UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-03391
CENTENNIAL GOVERNMENT TRUST
(Exact name of registrant as specified in charter)
6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924
(Address of principal executive offices)
(Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
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Date of fiscal year end: JUNE 30
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Date of reporting period: JULY 1, 2003 - DECEMBER 31, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
STATEMENT OF INVESTMENTS DECEMBER 31, 2003 / UNAUDITED
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PRINCIPAL VALUE
AMOUNT SEE NOTE 1
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U.S. GOVERNMENT AGENCIES--101.0%
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FNMA Master
Credit Facility:
0.95%, 1/2/04 $ 25,000,000 $ 24,999,340
1.09%, 1/2/04-1/5/04 51,100,000 51,095,274
1.10%, 2/2/04-3/1/04 53,400,000 53,338,718
1.11%, 3/1/04 20,000,000 19,963,000
1.11%, 4/1/04 19,175,000 19,121,789
1.115%, 3/1/04 30,000,000 29,944,250
1.12%, 3/1/04-5/3/04 32,500,000 32,405,578
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Federal Home
Loan Bank:
1.005%, 9/20/04 1 14,275,000 14,268,276
1.04%, 1/7/04-1/28/04 166,956,000 166,865,023
1.05%, 1/9/04-2/11/04 172,432,000 172,317,966
1.06%, 1/16/04-2/20/04 229,365,000 229,126,543
1.065%, 1/23/04 45,000,000 44,970,774
1.07%, 1/20/04-3/24/04 79,184,000 78,999,250
1.08%, 3/26/04 25,000,000 24,938,611
1.082%, 4/5/05 1 50,000,000 49,997,485
1.23%, 7/6/04 25,000,000 25,000,000
1.52%, 11/26/04 10,000,000 10,000,000
1.53%, 11/19/04 30,000,000 30,000,000
1.56%, 12/7/04 5,000,000 5,000,000
3.75%, 2/13/04-4/15/04 33,800,000 33,947,143
4.875%, 4/16/04 10,750,000 10,865,228
5.215%, 1/12/04 25,000,000 25,030,235
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Federal Home Loan
Mortgage Corp.:
1.045%, 4/1/04 35,000,000 34,907,547
1.05%, 1/15/04-3/18/04 57,393,000 57,331,240
1.055%, 3/25/04 38,000,000 37,906,690
1.06%, 3/11/04 25,000,000 24,948,472
1.07%, 2/5/04-2/19/04 65,000,000 64,908,917
1.073%, 2/12/04 30,000,000 29,962,200
1.075%, 2/26/04 25,000,000 24,958,194
1.085%, 3/4/04 30,000,000 29,943,038
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
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U.S. GOVERNMENT AGENCIES Continued
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Federal National
Mortgage Assn.:
1.016%, 1/20/04 $ 15,000,000 $ 14,999,784
1.04%, 1/29/04 25,000,000 24,979,778
1.05%, 1/20/04-4/14/04 24,437,000 24,397,300
1.06%, 3/31/04 30,000,000 29,921,625
1.075%, 4/5/04 30,000,000 29,915,094
1.08%, 3/17/04 34,000,000 33,924,633
1.085%, 3/10/04 35,000,000 34,929,227
3.625%, 4/15/04 6,500,000 6,546,937
4.75%, 3/15/04 3,000,000 3,022,172
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Overseas Private
Investment Corp.:
5.70%, 1/20/04 1,2 2,392,407 2,410,499
5.73%, 1/20/04 1,2 2,167,711 2,171,686
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Total U.S.
Government Agencies
(Cost $1,664,279,516) 1,664,279,516
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JOINT REPURCHASE AGREEMENTS--2.0%
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Undivided interest of 91.67% in joint repurchase
agreement (Principal Amount/Market Value
$36,000,000, with a maturity value of
$36,001,820) with PaineWebber, Inc.,
0.91%, dated 12/31/03, to be repurchased
at $33,001,668 on 1/2/04, collateralized
by Federal Home Loan Mortgage
Corp., 5%, 12/1/33, with a
value of $36,780,632
(Cost $33,000,000) 33,000,000 33,000,000
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TOTAL INVESTMENTS,
AT VALUE
(COST $1,697,279,516) 103.0% 1,697,279,516
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LIABILITIES IN EXCESS
OF OTHER ASSETS (3.0) (48,788,859)
----------------------------------
NET ASSETS 100.0% $1,648,490,657
==================================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Represents the current interest rate for a variable or increasing rate
security.
