EVERGREEN MUNICIPAL TRUST /DE/, N-1A EL/A, 1997-10-08

EVERGREEN MUNICIPAL TRUST /DE/
N-1A EL/A, 1997-10-08

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1933 Act File No. 333 -36033
1940 Act File No. 811 -08367

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A EL/A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 [X]
Pre-Effective Amendment No. [X]
Post-Effective Amendment No. 1 [ ]
---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 1 [X]
---

EVERGREEN MUNICIPAL TRUST
(Exact Name of Registrant as Specified in Charter)

200 Berkeley Street, Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices)

(617) 210-3200
(Registrant's Telephone Number)

Dorothy E. Bourassa, Esquire
200 Berkeley Street
Boston, Massachusetts 02116
(Name and Address of Agent for Service)

Registrant declares that it hereby elects pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940 to register by this
Registration Statement an indefinite number or amount of shares of its Evergreen
Tax Free Fund and Evergreen Florida Municipal Bond Fund series under the
Securities Act of 1933, as amended.

Approximate Date of Proposed Offering:
As soon as practicable after the effective date
of the Registration Statement.

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this

<PAGE>

Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.

<PAGE>

EVERGREEN MUNICIPAL TRUST

CONTENTS OF
REGISTRATION STATEMENT ON
FORM N-1A

This Registration Statement on Form N-1A of the Registrant consists of
the following pages, items of information and documents, together with the
exhibits indicated in Part C as being filed herewith:

Facing Sheet

Contents Page

Cross-Reference Sheet

PART A

Prospectuses of Evergreen Florida Municipal Bond Fund

Prospectus of Evergreen Tax Free Fund

PART B

Statement of Additional Information

PART C

Exhibits

Financial Statements

Number of Security Holders

Indemnification

Business and Other Connections of Investment Advisers

Principal Underwriter

Location of Accounts and Records

Signatures

<PAGE>

EVERGREEN MUNICIPAL TRUST

CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933

ITEM OF PART A OF FORM N-1A LOCATION IN PROSPECTUS

1. Cover Page Cover Page
2. Synopsis and Fee Table Cover Page; Expense
Information
3. Condensed Financial Not applicable.
Information
4. General Description of Cover Page; Description of
Registrant the Fund; Organization;
General Information
5. Management of the Fund Service Providers
6. Capital Stock and Other Dividends, Distributions
Securities and Taxes; General
Information
7. Purchase of Securities Purchase and Redemption of
Being Offered Shares
8. Redemption or Repurchase Purchase and Redemption of
Shares
9. Pending Legal Proceedings Not Applicable.

ITEM IN PART B OF FORM N-1A LOCATION IN STATEMENT OF
ADDITIONAL INFORMATION

10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Not Applicable.
History
13. Investment Objectives and Securities and Investment
Policies Practices; Investment
Restrictions and Guidelines
14. Management of the Fund Investment Advisory
Services

<PAGE>

15. Control Persons and Control Persons and
Principal Holders of Principal Holders of
Securities Securities
16. Investment Advisory and Investment Advisory and
Other Services Other Services
17. Brokerage Allocation Brokerage Allocation and
Other Practices
18. Capital Stock and Other Description of Shares;
Securities Voting Rights; Limitation
of Trustees' Liability
19. Purchase, Redemption and Purchase, Redemption and
Pricing of Securities Pricing of Securities Being
Being Offered Offered
20. Tax Status Additional Tax Information
21. Underwriters Principal Underwriter
22. Calculation of Calculation of Performance
Performance Data Data
23. Financial Statements Financial Statements

<PAGE>

PROSPECTUS , 1997

EVERGREEN STATE TAX FREE FUNDS

Evergreen Florida Municipal Bond Fund (Evergreen Tree Logo)

CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

The Evergreen Florida Municipal Bond Fund (the "Fund") seeks current
income exempt from federal regular income tax and the Florida state intangibles
tax, consistent with the preservation of capital.

This Prospectus provides information regarding the Class A, Class B and
Class C shares offered by the Fund. The Fund is a non-diversified series of an
open-end, management investment company. This Prospectus sets forth concise
information about the Fund that a prospective investor should know before
investing. The address of the Fund is 200 Berkeley Street, Boston, Massachusetts
02116.

