Centennial Money Market Trust
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----------------------------------------
Prospectus dated November 1, 2001 Centennial Money Market Trust is a
money market mutual fund. It seeks
the maximum current income that is
consistent with low capital risk and
maintaining liquidity. The Trust
invests in short-term, high-quality
"money market" instruments.
This Prospectus contains important
information about the Trust's
objective, its investment policies,
strategies and risks. It also
contains important information about
how to buy and sell shares of the
Trust and other account features.
As with all mutual funds, the Please read this Prospectus carefully
Securities and Exchange Commission has before you invest and keep it for
not approved or disapproved the Trust's future reference about your account.
securities nor has it determined that
this Prospectus is accurate or
complete. It is a criminal offense to
represent otherwise.
---------------------------------------------------------------------------------
CONTENTS
A B O U T T H E T R U S T
The Trust's Investment Objective and Strategies
Main Risks of Investing in the Trust
The Trust's Past Performance
Fees and Expenses of the Trust
About the Trust's Investments
I N V E S T I N G I N T H E T R U S T S
This section applies to the prospectuses of Centennial
Money Market Trust, Centennial Tax Exempt Trust and
Centennial Government Trust
How the Trusts are Managed
How to Buy Shares
Automatic Purchase and Redemption Programs
Direct Shareholders
How to Sell Shares
Automatic Purchase and Redemption Programs
Direct Shareholders
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends and Tax Information
Financial Highlights
A B O U T T H E T R U S T
The Trust's Investment Objective and Strategies
WHAT IS THE TRUST'S INVESTMENT OBJECTIVE? The Trust seeks the maximum
current income that is consistent with low capital risk and the maintenance
of liquidity.
WHAT DOES THE TRUST MAINLY INVEST IN? The Trust is a money market fund. It
invests in a variety of high-quality money market instruments to seek
income. Money market instruments are short-term, U.S. dollar denominated
debt instruments issued by the U.S. government, domestic and foreign
corporations and financial institutions and other entities. They include,
for example, bank obligations, repurchase agreements, commercial paper, other
corporate debt obligations and government debt obligations. To be considered
"high-quality," generally they must be rated in one of the two highest
credit-quality categories for short-term securities by nationally recognized
rating services. If unrated, a security must be determined by the Trust's
investment manager to be of comparable quality to rated securities.
WHO IS THE TRUST DESIGNED FOR? The Trust is designed for investors who are
seeking to earn income at current money market rates while preserving the
value of their investment, because the Trust tries to keep its share price
stable at $1.00. Income on money market instruments tends to be lower than
income on longer-term debt securities, so the Trust's yield will likely be
lower than the yield on longer-term fixed income funds. The Trust does not
invest for the purpose of seeking capital appreciation or gains and is not a
complete investment program.
Main Risks of Investing in the Trust
All investments carry risks to some degree. Funds that invest in debt
obligations for income may be subject to credit risks and interest rate
risks. There are risks that any of the Trust's holdings could have its credit
rating downgraded, or the issuer could default, or that interest rates could
rise sharply, causing the value of the Trust's securities (and its share
price) to fall. As a result, there is a risk that the Trust's shares could
fall below $1.00 per share. If there is a high redemption demand for the
Trust's shares that was not anticipated, portfolio securities might have to
be sold prior to their maturity at a loss. Also, there is the risk that the
value of your investment could be eroded over time by the effects of
inflation, and that poor security selection could cause the Trust to
underperform other funds with similar objectives.
------------------------------------------------------------------------------
An investment in the Trust is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Trust seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Trust.
------------------------------------------------------------------------------
The Trust's Past Performance
The bar chart and table below show how the Trust's returns may vary over
time, by showing changes in the Trust's performance from year to year for the
last ten calendar years and its average annual total returns for the 1-, 5-
and 10- year periods. Variability of returns is one measure of the risks of
investing in a money market fund. The Trust's past investment performance
does not predict how the Trust will perform in the future.
Annual Total Returns (as of 12/31 each year)
[See appendix to prospectus for annual total return data for bar chart.]
For the period from 1/1/01 through 9/30/01 the cumulative total return (not
annualized) was 3.15%.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 1.57% (1st Q 91) and the lowest return (not
annualized) for a calendar quarter was 0.65% (1st and 2nd Q 93).
Average Annual Total Returns
for the periods ended December 31, 1 Year 5 Years 10 Years
2000
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Centennial Money Market Trust 5.95% 5.16% 4.70%
(inception 9/8/81)
---------------------------------------------------------------------------------
The returns in the table measure the performance of a hypothetical account
and assume that all dividends have been reinvested in additional shares.
------------------------------------------------------------------------------
The total returns are not the Trust's current yield. The Trust's yield more
closely reflects the Trust's current earnings. To obtain the Trust's
current 7-day yield, please call the Transfer Agent toll-free at
1.800.525.9310.
------------------------------------------------------------------------------
Fees and Expenses of the Trust
The Trust pays a variety of expenses directly for management of its assets,
administration and other services. Those expenses are subtracted from the
Trust's assets to calculate the Trust's net asset value per share. All
shareholders therefore pay those expenses indirectly. The following tables
are meant to help you understand the fees and expenses you may pay if you buy
and hold shares of the Trust. The numbers below are based upon the Trust's
expenses during its fiscal year ended June 30, 2001.
SHAREHOLDER FEES. The Trust does not charge any initial sales charge to buy
shares or to reinvest dividends. There are no exchange fees or redemption
fees and no contingent deferred sales charges (unless you buy Trust shares by
exchanging Class A shares of other eligible funds that were purchased subject
to a contingent deferred sales charge, as described in "How to Sell Shares").
Annual Trust Operating Expenses (deducted from Trust assets):
(% of average daily net assets)
------------------------------------------------------------------------------
Management Fees 0.33%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees 0.20%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Other Expenses 0.14%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total Annual Operating Expenses 0.67%
------------------------------------------------------------------------------
"Other expenses" in the table include transfer agent fees, custodial fees,
and accounting and legal expenses the Trust pays.
EXAMPLE. The following example is intended to help you compare the cost of
investing in the Trust with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in shares of the Trust for the time
periods indicated and reinvest your dividends and distributions. The example
also assumes that your investment has a 5% return each year and that the
Trust's operating expenses remain the same. Your actual costs may be higher
or lower, because expenses will vary over time. Based on these assumptions
your expenses would be as follows, whether or not you redeem your investment
at the end of each period:
-----------------------------------------------------------------------------
1 year 3 years 5 years 10 years
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
$68 $214 $373 $835
-----------------------------------------------------------------------------
About the Trust's Investments
THE TRUST'S PRINCIPAL INVESTMENT POLICIES. The Trust invests in money market
instruments meeting quality, maturity and diversification standards
established by its Board of Trustees as well as rules that apply to money
market funds under the Investment Company Act. The Statement of Additional
Information contains more detailed information about the Trust's investment
policies and risks.
The Trust's investment manager, Centennial Asset Management
Corporation, (referred to in this Prospectus as the Manager) tries to reduce
risks by diversifying investments and by carefully researching securities
before they are purchased. The rate of the Trust's income will vary from day
to day, generally reflecting changes in overall short-term interest rates.
There is no assurance that the Trust will achieve its investment objective.
What Does the Trust Invest In? Money market instruments are high-quality,
short-term debt instruments. They may have fixed, variable or floating
interest rates. All of the Trust's money market instruments must meet
the special diversification, quality and maturity requirements set
under the Investment Company Act and the special procedures set by the
Board described briefly below. The following is a brief description of
the types of money market instruments the Trust can invest in.
o U.S. Government Securities. The Trust invests in obligations issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities. Some are direct obligations of the U.S. Treasury,
such as Treasury bills, notes and bonds, and are supported by the full
faith and credit of the United States. Other U.S. government
securities, such as pass-through certificates issued by the Government
National Mortgage Association (Ginnie Mae), are also supported by the
full faith and credit of the U.S. government. Some government
securities, agencies or instrumentalities of the U.S. government are
supported by the right of the issuer to borrow from the U.S. Treasury,
such as securities of the Federal National Mortgage Corporation (Fannie
Mae). Others may be supported only by the credit of the
instrumentality, such as obligations of the Federal Home Loan Mortgage
Corporation (Freddie Mac).
o Bank Obligations. The Trust can buy time deposits, certificates of
deposit and bankers' acceptances. These obligations must be
denominated in U.S. dollars, even if issued by a foreign bank.
o Commercial Paper. Commercial paper is a short-term, unsecured
promissory note of a domestic or foreign company or other financial
firm. The Trust may buy commercial paper only if it matures in nine
months or less from the date of purchase.
o Corporate Debt Obligations. The Trust can invest in other short-term
corporate debt obligations. Please see "What Standards Apply to the
Trust's Investment?" below for more details.
o Other Money Market Instruments. The Trust can invest in money market
obligations other than those listed above if they are subject to
repurchase agreements or guaranteed as to their principal and interest
by a corporation whose commercial paper may be purchased by the Trust
or by a domestic bank. The bank must meet credit criteria set by the
Board.
Additionally, the Trust can buy other money market instruments that the
Manager approves under procedures adopted by the Board of Trustees from time
to time. They must be U.S. dollar-denominated short-term investments that
the Manager must determine to have minimal credit risks.
Currently, the Board has approved the purchase of dollar-denominated
obligations of foreign banks payable in the U.S. or in London, England,
floating or variable rate demand notes, asset-backed securities, and bank
loan participation agreements. Their purchase may be subject to restrictions
adopted by the Board from time to time.
What Standards Apply to the Trust's Investments? Money market instruments are
subject to credit risk, the risk that the issuer might not make timely
payments of interest on the security or repay principal when it is
due. The Trust can buy only those instruments that meet standards set
by the Investment Company Act for money market funds and procedures
adopted by the Board of Trustees. The Trust's Board of Trustees has
adopted procedures to evaluate securities for the Trust's portfolio and
the Manager has the responsibility to implement those procedures when
selecting investments for the Trust.
In general, the Trust buys only high-quality investments that the Manager
believes present minimal credit risk at the time of purchase. "High-quality"
investments are:
o rated in one of the two highest short-term rating categories of two
national rating organizations, or
o rated by one rating organization in one of its two highest rating
categories (if only one rating organization has rated the investment),
or
o unrated investments that the Manager determines are comparable in
quality to the two highest rating categories.
The procedures also limit the amount of the Trust's assets that can be
invested in the securities of any one issuer (other than the U.S.
government, its agencies and instrumentalities), to spread the Trust's
investment risks. No security's maturity will exceed the maximum time
permitted under Rule 2a-7 (currently 397 days). Finally, the Trust
must maintain a dollar-weighted average portfolio maturity of not more
than 90 days, to reduce interest rate risks.
Can the Trust's Investment Objective and Policies Change? The Trust's Board
of Trustees can change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments
to this Prospectus. Fundamental policies cannot be changed without the
approval of a majority of the Trust's outstanding voting shares. The
Trust's investment objective is a fundamental policy. Some investment
restrictions that are fundamental policies are listed in the Statement
of Additional Information. An investment policy is not fundamental
unless this Prospectus or the Statement of Additional Information says
that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Trust can use the
investment techniques and strategies described below. The Trust might not
always use all of them. These techniques have risks. The Statement of
Additional Information contains more information about some of these
practices, including limitations on their use that are designed to reduce the
overall risks.
Floating Rate/Variable Rate Notes. The Trust can purchase investments with
floating or variable interest rates. Variable rates are adjustable at
stated periodic intervals. Floating rates are adjusted automatically
according to a specified market rate or benchmark for such investments,
such as the prime rate of a bank. If the maturity of an investment is
greater than the maximum time permitted under Rule 2a-7 (currently 397
days), it can be purchased if it has a demand feature. That feature
must permit the Trust to recover the principal amount of the investment
on not more than 30 days' notice at any time, or at specified times not
exceeding the maximum time permitted under Rule 2a-7.
Asset-Backed Securities. The Trust can invest in asset-backed securities.
These are fractional interests in pools of consumer loans and other
trade receivables, which are the obligations of a number of different
parties. The income from the underlying pool is passed through to
investors, such as the Trust. These investments might be supported by
a credit enhancement, such as a letter of credit, a guarantee or a
preference right. However, the credit enhancement generally applies
only to a fraction of the security's value. If the issuer of the
security has no security interest in the related collateral, there is
the risk that the Trust could lose money if the issuer defaults.
Repurchase Agreements. The Trust can enter into repurchase agreements. In a
repurchase transaction, the Trust buys a security and simultaneously
sells it to the vendor for delivery at a future date. Repurchase
agreements must be fully collateralized. However, if the vendor fails
to pay the resale price on the delivery date, the Trust may incur costs
in disposing of the collateral and may experience losses if there is
any delay in its ability to do so. The Trust will not enter into
repurchase transactions that will cause more than 10% of the Trust's
net assets to be subject to repurchase agreements having a maturity
beyond seven days. There is no limit on the amount of the Trust's net
assets that may be subject to repurchase agreements of seven days or
less.
Illiquid and Restricted Securities. Investments may be illiquid because they
do not have an active trading market, making it difficult to value them
or dispose of them promptly at an acceptable price. A restricted
security is one that has a contractual limit on resale or which cannot
be sold publicly until it is registered under federal securities laws.
The Trust will not invest more than 10% of its net assets in illiquid
or restricted securities. That limit does not apply to certain
restricted securities that are eligible for resale to qualified
institutional purchasers or purchases of commercial paper that may be
sold without registration under the federal securities laws. The Trust
may invest up to 25% of its net assets in restricted securities,
subject to the 10% limit on illiquid securities and restricted
securities other than those sold to qualified institutional
purchasers. The Manager monitors holdings of illiquid securities on an
ongoing basis to determine whether to sell any holdings to maintain
adequate liquidity. Difficulty in selling a security may result in a
loss to the Trust or additional costs.
Centennial Tax Exempt Trust
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----------------------------------------
Prospectus dated November 1, 2001 Centennial Tax Exempt Trust is a money
market mutual fund. It seeks the
maximum short-term interest income
exempt from federal income taxes that
is consistent with low capital risk
and the maintenance of liquidity. The
Trust invests in short-term, high
quality "money market" securities.
This Prospectus contains important
information about the Trust's
objective, its investment policies,
strategies and risks. It also
contains important information about
how to buy and sell shares of the
As with all mutual funds, the Trust and other account features.
Securities and Exchange Commission has Please read this Prospectus carefully
not approved or disapproved the Trust's before you invest and keep it for
securities nor has it determined that future reference about your account.
this Prospectus is accurate or
complete. It is a criminal offense to
represent otherwise.
---------------------------------------------------------------------------------
<PAGE>
2
CONTENTS
A B O U T T H E T R U S T
The Trust's Investment Objective and Strategies
Main Risks of Investing in the Trust
The Trust's Past Performance
Fees and Expenses of the Trust
About the Trust's Investments
I N V E S T I N G I N T H E T R U S T S
This section applies to the prospectuses of Centennial
Money Market Trust, Centennial Tax Exempt Trust and
Centennial Government Trust
How the Trusts are Managed
How to Buy Shares
Automatic Purchase and Redemption Programs
Direct Shareholders
How to Sell Shares
Automatic Purchase and Redemption Programs
Direct Shareholders
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends and Tax Information
Financial Highlights
<PAGE>
20
A B O U T T H E T R U S T
The Trust's Investment Objective and Strategies
WHAT IS THE TRUST'S INVESTMENT OBJECTIVE? The Trust seeks the maximum
short-term interest income exempt from federal income taxes that is
consistent with low capital risk and the maintenance of liquidity.
WHAT DOES THE TRUST MAINLY INVEST IN? The Trust is a money market fund. It
invests in a variety of high-quality money market instruments to seek
income. Money market instruments are short-term, U.S. dollar denominated
debt instruments issued by the U.S. government, domestic and foreign
corporations and financial institutions and other entities. They include,
for example, bank obligations, repurchase agreements, commercial paper, other
corporate debt obligations and government debt obligations. To be considered
"high-quality," generally they must be rated in one of the two highest
credit-quality categories for short-term securities by nationally recognized
rating services. If unrated, a security must be determined by the Trust's
investment manager to be of comparable quality to rated securities.
The Trust normally invests 100% of its assets in municipal securities.
It will not make any investment that will reduce the portion of its total
assets that are invested in municipal securities to less than 80%. The
balance of the Trust's assets can be invested in investments the income from
which may be taxable. The Trust will not invest more than 20% of its net
assets in municipal securities the income on which may be a tax preference
item that would increase an individual investor's alternative minimum tax.
WHO IS THE TRUST DESIGNED FOR? The Trust is designed for investors who are
seeking income at current money market rates while preserving the value of
their investment, because the Trust tries to keep its share price stable at
$1.00. Income on money market instruments tends to be lower than income on
longer-term debt securities, so the Trust's yield will likely be lower than
the yield on longer-term fixed income funds. The Trust does not invest for
the purpose of seeking capital appreciation or gains and is not a complete
investment program.
Main Risks of Investing in the Trust
All investments carry risks to some degree. Funds that invest in debt
obligations for income may be subject to credit risks and interest rate
risks. There are risks that any of the Trust's holdings could have its credit
rating downgraded, or the issuer could default, or that interest rates could
rise sharply, causing the value of the Trust's securities (and its share
price) to fall. As a result, there is a risk that the Trust's shares could
fall below $1.00 per share. If there is a high redemption demand for the
Trust's shares that was not anticipated, portfolio securities might have to
be sold prior to their maturity at a loss. Also, there is the risk that the
value of your investment could be eroded over time by the effects of
inflation, and that poor security selection could cause the Trust to
underperform other funds with similar objectives.
------------------------------------------------------------------------------
An investment in the Trust is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Trust seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Trust.
------------------------------------------------------------------------------
The Trust's Past Performance
The bar chart and table below show how the Trust's returns may vary over
time, by showing changes in the Trust's performance from year to year for the
last ten calendar years and average annual total returns for the 1-, 5- and
10- year periods. Variability of returns is one measure of the risks of
investing in a money market fund. The Trust's past investment performance
does not predict how the Trust will perform in the future.
Annual Total Returns (as of 12/31 each year)
[See appendix to prospectus for annual total return data for bar chart.]
For the period from 1/1/01 through 9/30/01 the cumulative total return (not
annualized) was 1.90%.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 1.11% (1st Q '91) and the lowest return for a
calendar quarter (not annualized) was 0.44% (1st Q '94).
Average Annual Total Returns
for the periods ended December 31, 1 Year 5 Years 10 Years
2000
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Centennial Tax Exempt Trust 3.42% 3.01% 2.97%
(inception 9/8/81)
---------------------------------------------------------------------------------
The returns in the table measure the performance of a hypothetical account
and assume that all dividends have been reinvested in additional shares.
------------------------------------------------------------------------------
The total returns are not the Trust's current yield. The Trust's yield more
closely reflects the Trust's current earnings. To obtain the Trust's current
7-day yield, please call the Transfer Agent toll-free at 1.800.525.9310.
------------------------------------------------------------------------------
Fees and Expenses of the Trust
The Trust pays a variety of expenses directly for management of its assets,
administration and other services. Those expenses are subtracted from the
Trust's assets to calculate the Trust's net asset value per share. All
shareholders therefore pay those expenses indirectly. The following tables
are meant to help you understand the fees and expenses you may pay if you buy
and hold shares of the Trust. The numbers below are based upon the Trust's
expenses during its fiscal year ended June 30, 2001.
SHAREHOLDER FEES. The Trust does not charge any initial sales charge to buy
shares or to reinvest dividends. There are no exchange fees or redemption
fees and no contingent deferred sales charges (unless you buy Trust shares by
exchanging Class A shares of other eligible funds that were purchased subject
to a contingent deferred sales charge, as described in "How to Sell Shares").
Annual Trust Operating Expenses (deducted from Trust assets):
(% of average daily net assets)
------------------------------------------------------------------------------
Management Fees 0.42%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees 0.20%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Other Expenses 0.08%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total Annual Operating Expenses 0.70%
------------------------------------------------------------------------------
"Other expenses" in the table include transfer agent fees, custodial fees,
and accounting and legal expenses the Trust pays.