2. Identifies issues considered to be illiquid. See Note 4 of Notes to
Financial Statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5 | CENTENNIAL GOVERNMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES UNAUDITED
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DECEMBER 31, 2003
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ASSETS
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Investments, at value (cost $1,697,279,516)-- see accompanying statement $1,697,279,516
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Cash 5,750,329
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Receivables and other assets:
Shares of beneficial interest sold 47,420,072
Interest 1,495,933
Other 104,498
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Total assets 1,752,050,348
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LIABILITIES
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Payables and other liabilities:
Investments purchased 86,552,852
Shares of beneficial interest redeemed 16,695,883
Service plan fees 155,368
Transfer and shareholder servicing agent fees 85,840
Shareholder reports 54,813
Trustees' compensation 2,768
Other 12,167
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Total liabilities 103,559,691
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NET ASSETS $1,648,490,657
===============
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COMPOSITION OF NET ASSETS
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Paid-in capital $1,648,493,214
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Accumulated net realized loss on investments (2,557)
---------------
NET ASSETS--applicable to 1,648,475,840 shares
of beneficial interest outstanding $1,648,490,657
===============
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NET ASSET VALUE, REDEMPTION PRICE PER SHARE AND OFFERING PRICE PER SHARE $1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6 | CENTENNIAL GOVERNMENT TRUST
STATEMENT OF OPERATIONS UNAUDITED
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FOR THE SIX MONTHS ENDED DECEMBER 31, 2003
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INVESTMENT INCOME
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Interest $ 9,413,140
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EXPENSES
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Management fees 3,693,820
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Service plan fees 1,730,960
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Transfer and shareholder servicing agent fees 502,219
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Shareholder reports 36,344
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Custodian fees and expenses 8,759
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Trustees' compensation 7,385
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Other 73,410
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Total expenses 6,052,897
Less reduction to custodian expenses (1,581)
Less reimbursement of expenses (1,689,577)
------------
Net expenses 4,361,739
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NET INVESTMENT INCOME 5,051,401
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NET REALIZED LOSS ON INVESTMENTS (1,956)
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $5,049,445
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7 | CENTENNIAL GOVERNMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, 2003 JUNE 30,
(UNAUDITED) 2003
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OPERATIONS
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Net investment income $ 5,051,401 $ 19,901,454
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Net realized gain (loss) (1,956) 11,525
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Net increase in net assets resulting from operations 5,049,445 19,912,979
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DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
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Dividends from net investment income (5,051,401) (19,901,454)
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BENEFICIAL INTEREST TRANSACTIONS
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Net increase (decrease) in net assets
resulting from beneficial
interest transactions (127,321,230) 228,169,387
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NET ASSETS
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Total increase (decrease) (127,323,186) 228,180,912
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Beginning of period 1,775,813,843 1,547,632,931
-----------------------------------
End of period $1,648,490,657 $1,775,813,843
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8 | CENTENNIAL GOVERNMENT TRUST
FINANCIAL HIGHLIGHTS
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SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, 2003 JUNE 30,
(UNAUDITED) 2003 2002 2001 2000 1999
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PER SHARE OPERATING DATA
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Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
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Income from investment operations--net
investment income and net realized gain -- 1 .01 .02 .05 .05 .04
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Dividends and/or distributions
to shareholders:
Dividends from net investment income -- 1 (.01) (.02) (.05) (.05) (.04)
Distributions from net realized gain -- -- -- 1 -- -- --
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Total dividends and/or
distributions to shareholders -- (.01) (.02) (.05) (.05) (.04)
==============================================================
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Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
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TOTAL RETURN 2 0.29% 1.15% 1.92% 5.29% 5.07% 4.47%
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RATIOS/SUPPLEMENTAL DATA
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Net assets, end of period (in millions) $1,648 $1,776 $1,548 $1,458 $1,192 $1,213
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Average net assets (in millions) $1,718 $1,744 $1,585 $1,367 $1,244 $1,245
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Ratios to average net assets: 3
Net investment income 0.58% 1.14% 1.90% 5.13% 4.92% 4.37%
Total expenses 0.70% 0.70% 0.71% 0.73% 0.74% 0.74%
Expenses after expense reimbursement
or fee waiver and reduction to
custodian expenses 0.50% 0.38% 0.63% N/A 4 N/A 4 N/A 4
<FN>
1. Less than $0.005 per share.
2. Assumes an 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 less than one
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on Trust distributions or the redemption of Trust shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9 | CENTENNIAL GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS UNAUDITED
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1. SIGNIFICANT ACCOUNTING POLICIES
Centennial Government Trust (the Trust) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Trust's investment objective is to seek a high level of current income that
is 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.
