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T. ROWE PRICE
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State Tax-Free Income Trust
Florida Insured Intermediate Tax-Free Fund
Reflecting the result of shareholder votes at the fund's annual meeting on
October 15, 1998, the fund's objective will be amended to remove the
requirement to invest primarily in insured bonds. This change was recommended
by the fund's management and board of directors to give the portfolio managers
more flexibility in selecting bonds. Broader diversification of assets
typically reduces volatility and may increase opportunities available to the
fund. The word "insured" will be omitted from the fund's name, and its new
abbreviation for newspaper listings will be FL Inter.
Supplement to prospectus dated July 1, 1998
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Effective November 1, 1998, the changes noted below are being made to the
prospectus.
Fund Name: Florida Intermediate Tax-Free Fund
Inside front cover: The existing paragraphs are replaced with the following:
Strategy
Invests in high-quality Florida municipal bonds. The fund's average
maturity is expected to be between five and 10 years.
Risk/Reward
Higher income than a short-term municipal bond fund, but also greater
potential for share price declines when interest rates rise.
Pages 4 and 5: The current questions-and-answers "What is the fund's objective
and investment program?" and "What are the fund's credit-quality guidelines?"
are replaced with the following:
What is the fund's objective?
To provide a high level of income exempt from federal income taxes consistent
with moderate price fluctuation by investing primarily in Florida municipal
bonds.
What is the fund's investment program?
At least 95% of the bonds purchased by the fund will be rated AAA or AA by at
least one national rating organization (Standard & Poor's Corporation, Moody's
Investor Service, Inc., or a similar service). Up to 5% may be rated A at the
time of purchase. The fund may purchase unrated bonds if T. Rowe Price believes
they are of comparable quality. At its discretion, the fund may retain a
security whose credit quality is downgraded after purchase. The fund's
dollar-weighted average maturity is expected to vary between five and 10 years.
An investment in the fund is expected to be exempt from the Florida intangibles
personal property tax. (For a detailed discussion of this tax and the fund's
eligibility for exemption, please see Useful Information on Distributions and
Taxes.)
Due to seasonal variations or shortages in the supply of suitable Florida
securities, and when deemed by T. Rowe Price to be in the fund's best interest,
the fund may invest up to 35% of its net assets in a fiscal year in municipal
securities that are not exempt from the Florida intangibles property tax. Every
effort will be made to minimize such investments.
Under the question, What are the main risks of investing in municipal bond
funds?, the third and fourth sentences of the first paragraph are omitted. The
sentences are: "Credit risk should be reduced by the extra protection provided
by municipal bond insurance. (For more discussion of municipal bond insurance,
please see Investment Policies and Practices.)
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The date of the above supplement is October 22, 1998.
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F91-041 10/22/98
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