A Statement of Additional Information for the Fund dated , 1997, as
supplemented from time to time, has been filed
with the Securities and Exchange Commission and is incorporated by reference
herein. The Statement of Additional Information provides information regarding
certain matters discussed in this Prospectus and other matters which may be of
interest to investors, and may be obtained without charge by calling the Fund at
(800) 343-2898. There can be no assurance that the investment objective of the
Fund will be achieved. Investors are advised to read this Prospectus carefully.

An investment in the Fund is not a deposit or obligation of any bank,
is not endorsed or guaranteed by any bank, and is not insured or otherwise
protected by the U.S. government, the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other government agency and involves risk,
including the possible loss of principal.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

Keep This Prospectus For Future Reference

<PAGE>

TABLE OF CONTENTS

EXPENSE INFORMATION...................................................4

FINANCIAL HIGHLIGHTS..................................................5

DESCRIPTION OF THE FUND...............................................5
Investment Objective and Policies............................5
Investment Practices and Restrictions........................7

ORGANIZATION AND SERVICE PROVIDERS...................................16
Organization................................................16
Service Providers...........................................17
Distribution Plans and Agreements...........................19

PURCHASE AND REDEMPTION OF SHARES....................................20
How to Buy Shares...........................................20
How to Redeem Shares .......................................26
Exchange Privilege..........................................29
Shareholder Services........................................30
Banking Laws................................................32

OTHER INFORMATION....................................................33
Dividends, Distributions and Taxes..........................33
General Information.........................................36

<PAGE>

EXPENSE INFORMATION

The table and examples below are designed to help you understand the
various expenses that you will bear, directly or indirectly, when you invest in
the Fund. Shareholder transaction expenses are fees paid directly from your
account when you buy or sell shares of the Fund.

SHAREHOLDER Class A Class B Class C
TRANSACTION EXPENSES Shares Shares Shares

Maximum Sales Charge 4.75% None None
Imposed on Purchases
(as a % of offering
price)
Maximum Sales Charge None None None
Imposed on Reinvested
Dividends (as a % of
offering price)
Maximum Contingent None(1) 5%(2) 1%(2)
Deferred Sales Charge
(as a % of original
purchase price or
redemption proceeds,
whichever is lower)

Annual operating expenses reflect the normal operating expenses of the
Fund, and include costs such as management, distribution and other fees. The
table below shows the Fund's estimated annual operating expenses for the fiscal
period ending August 31, 1998. The examples show what you would pay if you
invested $1,000 over periods indicated. The examples assume that you reinvest
all of your dividends and that the Fund's average annual return will be 5%. The
examples are for illustration purposes only and should not be considered a
representation of past or future expenses or annual return. The Fund's actual
expenses and returns will vary. For a more complete description of the various
costs and expenses borne by the Fund see "Organization and Service Providers."

Annual Operating Expenses
Class A Class B Class C

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Annual Operating Expenses
Management Fees
.50% .50% .50%
12b-1 Fees(3) .25% 1.00% 1.00%
Other Expenses .19% .19% .19%
Total .94% 1.69% 1.69%
==== ===== =====

Examples
Assuming Redemption at Assuming no
End of Period Redemption
Class A Class B Class C Class B Class C
After 1 Year $57 $67 $27 $17 $17
After 3 Years $76 $83 $53 $53 $53
- ---------------

(1) Investments of $1 million or more are not subject to a front-end sales
charge, but may be subject to a contingent deferred sales charge upon
redemption within one year after the month of purchase.
(2) The deferred sales charge on Class B shares declines from 5% to 1% on
amounts redeemed within six years after the month of purchase. The deferred
sales charge on Class C shares is 1% on amounts redeemed within one year
after the month of purchase. No sales charge is imposed on redemptions made
thereafter. See "Purchase and Redemption of Shares" for more information.
(3) Long-term shareholders may pay more than the economic equivalent front-end
sales charges permitted by the National Association of Securities Dealers,
Inc.

FINANCIAL HIGHLIGHTS

As of the date of this Prospectus the Fund had not commenced
operations. Consequently, no financial highlights are currently available.

DESCRIPTION OF THE FUND

Investment Objective and Policies

<PAGE>

The Fund seeks current income exempt from federal regular income tax
and the Florida state intangibles tax, consistent with the preservation of
capital.

