37% 4.82% 4.65% 4.83% 4.81%
Expenses(3) ..................................................... 0.74% 0.75% 0.76% 0.77% 0.80%
</TABLE>
1. Assumes a $1,000 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. Total returns are not annualized for
periods less than one full year.
2. Annualized for periods less than one full year.
3. The expense ratio reflects the effect of expenses paid indirectly by the
Trust.
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 level of
current income consistent with the preservation of capital and the maintenance
of liquidity. 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.
Securities 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, 1999, the Trust had
available for federal income tax purposes an unused capital loss carryover of
approximately $550,000, which expires between 2003 and 2005.
Distributions to Shareholders. Distributions to shareholders, which are
determined in accordance with income tax regulations, are recorded on the
ex-dividend date.
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Trust.
Other. Investment transactions are accounted for as of 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, 1999 Year Ended June 30, 1998
-------------------------------- ----------------------------------
Shares Amount Shares Amount
------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C>
Sold ........................... 3,478,267,909 $ 3,478,267,909 3,253,572,215 $ 3,253,572,215
Dividends and distributions
reinvested ..................... 53,427,071 53,427,071 52,695,140 52,695,140
Redeemed ....................... (3,451,038,531) (3,451,038,531) (3,201,418,918) (3,201,418,918)
-------------- --------------- -------------- ---------------
Net increase ................... 80,656,449 $ 80,656,449 104,848,437 $ 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 year ended June
30, 1999 was 0.45% of average annual net assets.
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, 1999, the Trust paid $84,980 to a broker/dealer
affiliated with the Manager as reimbursement for distribution-related expenses.
9
<PAGE> 11
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,
1999, the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended June 30, 1999 and 1998,
and the financial highlights for the period July 1, 1994 to June 30, 1999. 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 as of June
30, 1999, by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. 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 as of June 30, 1999, 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, 1999
10
<PAGE> 12
FEDERAL INCOME TAX INFORMATION (Unaudited)
Centennial Government Trust
In early 2000 shareholders will receive information regarding all dividends and
distributions paid to them by the Trust during calendar year 1999. 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,
1999 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
George C. Bowen, Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Carol E. Wolf, Vice President
Arthur J. Zimmer, Vice President
Andrew J. Donohue, Vice President and
Secretary
Brian W. Wixted, Vice President and Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
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
RA0170.001.0699 [RECYCLE LOGO] Printed on recycled paper