EXAMPLE. The following example is intended to help you compare the cost of
investing in the Trust with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in shares of the Trust for the time
periods indicated and reinvest your dividends and distributions. The example
also assumes that your investment has a 5% return each year and that the
Trust's operating expenses remain the same. Your actual costs may be higher
or lower, because expenses will vary over time. Based on these assumptions
your expenses would be as follows, whether or not you redeem your investment
at the end of each period:
-----------------------------------------------------------------------------
1 year 3 years 5 years 10 years
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
$72 $224 $390 $871
-----------------------------------------------------------------------------
About the Trust's Investments
THE TRUST'S PRINCIPAL INVESTMENT POLICIES. The Trust invests in money market
instruments meeting quality, maturity and diversification standards
established by its Board of Trustees as well as rules that apply to money
market funds under the Investment Company Act. The Statement of Additional
Information contains more detailed information about the Trust's investment
policies and risks.
The Trust's investment manager, Centennial Asset Management
Corporation, (referred to in this Prospectus as the Manager) tries to reduce
risks by diversifying investments and by carefully researching securities
before they are purchased. The rate of the Trust's income will vary from day
to day, generally reflecting changes in overall short-term interest rates.
There is no assurance that the Trust will achieve its investment objective.
What Does the Trust Invest In? Money market instruments are high-quality,
short-term debt instruments. They may have fixed, variable or floating
interest rates. All of the Trust's money market instruments must meet
the special diversification, quality and maturity requirements set
under the Investment Company Act and the special procedures set by the
Board described briefly below. The following is a brief description of
the types of money market instruments the Trust can invest in.
o Municipal Securities. The Trust buys municipal bonds and notes,
tax-exempt commercial paper, certificates of participation in municipal
leases and other debt obligations. These are debt obligations issued
by the governments of states, their political subdivisions (such as
cities, towns and counties), or the District of Columbia, or by their
agencies, instrumentalities and authorities, if the interest paid on
the security is not subject to federal individual income tax in the
opinion of bond counsel to the issuer. All of these types of debt
obligations are referred to as "municipal securities" in this
Prospectus.
o Other Money Market Instruments. Additionally, the Trust can buy other
money market instruments that the Manager approves under procedures
adopted by the Board of Trustees from time to time. They must be U.S.
dollar-denominated short-term investments that the Manager must
determine to have minimal credit risks.
What Standards Apply to the Trust's Investments? Money market instruments are
subject to credit risk, the risk that the issuer might not make timely
payments of interest on the security or repay principal when it is due.
The Trust can buy only those instruments that meet standards set by the
Investment Company Act for money market funds and procedures adopted by
the Board of Trustees. The Trust's Board of Trustees has adopted
procedures to evaluate securities for the Trust's portfolio and the
Manager has the responsibility to implement those procedures when
selecting investments for the Trust.
In general, the Trust buys only high-quality investments that the Manager
believes present minimal credit risk at the time of purchase. "High-quality"
investments are:
o rated in one of the two highest short-term rating categories of two
national rating organizations, or
o rated by one rating organization in one of its two highest rating
categories (if only one rating organization has rated the investment),
or
o unrated investments that the Manager determines are comparable in
quality to the two highest rating categories.
The procedures also limit the amount of the Trust's assets that can be
invested in the securities of any one issuer (other than the U.S. government,
its agencies and instrumentalities), to spread the Trust's investment risks.
The Trust must also maintain an average portfolio maturity of not more than
90 days, to reduce interest rate risks. Additionally, the remaining maturity
of any single portfolio investment may not exceed the maximum time permitted
under Rule 2a-7 (currently 397 days).
Can the Trust's Investment Objective and Policies Change? The Trust's Board
of Trustees can change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments
to this Prospectus. Fundamental policies cannot be changed without the
approval of a majority of the Trust's outstanding voting shares. The
Trust's investment objective is a fundamental policy. Some investment
restrictions that are fundamental policies are listed in the Statement
of Additional Information. An investment policy is not fundamental
unless this Prospectus or the Statement of Additional Information says
that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Trust can use the
investment techniques and strategies described below. The Trust might not
always use all of them. These techniques have risks. The Statement of
Additional Information contains more information about some of these
practices, including limitations on their use that are designed to reduce the
overall risks.
Floating Rate/Variable Rate Notes. The Trust can purchase investments with
floating or variable interest rates. Variable rates are adjustable at
stated periodic intervals. Floating rates are adjusted automatically
according to a specified market rate or benchmark for such investment,
such as the prime rate of a bank. If the maturity of an investment is
greater than the maximum time permitted under Rule 2a-7 (currently 397
days), it can be purchased if it has a demand feature. That feature
must permit the Trust to recover the principal amount of the investment
on not more than 30 days' notice at any time, or at specified times not
exceeding the maximum time permitted under Rule 2a-7 (currently 397
days) from the date of purchase.
"When-Issued" and "Delayed-Delivery" Transactions. The Trust can purchase
municipal securities on a "when-issued" basis and can purchase or sell
such securities on a "delayed-delivery" basis. These terms refer to
securities that have been created and for which a market exists, but
which are not available for immediate delivery. The Trust does not
intend to make such purchases for speculative purposes. During the
period between the purchase and settlement, no payment is made for the
security and no interest accrues to the buyer from the investment.
There is a risk of loss to the Trust if the value of the security
declines prior to the settlement date.
Municipal Lease Obligations. Municipal leases are used by state and local
governments to obtain funds to acquire land, equipment or facilities.
The Trust can invest in certificates of participation that represent a
proportionate interest in payments made under municipal lease
obligations. If the government stops making payments or transfers its
payment obligations to a private entity, the obligation could lose
value or become taxable. Some of these obligations might not have an
active trading market and would be subject to the Trust's limits on
"illiquid" securities described below. From time to time the Trust can
invest more than 5% of its net assets in municipal lease obligations
that the Manager has determined to be liquid under guidelines set by
the Trust's Board of Trustees.
Repurchase Agreements. The Trust can enter into repurchase agreements. In a
repurchase transaction, the Trust buys a security and simultaneously
sells it to the vendor for delivery at a future date. Repurchase
agreements must be fully collateralized. However, if the vendor fails
to pay the resale price on the delivery date, the Trust may incur costs
in disposing of the collateral and may experience losses if there is
any delay in its ability to do so. The Trust ordinarily will not enter
into repurchase transactions that will cause more than 10% of the
Trust's net assets to be subject to repurchase agreements having a
maturity beyond seven days. However, when the Trust assumes a temporary
defensive position, there is no limit on the amount of the Trust's
assets that may be subject to repurchase agreements having a maturity
of seven days or less. Income earned on repurchase transactions is not
tax-exempt. The Trust normally will limit its investments in repurchase
transactions to 20% of its total assets.
Illiquid and Restricted Securities. Investments may be illiquid because they
do not have an active trading market, making it difficult to value them
or dispose of them promptly at an acceptable price. A restricted
security is one that has a contractual limit on resale or which cannot
be sold publicly until it is registered under federal securities laws.
The Trust will not invest more than 10% of its net assets in illiquid
or restricted securities. That limit does not apply to certain
restricted securities that are eligible for resale to qualified
institutional purchasers or purchases of commercial paper that may be
sold without registration under the federal securities laws. The
Manager monitors holdings of illiquid securities on an ongoing basis to
determine whether to sell any holdings to maintain adequate liquidity.
Difficulty in selling a security may result in a loss to the Trust or
additional costs.
Demand Features and Guarantees. The Trust can invest a significant percentage
of its assets in municipal securities that have demand features,
guarantees or similar credit and liquidity enhancements. A demand
feature permits the holder of the security to sell the security within
a specified period of time at a stated price and entitles the holder of
the security to receive an amount equal to the approximate amortized
cost of the security plus accrued interest. A guarantee permits the
holder of the security to receive, upon presentment to the guarantor,
the principal amount of the underlying security plus accrued interest
when due or upon default. A guarantee is the unconditional obligation
of an entity other than the issuer of the security. These securities
are described in the Statement of Additional Information.
Temporary Defensive and Interim Investments. In times of unstable adverse
market or economic conditions, the Trust can invest up to 100% of its
assets in temporary defensive or interim investments that are
inconsistent with the Trust's principal investment strategies. These
temporary investments can include:
o obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities,
o bankers' acceptances; taxable commercial paper rated in the highest
category by a rating organization,
o short-term taxable debt obligations rated in one of the two highest
rating categories of a rating organization,
o certificates of deposit of domestic banks, and
o repurchase agreements.
To the extent the Trust assumes a temporary defensive position, a
significant portion of the Trust's distributions may be taxable.
Centennial Government Trust
---------------------------------------------------------------------------------
----------------------------------------
Prospectus dated November 1, 2001 Centennial Government Trust is a money
market mutual fund. It seeks a high
level of current income consistent
with preserving capital and
maintaining liquidity. The Trust
invests in short-term, high-quality
"money market" investments.
This Prospectus contains important
information about the Trust's
objective, its investment policies,
strategies and risks. It also
contains important information about
how to buy and sell shares of the
Trust and other account features.
As with all mutual funds, the Please read this Prospectus carefully
Securities and Exchange Commission has before you invest and keep it for
not approved or disapproved the Trust's future reference about your account.
securities nor has it determined that
this Prospectus is accurate or
complete. It is a criminal offense to
represent otherwise.
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2
CONTENTS
A B O U T T H E T R U S T
The Trust's Investment Objective and Strategies
Main Risks of Investing in the Trust
The Trust's Past Performance
Fees and Expenses of the Trust
About the Trust's Investments
I N V E S T I N G I N T H E T R U S T S
This section applies to the prospectuses of Centennial
Money Market Trust, Centennial Tax Exempt Trust and
Centennial Government Trust
How the Trusts are Managed
How to Buy Shares
Automatic Purchase and Redemption Programs
Direct Shareholders
How to Sell Shares
Automatic Purchase and Redemption Programs
Direct Shareholders
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends and Tax Information
Financial Highlights
19
A B O U T T H E T R U S T
The Trust's Investment Objective and Strategies
WHAT IS THE TRUST'S INVESTMENT OBJECTIVE? The Trust seeks a high level of
current income that is consistent with the preservation of capital and the
maintenance of liquidity.
WHAT DOES THE TRUST MAINLY INVEST IN? The Trust is a money market fund. It
invests in a variety of high-quality money market instruments to seek
income. The Trust invests principally in short-term, U.S. dollar denominated
debt instruments issued by the U.S. government, its agencies and
instrumentalities. To be considered "high-quality," generally they must be
rated in one of the two highest credit-quality categories for short-term
securities by nationally recognized rating services. If unrated, a security
must be determined by the Trust's investment manager to be of comparable
quality to rated securities.
WHO IS THE TRUST DESIGNED FOR? The Trust is designed for investors who are
seeking income at current money market rates while preserving the value of
their investment, because the Trust tries to keep its share price stable at
$1.00. Income on money market instruments tends to be lower than income on
longer-term debt securities, so the Trust's yield will likely be lower than
the yield on longer-term fixed income funds. The Trust does not invest for
the purpose of seeking capital appreciation or gains and is not a complete
investment program.
Main Risks of Investing in the Trust
All investments carry risks to some degree. Funds that invest in debt
obligations for income may be subject to credit risks and interest rate
risks. There are risks that any of the Trust's holdings could have its credit
rating downgraded, or the issuer could default, or that interest rates could
rise sharply, causing the value of the Trust's investments (and its share
price) to fall. As a result, there is a risk that the Trust's shares could
fall below $1.00 per share. If there is a high redemption demand for the
Trust's shares that was not anticipated, portfolio securities might have to
be sold prior to their maturity at a loss. Also, there is the risk that the
value of your investment could be eroded over time by the effects of
inflation, and that poor security selection could cause the Trust to
underperform other funds with similar objectives.
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An investment in the Trust is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Trust seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Trust.
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The Trust's Past Performance
The bar chart and table below show how the Trust's returns may vary over
time, by showing changes in the Trust's performance from year to year for the
last ten calendar years and average annual total returns for the 1-, 5- and
10- year periods. Variability of returns is one measure of the risks of
investing in a money market fund. The Trust's past investment performance
does not predict how the Trust will perform in the future.
Annual Total Returns (as of 12/31 each year)
[See appendix to prospectus for annual total return data for bar chart.]
For the period from 1/1/01 through 9/30/01 the cumulative total return (not
annualized) was 3.04%.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 1.52% (1st Q '91) and the lowest return (not
annualized) for a calendar quarter was 0.63% (1st Q '93).
Average Annual Total Returns
for the periods ended December 31, 1 Year 5 Years 10 Years
2000
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Centennial Government Trust 5.71% 4.91% 4.55%
(inception 10/5/81)
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The returns in the table measure the performance of a hypothetical account
and assume that all dividends have been reinvested in additional shares.
------------------------------------------------------------------------------
The total returns are not the Trust's current yield. The Trust's yield more
closely reflects the Trust's current earnings. To obtain the Trust's current
7-day yield, please call the Transfer Agent toll-free at 1.800.525.9310.
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Fees and Expenses of the Trust
The Trust pays a variety of expenses directly for management of its assets,
administration and other services. Those expenses are subtracted from the
Trust's assets to calculate the Trust's net asset value per share. All
shareholders therefore pay those expenses indirectly. The following tables
are meant to help you understand the fees and expenses you may pay if you buy
and hold shares of the Trust. The numbers below are based upon the Trust's
expenses during its fiscal year ended June 30, 2001.
SHAREHOLDER FEES. The Trust does not charge any initial sales charge to buy
shares or to reinvest dividends. There are no exchange fees or redemption
fees and no contingent deferred sales charges (unless you buy Trust shares by
exchanging Class A shares of other eligible funds that were purchased subject
to a contingent deferred sales charge, as described in "How to Sell Shares").
Annual Trust Operating Expenses (deducted from Trust assets):
(% of average daily net assets)
------------------------------------------------------------------------------
Management Fees 0.44%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees 0.20%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Other Expenses 0.09%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total Annual Operating Expenses 0.73%
------------------------------------------------------------------------------
"Other expenses" in the table include transfer agent fees, custodial fees,
and accounting and legal expenses the Trust pays.
EXAMPLE. The following example is intended to help you compare the cost of
investing in the Trust with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in shares of the Trust for the time
periods indicated and reinvest your dividends and distributions. The example
also assumes that your investment has a 5% return each year and that the
Trust's operating expenses remain the same. Your actual costs may be higher
or lower, because expenses will vary over time. Based on these assumptions
your expenses would be as follows whether or not you redeem your investment
at the end of each period:
-----------------------------------------------------------------------------
1 year 3 years 5 years 10 years
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
$75 $233 $406 $906
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About the Trust's Investments
THE TRUST'S PRINCIPAL INVESTMENT POLICIES. The Trust invests in money market
instruments meeting quality, maturity and diversification standards
established by its Board of Trustees as well as rules that apply to money
market funds under the Investment Company Act. The Statement of Additional
Information contains more detailed information about the Trust's investment
policies and risks.
The Trust's investment manager, Centennial Asset Management
Corporation, (referred to in this Prospectus as the Manager) tries to reduce
risks by diversifying investments and by carefully researching securities
before they are purchased. The rate of the Trust's income will vary from day
to day, generally reflecting changes in overall short-term interest rates.
There is no assurance that the Trust will achieve its investment objective.
What Does the Trust Invest In? Money market instruments are high-quality,
short-term debt instruments. They may have fixed, variable or floating
interest rates. All of the Trust's money market instruments must meet
the special diversification, quality and maturity requirements set
under the Investment Company Act and the special procedures set by the
Board described briefly below. The following is a brief description of
the types of money market instruments the Trust can invest in.
o U.S. Government Securities. The Trust invests mainly in obligations
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities. Some are direct obligations of the U.S. Treasury,
such as Treasury bills, notes and bonds, and are supported by the full
faith and credit of the United States. Other U.S. government
securities, such as pass-through certificates issued by the Government
National Mortgage Association (Ginnie Mae), are also supported by the
full faith and credit of the U.S. government. Some government
securities, agencies or instrumentalities of the U.S. government are
supported by the right of the issuer to borrow from the U.S. Treasury,
such as securities of the Federal National Mortgage Corporation (Fannie
Mae). Others may be supported only by the credit of the
instrumentality, such as obligations of the Federal Home Loan Mortgage
Corporation (Freddie Mac).
o Other Money Market Instruments. The Trust can invest in variable rate
notes, variable rate master demand notes or in master demand notes.
The Trust can also purchase other debt obligations with a length of
permitted maturity to up to the maximum permitted under Rule 2a-7
(currently 397 days) from the date of purchase. It may purchase debt
obligations that have been called for redemption by the issuer if the
redemption will occur within the length of permitted maturity to up to
the maximum permitted under Rule 2a-7 (currently 397 days). Please
refer to "What Standards Apply to the Trust's Investments?" below for
more details.
Additionally, the Trust can buy other money market instruments that the
Manager approves under procedures adopted by its Board of Trustees from time
to time. They must be U.S. dollar-denominated short-term investments that
the Manager must determine to have minimal credit risks.
What Standards Apply to the Trust's Investments? Money market instruments
are subject to credit risk, the risk that the issuer might not make
timely payments of interest on the security or repay principal when it
is due. The Trust can buy only those instruments that meet standards
set by the Investment Company Act for money market funds and procedures
adopted by the Board of Trustees. The Trust's Board of Trustees has
adopted procedures to evaluate securities for the Trust's portfolio and
the Manager has the responsibility to implement those procedures when
selecting investments for the Trust.
In general, the Trust buys only high-quality investments that the Manager
believes present minimal credit risk at the time of purchase. "High-quality"
investments are:
o rated in one of the two highest short-term rating categories of two
national rating organizations, or
o rated by one rating organization in one of its two highest rating
categories (if only one rating organization has rated the investment),
or
o unrated investments that the Manager determines are comparable in
quality to the two highest rating categories.
The procedures also limit the amount of the Trust's assets that can be
invested in the securities of any one issuer (other than the U.S. government,
its agencies and instrumentalities), to spread the Trust's investment risks.
According to the standards, the Trust can invest without limit in U.S.
government securities because of their limited investment risks. No
security's maturity will exceed the maximum time permitted under Rule 2a-7
(currently 397 days). Finally, the Trust must maintain a dollar-weighted
average portfolio maturity of not more than 90 days, to reduce interest rate
risks.
Can the Trust's Investment Objective and Policies Change? The Trust's Board
of Trustees can change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments
to this Prospectus. Fundamental policies cannot be changed without the
approval of a majority of the Trust's outstanding voting shares. The
Trust's investment objective is a fundamental policy. Some of the
investment restrictions that are fundamental policies are listed in the
Statement of Additional Information. An investment policy is not
fundamental unless this Prospectus or the Statement of Additional
Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Trust can use the
investment techniques and strategies described below. The Trust might not
always use all of them. These techniques have risks. The Statement of
Additional Information contains more information about some of these
practices, including limitations on their use that are designed to reduce the
overall risks.
Floating Rate/Variable Rate Notes. The Trust can purchase investments with
floating or variable interest rates. Variable rates are adjustable at
stated periodic intervals. Floating rates are adjusted automatically
according to a specified market rate or benchmark for such investment,
such as the prime rate of a bank. If the maturity of an investment is
greater than the maximum time permitted under Rule 2a-7 (currently 397
days), it can be purchased if it has a demand feature. That feature
must permit the Trust to recover the principal amount of the investment
on not more than 30 days' notice at any time, or at specified times not
exceeding the maximum time permitted under Rule 2a-7 (currently 397
days).
Repurchase Agreements. The Trust can enter into repurchase agreements. In a
repurchase transaction, the Trust buys a security and simultaneously
sells it to the vendor for delivery at a future date. Repurchase
agreements must be fully collateralized. However, if the vendor fails
to pay the resale price on the delivery date, the Trust may incur costs
in disposing of the collateral and may experience losses if there is
any delay in its ability to do so. The Trust will not enter into
repurchase transactions that will cause more than 10% of the Trust's
net assets to be subject to repurchase agreements having a maturity
beyond seven days. There is no limit on the amount of the Trust's net
assets that may be subject to repurchase agreements maturing in seven
days or less.