The Fund's investment objective is nonfundamental; as a result, the
Fund may change its objective(s) without a shareholder vote. The Fund has also
adopted certain fundamental investment policies which are mainly designed to
limit the Fund's exposure to risk. The Fund's fundamental policies cannot be
changed without a shareholder vote. See the Statement of Additional Information
("SAI") for more information regarding the Fund's fundamental investment
policies or other related investment policies. There can be no assurance that
the Fund's investment objective will be achieved.

Principal Investments and Investment Policies. The Fund will normally invest its
assets so that at least 80% of its annual interest income is, or at least 80% of
its net assets are, invested in obligations which provide interest income which
is exempt from federal regular income taxes. In addition, at least 65% of the
value of the Fund's total assets will be invested in Florida municipal bonds.

The Fund may make taxable investments and may, from time to time,
generate income subject to federal regular income tax.

Municipal obligations are debt obligations issued by a state or local
entity to support a government's general financial needs or special projects,
such as housing projects or sewer works. Municipal obligations also include
certain types of industrial development bonds that the government has issued to
finance privately operated facilities.

The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds involve the credit of
an issuer possessing taxing power and are payable from the issuer's general
unrestricted revenues. Their payment may be dependent upon an appropriation by
the issuer's legislative body and may be subject to quantitative limitations on
the issuer's taxing power. Limited obligation or revenue bonds are paid off only
with the revenue generated by the project financed by the bond or other
specified sources of revenue.

The Fund will invest at least 80% of its assets in bonds that, at the
date of investment, are rated within the four highest categories by Standard and
Poor's Ratings Group ("S&P") (AAA, AA, A and BBB), by Moody's Investors Service

<PAGE>

("Moody's") (Aaa, Aa, A and Baa), by Fitch Investors Services, L.P. ("Fitch")
(AAA, AA, A and BBB) or, if not rated or rated under a different system, are of
comparable quality to obligations so rated as determined by another nationally
recognized statistical ratings organization or by the Fund's investment adviser.
The Fund may invest the remaining 20% of its assets in lower rated bonds, but it
will not invest in bonds rated below B. If S&P, Moody's or Fitch changes its
ratings system, the Fund will try to use comparable ratings as standards
according to the Fund's investment objective and policies.

Other Eligible Securities. The Fund may also invest in participation interests
in any of the above obligations purchased from financial institutions such as
commercial banks, savings and loan associations and insurance companies,
variable rate securities and municipal leases.

During periods when, in the opinion of the Fund's investment adviser, a
temporary defensive position in the market is appropriate, the Fund may invest
in short-term tax-exempt or taxable investments. These temporary investments
include: notes issued by or on behalf of municipal or corporate issuers;
obligations issued or guaranteed by the U.S. government, its agencies, or
instrumentalities; other debt securities; commercial paper; bank certificates of
deposit; shares of other investment companies; and repurchase agreements. There
are no rating requirements applicable to temporary investments. However, the
Fund's investment adviser will limit temporary investments to those it considers
to be of comparable quality to the Fund's primary investments.

In addition to the investment policies detailed above, the Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions."

Investment Practices and Restrictions

Risk Factors. Bond yields are dependent on several factors including market
conditions, the size of an offering, the maturity of the bond, ratings of the
bond and the ability of issuers to meet their obligations. There is no limit on
the maturity of the bonds purchased by the Fund. Because the prices of bonds
fluctuate inversely in relation to the direction of interest rates, the prices
of longer term bonds fluctuate more widely in response to market interest rate
changes. The Fund's concentration in securities issued by Florida and its
political subdivisions provides a greater

<PAGE>

level of risk than a fund which is diversified across numerous states and
municipal entities.

If the municipal obligations held by the Fund (because of adverse
economic conditions in Florida, for example) are downgraded, the Fund's
concentration in securities of Florida may cause the Fund to be subject to the
risks inherent in holding material amounts of low-rated debt securities in its
portfolio.

Municipal Obligations. The Fund's ability to achieve its objective depends
partially on the prompt payment by issuers of the interest on and principal of
the municipal bonds held by the Fund. A moratorium, default, or other
non-payment of interest or principal when due on any municipal bond, in addition
to affecting the market value and liquidity of that particular security, could
affect the market value and liquidity of other municipal bonds held by the Fund.
In addition, the market for municipal bonds is often thin and can be temporarily
affected by large purchases and sales, including those by the Fund.

