OPPENHEIMER NEW YORK TAX-EXEMPT FUND
Supplement dated September 9, 1994
to the Prospectus dated January 25, 1994
The Prospectus is amended as follows:
1. The following is added after "Municipal Securities--When Issued-
Securities" on page 6:
- Inverse Floaters and Other Derivative Investments. The
Fund may invest in variable rate bonds known as "inverse
floaters." These bonds pay interest at a rate that varies as
the yields generally available on short-term tax-exempt bonds
change. However, the yields on inverse floaters move in the
opposite direction of yields on short-term bonds in response to
market changes. When the yields on short-term tax-exempt bonds
go up, the interest rate on the inverse floater goes down. When
the yields on short-term tax-exempt bonds go down, the interest
rate on the inverse floater goes up. As interest rates rise,
inverse floaters produce less current income. Inverse floaters
are a type of "derivative security," which is a specially
designed investment whose performance is linked to the
performance of another security or investment. Some inverse
floaters have a "cap" whereby if interest rates rise above the
"cap," the security pays additional interest income. If rates
do not rise above the "cap," the Fund will have paid an
additional amount for a feature that proves worthless. The Fund
may also invest in municipal derivative securities that pay
interest that depends on an external pricing mechanism.
Examples are interest rate swaps or caps and municipal bond or
swap indices. The Fund anticipates that it would invest no more
than 10% of its total assets in inverse floaters.
The risks of investing in derivative investments include
not only the ability of the issuer of the derivative investment
to pay the amount due on the maturity of the investment, but
also the risk that the underlying security or investment might
not perform the way the Manager expected it to perform. That
can mean that the Fund will realize less income than expected.
Another risk of investing in derivative investments is that
their market value could be expected to vary to a much greater
extent than the market value of municipal securities that are
not derivative investment but have similar credit quality,
redemption provisions and maturities.
September 9, 1994 PS360