Illiquid and Restricted Securities. Investments may be illiquid because they
do not have an active trading market, making it difficult to value them
or dispose of them promptly at an acceptable price. A restricted
security is one that has a contractual limit on resale or which cannot
be sold publicly until it is registered under federal securities laws.
The Trust will not invest more than 10% of its net assets in illiquid
securities. That limit does not apply to certain restricted securities
that are eligible for resale to qualified institutional purchasers or
purchases of commercial paper that may be sold without registration
under the federal securities laws. The Manager monitors holdings of
illiquid securities on an ongoing basis to determine whether to sell
any holdings to maintain adequate liquidity. Difficulty in selling a
security may result in a loss to the Trust or additional costs.
I N V E S T I N G I N T H E T R U S T S
The information below applies to Centennial Money Market Trust, Centennial
Tax Exempt Trust and Centennial Government Trust. Each is referred to as a
"Trust" and they are collectively referred to as the "Trusts." Unless
otherwise indicated, this information applies to each Trust.
How the Trusts are Managed
THE MANAGER. The investment advisor for the Trusts is the Manager, Centennial
Asset Management Corporation, a wholly owned subsidiary of OppenheimerFunds,
Inc. The Manager chooses each of the Trust's investments and handles its
day-to-day business. The Manager carries out its duties subject to the
policies established by the Trust's Board of Trustees, under an investment
advisory agreement with each Trust that states the Manager's
responsibilities. The agreement sets the fees the Trust pays to the Manager
and describes the expenses that the Trust is responsible to pay to conduct
its business.
The Manager has been an investment advisor since 1978. The Manager and
its affiliates managed assets of more than $115 billion as of September 30,
2001, including more than 65 funds having more than 5 million shareholder
accounts. The Manager is located at 6803 South Tucson Way, Englewood,
Colorado 80112.
Portfolio Managers. The portfolio managers of the Trusts are the persons
principally responsible for the day-to-day management of the Trusts'
portfolios. The portfolio managers of Centennial Money Market Trust
and Centennial Government Trust are Carol E. Wolf and Barry D. Weiss.
Ms. Wolf has had this responsibility since November 1988 and Mr. Weiss,
since August 2001. Ms. Wolf is a Senior Vice President of the Manager
and Mr. Weiss is a Vice President, and each is an officer and portfolio
manager of other funds for which the Manager or an affiliate serves as
investment advisor. The portfolio manager of Centennial Tax Exempt
Trust is Michael Carbuto (since October 1987). Mr. Carbuto is a Vice
President of OppenheimerFunds, Inc. and is an officer and portfolio
manager of other funds for which the Manager or an affiliate serves as
investment advisor.
Advisory Fees. Under each investment advisory agreement, a Trust pays the
Manager an advisory fee at an annual rate that declines on additional
assets as the Trust grows. That fee is computed on the average annual
net assets of the respective Trust as of the close of each business
day.
o Centennial Money Market Trust. The annual management fee rates are:
0.500% of the first $250 million of the Trust's net assets; 0.475% of
the next $250 million; 0.450% of the next $250 million; 0.425% of the
next $250 million; 0.400% of the next $250 million; 0.375% of the next
$250 million; 0.350% of the next $500 million; and 0.325% of net assets
in excess of $2 billion. In the agreement, the Manager guarantees that
the Trust's total expenses in any fiscal year, exclusive of taxes,
interest and brokerage commissions, and extraordinary expenses such as
litigation costs, shall not exceed the lesser of (1) 1.5% 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 (2) 25% of the
total annual investment income of the Trust. Centennial Money Market
Trust's management fee for its fiscal year ended June 30, 2001 was
0.33% of the Trust's average annual net assets.
o Centennial Government Trust. The annual management fee rates are:
0.500% of the first $250 million of the Trust's net assets; 0.475% of
the next $250 million; 0.450% of the next $250 million; 0.425% of the
next $250 million; 0.400% of the next $250 million; 0.375% of the next
$250 million; and 0.350% of net assets in excess of $1.5 billion. The
Manager has made the same guarantee to Centennial Government Trust
regarding expenses as described above for Centennial Money Market
Trust. The Trust's management fee for its fiscal year ended June 30,
2001 was 0.44% of the Trust's average annual net assets.
o Centennial Tax Exempt Trust. The annual management fee rates
applicable to the Trust are as follows: 0.500% of the first $250
million of the Trust's net assets; 0.475% of the next $250 million;
0.450% of the next $250 million; 0.425% of the next $250 million;
0.400% of the next $250 million; 0.375% of the next $250 million;
0.350% of the next $500 million; and 0.325% of net assets in excess of
$2 billion. Under the agreement, when the value of the Trust's net
assets is less than $1.5 billion, the annual fee payable to the Manager
shall be reduced by $100,000 based on average net assets computed daily
and paid monthly at the annual rates. However, the annual fee cannot
be less than $0. The Trust's management fee for its fiscal year ended
June 30, 2001 was 0.42% of the Trust's average annual net assets.
How to Buy Shares
AT WHAT PRICE ARE SHARES SOLD? Shares of each Trust are sold at their
offering price, which is the net asset value per share without any sales
charge. The net asset value per share will normally remain fixed at $1.00
per share. However, there is no guarantee that a Trust will maintain a
stable net asset value of $1.00 per share.
The offering price that applies to a purchase order is based on the
next calculation of the net asset value per share that is made after the
Distributor or the Sub-Distributor (OppenheimerFunds Distributor, Inc.)
receives the purchase order at its offices in Colorado, or after any agent
appointed by the Sub-Distributor receives the order and sends it to the
Sub-Distributor as described below.
How is a Trust's Net Asset Value Determined? The net asset value of shares
of each Trust is determined twice each day, at 12:00 Noon and at 4:00
P.M., on each day The New York Stock Exchange is open for trading
(referred to in this Prospectus as a "regular business day"). All
references to time in this Prospectus mean "New York time."
The net asset value per share is determined by dividing the value of a
Trust's net assets by the number of shares that are outstanding. Under a
policy adopted by the Board of Trustees of the Trusts, each Trust uses the
amortized cost method to value its securities to determine net asset value.
The shares of each Trust offered by this Prospectus are considered to
be Class A shares for the purposes of exchanging them or reinvesting
distributions among other eligible funds that offer more than one class of
shares.
HOW MUCH MUST YOU INVEST? You can open an account with a minimum initial
investment described below, depending on how you buy and pay for your
shares. You can make additional purchases at any time with as little as
$25. The minimum investment requirements do not apply to reinvesting
distributions from the Trust or other eligible funds (a list of them appears
in the Statement of Additional Information, or you can ask your broker-dealer
or call the Transfer Agent) or reinvesting distributions from unit investment
trusts that have made arrangements with the Distributor.
HOW ARE SHARES PURCHASED? You can buy shares in one of several ways:
Buying Shares Through a Broker-Dealer's Automatic Purchase and Redemption
Program. You can buy shares of a Trust through a broker-dealer that
has a sales agreement with the Trust's Distributor or Sub-Distributor
that allows shares to be purchased through the broker-dealer's
Automatic Purchase and Redemption Program. Shares of each Trust are
sold mainly to customers of participating broker-dealers that offer the
Trusts' shares under these special purchase programs. If you
participate in an Automatic Purchase and Redemption Program established
by your broker-dealer, your broker-dealer buys shares of the Trust for
your account with the broker-dealer. Program participants should also
read the description of the program provided by their broker-dealer.
Buying Shares Through Your Broker-Dealer. If you do not participate in an
Automatic Purchase and Redemption Program, you can buy shares of a
Trust through any broker-dealer that has a sales agreement with the
Distributor or Sub-Distributor. Your broker-dealer will place your
order with the Distributor on your behalf.
Buying Shares Directly Through the Sub-Distributor. You can also purchase
shares directly through the Trust's Sub-Distributor. Shareholders who
make purchases directly and hold shares in their own names are referred
to as "direct shareholders" in this Prospectus.
The Sub-Distributor may appoint certain servicing agents to accept
purchase (and redemption) orders, including broker-dealers that have
established Automatic Purchase and Redemption Programs. The Distributor or
Sub-Distributor, in their sole discretion, may reject any purchase order for
shares of a Trust.
AUTOMATIC PURCHASE AND REDEMPTION PROGRAM. If you buy shares of a Trust
through your broker-dealer's Automatic Purchase and Redemption Program, your
broker-dealer will buy your shares for your Program Account and will hold
your shares in your broker-dealer's name. These purchases will be made under
the procedures described in "Guaranteed Payment Procedures" below. Your
Automatic Purchase and Redemption Program Account may have minimum investment
requirements established by your broker-dealer. You should direct all
questions about your Automatic Purchase and Redemption Program to your
broker-dealer, because the Trusts' Transfer Agent does not have access to
information about your account under that Program.
Guaranteed Payment Procedures. Some broker-dealers may have arrangements
with the Distributor to enable them to place purchase orders for shares
of a Trust and to guarantee that the Trust's custodian bank will
receive Federal Funds to pay for the shares prior to specified times.
Broker-dealers whose clients participate in Automatic Purchase and
Redemption Programs may use these guaranteed payment procedures to pay
for purchases of shares of a Trust.
o If the Distributor receives a purchase order before 12:00 Noon on a
regular business day with the broker-dealer's guarantee that the
Trust's custodian bank will receive payment for those shares in Federal
Funds by 2:00 P.M. on that same day, the order will be effected at the
net asset value determined at 12:00 Noon that day. Distributions will
begin to accrue on the shares on that day if the Federal Funds are
received by the required time.
o If the Distributor receives a purchase order after 12:00 Noon on a
regular business day with the broker-dealer's guarantee that the
Trust's custodian bank will receive payment for those shares in Federal
Funds by 2:00 P.M. on that same day, the order will be effected at the
net asset value determined at 4:00 P.M. that day. Distributions will
begin to accrue on the shares on that day if the Federal Funds are
received by the required time.
o If the Distributor receives a purchase order between 12:00 Noon and
4:00 P.M. on a regular business day with the broker-dealer's guarantee
that the Trust's custodian bank will receive payment for those shares
in Federal Funds by 4:00 P.M. the next regular business day, the order
will be effected at the net asset value determined at 4:00 P.M. on the
day the order is received and distributions will begin to accrue on the
shares purchased on the next regular business day if the Federal Funds
are received by the required time.
HOW CAN DIRECT SHAREHOLDERS BUY SHARES? Direct shareholders can buy shares
of a Trust by completing a Centennial Funds New Account Application and
sending it to the Sub-Distributor, OppenheimerFunds Distributor, Inc., P.O.
Box 5143, Denver, Colorado 80217. Payment must be made by check or by
Federal Funds wire as described below. If you don't list a broker-dealer on
the application, the Sub-Distributor, will act as your agent in buying the
shares. However, we recommend that you discuss your investment with a
financial advisor before you make a purchase to be sure that the Trust is
appropriate for you.
Each Trust intends to be as fully invested as possible to maximize its
yield. Therefore, newly purchased shares normally will begin to accrue
distributions after the Sub-Distributor or its agent accepts your purchase
order, starting on the business day after the Trust receives Federal Funds
from the purchase payment.
Payment by Check. Direct shareholders may pay for purchases of shares of a
Trust by check. Send your check, payable to "OppenheimerFunds
Distributor, Inc.," along with your application and other documents to
the address listed above. For initial purchases, your check should be
payable in U.S. dollars and drawn on a U.S. bank so that distributions
will begin to accrue on the next regular business day after the
Sub-Distributor accepts your purchase order. If your check is not drawn
on a U.S. bank and is not payable in U.S. dollars, the shares will not
be purchased until the Sub-Distributor is able to convert the purchase
payment to Federal Funds. In that case distributions will begin to
accrue on the purchased shares on the next regular business day after
the purchase is made. The minimum initial investment for direct
shareholders by check is $500.
Payment by Federal Funds Wire. Direct shareholders may pay for purchases of
shares of a Trust by Federal Funds wire. You must also forward your
application and other documents to the address listed above. Before
sending a wire, call the Sub-Distributor's Wire Department at
1.800.525.9310 (toll-free from within the U.S.) or 303.768.3200 (from
outside the U.S.) to notify the Sub-Distributor of the wire, and to
receive further instructions.
Distributions will begin to accrue on the purchased shares on the
purchase date that is a regular business day if the Federal Funds from your
wire and the application are received by the Sub-Distributor and accepted by
12:00 Noon. If the Sub-Distributor receives the Federal Funds from your wire
and accepts the purchase order between 12:00 Noon and 4:00 P.M. on the
purchase date, distributions will begin to accrue on the shares on the next
regular business day. The minimum investment by Federal Funds Wire is $2,500.
Buying Shares Through Automatic Investment Plans. Direct shareholders can
purchase shares of a Trust automatically each month by authorizing the
Trust's Transfer Agent to debit your account at a U.S. domestic bank or
other financial institution. Details are in the Automatic Investment
Plan Application and the Statement of Additional Information. The
minimum monthly purchase is $25.
Service (12b-1) Plans. Each Trust has adopted a service plan. It reimburses
the Distributor for a portion of its costs incurred for services
provided to accounts that hold shares of the Trust. Reimbursement is
made quarterly, or monthly depending on asset size, at an annual rate
of up to 0.20% of the average annual net assets of the Trust. The
Distributor currently uses all of those fees (together with significant
amounts from the Manager's own resources) to pay dealers, brokers,
banks and other financial institutions quarterly for providing personal
services and maintenance of accounts of their customers that hold
shares of the Trust.
Retirement Plans. Direct shareholders may buy shares of Centennial Money
Market Fund or Centennial Government Fund for a retirement plan
account. If you participate in a plan sponsored by your employer, the
plan trustee or administrator must buy the shares for your plan
account. The Sub-Distributor also offers a number of different
retirement plans that individuals and employers can use:
o Individual Retirement Accounts (IRAs). These include regular IRAs,
Roth IRAs, rollover IRAs and Education IRAs.
o SEP-IRAs. These are Simplified Employee Pensions Plan IRAs for small
business owners or self-employed individuals.
o 403(b)(7) Custodial Plans. These are tax deferred plans for employees
of eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations.
o 401(k) Plans. These are special retirement plans for businesses.
o Pension and Profit-Sharing Plans. These plans are designed for
businesses and self-employed individuals.
Please call the Sub-Distributor for retirement plan documents, which
include applications and important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular business
day. Your shares will be sold at the next net asset value calculated after
your order is received in proper form (which means that it must comply with
the procedures described below) and is accepted by the Transfer Agent.
HOW CAN PROGRAM PARTICIPANTS SELL SHARES? If you participate in an Automatic
Purchase and Redemption Program sponsored by your broker-dealer, you must
redeem shares held in your Program Account by contacting your broker-dealer
firm, or you can redeem shares by writing checks as described below. You
should not contact the Trust or its Transfer Agent directly to redeem shares
held in your Program Account. You may also arrange (but only through your
broker-dealer) to have the proceeds of redeemed Trust shares sent by Federal
Funds wire, as described below in "Sending Redemption Proceeds by Wire."
HOW CAN DIRECT SHAREHOLDERS REDEEM SHARES? Direct shareholders can redeem
their shares by writing a letter to the Transfer Agent, by using a Trust's
checkwriting privilege, or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis. If you have questions
about any of these procedures, and especially if you are redeeming shares in
a special situation, such as due to the death of the owner or from a
retirement plan account, please call the Transfer Agent for assistance first,
at 1.800.525.9310.
Certain Requests Require a Signature Guarantee. To protect you and the Trust
from fraud, the following redemption requests for accounts of direct
shareholders must be in writing and must include a signature guarantee
(although there may be other situations that also require a signature
guarantee):
o You wish to redeem $100,000 or more and receive a check
o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your
account statement
o Shares are being transferred to an account with a different owner or
name
o Shares are being redeemed by someone (such as an Executor) other than
the owners listed in the account registration.
Where Can Direct Shareholders Have Their Signatures Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities
or government securities, or
o a U.S. national securities exchange, a registered securities
association or a clearing agency.
If you are signing on behalf of a corporation, partnership or other
business or as a fiduciary, you must also include your title in the signature.
How Can Direct Shareholders Sell Shares by Mail? Write a letter to the
Transfer Agent that includes:
o Your name
o The Trust's name
o Your account number (from your account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as the account is
registered, and
o Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares (such as Letters
Testamentary of an Executor).
---------------------------------------------------------------------------------
---------------------------------------- ---------------------------------------
Use the following address for Send courier or express mail
---------------------------------------- requests to:
requests by mail: Shareholder Services, Inc.
Shareholder Services, Inc. 10200 E. Girard Avenue, Building D
P.O. Box 5143 Denver, Colorado 80231
Denver, Colorado 80217-5270
---------------------------------------------------------------------------------
How Can Direct Shareholders Sell Shares by Telephone? Direct shareholders
and their broker-dealer representative of record may also sell shares
by telephone. To receive the redemption price calculated on a
particular regular business day, the Transfer Agent or its designated
agent must receive the request by 4:00 P.M. on that day. You may not
redeem shares held under a share certificate or in a retirement account
by telephone. To redeem shares through a service representative, call
1.800.525.9310. Proceeds of telephone redemptions will be paid by
check payable to the shareholder(s) of record and will be sent to the
address of record for the account. Up to $100,000 may be redeemed by
telephone in any 7-day period. Telephone redemptions are not available
within 30 days of changing the address on an account.
Retirement Plan Accounts. There are special procedures to sell shares held
in a retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must
ask the plan trustee or administrator to request the sale of the Trust
shares in your plan account.
Sending Redemption Proceeds By Wire. While the Transfer Agent normally sends
direct shareholders their money by check, you can arrange to have the
proceeds of the shares you sell sent by Federal Funds wire to a bank
account you designate. It must be a commercial bank that is a member
of the Federal Reserve wire system. The minimum redemption you can
have sent by wire is $2,500. There is a $10 fee for each wire. To find
out how to set up this feature on an account or to arrange a wire,
direct shareholders should call the Transfer Agent at 1.800.525.9310.
If you hold your shares through your broker-dealer's Automatic Purchase
and Redemption Program, you must contact your broker-dealer to arrange
a Federal Funds wire.
Can Direct Shareholders Submit Requests by Fax? Direct shareholders may send
requests for certain types of account transactions to the Transfer
Agent by fax (telecopier). Please call 1.800.525.9310 for information
about which transactions may be handled this way. Transaction requests
submitted by fax are subject to the same rules and restrictions as
written and telephone requests described in this Prospectus.
HOW DO I WRITE CHECKS AGAINST MY ACCOUNT? Automatic Purchase and Redemption
Program participants may write checks against an account held under their
Program, but must arrange for checkwriting privileges through their
broker-dealers. Direct shareholders may write checks against their account
by requesting that privilege on the account application or by contacting the
Transfer Agent for signature cards. They must be signed (with a signature
guarantee) by all owners of the account and returned to the Transfer Agent so
that checks can be sent to you to use. Shareholders with joint accounts can
elect in writing to have checks paid over the signature of one owner. If
checkwriting is established after November 1, 2000, only one signature is
required for shareholders with joint accounts, unless you elect otherwise.
o Checks can be written to the order of whomever you wish, but may not be
cashed at the bank the checks are payable through or the Trust's
custodian bank.
o Checkwriting privileges are not available for accounts holding shares
that are subject to a contingent deferred sales charge.
o Checks must be written for at least $250.
o Checks cannot be paid if they are written for more than your account
value.
o You may not write a check that would require the redemption of shares
that were purchased by check or Automatic Investment Plan payments
within the prior 10 days.
o Don't use your checks if you changed your account number, until you
receive new checks.
WILL I PAY A SALES CHARGE WHEN I SELL MY SHARES? The Trust does not charge a
fee to redeem shares of a Trust that were bought directly or by reinvesting
distributions from that Trust or another Centennial Trust or eligible fund.