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SECURITIES VALUATION. Portfolio securities are valued on the basis of amortized
cost, which approximates market value.
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JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Trust, along with other affiliated
funds advised by the Manager, may transfer uninvested cash balances into joint
trading accounts on a daily basis. Secured by U.S. government securities, these
balances are invested in one or more repurchase agreements. Securities pledged
as collateral for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal. In the
event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
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FEDERAL TAXES. The Trust intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
As of December 31, 2003, the Trust had available for federal income tax
purposes an estimated unused capital loss carryforward of $2,556 expiring by
2012. This estimated capital loss carryforward represents carryforward as of
the end of the last fiscal year, increased for losses deferred under tax
accounting rules to the current fiscal year and is increased or decreased by
capital losses or gains realized in the first six months of the current fiscal
year. During the six months ended December 31, 2003 and the year ended June 30,
2003, the Trust used $0 and $0, respectively, of carryforward to offset capital
gains realized.
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TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Trust. Under the plan, deferred amounts are treated as
though equal dollar amounts had been invested in shares of the Trust or are
invested in other Oppenheimer funds selected by the Trustee. Deferral of
trustees' fees under the plan will not affect the net assets of the
10 | CENTENNIAL GOVERNMENT TRUST
Trust, and will not materially affect the Trust's assets, liabilities or net
investment income per share. Amounts will be deferred until distributed in
accordance to the Plan.
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DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are
declared daily and paid monthly. Capital gain distributions, if any, are
declared and paid annually.
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EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Trust.
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SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
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OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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.
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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:
SIX MONTHS ENDED DECEMBER 31, 2003 YEAR ENDED JUNE 30, 2003
SHARES AMOUNT SHARES AMOUNT
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Sold 1,941,246,202 $ 1,941,246,202 4,283,051,983 $ 4,283,051,983
Dividends and/or
distributions reinvested 5,430,711 5,430,711 19,700,770 19,700,770
Redeemed (2,073,998,143) (2,073,998,143) (4,074,583,366) (4,074,583,366)
------------------------------------------------------------------------
Net increase (decrease) (127,321,230) $ (127,321,230) 228,169,387 $ 228,169,387
========================================================================
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3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with
the investment advisory agreement with the Trust which provides for a fee at an
annual rate of 0.50% of the first $250 million of the Trust's net assets,
0.475% of the next $250 million, 0.45% of the next $250 million, 0.425% of the
next $250 million, 0.40% of the next $250 million, 0.375% of the next $250
million, 0.35% of net assets in excess of $1.5 billion. In the agreement, the
Manager guarantees that the Trust's total expenses in any fiscal year,
exclusive of taxes, interest and brokerage concessions, and extraordinary
expenses such as litigation costs, shall not exceed the lesser of 1.50% of the
average annual net assets of the Trust up to $30 million and 1% of its average
annual net assets in excess of $30 million; or 25% of the total annual
investment income of the Trust. As a result of this agreement, the Trust was
reimbursed $1,689,577 for the six months ended December 31, 2003. Effective
September 22, 2003, the expense limitation was terminated.
11 | CENTENNIAL GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS UNAUDITED / CONTINUED
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3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
TRANSFER AGENT FEES. Shareholder Services, Inc. (SSI) acts as the transfer and
shareholder servicing agent for the Trust and for other registered investment
companies. The Trust pays SSI a per account fee. For the six months ended
December 31, 2003, the Trust paid $495,647 to SSI for services to the Trust.
SSI has voluntarily agreed to limit transfer and shareholder servicing agent
fees up to an annual rate of 0.35% of average net assets of the Trust. This
undertaking may be amended or withdrawn at any time.
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SERVICE PLAN (12B-1) FEES. The Trust has adopted a service plan. It reimburses
Centennial Asset Management Corporation, the Distributor, for a portion of its
costs incurred for services provided to accounts that hold shares of the Trust.
Reimbursement is made quarterly at an annual rate up to 0.20% of the average
annual net assets of the Trust. Fees incurred by the Trust under the plan are
detailed in the Statement of Operations.
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4. ILLIQUID SECURITIES
As of December 31, 2003, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Trust intends to invest no more than 10% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of
December 31, 2003 was $4,582,185, which represents 0.28% of the Trust's net
assets.