From time to time, proposals have been introduced before the U.S.
Congress for the purpose of restricting or eliminating the federal income tax
exemption for interest on municipal bonds, and similar proposals may be
introduced in the future. The enactment of such a proposal could materially
affect the availability of municipal bonds for investment by the Fund and the
value of the Fund's portfolio. In the event of such legislation, the Fund would
re-evaluate its investment objective and policies and consider changes in the
structure of the Fund or dissolution.

Below-Investment Grade Bonds. Below-investment grade bonds have low ratings, and
a degree of doubt surrounds the safety of investment and the ability of the
issuer to continue interest payments. These bonds are also called "high risk,
high yield" bonds or "junk" bonds. Junk bonds are usually backed by issuers of
less proven or questionable financial strength. Compared with higher-grade
bonds, issuers of junk bonds are more likely to face financial problems and to
be materially affected by those problems. As a result, the ability of issuers of
junk bonds to pay interest and principal is uncertain. Moreover, the junk bond
market may react strongly to real or perceived unfavorable news about an issuer
or the economy. If a junk bond issuer defaults, the bond will lose some or all
of its value.

Non-Diversification. The Fund is a non-diversified series of an investment
company and, as such, there is no limit on the

<PAGE>

percentage of assets which can be invested in any single issuer. An investment
in the Fund, therefore, will entail greater risk than would exist in a
diversified investment company because the higher percentage of investments
among fewer issuers may result in greater fluctuation in the total market value
of the Fund's portfolio. The Fund intends to comply with Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") which requires that at
the end of each quarter of each taxable year, with regard to at least 50% of the
Fund's total assets, no more than 5% of the total assets may be invested in the
securities of a single issuer and that with respect to the remainder of the
Fund's total assets, no more than 25% of its total assets are invested in the
securities of a single issuer.

Downgrades. If any security invested in by the Fund loses its rating or has its
rating reduced after the Fund has purchased it, the Fund is not required to sell
or otherwise dispose of the security, but may consider doing so.

Repurchase Agreements. The Fund may invest in repurchase agreements. Repurchase
agreements are agreements by which the Fund purchases a security (usually U.S.
government securities) for cash and obtains a simultaneous commitment from the
seller (usually a bank or broker/dealer) to repurchase the security at an
agreed-upon price and specified future date. The repurchase price reflects an
agreed-upon interest rate for the time period of the agreement. The Fund's risk
is the inability of the seller to pay the agreed-upon price on the delivery
date. However, this risk is tempered by the ability of the Fund to sell the
security in the open market in the case of a default. In such a case, the Fund
may incur costs in disposing of the security which would increase Fund expenses.
The Fund's investment adviser will monitor the creditworthiness of the firms
with which the Fund enters into repurchase agreements.

Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is an agreement by the Fund to sell a
security and repurchase it at a specified time and price. The Fund could lose
money if the market values of the securities it sold decline below their
repurchase prices. Reverse repurchase agreements may be considered a form of
borrowing, and, therefore, a form of leverage. Leverage may magnify gains or
losses of the Fund.

<PAGE>

fluctuation during this period and no income accrues to the Fund until
settlement. At the time of settlement, a when- issued security may be valued at
less than its purchase price. When entering into these transactions, the Fund
relies on the other party to consummate the transaction; if the other party
fails to do so, the Fund may be disadvantaged.

Securities Lending. To generate income and offset expenses, the Fund may lend
securities to broker-dealers and other financial institutions. Loans of
securities by the Fund may not exceed 30% of the value of the Fund's total
assets. While securities are on loan, the borrower will pay the Fund any income
accruing on the security. Also, the Fund may invest any collateral it receives
in additional securities. Gains or losses in the market value of a lent security
will affect the Fund and its shareholders. When the Fund lends its securities,
it runs the risk that it could not retrieve the securities on a timely basis,
possibly losing the opportunity to sell the securities at a desirable price.
Also, if the borrower files for bankruptcy or becomes insolvent, the Fund's
ability to dispose of the securities may be delayed.

Investing in Securities of Other Investment Companies. The Fund may invest in
the securities of other investment companies. The Fund's investment adviser will
waive its investment advisory fee on assets invested in securities of other
open-end investment companies.

Borrowing. The Fund may borrow from banks in an amount up to 33 1/3% of its
total assets, taken at market value. The Fund may only borrow as a temporary
measure for extraordinary or emergency purposes such as the redemption of Fund
shares. The Fund will not purchase securities while borrowings are outstanding
except to exercise prior commitments and to exercise subscription rights. The
Fund does not intend to leverage.