Generally, there is no fee to redeem shares of a Trust bought by exchange of
shares of another Centennial Trust or eligible fund. However,
o if you acquired shares of a Trust by exchanging Class A shares of
another eligible fund that you bought subject to the Class A contingent
deferred sales charge, and
o those shares are still subject to the Class A contingent deferred sales
charge when you exchange them into the Trust, then
o you will pay the contingent deferred sales charge if you redeem those
shares from the Trust within 18 months of the purchase date of the
shares of the fund you exchanged.
How to Exchange Shares
Shares of a Trust can be exchanged for shares of certain other Centennial
Trusts or other eligible funds, depending on whether you own your shares
through your broker-dealer's Automatic Purchase and Redemption Program or as
a direct shareholder.
HOW CAN PROGRAM PARTICIPANTS EXCHANGE SHARES? If you participate in an
Automatic Purchase and Redemption Program sponsored by your broker-dealer,
you may exchange shares held in your Program Account for shares of Centennial
Money Market Trust, Centennial Government Trust, Centennial Tax Exempt Trust,
Centennial California Tax Exempt Trust and Centennial New York Tax Exempt
Trust (referred to in this Prospectus as the "Centennial Trusts"), if
available for sale in your state of residence, by contacting your broker or
dealer and obtaining a Prospectus of the selected Centennial Trust.
HOW CAN DIRECT SHAREHOLDERS EXCHANGE SHARES? Direct shareholders can
exchange shares of a Trust for Class A shares of certain eligible funds
listed in the Statement of Additional Information. To exchange shares, you
must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectuses of the Trust and the fund whose shares you want to buy
must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them. After the account is open 7
days, you can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund whose
shares you purchase by exchange.
o Before exchanging into a fund, you must obtain and read its prospectus.
Shares of a particular class of an eligible fund may be exchanged only
for shares of the same class in other eligible funds. For example, you can
exchange shares of a Trust only for Class A shares of another fund, and you
can exchange only Class A shares of another eligible fund for shares of a
Trust.
You may pay a sales charge when you exchange shares of a Trust.
Because shares of the Trusts are sold without sales charge, in some cases you
may pay a sales charge when you exchange shares of a Trust for shares of
other eligible funds that are sold subject to a sales charge. You will not
pay a sales charge when you exchange shares of a Trust purchased by
reinvesting distributions from that Trust or other eligible funds (except
Oppenheimer Cash Reserves), or when you exchange shares of a Trust purchased
by exchange of shares of an eligible fund on which you paid a sales charge.
For tax purposes, exchanges of shares involve a sale of the shares of
the fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. Since shares of a Trust normally maintain
a $1.00 net asset value, in most cases you should not realize a capital gain
or loss when you sell or exchange your shares.
Direct shareholders can find a list of eligible funds currently
available for exchanges in the Statement of Additional Information or you can
obtain one by calling a service representative at 1.800.525.9310. The list
of eligible funds can change from time to time.
How Do Direct Shareholders Submit Exchange Requests? Direct shareholders may
request exchanges in writing or by telephone:
o Written Exchange Requests. Complete an Exchange Authorization Form,
signed by all owners of the account. Send it to the Transfer Agent at
the address on the back cover.
o Telephone Exchange Requests. Telephone exchange requests may be made
by calling a service representative at 1.800.525.9310. Telephone
exchanges may be made only between accounts that are registered with
the same name(s) and address. Shares held under certificates may not
be exchanged by telephone.
ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on
which the Transfer Agent receives an exchange request that conforms to
the policies described above. Requests for exchanges to any of the
Centennial Trusts must be received by the Transfer Agent by 4:00 P.M.
on a regular business day to be effected that day. The Transfer Agent
must receive requests to exchange shares of a Trust to funds other than
the Centennial Trusts on a regular business day by the close of The New
York Stock Exchange that day. The close is normally 4:00 P.M. but may
be earlier on some days.
o The interests of the Trusts' long-term shareholders and its ability to
manage its investments may be adversely affected when its shares are
repeatedly bought and sold in response to short-term market
fluctuations--also known as "market timing." When large dollar amounts
are involved, the Trusts may have difficulty implementing long-term
investment strategies, because it cannot predict how much cash it will
have to invest. Market timing also may force the Trusts to sell
portfolio securities at disadvantageous times to raise the cash needed
to buy a market timer's Fund shares. These factors may hurt the Trusts'
performance and its shareholders. When the Manager believes frequent
trading would have a disruptive effect on the Trusts' ability to manage
its investments, the Manager and the Trusts may reject purchase orders
and exchanges into the Trusts by any person, group or account that the
Manager believes to be a market timer.
o Either fund may delay the purchase of shares of the fund you are
exchanging into up to seven days if it determines it would be
disadvantaged by a same-day exchange. For example, the receipt of the
multiple exchange requests from a "market timer" might require a fund
to sell securities at a disadvantageous time and/or price.
o Because excessive trading can hurt fund performance and harm
shareholders, the Trusts reserve the right to refuse any exchange
request that may, in the opinion of the Trusts, be disadvantageous, or
to refuse multiple exchange requests submitted by a shareholder or
dealer.
o The Trusts may amend, suspend or terminate the exchange privilege at
any time. The Trusts will provide you notice whenever they are required
to do so by applicable law, but they may impose these changes at any
time for emergency purposes.
o If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
More information about the Trusts' policies and procedures for buying,
selling and exchanging shares is contained in the Statement of Additional
Information.
The offering of shares of a Trust may be suspended during any period in which
the Trust's determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time it
believes it is in a Trust's best interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may
be modified, suspended or terminated by a Trust at any time. If an
account has more than one owner, a Trust and the Transfer Agent may
rely on the instructions of any one owner. Telephone privileges apply
to each owner of the account and the broker-dealer representative of
record for the account unless the Transfer Agent receives cancellation
instructions from an owner of the account.
The Transfer Agent will record any telephone calls to verify data concerning
transactions. It has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data and by confirming such
transactions in writing. The Transfer Agent and the Trusts will not be
liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent
receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by
check or by Federal Funds wire (as elected by the shareholder) within
seven days after the Transfer Agent receives redemption instructions in
proper form. However, under unusual circumstances determined by the
Securities and Exchange Commission, payment may be delayed or
suspended. For accounts registered in the name of a broker-dealer,
payment will normally be forwarded within three business days after
redemption.
The Transfer Agent may delay forwarding a check or making a payment via
Federal Funds wire for the redemption of recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by Federal Funds wire or certified
check, or arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Trusts if the
account value has fallen below $250 for reasons other than the fact
that the market value of shares has dropped. In some cases involuntary
redemptions may be made to repay the Distributor or Sub-Distributor for
losses from the cancellation of share purchase orders.
"Backup Withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges)
if you fail to furnish the Trust your correct, certified Social
Security or Employer Identification Number when you sign your
application, or if you under-report your income to the Internal Revenue
Service.
To avoid sending duplicate copies of materials to households, the Trusts will
mail only one copy of each prospectus, annual and semi-annual reports
and annual notice of the Trusts' privacy policy to shareholders having
the same last name and address on the Trusts' records. The
consolidation of these mailings, called householding, benefits the
Trusts through reduced mailing expense. If you want to receive
multiple copies of these materials, you may call the Transfer Agent at
1.800.525.9310. You may also notify the Transfer Agent in writing.
Individual copies of prospectuses, reports and privacy notices will be
sent to you commencing 30 days after the Transfer Agent receives your
request to stop householding.
Dividends and Tax Information
DIVIDENDS. Each Trust intends to declare dividends from net investment
income each regular business day and to pay those dividends to shareholders
monthly on a date selected by the Board of Trustees. To maintain a net asset
value of $1.00 per share, a Trust might withhold dividends or make
distributions from capital or capital gains. Daily dividends will not be
declared or paid on newly purchased shares until Federal Funds are available
to a Trust from the purchase payment for such shares.
CAPITAL GAINS. Each Trust normally holds its securities to maturity and
therefore will not usually pay capital gains. Although the Trusts do not seek
capital gains, a Trust could realize capital gains on the sale of its
portfolio securities. If it does, it may make distributions out of any net
short-term or long-term capital gains in December of each year. A Trust may
make supplemental distributions of dividends and capital gains following the
end of its fiscal year.
What Choices Do I Have for Receiving Distributions? For Automatic Purchase
and Redemption Programs, dividends and distributions are automatically
reinvested in additional shares of the selected Trust. For direct
shareholders, when you open your account, you should specify on your
application how you want to receive your dividends and distributions.
You have four options:
o Reinvest All Distributions in the Trust. You can elect to reinvest
some distributions (dividends, short-term capital gains or long-term
capital gains distributions) in the selected Trust.
o Reinvest Capital Gains Only. You can elect to reinvest some capital
gains distributions (short-term capital gains or long-term capital
gains distributions) in the selected Trust while receiving dividends by
check or having them sent to your bank account.
o Receive All Distributions in Cash. You can elect to receive a check
for all distributions or have them sent to your bank.
o Reinvest Your Distributions in Another Account. You can reinvest all
distributions (dividends, short-term capital gains or long-term capital
gains distributions) in the same class of shares of another eligible
fund account you have established.
Under the terms of Automatic Purchase and Redemption Programs, your
broker-dealer can redeem shares to satisfy debit balances arising in your
Program Account. If that occurs, you will be entitled to dividends on those
shares as described in your Program Agreements.
TAXES.
Centennial Money Market Trust and Centennial Government Trust. If your
shares are not held in a tax-deferred retirement account, you should be
aware of the following tax implications of investing in Centennial
Money Market Trust and Centennial Government Trust. Dividends paid from
net investment income and short-term capital gains are taxable as
ordinary income. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions
in additional shares or take them in cash, the tax treatment is the
same.
Every year the Trust will send you and the IRS a statement showing the
amount of each taxable distribution you received in the previous year. Any
long-term capital gains distributions will be separately identified in the
tax information the Trust sends you after the end of the calendar year.
Centennial Tax Exempt Trust. Exempt interest dividends paid from net
investment income earned by the Trust on municipal securities will be
excludable from gross income for federal income tax purposes. A
portion of a dividend that is derived from interest paid on certain
"private activity bonds" may be an item of tax preference if you are
subject to the alternative minimum tax. If the Trust earns interest on
taxable investments, any dividends derived from those earnings will be
taxable as ordinary income to shareholders.
Dividends and capital gains distributions may be subject to state or
local taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders. It does not matter how long you have held
your shares. Dividends paid from short-term capital gains and non-tax exempt
net investment income are taxable as ordinary income. Whether you reinvest
your distributions in additional shares or take them in cash, the tax
treatment is the same. Every year the Trust will send you and the IRS a
statement showing the amount of any taxable distribution you received in the
previous year as well as the amount of your tax-exempt income.
Remember, There May be Taxes on Transactions. Because each Trust seeks to
maintain a stable $1.00 per share net asset value, it is unlikely that
you will have a capital gain or loss when you sell or exchange your
shares. A capital gain or loss is the difference between the price you
paid for the shares and the price you received when you sold them. Any
capital gain is subject to capital gains tax.
Returns of Capital Can Occur. In certain cases, distributions made by a
Trust may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders.
This information is only a summary of certain federal income tax
information about your investment. You should consult with your tax advisor
about the effect of an investment in a Trust on your particular tax situation.
Financial Highlights
The Financial Highlights Tables are presented to help you understand each
Trust's financial performance for the past five fiscal years. Certain
information reflects financial results for a single Trust share. The total
returns in the tables represent the rate that an investor would have earned
(or lost) on an investment in the Trusts (assuming reinvestment of all
dividends and distributions). This information for the past five fiscal
years ended June 30, 2001, has been audited by Deloitte & Touche LLP, the
Trusts' independent auditors, whose report, along with the Trusts' financial
statements, are included in the Statements of Additional Information, which
are available on request.
Financial Highlights Centennial Money Market Trust
Year Ended June 30,
2001 2000 1999 1998 1997
------- ------- ------- ------- ------
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....... .06 .05 .05 .05 .05
Dividends and/or
distributions to
shareholders............ (.06) (.05) (.05) (.05) (.05)
------- ------- ------- ------- ------
Net asset value, end of
period.................. $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======
TOTAL RETURN(/1/)........ 5.51% 5.36% 4.75% 5.16% 4.97%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in millions)........... $22,210 $18,734 $17,821 $15,114 $9,063
Average net assets (in
millions)............... $20,830 $18,537 $17,128 $12,617 $8,033
Ratios to average net
assets:(/2/)
Net investment income.... 5.34% 5.20% 4.63% 5.04% 4.86%
Expenses................. 0.67% 0.67% 0.66% 0.68%(/3/) 0.73%(/3/)
Expenses, net of
reduction to excess
expenses................ N/A N/A N/A 0.66% 0.67%
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 year.
2. Annualized for periods of less than one full year. 3. Expense ratio reflects the reduction to custodian expenses.
FINANCIAL HIGHLIGHTS Centennial Tax Exempt Trust
<PRE>
YEAR ENDED JUNE 30,
--------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ----------- ----------
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 .03 .03 .03 .03 .03
Dividends and/or distributions to shareholders (.03) (.03) (.03) (.03) (.03)
-------- -------- ------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= ======= =======
TOTAL RETURN(1) 3.26% 3.01% 2.61% 3.12% 3.01%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 1,822 $ 1,692 $ 1,749 $ 1,829 $ 1,649
Average net assets (in millions) $ 1,779 $ 1,737 $ 1,896 $ 1,832 $ 1,591
Ratios to average net assets:(2)
Net investment income 3.21% 2.94% 2.58% 3.07% 2.95%
Expenses 0.70% 0.72% 0.69% 0.69%(3) 0.72%(3)
Expenses, net of reduction to custodian expenses 0.69% N/A N/A N/A N/A
</PRE>
(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 of less than one full year.
(2) Annualized for periods of less than one full year.
(3) Expense ratio reflects the reduction to custodian expenses.
<PAGE>
FINANCIAL HIGHLIGHTS Centennial Government Trust
YEAR ENDED JUNE 30,
---------------------------------------------------------------------------------
2001 2000 1999 1998 1997
--------- --------- --------- --------- ---------
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 .04 .05 .05
Dividends and/or distributions to
shareholders (.05) (.05) (.04) (.05) (.05)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
TOTAL RETURN(1) 5.29% 5.07% 4.47% 4.93% 4.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 1,458 $ 1,192 $ 1,213 $ 1,132 $ 1,027
Average net assets (in millions) $ 1,367 $ 1,244 $ 1,245 $ 1,117 $ 1,032
Ratios to average net assets:(2)
Net investment income 5.13% 4.92% 4.37% 4.82% 4.65%
Expenses 0.73% 0.74% 0.74% 0.75%(3) 0.76%(3)
---------------- 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 of less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio reflects the reduction to custodian expenses.
APPENDIX TO THE PROSPECTUS OFINFORMATION AND SERVICES For More Information on Centennial Money Market Trust, Centennial Tax-Exempt Trust And Centennial Government Trust: The following additional information about the Trust is available without charge upon request: STATEMENT OF ADDITIONAL INFORMATION This document includes additional information about the Trust's investment policies, risks, and operations. It is incorporated by reference into this Prospectus (which means it is legally part of this Prospectus). ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Trust's investments and performance is available in the Trust's Annual and Semi-Annual Reports to shareholders. The Annual Report includes a discussion of market conditions and investment strategies that significantly affected the Trust's performance during its last fiscal year. How to Get More Information: You can request the Statement of Additional Information, the Annual and Semi-Annual Reports, the notice explaining the Trust's privacy policy and other information about the Trusts or your account: --------------------------------------------------------------------------------- By Telephone: Call Shareholder Services, Inc. toll-free: 1.800.525.9310 --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- By Mail: Write to: Shareholder Services, Inc. P.O. Box 5143 Denver, Colorado 80217 --------------------------------------------------------------------------------- Information about the Trust including the Statement of Additional Information can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1.202.942.8090. Reports and other information about the Trust are available on the EDGAR database on the SEC's Internet website at http://www.sec.gov. Copies may be obtained after payment of a ------------------ duplicating fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. No one has been authorized to provide any information about the Trust or to make any representations about the Trust other than what is contained in this Prospectus. This Prospectus is not an offer to sell shares of the Trust, nor a solicitation of an offer to buy shares of the Trust, to any person in any state or other jurisdiction where it is unlawful to make such an offer. The Trust's shares are distributed by: The Fund's SEC File No. 811-02945 Centennial Asset Management Corporation PR0150.001.1101 Printed on recycled paper APPENDIX TO THE PROSPECTUS OF CENTENNIAL MONEY MARKET TRUST Graphic material included in Prospectus of Centennial Money Market Trust (the "Trust") under the heading: "Annual Total Returns (as of 12/31 each year)." Bar chart will be included in the Prospectus of the Trust depicting the annual total returns of a hypothetical investment in shares of the Trust for the past 10 full calendar years. Set forth below are the relevant data points that will appear on the bar chart. -------------------------------------------------------------------- Calendar Year Ended: Annual Total Returns -------------------------------------------------------------------- -------------------------------------------------------------------- 12/31/91 5.80% -------------------------------------------------------------------- -------------------------------------------------------------------- 12/31/92 3.53% -------------------------------------------------------------------- -------------------------------------------------------------------- 12/31/93 2.69% -------------------------------------------------------------------- -------------------------------------------------------------------- 12/31/94 3.77% -------------------------------------------------------------------- -------------------------------------------------------------------- 12/31/95 5.46% -------------------------------------------------------------------- -------------------------------------------------------------------- 12/31/96 4.94% -------------------------------------------------------------------- -------------------------------------------------------------------- 12/31/97 5.10% -------------------------------------------------------------------- -------------------------------------------------------------------- 12/31/98 5.09% -------------------------------------------------------------------- -------------------------------------------------------------------- 12/31/99 4.72% -------------------------------------------------------------------- -------------------------------------------------------------------- 12/31/00 5.95% --------------------------------------------------------------------
CENTENNIAL TAX EXEMPT TRUST
Graphic material included in Prospectus of Centennial Tax Exempt Trust
(the "Trust") under the heading: "Annual Total Returns (as of 12/31 each
year)."
Bar chart will be included in the Prospectus of the Trust depicting the
annual total returns of a hypothetical investment in shares of the Trust for
the full calendar year since the Trust's inception as a money market fund.
Set forth below are the relevant data points that will appear on the bar
chart.
--------------------------------------------------------------------
Calendar Year Ended: Annual Total Returns
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/91 4.32%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/92 2.64%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/93 1.91%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/94 2.30%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/95 3.47%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/96 3.00%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/97 3.11%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/98 2.91%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/99 2.60%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/00 3.42%
--------------------------------------------------------------------
</PRE>
APPENDIX TO THE PROSPECTUS OF
CENTENNIAL GOVERNMENT TRUST
Graphic material included in Prospectus of Centennial Government Trust
(the "Trust") under the heading: "Annual Total Returns (as of 12/31 each
year)."
Bar chart will be included in the Prospectus of the Trust depicting the
annual total returns of a hypothetical investment in shares of the Trust for
the full calendar year since the Trust's inception as a money market fund.
Set forth below are the relevant data points that will appear on the bar
chart.
--------------------------------------------------------------------
Calendar Year Ended: Annual Total Returns
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/91 5.85%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/92 3.46%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/93 2.67%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/94 3.71%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/95 5.26%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/96 4.72%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/97 4.86%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/98 4.84%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/99 4.43%
--------------------------------------------------------------------
--------------------------------------------------------------------
12/31/00 5.71%
--------------------------------------------------------------------
Centennial Government Trust
------------------------------------------------------------------------------
6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.9310
Statement of Additional Information dated November 1, 2001
This Statement of Additional Information is not a prospectus. This
document contains additional information about the Trust and supplements
information in the Prospectus dated November 1, 2001. It should be read
together with the Prospectus, which may be obtained by writing to the Trust's
Transfer Agent, Shareholder Services, Inc., at P.O. Box 5143, Denver,
Colorado 80217, or by calling the Transfer Agent at the toll-free number
shown above.