12 | CENTENNIAL GOVERNMENT TRUST
PORTFOLIO PROXY VOTING
POLICIES AND PROCEDURES UNAUDITED
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The Trust has adopted Portfolio Proxy Voting Policies and Procedures under
which the Trust votes proxies relating to securities ("portfolio proxies") held
by the Trust. A description of the Trust's Portfolio Proxy Voting Policies and
Procedures is available (i) without charge, upon request, by calling the Trust
toll-free at 1.800.225.5677, (ii) on the Trust's website at
www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In
addition, the Trust will be required to file new Form N-PX, with its complete
proxy voting record for the 12 months ended June 30th, no later than August
31st of each year. The first such filing is due no later than August 31, 2004,
for the twelve months ended June 30, 2004. Once filed, the Trust's Form N-PX
filing will be available (i) without charge, upon request, by calling the Trust
toll-free at 1.800.225.5677, and (ii) on the SEC's website at www.sec.gov.
13 | CENTENNIAL GOVERNMENT TRUST
SHAREHOLDER MEETING UNAUDITED
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On September 19, 2003, a special shareholder meeting was held at which
shareholders elected all of the nominated Trustees and approved proposals 2 and
3 as described in the Trust's proxy statement for the meeting.
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PROPOSAL NO. 1
The eleven persons named below to serve as Trustee of the Trust until their
successors are elected and shall qualify:
NOMINEE FOR WITHHELD TOTAL
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James C. Swain 809,062,022.070 82,473,004.890 891,535,026.960
Richard F. Grabish 812,779,148.200 78,755,878.760 891,535,026.960
William L. Armstrong 808,247,584.720 83,287,442.240 891,535,026.960
Robert G. Avis 809,858,051.280 81,676,975.680 891,535,026.960
George C. Bowen 809,795,442.050 81,739,584.910 891,535,026.960
Edward L. Cameron 811,349,086.530 80,185,940.430 891,535,026.960
Jon S. Fossel 811,929,156.960 79,605,870.000 891,535,026.960
Sam Freedman 811,632,515.410 79,902,511.550 891,535,026.960
F. William Marshall, Jr. 812,164,372.950 79,370,654.010 891,535,026.960
Beverly L. Hamilton 816,845,453.510 74,689,573.450 891,535,026.960
Robert J. Malone 812,393,012.270 79,142,014.690 891,535,026.960
FOR AGAINST ABSTAIN BROKER NON-VOTES TOTAL
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PROPOSAL NO. 2
Approval of the amendment to the Trust's fundamental investment restriction
regarding investments in debt securities having a maturity greater than time
limitation provided in Rule 2a-7:
696,601,678.520 107,928,713.910 87,004,634.530 -- 891,535,026.960
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PROPOSAL NO. 3
To approve a new Investment Advisory Agreement to eliminate an expense limitation:
599,802,216.840 212,813,425.350 78,919,384.770 -- 891,535,026.960
14 | CENTENNIAL GOVERNMENT TRUST
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of the Trust has determined that Edward L.
Cameron, the Chairman of the Board's Audit Committee, and George C. Bowen, a
member of the Board's Audit Committee, possess the technical attributes
identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as "audit
committee financial experts," and has designated Messrs. Cameron and Bowen as
the Audit Committee's financial experts. Messrs. Cameron and Bowen are
"independent" Trustees pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable to semiannual reports.
ITEM 5. NOT APPLICABLE
ITEM 6. RESERVED
ITEM 7. NOT APPLICABLE
ITEM 8. NOT APPLICABLE
Item 9. Submission of Matters to a Vote of Security Holders
Not applicable for fiscal periods ending December 31, 2003.
ITEM 10. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(c)) as of December 31, 2003, registrant's
principal executive officer and principal financial officer found
registrant's disclosure controls and procedures to provide reasonable
assurances that information required to be disclosed by registrant in
the reports that it files under the Securities Exchange Act of 1934 (a)
is accumulated and communicated to registrant's management, including
its principal executive officer and principal financial officer, to
allow timely decisions regarding required disclosure, and (b) is
recorded, processed, summarized and reported, within the time periods
specified in the rules and forms adopted by the U.S. Securities and
Exchange Commission.
(b) There have been no significant changes in registrant's internal
controls over financial reporting that occurred during the registrant's
last fiscal half-year that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 11. EXHIBITS.
(A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)