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T. ROWE PRICE
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STATE TAX-FREE INCOME TRUST
Supplement to Statement of Additional Information dated July 1,
1995, revised to November 22, 1995
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The section entitled "Pricing of Securities" beginning on
page 70 has been revised to read as follows:
PRICING OF SECURITIES BEING OFFERED
Fixed income securities are generally traded in the over-
the-counter market. Investments in securities with remaining
maturities of one year or more are stated at fair value using a
bid-side valuation as furnished by dealers who make markets in
such securities or by an independent pricing service, which
considers yield or price of bonds of comparable quality, coupon,
maturity, and type, as well as prices quoted by dealers who make
markets in such securities.
Except with respect to certain securities held by the Money
Funds, securities with remaining maturities less than one
year are stated at fair value which is determined by using a
matrix system that establishes a value for each security based on
bid-side money market yields. Securities originally purchased by
the Money Funds are valued at amortized cost.
There are a number of pricing services available, and the
Boards of Trustees, on the basis of ongoing evaluation of these
services, may use or may discontinue the use of any pricing
service in whole or in part.
Securities or other assets for which the above valuation
procedures are inappropriate or are deemed not to reflect fair
value will be appraised at prices deemed best to reflect their
fair value. Such determinations will be made in good faith by or
under the supervision of officers of the Funds, as authorized by
its Board of Trustees.
Maintenance of New York and California Money Funds' Net Asset
Value Per Share at $1.00
It is the policy of the Funds to attempt to maintain a net
asset value of $1.00 per share by using the amortized cost method
of valuation permitted by Rule 2a-7 under the Investment Company
Act of 1940. Under this method, securities are valued by
reference to the Fund's acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than
by reference to their market value. Under Rule 2a-7:
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(a) The Board of Trustees must establish written
procedures reasonably designed, taking into account
current market conditions and the fund's investment
objectives, to stabilize the fund's net asset value
per share, as computed for the purpose of
distribution, redemption and repurchase, at a single
value;
(b) Each Fund must (i) maintain a dollar-weighted
average portfolio maturity appropriate to its
objective of maintaining a stable price per share,
(ii) not purchase any instrument with a remaining
maturity greater than 397 days, and (iii) maintain a
dollar-weighted average portfolio maturity of 90
days or less;
(c) Each Fund must limit its purchase of portfolio
instruments, including repurchase agreements, to
those U.S. dollar-denominated instruments which a
Fund's Board of Trustees determines present minimal
credit risks, and which are eligible securities as
defined by Rule 2a-7. Eligible securities are
generally securities which have been rated (or whose
issuer has been rated or whose issuer has comparable
securities rated) in or of the two highest rating
categories by nationally recognized statistical
rating organizations or, in the case of any
instrument that is not so rated, is of comparable
quality as determined by procedures adopted by the
Funds' Boards of Trustees; and
(d) Each Board of Trustees must determine that (i) it is
in the best interest of a Fund and its shareholders
to maintain a stable net asset value per share under
the amortized cost method; and (ii) a Fund will
continue to use the amortized cost method only so
long as each Board of Trustees believes that it
fairly reflects the Fund's market based net asset
value per share.
Although the Funds believe that it will be able to maintain
its net asset value at $1.00 per share under most conditions,
there can be no absolute assurance that it will be able to do so
on a continuous basis. If a Fund's net asset value per share
declined, or was expected to decline, below $1.00 (rounded to the
nearest one cent), the Board of Trustees of a Fund might
temporarily reduce or suspend dividend payments in an effort to
maintain the net asset value at $1.00 per share. As a result of
such reduction or suspension of dividends, an investor would
receive less income during a given period than if such a
reduction or suspension had not taken place. Such action could
result in an investor receiving no dividend for the period during
which he holds his shares and in his receiving, upon redemption,
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a price per share lower than that which he paid. On the other
hand, if a Fund's net asset value per share were to increase, or
were anticipated to increase above $1.00 (rounded to the nearest
one cent), the Board of Trustees of a Fund might supplement
dividends in an effort to maintain the net asset value at $1.00
per share.
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The date of this Supplement is November 20, 1995.
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