Contents
Page
About the Trust
Additional Information about the Trust's Investment Policies and Risks........
The Trust's Investment Policies..........................................
Other Investment Strategies..............................................
Investment Restrictions..................................................
How the Trust is Managed......................................................
Organization and History.................................................
Trustees and Officers of the Trust.......................................
The Manager..............................................................
Service Plan..................................................................
Performance of the Trust......................................................
About Your Account
How To Buy Shares.............................................................
How To Sell Shares............................................................
How To Exchange Shares........................................................
Dividends and Taxes...........................................................
Additional Information About the Trust........................................
Financial Information About the Trust
Independent Auditors' Report..................................................
Financial Statements..........................................................
Appendix A: Description of Securities Ratings..............................A-1
Appendix B: Municipal Bond Industry Classifications........................B-1
A B O U T T H E T R U S T
Additional Information About the Trust's Investment Policies and Risks
The investment objective and the principal investment policies of the Trust
are described in the Prospectus. This Statement of Additional Information
contains supplemental information about those policies and the types of
securities that the Trust's investment manager, Centennial Asset Management
Corporation, (referred to as, the "Manager") will select for the Trust.
Additional explanations are also provided about the strategies the Trust may
use to try to achieve its objective.
The Trust's Investment Policies. The composition of the Trust's portfolio and
the techniques and strategies that the Trust's Manager uses in selecting
portfolio securities will vary over time. The Trust is not required to use
all of the investment techniques and strategies described below at all times
in seeking its goal. It may use some of the special investment techniques
and strategies at some times or not at all.
The Trust's objective is to seek a high level of current income
consistent with preservation of capital and the maintenance of liquidity.
The Trust will not make investments with the objective of seeking capital
growth. However, the value of the securities held by the Trust may be
affected by changes in general interest rates. Because the current value of
debt securities varies inversely with changes in prevailing interest rates,
if interest rates increase after a security is purchased, that security would
normally decline in value. Conversely, if interest rates decrease after a
security is purchased, its value would rise. However, those fluctuations in
value will not generally result in realized gains or losses to the Trust
since the Trust does not usually intend to dispose of securities prior to
their maturity. A debt security held to maturity is redeemable by its issuer
at full principal value plus accrued interest.
The Trust may sell securities prior to their maturity, to attempt to
take advantage of short-term market variations, or because of a revised
credit evaluation of the issuer or other considerations. The Trust may also
do so to generate cash to satisfy redemptions of Trust shares. In such
cases, the Trust may realize a capital gain or loss on the security.
|X| Ratings of Securities - Portfolio Quality, Maturity and
Diversification. Under Rule 2a-7 of the Investment Company Act, the Trust
uses the amortized cost method to value its portfolio securities to determine
the Trust's net asset value per share. Rule 2a-7 imposes requirements for
the maturity, quality and diversification of the securities which the Trust
buys. The Trust may purchase only those securities that the Manager, under
procedures approved by the Board of Trustees, has determined have minimal
credit risk and, as such, are "eligible securities".
|_| Quality. Eligible securities are securities that have received a
rating in one of the two highest short-term rating categories by a rating
organization. Rating organizations are designated by the SEC. Eligible
securities may be "first tier" or "second tier" securities. First tier
securities are those that have received a rating in the highest category for
short term debt obligations by at least two rating organizations. If only
one rating organization has rated the security, it must be rated in the
highest category for that rating organization. U.S. government securities
and securities issued by a registered money market mutual fund are also first
tier securities.
The Trust may also buy second tier "conduit securities". These
eligible securities are securities rated by rating organizations but are not
first tier securities. Conduit securities are municipal securities such as
industrial development or revenue bonds issued to finance non-government
projects. The payment of the principal and interest on a conduit security is
not the obligation of the municipal issuer, but is the obligation of another
person who is ultimately responsible for the payment of principal and
interest, such as the user of the facility. The Trust may not invest more
than 5% of its total assets in second tier conduit securities.
The Trust may also buy unrated securities that the Manager determines
are comparable in quality to a first or second tier security by applying
certain criteria established by the Board to determine its creditworthiness.
These criteria require a high quality short term or long-term rating
(depending on the security) from a rating organization. Unrated securities
the Trust may buy include asset backed securities and securities subject to
"demand features" or "guarantees".
The Trust may purchase a security subject to a guarantee if the
guarantee is an eligible security or a first tier security. The trust may
also purchase a security subject to a "conditional" demand feature if the
demand feature is an eligible security and the Manager has decided that the
conditional demand feature meets the requirements imposed by Rule 2a-7.
If a security's rating is downgraded, the Manager or the Board of
Trustees may have to reassess the security's credit risk. If a security is
downgraded, the Manager or the Board of Trustees will promptly reassess
whether the security continues to present minimal credit risk, reassess the
status of the security as an "eligible security," and take such actions as is
appropriate. If the Trust disposes of the security within five days of the
Manager learning of the downgrade, the Manager will provide the Board of
Trustees with subsequent notice of such downgrade. If a security is in
default, or ceases to be an eligible security, or is determined no longer to
present minimal credit risks, the Board of Trustees must determine whether it
would be in the best interests of the Trust to dispose of the security.
|_| Diversification. With respect to 75% of its total assets, the
Trust cannot invest more than 5% of its total assets in securities issued by
one issuer. It cannot invest more than 5% of its total assets in securities
of one issuer unless the security is a first tier security. The Trust also
cannot invest more than 1% of its total assets or $1.0 million, whichever is
greater, in second tier securities of one issuer. For diversification
purposes, the Trust is considered to have purchased the security underlying a
repurchase agreement if the repurchase agreement is fully collateralized.
For a refunded security, the Trust is considered to have the U.S. government
securities underlying the refunded security. For conduit securities, the
Trust considers the issuer to be the person ultimately responsible for
payment of the obligation. If the Trust buys an asset backed security, the
issuer of the security is deemed to be the "special purpose" entity which
issued the security. A special purpose entity is an entity which is
organized solely for the purpose of issuing asset backed securities. If the
asset backed securities issued by the special purpose entity include the
obligations of another person or another special purpose entity and those
obligations amount to 10% or more of the asset backed securities the Trust
buys, that other person or entity is considered to be the issuer of a pro
rata percentage of the asset backed security.
The Trust may buy a security subject to a demand feature or guarantee.
In this case, with respect to 75% of its total assets, the Trust may not
invest more than 10% of its total assets in securities issued by or subject
to demand features or guarantees issued by the same issuer. If the demand
feature or guarantee is a second tier security, the Trust may not invest more
than 5% of its total assets in securities subject to demand features or
guarantees from the same issuer. And, the Trust may not invest more than 10%
of its total assets in securities issued by or subject to demand features or
guarantees from the same issuer. However, if the demand feature or guarantee
is issued by a person who is a non-controlled person, the Trust does not have
to limit its investments to no more than 10% of its total assets in
securities issued by or subject to demand features or guarantees from the
same issuer.
|_| Maturity. The Trust must maintain a dollar-weighted average
portfolio maturity of not more than 90 days, and the maturity of any single
security must not be in excess the maximum permitted maturity under Rule 2a-7
(or any other applicable rule) which is currently 397 days from the date of
purchase. The Trust also may buy adjustable and floating rate securities,
enter into repurchase agreements and lend portfolio securities. Rule 2a-7
defines how the maturities of these securities are determined.
|_| Demand Features and Guarantees. Demand features and guarantees
and some of their uses are described in the Prospectus. The Trust also uses
demand features and guarantees to satisfy the maturity, quality and
diversification requirements described above. The Trust considers the person
which issues the demand feature as the person to whom the Trust will look for
payment. An unconditional demand feature is considered a guarantee and the
Trust looks to the person making the guarantee for payment of the obligation
of the underlying security.
When the Trust buys municipal securities, it may obtain a demand
feature from the seller to repurchase the securities that entitles the Trust
to achieve same day settlement from the repurchaser and to receive an
exercise price equal to the amortized cost of the underlying security plus
accrued interest, if any, at the time of exercise. Another type of demand
feature purchased in conjunction with a Municipal Security enables the Trust
to sell the underlying security within a specified period of time at a fixed
exercise price. The Trust may pay for demand features either separately in
cash or by paying a higher price for the securities acquired subject to the
demand features. The Trust will enter into these transactions only with
banks and dealers which, in the Manager's opinion, present minimal credit
risks. The Trust's purchases of demand features are subject to the
provisions of Rule 2a-7 under the Investment Company Act because the Trust
uses the amortized cost method to value its portfolio securities.
The Trust's ability to exercise a demand feature or guarantee will
depend on the ability of the bank or dealer to pay for the securities if the
demand feature or guarantee is exercised. If the bank or dealer should
default on its obligation, the Trust might not be able to recover all or a
portion of any loss sustained from having to sell the security elsewhere.
Demand features and guarantees are not transferable by the Trust, and
therefore terminate if the Trust sells the underlying security to a third
party. The Trust intends to enter into these arrangements to facilitate
portfolio liquidity, although such arrangements may enable the Trust to sell
a security at a pre-arranged price which may be higher than the prevailing
market price at the time the demand feature or guarantee is exercised. Any
considerations paid by the Trust for the demand feature (which increases the
cost of the security and reduces the yield otherwise available for the
security) will be reflected on the Trust's books as unrealized depreciation
while the demand feature or guarantee is held, and a realized gain or loss
when demand feature is exercised or expires.
|X| U.S. Government Securities. U.S. government securities are
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities. They include Treasury Bills (which mature within one year
of the date they are issued) and Treasury Notes and Bonds (which are issued
with longer maturities). All Treasury securities are backed by the full
faith and credit of the United States.
U.S. government agencies and instrumentalities that issue or guarantee
securities include, but are not limited to, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage
Association, General Services Administration, Bank for Cooperatives, Federal
Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, Federal Land Banks, Maritime Administration, the Tennessee
Valley Authority and the District of Columbia Armory Board. The Trust will
not invest in securities issued by the Inter-American Development Bank, the
Asian-American Development Bank and the International Bank for Reconstruction
and Development or in pooled mortgages offered by the Federal Housing
Administration or Veterans Administration.
Securities issued or guaranteed by U.S. government agencies and
instrumentalities are not always backed by the full faith and credit of the
United States. Some, such as securities issued by the Federal National
Mortgage Association ("Fannie Mae"), are backed by the right of the agency or
instrumentality to borrow from the Treasury. Others, such as securities
issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac"), are
supported only by the credit of the instrumentality and not by the Treasury.
If the securities are not backed by the full faith and credit of the United
States, the purchaser must look principally to the agency issuing the
obligation for repayment and may not be able to assert a claim against the
United States if the issuing agency or instrumentality does not meet its
commitment. The Trust will invest in U.S. government securities of such
agencies and instrumentalities only when the Manager is satisfied that the
credit risk with respect to such instrumentality is minimal and that the
security is an Eligible Security.
|X| Repurchase Agreements. In a repurchase transaction, the Trust
acquires a security from, and simultaneously resells it to, an approved
vendor for delivery on an agreed-upon future date. The resale price exceeds
the purchase price by an amount that reflects an agreed-upon interest rate
effective for the period during which the repurchase agreement is in effect.
An "approved vendor" may be a U.S. commercial bank or the U.S. branch of a
foreign bank having total domestic assets of at least $1 billion, or a
broker-dealer with a net capital of $50 million which has been designated a
primary dealer in government securities.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically will occur within one to five days of the
purchase. The Trust will not enter into a repurchase agreement that will
cause more than 10% of its net assets to be subject to repurchase agreements
maturing in more than seven days.
Repurchase agreements are considered "loans" under the Investment
Company Act, collateralized by the underlying security. The Trust's
repurchase agreements require that at all times while the repurchase
agreement is in effect, the collateral's value must equal or exceed the
repurchase price to fully collateralize the repayment obligation.
Additionally, the Manager will monitor the vendor's creditworthiness to
confirm that the vendor is financially sound and will continuously monitor
the collateral's value. However, if the vendor fails to pay the resale price
on the delivery date, the Trust may incur costs in disposing of the
collateral and may experience losses if there is any delay in its ability to
do so.
Other Investment Strategies
o Floating Rate/Variable Rate Obligations. The Trust may invest in
instruments with floating or variable interest rates. The interest rate on a
floating rate obligation is based on a stated prevailing market rate, such as
a bank's prime rate, the 90-day U.S. Treasury Bill rate, the rate of return
on commercial paper or bank certificates of deposit, or some other standard.
The rate on the investment is adjusted automatically each time the market
rate is adjusted. The interest rate on a variable rate obligation is also
based on a stated prevailing market rate but is adjusted automatically at a
specified interval. Some variable rate or floating rate obligations in which
the Trust may invest have a demand feature entitling the holder to demand
payment of an amount approximately equal to the amortized cost of the
instrument or the principal amount of the instrument plus accrued interest at
any time, or at specified intervals not exceeding the maximum time permitted
under Rule 2a-7 (which is currently 397 days). These notes may or may not be
backed by bank letters of credit.
Variable rate demand notes may include master demand notes, which are
obligations that permit the Trust to invest fluctuating amounts in a note.
The amount may change daily without penalty, pursuant to direct arrangements
between the Trust, as the note purchaser, and the issuer of the note. The
interest rates on these notes fluctuate from time to time. The issuer of
this type of obligation normally has a corresponding right in its discretion,
after a given period, to prepay the outstanding principal amount of the
obligation plus accrued interest. The issuer must give a specified number of
days' notice to the holders of those obligations. Generally, the changes in
the interest rate on those securities reduce the fluctuation in their market
value. As interest rates decrease or increase, the potential for capital
appreciation or depreciation is less than that for fixed-rate obligations
having the same maturity.
Because these types of obligations are direct lending arrangements
between the note purchaser and issuer of the note, these instruments
generally will not be traded. Generally, there is no established secondary
market for these types of obligations, although they are redeemable from the
issuer at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Trust's right
to redeem them is dependent on the ability of the note issuer to pay
principal and interest on demand. These types of obligations usually are not
rated by credit rating agencies. The Trust may invest in obligations that
are not rated only if the Manager determines at the time of investment that
they are Eligible Securities. The Manager, on behalf of the Trust, will
monitor the creditworthiness of the issuers of the floating and variable rate
obligations in the Trust's portfolio on an ongoing basis. There is no limit
on the amount of the Trust's assets that may be invested in floating rate and
variable rate obligations that meet the requirements of Rule 2a-7.
o Loans of Portfolio Securities. To attempt to increase its income, the
Trust may lend its portfolio securities to brokers, dealers and other
financial institutions. These loans are limited to not more than 25% of the
value of the Trust's total assets and are subject to other conditions
described below. The Trust will not enter into any securities lending
agreements having a maturity of greater than the maximum time permitted under
Rule 2a-7. The Trust presently does not intend that the value of securities
loaned will exceed 5% of the value of the Trust's total assets in the coming
year. There are some risks in lending securities. The Trust could experience
a delay in receiving additional collateral to secure a loan, or a delay in
recovering the loaned securities.
The Trust may receive collateral for a loan. Any securities received as
collateral for a loan must mature in twelve months or less. Under current
applicable regulatory requirements (which are subject to change), on each
business day the loan collateral must be at least equal to the market value
of the loaned securities. The collateral must consist of cash, bank letters
of credit, U.S. government securities or other cash equivalents in which the
Trust is permitted to invest. To be acceptable as collateral, letters of
credit must obligate a bank to pay amounts demanded by the Trust if the
demand meets the terms of the letter. Such terms and the issuing bank must
be satisfactory to the Trust.
When it lends securities, the Trust receives from the borrower an
amount equal to the interest paid or the dividends declared on the loaned
securities during the term of the loan. It may also receive negotiated loan
fees and the interest on the collateral securities, less any finders',
custodian, administrative or other fees the Trust pays in connection with the
loan. The Trust may share the interest it receives on the collateral
securities with the borrower as long as it realizes at least a minimum amount
of interest required by the lending guidelines established by its Board of
Trustees.
The Trust will not lend its portfolio securities to any officer,
Trustee, employee or affiliate of the Trust or its Manager. The terms of the
Trust's loans must meet certain tests under the Internal Revenue Code and
permit the Trust to reacquire loaned securities on five business days notice
or in time to vote on any important matter.
o Bank Loan Participation Agreements. The Fund may invest in bank
loan participation agreements, subject to the investment limitation set forth
in the Prospectus as to investments in illiquid securities. Participation
agreements provide an undivided interest in a loan made by the bank issuing
the participation interest in the proportion that the buyer's investment
bears to the total principal amount of the loan. Under this type of
arrangement, the issuing bank may have no obligation to the buyer other than
to pay principal and interest on the loan if and when received by the bank.
Thus, the Fund must look to the creditworthiness of the borrower, which is
obligated to make payments of principal and interest on the loan. If the
borrower fails to pay scheduled principal or interest payments, the Fund may
experience a reduction in income.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Trust has adopted to govern its investments that can be
changed only by the vote of a "majority" of the Trust's outstanding voting
securities. Under the Investment Company Act, a "majority" vote is defined
as the vote of the holders of the lesser of:
|_| 67% or more of the shares present or
represented by proxy at a shareholder meeting, if the holders of more
than 50% of the outstanding shares are present or represented by proxy,
or
|_| more than 50% of the outstanding shares.
The Trust's investment objective is a fundamental policy. Other
policies described in the Prospectus or this Statement of Additional
Information are "fundamental" only if they are identified as such. The
Trust's Board of Trustees can change non-fundamental policies without
shareholder approval. However, significant changes to investment policies
will be described in supplements or updates to the Prospectus or this
Statement of Additional Information, as appropriate. The Trust's most
significant investment policies are described in the Prospectus.
|X| Does the Trust Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Trust.
|_| The Trust cannot enter into repurchase agreements maturing in
more than seven days or purchase securities which are restricted as to resale
or for which market quotations are not readily available, if any such
investment would cause more than 10% of the Trust's assets to be invested in
such securities;
|_| The Trust cannot borrow money in excess of 10% of the value of
its total assets, and then only as a temporary measure for extraordinary or
emergency purposes; provided that the Trust will not make any investment at a
time during which such borrowing exceeds 5% of the value of its assets; no
assets of the Trust may be pledged, mortgaged or assigned to secure a debt;
|_| The Trust cannot make loans, except through (i) the purchase of
debt securities listed in the Prospectus under "Investment Objective and
Policies," (ii) the purchase of such debt securities subject to repurchase
agreements, or (iii) loans of securities as described under "Other Investment
Strategies - Loans of Portfolio Securities," in this Statement of Additional
Information;
|_| The Trust cannot invest in commodities or commodity
contracts or invest in interests in oil, gas or other mineral exploration or
development programs;
|_| The Trust cannot invest in real estate;
|_| The Trust cannot purchase securities on margin or make short
sales of securities;
|_| The Trust cannot invest in or hold securities of any issuer if
those officers and Trustees of the Trust or its advisor who beneficially own
individually more than 0.5% of the securities of such issuer together own
more than 5% of the securities of such issuer;
|_| The Trust cannot underwrite securities of other companies; or
|_| The Trust cannot invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets.
|_| The Trust cannot issue "senior securities," but this does not prohibit
certain investment activities for which assets of the Trust are designated as
segregated, or margin, collateral or escrow arrangements are established, to
cover the related obligations.
|_| The Trust cannot invest 25% or more of its total assets in any one
industry; however, for the purposes of this restriction, municipal securities
and U.S. government obligations are not considered to be part of any single
industry.
|_| The Trust cannot invest in any debt instrument having a maturity in
excess of the time period provided for in Rule 2a-7 of the Investment Company
Act of 1940, or any other applicable rule, or in the case of a debt
instrument subject to a repurchase agreement or called for redemption, unless
purchased subject to a demand feature which may not exceed the time period
provided for in Rule 2a-7, or any other applicable rule.
How the Trust is Managed
Organization and History. The Trust is an open-end, diversified management
investment company organized as a Massachusetts business trust in 1979, with
an unlimited number of authorized shares of beneficial interest.
The Trust is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Trust's
activities, review its performance, and review the actions of the Manager.