<PAGE>

which are eligible for resale pursuant to Rule 144A will be monitored by the
Fund's investment adviser on an ongoing basis, subject to the oversight of the
Board of Trustees. In the event that such a security is deemed to be no longer
liquid, the Fund's holdings will be reviewed to determine what action, if any,
is required to ensure that the retention of such security does not result in the
Fund having more than 15% of its net assets invested in illiquid or not readily
marketable securities.

Municipal Lease Obligations. The Fund may purchase municipal leases, which are
issued by state and local governments or authorities to finance the acquisition
of equipment and facilities. The Fund may purchase municipal securities in the
form of participation interests which represent undivided proportional interests
in lease payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. In particular, lease obligations may
be subject to periodic appropriation. If the entity does not appropriate funds
for future lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate trustee cannot accelerate
lease obligations upon default. The trustee would only be able to enforce lease
payments as they become due. In the event of a default or failure of
appropriation, it is unlikely that the trustee would be able to obtain an
acceptable substitute source of payment or that the substitute source of payment
would generate tax-exempt income.

Resource Recovery Bonds. The Fund may purchase resource recovery bonds, which
may be general obligations of the issuing municipality or supported by corporate
or bank guarantees. The viability of the resource recovery project,
environmental protection regulations and project operator tax incentives may
affect the value and credit quality of resource recovery bonds.

Zero Coupon Debt Securities. The Fund may purchase zero coupon debt securities.
These securities do not make regular interest payments. Instead, they are sold
at a deep discount from their face value. In calculating their daily dividends,
each day the Fund takes into account as income a portion of the difference
between these securities' purchase price and their face value. Because they do
not pay current income, the prices of zero coupon debt securities can be very
volatile when interest rates change.

<PAGE>

Securities with Put or Demand Rights. The Fund has the ability to enter into put
transactions, sometimes referred to as stand-by commitments, with respect to
municipal obligations held in its portfolio or to purchase securities which
carry a demand feature or put option which permit the Fund, as holder, to tender
them back to the issuer or a third party prior to maturity and receive payment
within seven days. Segregated accounts will be maintained by the Fund for all
such transactions.

The amount payable to the Fund by the seller upon its exercise of a put
will normally be (1) the Fund's acquisition cost of the securities (excluding
any accrued interest which the Fund paid on their acquisition), less any
amortized market premium plus any amortized market or original issue discount
during the period a Fund owned the securities, plus (2) all interest accrued on
the securities since the last interest payment date during the period the
securities were owned by the Fund. Accordingly, the amount payable by a
broker-dealer or bank during the time a put is exercisable will be substantially
the same as the value of the underlying securities.

The Fund's right to exercise a put is unconditional and unqualified. A
put is not transferable by the Fund, although the Fund may sell the underlying
securities to a third party at any time. The Fund expects that puts will
generally be available without any additional direct or indirect cost. However,
if necessary and advisable, the Fund may pay for certain puts either separately
in cash or by paying a higher price for portfolio securities which are acquired
subject to such a put (thus reducing the yield to maturity otherwise available
to the same securities). Thus, the aggregate price paid for securities with put
rights may be higher than the price that would otherwise be paid.

The Fund may enter into put transactions only with broker-dealers (in
accordance with the rules of the Securities and Exchange Commission) and banks
which, in the opinion of the Fund's investment adviser, present minimal credit
risks. The Fund's investment adviser will monitor periodically the
creditworthiness of issuers of such obligations held by the Fund. The Fund's
ability to exercise a put will depend on the ability of the broker-dealer or
bank to pay for the underlying securities at the time the put is exercised. In
the event that a broker-dealer should default on its obligation to purchase an
underlying security, the Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere. The Fund intends to
enter into put transactions solely to maintain portfolio liquidity and does

<PAGE>

not intend to exercise its rights thereunder for trading
purposes.

Special Risk Factors Related to Investing in Municipal Securities. It should be
noted that municipal securities may be adversely affected by local political and
economic conditions and developments within a state. For example, adverse
conditions in a significant industry within Florida may from time to time have a
correspondingly adverse effect on specific issuers within Florida or on
anticipated revenue to the State itself; conversely, an improving economic
outlook for a significant industry may have a positive effect on such issuers or
revenues.