Although the Trust will not normally hold annual meetings of its
shareholders, it may hold
shareholder meetings from time to time on important matters. Shareholders of
the Trust may have the right to call a meeting to remove a Trustee or to take
other action described in the Declaration of Trust.
The Board of Trustees has an Audit Committee and a Review
Committee. The members of the Audit Committee are Edward L. Cameron, C.
Howard Kast and F. William Marshall, Jr. The Audit Committee held six
meetings during the Trust's fiscal year ended June 30, 2001. The Audit
Committee provides the Board with recommendations regarding the selection of
the Trust's independent auditor. The Audit Committee also reviews the scope
and results of audits and the audit fees charged, reviews reports from the
Trust's independent audit concerning the Trust's internal accounting
procedures and controls and selects and nominates for approval by the Board
the independent Trustees, among other duties as set forth in the Committee's
charter.
The members of the Review Committee are Jon S. Fossel, Sam Freedman,
William L. Armstrong, Robert G. Avis and George C. Bowen. The Review
Committee held six meetings during the fiscal year ended June 30, 2001. The
Review Committee reviews reports and makes recommendations to the Board
concerning the fees paid to the Trust's Transfer Agent and the services
provided to the Trust by the Transfer Agent. The Review Committee also
reviews policies and procedures adopted by the Trust to comply with the
Investment Company Act of 1940 and other applicable law, among other duties
as set forth in the Committee's charter.
|X| Classes of Shares. The Trust has a single class of
shares of stock. While that class has no designation, it is deemed to be the
equivalent of Class A for purposes of the shareholder account policies that
apply to Class A shares of the Oppenheimer funds. Shares of the Trust are
freely transferable. Each share has one vote at shareholder meetings, with
fractional shares voting proportionally on matters submitted to a vote of
shareholders. There are no preemptive or conversion rights and shares
participate equally in the assets of the Trust upon liquidation.
|X| Meetings of Shareholders. As a Massachusetts business trust, the
Trust is not required to hold, and does not plan to hold, regular annual
meetings of shareholders. The Trust will hold meetings when required to do so
by the Investment Company Act or other applicable law. It will also do so
when a shareholder meeting is called by the Trustees or upon proper request
of the shareholders.
Shareholders have the right, upon the declaration in writing or vote of
two-thirds of the outstanding shares of the Trust, to remove a Trustee. The
Trustees will call a meeting of shareholders to vote on the removal of a
Trustee upon the written request of the record holders of 10% of the
outstanding shares of the Trust. If the Trustees receive a request from at
least 10 shareholders stating that they wish to communicate with other
shareholders to request a meeting to remove a Trustee, the Trustees will then
either make the shareholder lists of the Trust available to the applicants or
mail their communication to all other shareholders at the applicants'
expense. The shareholders making the request must have been shareholders for
at least six months and must hold
shares of the Trust valued at $25,000 or more or constituting at least 1% of
the outstanding shares of the Trust, whichever is less. The Trustees may
also take other action as permitted by the Investment Company Act.
|_| Shareholder and Trustee Liability. The Declaration of
Trust contains an express disclaimer of shareholder or Trustee liability for
the Trust's obligations. It also provides for indemnification and
reimbursement of expenses out of the Trust's property for any shareholder
held personally liable for its obligations. The Declaration of Trust also
states that upon request, the Trust shall assume the defense of any claim
made against a shareholder for any act or obligation of the Trust and shall
satisfy any judgment on that claim. Massachusetts law permits a shareholder
of a business trust (such as the Trust) to be held personally liable as a
"partner" under certain circumstances. However, the risk that a Trust
shareholder will incur financial loss from being held liable as a "partner"
of the Trust is limited to the relatively remote circumstances in which the
Trust would be unable to meet its obligations.
The Trust's contractual arrangements state that any person doing
business with the Trust (and each shareholder of the Trust) agrees under the
Declaration of Trust to look solely to the assets of the Trust for
satisfaction of any claim or demand that may arise out of any dealings with
the Trust. Additionally, the Trustees shall have no personal liability to any
such person, to the extent permitted by law.
Trustees and Officers of the Trust. The Trust's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. Trustees denoted with an asterisk (*) below are
deemed to be "interested persons" of the Trust under the Investment Company
Act. All of the Trustees are also trustees, directors or managing general
partners of the following Denver-based Oppenheimer funds1:
Oppenheimer Cash Reserves Oppenheimer Select Managers
Oppenheimer Champion Income Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Capital Income Fund Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer International Bond Fund Oppenheimer Variable Account Funds
Oppenheimer Integrity Funds Panorama Series Fund, Inc.
Oppenheimer Limited-Term Government
Fund Centennial America Fund, L. P.
Oppenheimer Main Street Funds, Inc. Centennial California Tax Exempt Trust
Oppenheimer Main Street Opportunity
Fund Centennial Government Trust
Oppenheimer Main Street Small Cap
Fund Centennial Money Market Trust
Oppenheimer Municipal Fund Centennial New York Tax Exempt Trust
Oppenheimer Real Asset Fund Centennial Tax Exempt Trust
Messrs. Swain, Murphy, Bishop, Wixted, Farrar and Zack, who are
officers of the Trust, respectively hold the same offices with the other
Denver-based Oppenheimer funds. As of October 9, 2001, the Trustees and
officers of the Trust as a group owned less than 1% of the outstanding shares
of the Fund. The foregoing statement does not reflect shares held of record
by an employee benefit plan for employees of OppenheimerFunds, Inc. other
than shares beneficially owned under that plan by the officers of the Fund
listed below. Mr. Murphy is the trustee of that plan.
James C. Swain*, Chairman, Chief Executive Officer and Trustee, Age: 68
6803 South Tucson Way, Englewood, Colorado 80112
Vice Chairman (since September 1988) of OppenheimerFunds, Inc.; of which the
Manager is a wholly-owned subsidiary; formerly President and a director of
the Manager and Chairman of the Board of Shareholder Services, Inc., a
transfer agent subsidiary of OppenheimerFunds, Inc.
John V. Murphy*, President, Age: 52
498 7th Avenue, New York, New York 10018
Chairman and Chief Executive Officer and director (since July 2001) and
President (since August 2000) of the OppenheimerFunds, Inc. (an investment
advisor); President and a trustee of other Oppenheimer funds; trustee MML
Series Investment Fund, an open-end investment company; President and a
director (since July 2001) of Oppenheimer Acquisition Corp., the Manager's
parent holding company; President, Chief Executive Officer and a director
(since July 2001) of OFI Private Investments, Inc., an investment adviser
subsidiary of the Manager; Chairman and a director (since July 2001) of
Shareholder Services, Inc. and of Shareholder Financial Services, Inc.,
transfer agent subsidiaries of the Manager; President and a director (since
July 2001) of Oppenheimer Partnership Holdings, Inc., a holding company
subsidiary of the Manager; a director of HarbourView Asset Management
Corporation and of Oppenheimer Real Asset Management, Inc. (since July 2001),
investment adviser subsidiaries of the Manager; President and a director
(since July 2001) of OppenheimerFunds Legacy Program, a charitable trust
program established by the Manager; formerly Chief Operating Officer (August
2000 - July 2001) of the Manager; Executive Vice President of MassMutual
Financial Group (from 1995 to 1997); Executive Vice President and Chief
Operating Officer of David L. Babson & Company (from 1995 to 1997), an
investment advisor; Chief Operating Officer of Concert Capital Management,
Inc. (from 1993 to 1996), and investment advisor.
William L. Armstrong, Trustee, Age: 64.
6803 South Tucson Way, Englewood, Colorado 80112
Chairman of the following private mortgage banking companies: Cherry Creek
Mortgage Company (since 1991), Centennial State Mortgage Company (since
1994), The El Paso Mortgage Company (since 1993), Transland Financial
Services, Inc. (since 1997); Chairman of the following private companies:
Great Frontier Insurance (insurance agency) (since 1995) and Ambassador Media
Corporation (since 1984); Director of the following public companies: Storage
Technology Corporation (computer equipment company) (since 1991), Helmerich &
Payne, Inc. (oil and gas drilling/production company) (since 1992),
UNUMProvident (insurance company) (since 1991); formerly Director of
International Family Entertainment (television channel) (1992 - 1997) and
Natec Resources, Inc. (air pollution control equipment and services company)
(1991-1995), Frontier Real Estate, Inc. (residential real estate brokerage)
(1994-1999), and Frontier Title (title insurance agency) (1995-June 1999);
formerly U.S. Senator (January 1979-January 1991).
Robert G. Avis, Trustee, Age: 70.
6803 South Tucson Way, Englewood, Colorado 80112
Formerly, (until February 2001) Director and President of A.G. Edwards
Capital, Inc. (General Partner of private equity funds), formerly, (until
March 2000) Chairman, President and Chief Executive Officer of A.G. Edwards
Capital, Inc.; formerly, (until March 1999) Vice Chairman and Director of
A.G. Edwards, Inc. and Vice Chairman of A.G. Edwards & Sons, Inc. (its
brokerage company subsidiary); (until March 1999) Chairman of A.G. Edwards
Trust Company and A.G.E. Asset Management (investment advisor); (until March
2000) a Director of A.G. Edwards & Sons and A.G. Edwards Trust Company.
George C. Bowen, Trustee, Age: 65.
6803 South Tucson Way, Englewood, Colorado 80112
Formerly (until April 1999) Mr. Bowen held the following positions: Senior
Vice President (from September 1987) and Treasurer (from March 1985) of
OppenheimerFunds, Inc; Vice President (from June 1983) and Treasurer (since
March 1985) of OppenheimerFunds, Distributor, Inc., a subsidiary of
OppenheimerFunds, Inc. and the Trust's Sub-Distributor; Senior Vice President
(since February 1992), Treasurer (since July 1991) Assistant Secretary and a
director (since December 1991) of the Manager; Vice President (since October
1989) and Treasurer (since April 1986) of HarbourView Asset Management
Corporation; President, Treasurer and a director of Centennial Capital
Corporation (since June 1989); Vice President and Treasurer (since August
1978) and Secretary (since April 1981) of Shareholder Services, Inc.; Vice
President, Treasurer and Secretary of Shareholder Financial Services, Inc.
(since November 1989); Assistant Treasurer of Oppenheimer Acquisition Corp.
(since March 1998); Treasurer of Oppenheimer Partnership Holdings, Inc.
(since November 1989); Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc. (since July 1996); Treasurer of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997).
Edward L. Cameron, Trustee, Age: 63
6803 South Tucson Way, Englewood, Colorado 80112
Formerly (from 1974-1999) a partner with PricewaterhouseCoopers LLC (an
accounting firm) and Chairman, Price Waterhouse LLP Global Investment
Management Industry Services Group (from 1994-1998).
Jon S. Fossel, Trustee, Age: 59.
6803 South Tucson Way, Englewood, Colorado 80112
Formerly (until October 1996) Chairman and a director of OppenheimerFunds,
Inc.; President and a director of Oppenheimer Acquisition Corp., Shareholder
Services, Inc. and Shareholder Financial Services, Inc.
Sam Freedman, Trustee, Age: 61.
6803 South Tucson Way, Englewood, Colorado 80112
Formerly (until October 1994) Chairman and Chief Executive Officer of
OppenheimerFunds Services, Chairman, Chief Executive Officer and a director
of Shareholder Services, Inc., Chairman, Chief Executive Officer and director
of Shareholder Financial Services, Inc., Vice President and director of
Oppenheimer Acquisition Corp. and a director of OppenheimerFunds, Inc.
Richard F. Grabish*, Trustee, Age: 53.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President, Assistant Director of Sales and Marketing since March
1997, and Manager of Private Client Services since June 1985 for A.G. Edwards
& Sons, Inc. (broker/dealer and investment firm). Chairman and Chief
Executive Officer of A.G. Edwards Trust Company since March 2001). Director
of A.G. Edwards & Sons, Inc. since March 1988); formerly (until March 1987)
President and Vice Chairman of A.G. Edwards Trust Company.
C. Howard Kast, Trustee, Age: 79.
6803 South Tucson Way, Englewood, Colorado 80112
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Trustee, Age: 80.
6803 South Tucson Way, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
F. William Marshall, Jr., Trustee, Age: 59.
6803 South Tucson Way, Englewood, Colorado 80112
Formerly (until 1999) Chairman of SIS & Family Bank, F.S.B. (formerly SIS
Bank); President, Chief Executive Officer and Director of SIS Bankcorp., Inc.
and SIS Bank (formerly Springfield Institution for Savings) (1993-1999);
Executive Vice President (until 1999) of Peoples Heritage Financial Group,
Inc.; Chairman and Chief Executive Office of Bank of Ireland First Holdings,
Inc. and First New Hampshire Banks (1990-1993); Trustee (since 1996) of
MassMutual Institutional Funds and of MML Series Investment Fund (open-end
investment companies).
Carol E. Wolf, Vice President and Portfolio Manager, Age: 49.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since June 2000) of OppenheimerFunds, Inc.; an officer
and portfolio manager of other Oppenheimer funds; formerly Vice President of
OppenheimerFunds, Inc. (June 1990 - June 2000).
Barry D. Weiss, Vice President and Portfolio Manager, Age: 37.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President (since June 2001) of the Manager; an officer and portfolio
manager of other Oppenheimer funds; formerly Senior Credit Analyst of the
Manager (February 2000 - June 2001); formerly Associate Director, Fitch IBCA
Inc. (April 1998 - February 2000); formerly News Director, Fitch Investors
Service (September 1996 - April 1998); formerly Senior Budget Analyst, City
of New York, Office of Management & Budget (February 1990 - September 1996).
Robert G. Zack, Vice President and Secretary, Age: 53.
498 7th Avenue, New York, New York 10018
Acting General Counsel (from November 1, 2001), Senior Vice President (since
May 1985), Associate General Counsel (from May 1981 until November 1, 2001)
of OppenheimerFunds, Inc.; Assistant Secretary of Shareholder Services, Inc.
(since May 1985), Shareholder Financial Services, Inc. (since November 1989);
OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
Brian W. Wixted, Treasurer, Age: 42.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since March 1999) of OppenheimerFunds,
Inc.; Treasurer (since March 1999) of HarbourView Asset Management
Corporation, Shareholder Services, Inc., Oppenheimer Real Asset Management
Corporation, Shareholder Financial Services, Inc. and Oppenheimer Partnership
Holdings, Inc., of OFI Private Investments, Inc. (since March 2000) and of
OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc
(since May 2000); Treasurer and Chief Financial Officer (since May 2000) of
Oppenheimer Trust Company; Assistant Treasurer (since March 1999) of
Oppenheimer Acquisition Corp. and of the Manager; an officer of other
Oppenheimer funds; formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment
Management Corp. (September 1991 - March 1995).
Robert J. Bishop, Assistant Treasurer, Age: 42.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of OppenheimerFunds, Inc. (since May 1996); an officer of
other Oppenheimer funds; formerly an Assistant Vice President (April 1994 -
May 1996) and a Fund Controller of OppenheimerFunds, Inc.
Scott T. Farrar, Assistant Treasurer, Age: 36.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of OppenheimerFunds, Inc. (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds; formerly an Assistant Vice President
(April 1994 - May 1996) and a Fund Controller of OppenheimerFunds, Inc.
o Remuneration of Trustees. The officers of the Trust and Mr. Swain are
affiliated with the Manager and receive no salary or fee from the Trust. The
remaining Trustees of the Trust received the compensation shown below. The
compensation from the Trust was paid during its fiscal year ended June 30,
2001. The compensation from all of the Denver-based Oppenheimer funds
includes the Trust and is compensation received as a director, trustee,
managing general partner or member of a committee of the Board during the
calendar year 2000.
-----------------------------------------------------------------------------
Aggregate Total Compensation
---------------------------- Compensation from all Denver-Based
Trustee's Name from Trust1 Oppenheimer Funds2
and Other Positions (41 Funds)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
William L. Armstrong $1,599 $49,270
Review Committee Member
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Robert G. Avis $1,867 $72,000
Review Committee Member
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
George C. Bowen $1,613 $55,948
Review Committee Member
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Edward L. Cameron $1,228 $26,709
Audit Committee Chairman
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Jon S. Fossel $2,024 $77,880
Review Committee Chairman
------------------------------------------------
-----------------------------------------------------------------------------
Sam Freedman $2,117 $80,100
Review Committee Member
------------------------------------------------
-----------------------------------------------------------------------------
Richard F. Grabish $62 $0
------------------------------------------------
-----------------------------------------------------------------------------
C. Howard Kast $2,245 $86,150
Audit Committee Member
-----------------------------------------------------------------------------
------------------------------------------------
Robert M. Kirchner $2,036 $76,950
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
F. William Marshall, Jr. $828 $3,768
Audit Committee Member
------------------------------------------------
2. * Effective July 1, 2000, William A. Baker and Ned M. Steel resigned as
Trustees of the Trust and subsequently became Trustees Emeritus of the
Trust. For the fiscal year ended June 30, 2001, Messrs. Baker and Steel
each received $1,474 aggregate compensation from the Trust and for the
calendar year ended December 31, 2000, they each received $63,999 total
compensation from all Denver-based Oppenheimer funds. Effective April 5,
2001, Raymond J. Kalinowski resigned as Trustee of the Trust. For the
fiscal year ended June 30, 2001, Mr. Kalinowski received $1,447 aggregate
compensation from the Trust and for the calendar year ended December 31,
2000, he received $73,500 total compensation from all Denver-based
Oppenheimer funds.
1. For the Trust's fiscal year end June 30, 2001.
2. For the 2000 calendar year.
o Deferred Compensation Plan for Trustees. The Trustees have adopted a
Deferred Compensation Plan for disinterested Trustees that enables them to
elect to defer receipt of all or a portion of the annual fees they are
entitled to receive from the Trust. Under the plan, the compensation
deferred by a Trustee is periodically adjusted as though an equivalent amount
had been invested in shares of one or more Oppenheimer funds selected by the
Trustee. The amount paid to the Trustee under this plan will be determined
based upon the performance of the selected funds.
Deferral of fees of the Trustees under this plan will not materially
affect the Trust's assets, liabilities or net income per share. This plan
will not obligate the Trust to retain the services of any Trustee or to pay
any particular level of compensation to any Trustee. Pursuant to an Order
issued by the Securities and Exchange Commission, the Trust may invest in the
funds selected by any Trustee under this plan without shareholder approval
for the limited purpose of determining the value of the Trustees' deferred
fee accounts.
|X| Major Shareholders. As of October 9, 2001 the only
person who owned of record or was known by the Trust to own beneficially 5%
or more of the Trust's outstanding retail shares was A.G. Edwards & Sons,
Inc., 1 North Jefferson Avenue, St. Louis, Missouri 63103, which owned
1,617,124,608.150 shares of the Trust which was 94.85% of the outstanding
shares of the Trust on that date, for accounts of its customers none of whom
individually owned more than 5% of the outstanding shares.
The Manager. The Manager, Centennial Asset Management Corporation, is
wholly-owned by OppenheimerFunds, Inc., which is a wholly-owned subsidiary of
Oppenheimer Acquisition Corp., a holding company controlled by Massachusetts
Mutual Life Insurance Company.
The portfolio managers of the Trust are principally responsible for the
day-to-day management of the Trust's investment portfolio. Other members of
the Manager's fixed-income portfolio department, particularly security
analysts, traders and other portfolio managers, have broad experience with
fixed-income securities. They provide the Trust's portfolio managers with
research and support in managing the Trust's investments.
|X| The Investment Advisory Agreement. The Manager
provides investment advisory and management services to the Trust under an
investment advisory agreement between the Manager and the Trust. The Manager
selects securities for the Trust's portfolio and handles its day-to-day
business. The agreement requires the Manager, at its expense, to provide the
Trust with adequate office space, facilities and equipment. It also requires
the Manager to provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for the
Trust. Those responsibilities include the compilation and maintenance of
records with respect to its operations, the preparation and filing of
specified reports, and composition of proxy materials and registration
statements for continuous public sale of shares of the Trust.
Expenses not expressly assumed by the Manager under the investment
advisory agreement are paid by the Trust. The investment advisory agreement
lists examples of expenses paid by the Trust. The major categories relate to
interest, taxes, fees to unaffiliated Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain printing
and registration costs and non-recurring expenses, including litigation
costs. The management fees paid by the Trust to the Manager are calculated
at the rates described in the Prospectus.
---------------------------------------------------------------------------------
Fiscal Year Management Fee Paid to Centennial Asset Management Corporation
ending 6/30
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
1999 $5,601,294
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
2000 $5,607,527
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
2001 $6,049,419
---------------------------------------------------------------------------------
Under the investment advisory agreement, the Manager has agreed to
reimburse the Trust to the extent that the Trust's total expenses (including
the management fee but excluding interest, taxes, brokerage commissions, and
extraordinary expenses such as litigation costs) exceed in any fiscal year
the lesser of: (i) 1.5% of average annual net assets of the Trust up to $30
million plus 1% of the average annual net assets in excess of $30 million or;
(ii) 25% of the total annual investment income of the Trust.
The investment advisory agreement provides that the Manager shall not be
liable for any loss sustained by reason of the adoption of an investment
policy or the purchase, sale or retention of any security on its
recommendation, whether or not such recommendation shall have been based upon
its own investigation and research or upon investigation and research made by
any other individual, firm or corporation, if such recommendation shall have
been made and such other individual, firm or corporation shall have been
selected with due care and in good faith, provided that nothing in the
agreement shall be construed to protect the Manager against any liability to
the Trust or its shareholders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under the agreement.
|X| The Distributor. Under its General Distributor's
Agreement with the Trust, Centennial Asset Management Corporation acts as the
Trust's principal underwriter and Distributor in the continuous public
offering of the Trust's shares. The Distributor is not obligated to sell a
specific number of shares. The Distributor bears the expenses normally
attributable to sales, including advertising and the cost of printing and
mailing prospectuses, other than those furnished to existing shareholders.
For other distribution expenses paid by the Trust, see the section entitled
"Service Plan" below. The Trust's Sub-Distributor is OppenheimerFunds
Distributor, Inc.
Portfolio Transactions. Portfolio decisions are based upon recommendations
and judgment of the Manager subject to the overall authority of the Board of
Trustees. Most purchases made by the Trust are principal transactions at net
prices, so the Trust incurs little or no brokerage costs. The Trust deals
directly with the selling or purchasing principal or market maker without
incurring charges for the services of a broker on its behalf unless the
Manager determines that a better price or execution may be obtained by using
the services of a broker. Purchases of portfolio securities from
underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a spread between the bid and
asked prices.
The Trust seeks to obtain prompt execution of orders at the most
favorable net price. If broker/dealers are used for portfolio transactions,
transactions may be directed to broker/dealers for their execution and
research services. The research services provided by a particular broker may
be useful only to one or more of the advisory accounts of the Manager and its
affiliates. Investment research received for the commissions of those other
accounts may be useful both to the Trust and one or more of such other
accounts. Investment research services may be supplied to the Manager by a
third party at the instance of a broker through which trades are placed. It
may include information and analyses on particular companies and industries
as well as market or economic trends and portfolio strategy, receipt of
market quotations for portfolio evaluations, information systems, computer
hardware and similar products and services. If a research service also
assists the Manager in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that
provides assistance to the Manager in the investment decision-making process
may be paid in commission dollars.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager
obtain market information for the valuation of securities held in the Trust's
portfolio or being considered for purchase.
Subject to applicable rules covering the Manager's activities in this
area, sales of shares of the Trust and/or the other investment companies
managed by the Manager or distributed by the Distributor may also be
considered as a factor in the direction of transactions to dealers. That
must be done in conformity with the price, execution and other considerations
and practices discussed above. Those other investment companies may also
give similar consideration relating to the sale of the Trust's shares. No
portfolio transactions will be handled by any securities dealer affiliated
with the Manager.
The Trust may experience high portfolio turnover that may increase the
Trust's transaction costs. However, since brokerage commissions, if any, are
small, high turnover does not have an appreciable adverse effect upon the
income of the Trust.
Service Plan
The Trust has adopted a Service Plan for the shares. The plan has been
approved by a vote of the Board of Trustees, including a majority of the
Independent Trustees2, cast in person at a meeting called for the purpose of
voting on that plan.
Under the plan, the Manager and the Distributor may make payments to
affiliates and, in their sole discretion, from time to time, may use their
own resources (at no direct cost to the Trust) to make payments to brokers,
dealers or other financial institutions for distribution and administrative
services they perform. The Manager may use its profits from the advisory fee
it receives from the Trust. In their sole discretion, the Distributor and
the Manager may increase or decrease the amount of payments they make from
their own resources to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Trust's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose
of voting on continuing the plan. A plan may be terminated at any time by
the vote of a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the Investment Company Act) of the
outstanding shares of the Trust.
The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the
amount of payments to be made under a plan must be approved by shareholders
of the class affected by the amendment. The approval must be by a "majority"
(as defined in the Investment Company Act) of the shares.
While the plan is in effect, the Treasurer of the Trust shall provide
separate written reports on the plan to the Board of Trustees at least
quarterly for its review. The Reports shall detail the amount of all
payments made under the plan and the purpose for which the payments were
made. Those reports are subject to the review and approval of the Independent
Trustees.
The plan states that while it is in effect, the selection and
nomination of those Trustees of the Trust who are not "interested persons" of
the Trust is committed to the discretion of the Independent Trustees. This
does not prevent the involvement of others in the selection and nomination
process as long as the final decision as to selection or nomination is
approved by a majority of the Independent Trustees.
Under the plan, no payment will be made to any recipient in any quarter
in which the aggregate net asset value of all Trust shares held by the
recipient for itself and its customers does not exceed a minimum amount, if
any, that may be set from time to time by a majority of the Independent
Trustees. The Board of Trustees has set no minimum amount of assets to
qualify for payments under the plan.
|X| Service Plan Fees. Under the service plan, the Distributor
currently uses the fees it receives from the Trust to pay brokers, dealers
and other financial institutions (they are referred to as "recipients") for
personal services and account maintenance services they provide for their
customers who hold shares. The services include, among others, answering
customer inquiries about the Trust, assisting in establishing and maintaining
accounts in the Trust, making the Trust's investment plans available and
providing other services at the request of the Trust or the Distributor. The
service plan permits reimbursements to the Distributor at a rate of up to
0.20% of average annual net assets of the shares. The Distributor makes
payments to plan recipients quarterly at an annual rate not to exceed 0.20%
of the average annual net assets consisting of shares held in the accounts of
the recipients or their customers.
For the fiscal year ended June 30, 2001 payments under the plan totaled
$2,727,603, all of which was paid by the Distributor to recipients. That
included $168,532 paid to an affiliate of the Distributor's parent company.
For the fiscal year ended June 30, 2001, the Manager paid, in the aggregate,
$3,834,735 in fees out of its own resources for distribution assistance. Any
unreimbursed expenses the Distributor incurs with respect to the shares in
any fiscal quarter cannot be recovered in subsequent quarters. The
Distributor may not use payments received under the plan to pay any of its
interest expenses, carrying charges, or other financial costs, or allocation
of overhead.
Performance of the Trust
Explanation of Performance Terminology. The Trust uses a variety of terms to
illustrate its performance. These terms include "yield," "compounded
effective yield" and "average annual total return." An explanation of how
yields and total returns are calculated is set forth below. The charts below
show the Trust's performance as of the Trust's most recent fiscal year end.
You can obtain current performance information by calling the Trust's
Transfer Agent at 1.800.525.9310.
The Trust's illustrations of its performance data in advertisements
must comply with rules of the Securities and Exchange Commission. Those
rules describe the types of performance data that may be used and how it is
to be calculated. If the Trust shows total returns in addition to its
yields, the returns must be for the 1-, 5- and 10-year periods ending as of
the most recent calendar quarter prior to the publication of the
advertisement (or its submission for publication).
Use of standardized performance calculations enables an investor to
compare the Trust's performance to the performance of other funds for the
same periods. However, a number of factors should be considered before using
the Trust's performance information as a basis for comparisons with other
investments:
Yields and total returns measure the performance of a hypothetical
account in the Trust over various periods and do not show the
performance of each shareholder's account. Your account's
performance will vary from the model performance data if your
dividends are received in cash, or you buy or sell shares during the
period, or you bought your shares at a different time than the
shares used in the model.
An investment in the Trust is not insured by the FDIC or any other
government agency.
The Trust's yield is not fixed or guaranteed and will fluctuate.
Yields and total returns for any given past period represent historical
performance information and are not, and should not be considered, a
prediction of future yields or returns.
|_| Yields. The Trust's current yield is calculated for
a seven-day period of time as follows. First, a base period return is
calculated for the seven-day period by determining the net change in the
value of a hypothetical pre-existing account having one share at the
beginning of the seven-day period. The change includes dividends declared on
the original share and dividends declared on any shares purchased with
dividends on that share, but such dividends are adjusted to exclude any
realized or unrealized capital gains or losses affecting the dividends
declared. Next, the base period return is multiplied by 365/7 to obtain the
current yield to the nearest hundredth of one percent.
The compounded effective yield for a seven-day period is calculated by
(1) adding 1 to the base period return (obtained as described above),
(2) raising the sum to a power equal to 365 divided by 7, and
(3) subtracting 1 from the result.
The yield as calculated above may vary for accounts less than
approximately $100 in value due to the effect of rounding off each daily
dividend to the nearest full cent. The calculation of yield under either
procedure described above does not take into consideration any realized or
unrealized gains or losses on the Trust's portfolio securities which may
affect dividends. Therefore, the return on dividends declared during a
period may not be the same on an annualized basis as the yield for that
period.
o Total Return Information. There are different types of "total
returns" to measure the Trust's performance. Total return is the change in
value of a hypothetical investment in the Trust over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares and that the investment is redeemed at the end of the
period. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return shows
the average rate of return for each year in a period that would produce the
cumulative total return over the entire period. However, average annual
total returns do not show actual year-by-year performance. The Trust uses
standardized calculations for its total returns as prescribed by the SEC.
The methodology is discussed below.
|_| Average Annual Total Return. The "average annual total
return" of each class is an average annual compounded rate of return for each
year in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV" in the formula) of that investment, according to the
following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
|_| Cumulative Total Return. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation
|_| uses some of the same factors as average annual total return, but it
does not average the rate of return on an annual basis. Cumulative total
return is determined as follows:
ERV - P
------- = Total Return
P
------------------------------------------------------------------------------
------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Yield Compounded Average Annual Total Returns (at 6/30/01)
(7 days ended Effective Yield
6/30/01) (7 days ended
6/30/01)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
1-Year 5 Years 10 Years
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
3.53% 3.59% 5.29% 4.90% 4.48%
---------------------------------------------------------------------------------
|X| Other Performance Comparisons. Yield information may
be useful to investors in reviewing the Trust's performance. The Trust may
make comparisons between its yield and that of other investments, by citing
various indices such as The Bank Rate Monitor National Index (provided by
Bank Rate Monitor(TM)) which measures the average rate paid on bank money market
accounts, NOW accounts and certificates of deposits by the 100 largest banks
and thrifts in the top ten metro areas. When comparing the Trust's yield
with that of other investments, investors should understand that certain
other investment alternatives such as certificates of deposit, U.S.
government securities, money market instruments or bank accounts may provide
fixed yields and may be insured or guaranteed.
From time to time, the Trust may include in its advertisements and
sales literature performance information about the Trust cited in other
newspapers and periodicals, such as The New York Times, which may include
performance quotations from other sources.
From time to time the Trust may include in its advertisements and
sales literature the total return performance of a hypothetical investment
account that includes shares of the Trust and other Oppenheimer funds. The
combined account may be part of an illustration of an asset allocation model
or similar presentation. The account performance may combine total return
performance of the Trust and the total return performance of other
Oppenheimer funds included in the account. Additionally, from time to time,
the Trust's advertisements and sales literature may include, for illustrative
or comparative purposes, statistical data or other information about general
or specific market and economic conditions. That may include, for example,
o information about the performance of certain securities or commodities
markets or segments of those markets,
o information about the performance of the economies of particular
countries or regions,
o the earnings of companies included in segments of particular
industries, sectors, securities markets, countries or
regions,
o the availability of different types of securities or offerings of
securities,
o information relating to the gross national or gross domestic product of
the United States or other countries or regions,
o comparisons of various market sectors or indices to demonstrate
performance, risk, or other characteristics of the Trust.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Determination of Net Asset Value Per Share. The net asset value per share of
the Trust is determined twice each day that the New York Stock Exchange
("Exchange") is open, at 12:00 Noon and at 4:00 P.M, on each day that the
Exchange is open, by dividing the value of the Trust's net assets by the
total number of shares outstanding. All references to time in this Statement
of Additional Information mean New York time. The Exchange's most recent
annual announcement (which is subject to change) states that it will close on
New Year's Day, Martin Luther King Jr. Day, Washington's Birthday, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days.
The Trust's Board of Trustees has adopted the amortized cost method to
value the Trust's portfolio securities. Under the amortized cost method, a
security is valued initially at its cost and its valuation assumes a constant
amortization of any premium or accretion of any discount, regardless of the
impact of fluctuating interest rates on the market value of the security.
This method does not take into consideration any unrealized capital gains or
losses on securities. While this method provides certainty in valuing
securities, in certain periods the value of a security determined by
amortized cost may be higher or lower than the price the Trust would receive
if it sold the security.
The Trust's Board of Trustees has established procedures reasonably
designed to stabilize the Trust's net asset value at $1.00 per share. Those
procedures include a review of the valuations of the Trust's portfolio
holdings by the Board of Trustees, at intervals it deems appropriate, to
determine whether the Trust's net asset value calculated by using available
market quotations deviates from $1.00 per share based on amortized cost.
The Board of Trustees will examine the extent of any deviation between
the Trust's net asset value based upon available market quotations and
amortized cost. If the Trust's net asset value were to deviate from $1.00 by
more than 0.5%, Rule 2a-7 requires the Board of Trustees to consider what
action, if any, should be taken. If they find that the extent of the
deviation may cause a material dilution or other unfair effects on
shareholders, the Board of Trustees will take whatever steps it considers
appropriate to eliminate or reduce the dilution, including, among others,
withholding or reducing dividends, paying dividends from capital or capital
gains, selling portfolio instruments prior to maturity to realize capital
gains or losses or to shorten the average maturity of the portfolio, or
calculating net asset value per share by using available market quotations.
During periods of declining interest rates, the daily yield on shares
of the Trust may tend to be lower (and net investment income and dividends
higher) than those of a fund holding the identical investments as the Trust
but which used a method of portfolio valuation based on market prices or
estimates of market prices. During periods of rising interest rates, the
daily yield of the Trust would tend to be higher and its aggregate value
lower than that of an identical portfolio using market price valuation.
How to Sell Shares
The information below supplements the terms and conditions for redeeming
shares set forth in the Prospectus.
Checkwriting. When a check is presented to the Bank for clearance, the Bank
will ask the Trust to redeem a sufficient number of full and fractional
shares in the shareholder's account to cover the amount of the check. This
enables the shareholder to continue receiving dividends on those shares until
the check is presented to the Trust. Checks may not be presented for payment
at the offices of the Bank or the Trust's Custodian. This limitation does
not affect the use of checks for the payment of bills or to obtain cash at
other banks. The Trust reserves the right to amend, suspend or discontinue
offering checkwriting privileges at any time without prior notice.
In choosing to take advantage of the Checkwriting privilege, by signing
the Account Application or by completing a Checkwriting card, each individual
who signs:
(1) for individual accounts, represents that they are the registered
owner(s) of the shares of the Trust in that account;
(2) for accounts for corporations, partnerships, trusts and other entities,
represents that they are an officer, general partner, trustee or
other fiduciary or agent, as applicable, duly authorized to act on
behalf of the registered owner(s);
(3) authorizes the Trust, its Transfer Agent and any bank through which the
Trust's drafts (checks) are payable to pay all checks drawn on the
Trust account of such person(s) and to redeem a sufficient amount of
shares from that account to cover payment of each check;
(4) specifically acknowledges that if they choose to permit checks to be
honored if there is a single signature on checks drawn against joint
accounts, or accounts for corporations, partnerships, trusts or other
entities, the signature of any one signatory on a check will be
sufficient to authorize payment of that check and redemption from the
account, even if that account is registered in the names of more than
one person or more than one authorized signature appears on the
Checkwriting card or the Application, as applicable;
(5) understands that the Checkwriting privilege may be terminated or
amended at any time by the Trust and/or the Trust's bank; and
(6) acknowledges and agrees that neither the Trust nor its bank shall incur
any liability for that amendment or termination of checkwriting
privileges or for redeeming shares to pay checks reasonably believed
by them to be genuine, or for returning or not paying checks that
have not been accepted for any reason.
Sending Redemption Proceeds by Federal Funds Wire. The Federal Funds wire of
redemptions proceeds may be delayed if the Trust's custodian bank is not open
for business on a day when the Trust would normally authorize the wire to be
made, which is usually the Trust's next regular business day following the
redemption. In those circumstances, the wire will not be transmitted until
the next bank business day on which the Trust is open for business. No
distributions will be paid on the proceeds of redeemed shares awaiting
transfer by Federal Funds wire
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans or
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address
listed in "How To Sell Shares" in the Prospectus or on the back cover of this
Statement of Additional Information. The request must
(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the distribution is
premature; and
(3) conform to the requirements of the plan and the Trust's other
redemption requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Trust held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary must sign
the request.
Distributions from pension and profit sharing plans are subject to
special requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed and submitted to the
Transfer Agent before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the Internal
Revenue Code, and IRS Form W-4P (available from the Transfer Agent) must be
submitted to the Transfer Agent with the distribution request, or the
distribution may be delayed. Unless the shareholder has provided the
Transfer Agent with a certified tax identification number, the Internal
Revenue Code requires that tax be withheld from any distribution even if the
shareholder elects not to have tax withheld. The Trust, the Manager, the
Distributor the Sub-Distributor, and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the conditions
of applicable tax laws and will not be responsible for any tax penalties
assessed in connection with a distribution.
How to Exchange Shares
As stated in the Prospectus, direct shareholders can exchange shares of the
Trust for Class A shares of any of the following eligible funds:
Oppenheimer Bond Fund Oppenheimer Main Street Growth & Income
Fund
Oppenheimer California Municipal Fund Oppenheimer Main Street Opportunity Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Preservation Fund Oppenheimer MidCap Fund
Oppenheimer Capital Income Fund Oppenheimer Special Value Fund
Oppenheimer Champion Income Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Concentrated Growth Fund Oppenheimer Municipal Bond Fund
Oppenheimer Convertible Securities Fund OSM1 - Mercury Advisors S&P 500 Index
OSM1 - Mercury Advisors Focus Growth
Oppenheimer Developing Markets Fund Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer New York Municipal Fund
Oppenheimer Value Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Discovery Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Emerging Growth Fund OSM1 - QM Active Balanced Fund
Oppenheimer Emerging Technologies Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Enterprise Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Europe Fund Inc.
Oppenheimer Rochester National
Municipals Oppenheimer Quest Opportunity Value Fund
OSM1- Gartmore Millennium Growth Fund II Oppenheimer Quest Value Fund, Inc.
Oppenheimer Global Fund Oppenheimer Real Asset Fund
Oppenheimer Global Growth & Income Fund OSM1 - Salomon Brothers Capital Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Growth Fund Oppenheimer Small Cap Value Fund
Oppenheimer High Yield Fund Oppenheimer Strategic Income Fund
Oppenheimer Intermediate Municipal Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer International Bond Fund Oppenheimer Trinity Core Fund
Oppenheimer Trinity Large Cap Growth
Oppenheimer International Growth Fund Fund
Oppenheimer International Small Company
Fund Oppenheimer Trinity Value Fund
OSM1 -Jennison Growth Fund Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund Limited-Term New York Municipal Fund
Rochester Fund Municipals
and the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
1 - "OSM" is Oppenheimer Select Managers
Shares of the Trust purchased without a sales charge may be exchanged
for shares of an eligible fund offered with a sales charge upon payment of
the sales charge. Shares of the Trust acquired by reinvestment of dividends
or distributions from the Trust or any of the other eligible funds (other
than Oppenheimer Cash Reserves) or from any unit investment trust for which
reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the eligible funds.
|_| Limits on Multiple Exchange Orders. The Trust
reserves the right to reject telephone or written exchange requests submitted
in bulk by anyone on behalf of more than one account. The Trust may accept
requests for exchanges of up to 50 accounts per day from representatives of
authorized dealers that qualify for this privilege.
|_| Telephone Exchange Requests. When exchanging shares
by telephone, a direct shareholder must have an existing account in the fund
to which the exchange is to be made. Otherwise, the investor must obtain a
prospectus of that fund before the exchange request may be submitted. If all
telephone lines are busy (which might occur, for example, during periods of
substantial market fluctuations), shareholders might not be able to request
exchanges by telephone and would have to submit written exchange requests.
|_| Processing Exchange Requests. Shares to be exchanged
are redeemed on the regular business day the Transfer Agent receives an
exchange request in proper form (the "Redemption Date"). Normally, shares of
the fund to be acquired are purchased on the Redemption Date, but such
purchases may be delayed by either fund up to five business days if it
determines that it would be disadvantaged by an immediate transfer of the
redemption proceeds. The Trust reserves the right, in its discretion, to
refuse any exchange request that may disadvantage it (for example, if the
receipt of multiple exchange requests from a dealer might require the
disposition of portfolio securities at a time or at a price that might be
disadvantageous to the Trust).
In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered by a
share certificate that is not tendered with the request. In those cases,
only the shares available for exchange without restriction will be
exchanged.
The different eligible funds available for exchange have different
investment objectives, policies and risks. A shareholder should assure that
the fund selected is appropriate for his or her investment and should be
aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of one
fund and a purchase of shares of another. The Trust, the Distributor, the
Sub-Distributor, and the Transfer Agent are unable to provide investment, tax
or legal advice to a shareholder in connection with an exchange request or
any other investment transaction.
The Trust may amend, suspend or terminate the exchange privilege at any
time. Although, the Trust may impose these changes at any time, it will
provide you with notice of those changes whenever it is required to do so by
applicable law. It may be required to provide 60 days notice prior to
materially amending or terminating the exchange privilege. That 60-day
notice is not required in extraordinary circumstances.
Dividends and Taxes
Tax Status of the Trust's Dividends and Distributions. The federal tax
treatment of the Trust's dividends and capital gains distributions is
explained in the Prospectus under the caption "Distributions and Taxes."
Under the Internal Revenue Code, by December 31 each year, the Trust must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year. It
if does not, the Trust must pay an excise tax on the amounts not
distributed. It is presently anticipated that the Trust will meet those
requirements. However, the Board of Trustees and the Manager might determine
in a particular year that it would be in the best interest of shareholders
for the Trust not to make distributions at the required levels and to pay the
excise tax on the undistributed amounts. That would reduce the amount of
income or capital gains available for distribution to shareholders. The
Trust's dividends will not be eligible for the dividends-received deduction
for corporations.
If the Trust qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for federal income taxes on
amounts paid by it as distributions. That qualification enables the Trust to
"pass through" its income and realized capital gains to shareholders without
having to pay tax on them. The Trust qualified as a regulated investment
company in its last fiscal year and intends to qualify in future years, but
reserves the right not to qualify. The Internal Revenue Code contains a
number of complex tests to determine whether the Trust qualifies. The Trust
might not meet those tests in a particular year. If it does not qualify, the
Trust will be treated for tax purposes as an ordinary corporation and will
receive no tax deduction for payments of distributions made to shareholders.
Dividends, distributions and the proceeds of the redemption of Trust
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of the Trust as promptly
as possible after the return of such checks to the Transfer Agent, in order
to enable the investor to earn a return on otherwise idle funds.
Dividend Reinvestment in Another Trust. Direct shareholders of the Trust may
elect to reinvest all dividends and/or capital gains distributions in Class A
shares of any eligible fund listed above. To elect this option, the
shareholder must notify the Transfer Agent in writing and must have an
existing account in the fund selected for reinvestment. Otherwise, the
shareholder first must obtain a prospectus for that fund and an application
from the Distributor to establish an account. The investment will be made at
the close of business on the payable date of the dividend or distribution.
Additional Information About the Trust
The Distributor. The Trust's shares are sold through dealers, brokers and
other financial institutions that have a sales agreement with the
Sub-Distributor. The Distributor and the Sub-Distributor also distribute
shares of the other funds managed by the Manager or an affiliate.
The Transfer Agent. Shareholder Services, Inc. the Trust's Transfer Agent,
is responsible for maintaining the Trust's shareholder registry and
shareholder accounting records, and for paying dividends and distributions to
shareholders of the Trust. It also handles shareholder servicing and
administrative functions.
The Custodian. Citibank, N.A. is the Custodian of the Trust's assets. The
Custodian's responsibilities include safeguarding and controlling the Trust's
portfolio securities and handling the delivery of such securities to and from
the Trust. It will be the practice of the Trust to deal with the Custodian
in a manner uninfluenced by any banking relationship the Custodian may have
with the Manager and its affiliates. The Trust's cash balances with the
Custodian in excess of $100,000 are not protected by federal deposit
insurance. Those uninsured balances at times may be substantial.
Independent Auditors. Deloitte & Touche LLP are the independent auditors of
the Trust. They audit the Trust's financial statements and perform other
related audit services. They also act as auditors for the Manager and
OppenheimerFunds, Inc. and for certain other funds advised by the Manager and
its affiliates.
INDEPENDENT AUDITORS' REPORT
Centennial Government Trust
To the Shareholders and Board of Trustees of Centennial Government Trust:
We have audited the accompanying statement of assets and liabilities of
Centennial Government Trust, including the statement of investments, as of June
30, 2001, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. 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 auditing standards generally accepted
in the United States of America. 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, 2001, 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Centennial Government Trust as of June 30, 2001, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
July 23, 2001
12 STATEMENT OF INVESTMENTS June 30, 2001 Centennial Government Trust
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
------------ ---------------
REPURCHASE AGREEMENTS--15.4%
Repurchase agreement with PaineWebber, Inc., 4.01%, dated 6/29/01, to be
repurchased at $224,274,920 on 7/2/01, collateralized by Federal National
Mortgage Assn., 7%, 6/1/28, with a value of $85,277,425, Federal Home Loan
Mortgage Corp., 6.50%, 3/1/29, with a value of $91,069,151 and Government
National Mortgage Assn., 6.50%, 4/20/28, with a value of $52,796,280
(Cost $ 224,200,000) $224,200,000 $224,200,000
U.S. GOVERNMENT AGENCIES--84.9%
Federal Farm Credit Bank:
3.80%, 7/20/01 20,000,000 19,959,889
Federal Home Loan Bank:
3.67%, 9/28/01 20,000,000 19,818,539
3.77%, 7/24/01 33,600,000 33,519,071
3.79%, 8/15/01(1) 35,000,000 34,975,972
4.14%, 7/25/01 35,000,000 34,903,400
4.60%, 7/6/01 8,000,000 7,994,889
4.81%, 8/24/01 48,643,000 48,295,117
5.20%, 7/11/01 46,000,000 45,938,156
5.21%, 7/18/01 40,000,000 39,912,167
5.49%, 7/13/01 40,000,000 39,938,000
5.82%, 7/9/01(1) 23,000,000 23,002,138
5.875%, 9/17/01 16,500,000 16,562,394
6%, 11/15/01 17,000,000 17,124,492
6.346%, 2/26/02 8,500,000 8,621,714
6.375%, 12/5/01 20,525,000 20,741,941
6.55%, 9/28/01 11,695,000 11,744,607
6.70%, 12/19/01 10,000,000 10,122,306
6.75%, 2/15/02 5,000,000 5,079,465
Federal Home Loan Mortgage Corp.:
3.53%, 8/21/01 20,000,000 19,899,983
3.595%, 7/26/01(1) 25,000,000 24,982,500
3.67%, 12/6/01 30,000,000 29,516,783
3.71%, 9/6/01 20,000,000 19,861,906
3.897%, 8/23/01 48,000,000 47,724,612
4.12%, 8/2/01 25,000,000 24,908,444
4.13%, 7/26/01 25,000,000 24,928,299
4.15%, 5/15/02 25,000,000 24,980,469
3 STATEMENT OF INVESTMENTS June 30, 2001 (Continued) Centennial Government Trust
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------- ---------------
U.S. GOVERNMENT AGENCIES (Continued)
Federal Home Loan Mortgage Corp.: (Continued)
4.40%, 5/8/02 $ 25,000,000 $ 24,994,141
4.478%, 7/12/01 57,824,000 57,743,954
4.56%, 7/6/01-7/19/01 48,000,000 47,928,433
4.58%, 7/27/01 53,000,000 52,824,688
4.59%, 7/5/01 25,000,000 24,987,250
4.65%, 9/13/01 47,000,000 46,658,963
4.75%, 12/14/01 42,365,000 42,558,410
Federal National Mortgage Assn.:
3.83%, 8/16/01 15,000,000 14,926,592
4.625%, 10/15/01 20,000,000 20,051,563
5.94%, 9/4/01 45,000,000 45,142,479
6.24%, 12/6/01 10,000,000 10,095,382
6.40%, 12/21/01 6,000,000 6,066,827
6.48%, 11/2/01 5,325,000 5,372,109
6.64%, 9/18/01 11,000,000 11,059,085
FNMA Master Credit Facility:
3.86%, 9/4/01 7,000,000 6,951,214
4.08%, 11/1/01 45,000,000 44,372,700
4.67%, 7/3/01 36,000,000 35,990,660
5.10%, 8/1/01 49,000,000 48,784,808
Overseas Private Investment Corp.:
4.076%, 7/20/01(1)(2) 2,642,406 2,666,223
5.736%, 7/20/01(1)(2) 3,167,710 3,178,286
Student Loan Marketing Assn., guaranteeing commercial
paper of New Hampshire Higher Education Loan Corp.,
Series 1995A:
3.83%, 7/23/01 15,917,000 15,879,745
3.85%, 7/16/01 15,000,000 14,975,937
-------------
Total U.S. Government Agencies (Cost $1,238,266,702) 1,238,266,702
-------------
Total Investments, at Value (Cost $1,462,466,702) 100.3% 1,462,466,702
Liabilities in Excess of Other Assets (0.3) (4,961,882)
----------- -------------
Net Assets 100.0% $ 1,457,504,820
========== ===============
---------- 1. Represents the current interest rate for a variable rate security. 2. Identifies issues considered to be illiquid--See Note 4 of Notes to Financial Statements. See accompanying Notes to Financial Statements. 4
ASSETS
Investments, at value (Cost $1,462,466,702)Esee accompanying statement $ 1,462,466,702
Cash 1,896,555
Receivables and other assets:
Interest 3,714,963
Shares of beneficial interest sold 2,962,843
Other 58,725
---------------
Total assets 1,471,099,788
===============
LIABILITIES
Payables and other liabilities:
Dividends 1,281,316
Shares of beneficial interest redeemed 11,939,300
Shareholder reports 145,136
Service plan fees 111,532
Trustees' compensation 7,042
Other 110,642
---------------
Total liabilities 13,594,968
---------------
NET ASSETS $ 1,457,504,820
===============
COMPOSITION OF NET ASSETS
Paid-in capital $ 1,457,723,867
Accumulated net realized gain (loss) on investment transactions (219,047)
---------------
NET ASSETS--applicable to 1,457,723,867 shares of beneficial interest
outstanding $ 1,457,504,820
===============
NET ASSETS VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $ 1.00
See accompanying Notes to Financial Statements. 5 STATEMENT OF OPERATIONS For the Year Ended June 30, 2001 Centennial Government Trust
INVESTMENT INCOME--Interest $ 80,100,943
------------
EXPENSES
Management fees 6,049,419
Service plan fees 2,727,603
Transfer and shareholder servicing agent fees 678,718
Shareholder reports 251,476
Custodian fees and expenses 48,318
Trustees' compensation 20,015
Other 175,287
------------
Total expenses 9,950,836
Less reduction to custodian expenses (12,349)
------------
Net expenses 9,938,487
------------
NET INVESTMENT INCOME 70,162,456
------------
NET REALIZED GAIN (LOSS) ON INVESTMENTS 328,977
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 70,491,433
============
See accompanying Notes to Financial Statements. 6
YEAR ENDED JUNE 30,
--------------------------------------
2001 2000
-------------- ----------------
OPERATIONS
Net investment income (loss) $ 70,162,456 $ 61,238,668
Net realized gain (loss) 328,977 13,728
--------------- ---------------
Net increase (decrease) in net assets resulting from operations 70,491,433 61,252,396
--------------- ---------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS (70,162,456) (61,238,668)
--------------- ---------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from
beneficial interest transactions 265,420,116 (21,379,309)
--------------- ---------------
NET ASSETS
Total increase (decrease) 265,749,093 (21,365,581)
Beginning of period 1,191,755,727 1,213,121,308
--------------- ---------------
End of period $ 1,457,504,820 $ 1,191,755,727
=============== ===============
See accompanying Notes to Financial Statements. 7 FINANCIAL HIGHLIGHTS Centennial Government Trust
YEAR ENDED JUNE 30,
---------------------------------------------------------------------------------
2001 2000 1999 1998 1997
--------- --------- --------- --------- ---------
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 .04 .05 .05
Dividends and/or distributions to
shareholders (.05) (.05) (.04) (.05) (.05)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
TOTAL RETURN(1) 5.29% 5.07% 4.47% 4.93% 4.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 1,458 $ 1,192 $ 1,213 $ 1,132 $ 1,027
Average net assets (in millions) $ 1,367 $ 1,244 $ 1,245 $ 1,117 $ 1,032
Ratios to average net assets:(2)
Net investment income 5.13% 4.92% 4.37% 4.82% 4.65%
Expenses 0.73% 0.74% 0.74% 0.75%(3) 0.76%(3)
---------------- 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 of less than one full year. 2. Annualized for periods of less than one full year. 3. Expense ratio reflects the reduction to custodian expenses. See accompanying Notes to Financial Statements. 8
EXPIRING
--------
2004 $195,788
2005 16,379
--------
Total $212,167
========
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.
Security Transactions. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost.
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.
9 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:
YEAR ENDED JUNE 30, 2001 YEAR ENDED JUNE 30, 2000
-------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
Sold 3,739,905,295 $ 3,739,905,295 3,599,296,440 $ 3,599,296,440
Dividends and/or
distributions reinvested 70,389,432 70,389,432 58,889,090 58,889,090
Redeemed (3,544,874,611) (3,544,874,611) (3,679,564,839) (3,679,564,839)
--------------- --------------- --------------- ---------------
Net increase (decrease) 265,420,116 $ 265,420,116 (21,379,309) $ (21,379,309)
=============== =============== =============== ===============
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 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 1.5% 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. The Trust's management fee for year ended June 30, 2001, was an annualized rate of 0.44%.
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 an annual maintenance fee for each Trust shareholder account.
Service Plan Fees. Under an approved service plan, the Trust may expend up to 0.20% of its average annual net assets annually to reimburse the Manager, as distributor, for costs incurred in connection with the personal service and maintenance of accounts that hold shares of the Trust, including amounts paid to brokers, dealers, banks and other financial institutions. During the year ended June 30, 2001, the Trust paid $168,532 to a broker/dealer affiliated with the Manager as reimbursement for distribution-related expenses.
10
As of June 30, 2001, 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 June 30, 2001, was $5,844,509, which represents 0.40% of the Trust's net assets.
11
Appendix A
Description of Securities Ratings
Below is a description of the two highest rating categories for Short Term
Debt and Long Term Debt by the "Nationally-Recognized Statistical Rating
Organizations" which the Manager evaluates in purchasing securities on behalf
of the Fund. The ratings descriptions are based on information supplied by
the ratings organizations to subscribers.
SHORT TERM DEBT RATINGS.
Moody's Investors Service, Inc. ("Moody's")
The following rating designations for commercial paper (defined by Moody's as
promissory obligations not having original maturity in excess of nine
months), are judged by Moody's to be investment grade, and indicate the
relative repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally be
evidenced by the following characteristics: (a) leading market positions in
well-established industries; (b) high rates of return on funds employed; (c)
conservative capitalization structure with moderate reliance on debt and
ample asset protection; (d) broad margins in earning coverage of fixed
financial charges and high internal cash generation; and (e) well-established
access to a range of financial markets and assured sources of alternate
liquidity.
Prime-2: Strong capacity for repayment. This will normally be evidenced by
many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is maintained.
Moody's ratings for state and municipal short-term obligations are
designated "Moody's Investment Grade" ("MIG"). Short-term notes which have
demand features may also be designated as "VMIG". These rating categories
are as follows:
MIG 1/VMIG 1: Denotes superior credit quality. Excellent protection is
afforded by established cash flows, highly reliable liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: Denotes strong credit quality. Margins of protection are ample
although not as large as in the preceding group.
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. ("Standard and Poor's")
The following ratings by Standard and Poor's for commercial paper (defined by
Standard and Poor's as debt having an original maturity of no more than 365
days) assess the likelihood of payment:
A-1: Obligation is rated in the highest category. The obligor's capacity to
meet its financial commitment on the obligation is strong. Within this
category, a plus (+) sign designation indicates the obligor's capacity to
meet its financial obligation is extremely strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
Standard and Poor's ratings for Municipal Notes due in 3 years or less:
------------------------------------------------------------------------
SP-1: Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
Standard and Poor's assigns "dual ratings" to all municipal debt issues that
have a demand or double feature as part of their provisions. The first
rating addresses the likelihood of repayment of principal and interest as
due, and the second rating addresses only the demand feature. With
short-term demand debt, Standard and Poor's note rating symbols are used with
the commercial paper symbols (for example, "SP-1+/A-1+").
Fitch, Inc. ("Fitch")
Fitch assigns the following short-term ratings to debt obligations that are
payable on demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes:
F1: Highest credit quality. Strongest capacity for timely payment of
financial commitments. May have an added "+" to denote any exceptionally
strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the
case of higher ratings.
LONG TERM DEBT RATINGS.
These ratings are relevant for securities purchased by the Fund with a
remaining maturity of 397 days or less, or for rating issuers of short-term
obligations.
Moody's
Bonds (including municipal bonds) are rated as follows:
Aaa: Judged to be the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edged." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely to
change, the changes that can be expected are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Judged to be of high quality by all standards. Together with the "Aaa"
group, they comprise what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as with "Aaa" securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than that of "Aaa" securities.
Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" rating
classification. The modifier "1" indicates that the obligation ranks in the
higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates a ranking in the lower end
of that generic rating category.
Standard and Poor's
Bonds (including municipal bonds maturing beyond 3 years) are rated as
follows:
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. A strong capacity to meet its financial commitment on the obligation
is very strong.
Fitch
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments, short-term debt
of these issuers is generally rated "F-1+".
B-1
Appendix B
------------------------------------------------------------------------------
Industry Classifications
------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
------------------------------------------------------------------------------
Centennial Government Trust
------------------------------------------------------------------------------
Investment Advisor and Distributor
Centennial Asset Management Corporation
6803 South Tucson Way
Englewood, Colorado 80112
Sub-Distributor
OppenheimerFunds Distributor, Inc.
P.O. Box 5254
Denver, Colorado 80217
Transfer Agent
Shareholder Services, Inc.
P.O. Box 5143
Denver, Colorado 80217
1.800.525.9310
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
PX0170.001.1101
--------
1Messrs. Bowen, Cameron and Marshall are not Directors of Panorama Series
Fund, Inc. Messrs. Armstrong, Bowen, Cameron, Fossel and Marshall are not
Managing General Partners of Centennial America Fund, L.P. Mr. Grabish is
only a Trustee of Centennial Money Market Trust, Centennial Tax Exempt Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust and
Centennial California Tax Exempt Trust.
2. In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Trust and who do not
have any direct or indirect financial interest in the operation of any
agreement under the plan.