The value of municipal securities may also be affected by general
conditions in the money markets or the municipal bond markets, the levels of
federal and state income tax rates, the supply of tax-exempt bonds, the size of
the particular offering, the maturity of the obligation, the credit quality and
rating of the issue, and perceptions with respect to the level of interest
rates. In general, the value of bonds tends to appreciate when interest rates
decline and depreciate when interest rates rise. An expanded discussion of the
risks associated with the purchase of securities issued in Florida is contained
in the SAI.

Options and Futures. The Fund may engage in options and futures transactions.
Options and futures transactions are intended to enable the Fund to manage
market or interest rate risk. The Fund does not use these transactions for
speculation or leverage.

The Fund may attempt to hedge all or a portion of its portfolio through
the purchase of both put and call options on its portfolio securities and listed
put options on financial futures contracts for portfolio securities. The Fund
may also purchase call options on financial futures contracts. The Fund may also
write covered call options on its portfolio securities to attempt to increase
its current income. The Fund will maintain its positions in securities, option
rights, and segregated cash subject to puts and calls until the options are
exercised, closed, or have expired. An option position may be closed out only on
an exchange which provides a secondary market for an option of the same series.

<PAGE>

term of the option to purchase the securities underlying the option at the
exercise price if the option is exercised. The Fund also may write straddles
(combinations of covered puts and calls on the same underlying security). The
Fund may only write "covered" options. This means that so long as the Fund is
obligated as the writer of a call option, it will own the underlying securities
subject to the option or, in the case of call options on U.S. Treasury bills,
the Fund might own substantially similar U.S. Treasury bills. The Fund will be
considered "covered" with respect to a put option it writes if, so long as it is
obligated as the writer of the put option, it deposits and maintains with its
custodian in a segregated account liquid assets having a value equal to or
greater than the exercise price of the option.

The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Fund receives a premium from writing a
call or put option which it retains whether or not the option is exercised. By
writing a call option, the Fund might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Fund might become obligated to purchase the underlying securities for more than
their current market price upon exercise.

A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government. If the Fund would enter into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period. The Fund
would agree to purchase securities in the future at a predetermined price (i.e.,
"go long") to hedge against a decline in market interest rates.

The Fund may also enter into financial futures contracts and write
options on such contracts. The Fund intends to enter into such contracts and
related options for hedging purposes. The Fund will enter into futures on
securities or index-based futures contracts in order to hedge against changes in
interest rates or securities prices. A futures contract on

<PAGE>

securities is an agreement to buy or sell securities during a designated month
at whatever price exists at that time. A futures contract on a securities index
does not involve the actual delivery of securities, but merely requires the
payment of a cash settlement based on changes in the securities index. The Fund
does not make payment or deliver securities upon entering into a futures
contract. Instead, it puts down a margin deposit, which is adjusted to reflect
changes in the value of the contract and which remains in effect until the
contract is terminated.

The Fund may sell or purchase other financial futures contracts. When a
futures contract is sold by the Fund, the profit on the contract will tend to
rise when the value of the underlying securities declines and to fall when the
value of such securities increases. Thus, the Fund sells futures contracts in
order to offset a possible decline in the profit on their securities. If a
futures contract is purchased by the Fund, the value of the contract will tend
to rise when the value of the underlying securities increases and to fall when
the value of such securities declines.

The Fund may enter into closing purchase and sale transactions in order
to terminate a futures contract and may buy or sell put and call options for the
purpose of closing out its options positions. The Fund's ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that the Fund will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If the
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the contract and to complete
the contract according to its terms, in which case it would continue to bear
market risk on the transaction.

Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Fund to manage market or interest rate
risks, these investment devices can be highly volatile, and the Fund's use of
them can result in poorer performance (i.e., the Fund's return may be reduced).
The Fund's attempt to use such investment devices for hedging purposes may not
be successful. Successful futures strategies require the ability to predict
future movements in securities prices, interest rates and other economic
factors. When the Fund uses financial futures contracts and options on financial
futures contracts as hedging devices, there is a risk that the prices of the
securities subject to the

<PAGE>

financial futures contracts and options on financial futures contracts may not
correlate perfectly with the prices of the securities in the Fund's portfolio.
This may cause the financial futures contract and any related options to react
to market changes differently than the portfolio securities. In addition, the
Fund's investment adviser could be incorrect in its expectations and forecasts
about the direction or extent of market factors, such as interest rates,
securities price movements, and other economic factors. Even if the Fund's
investment adviser correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of the Fund's futures position did not
correspond to changes in the value of its investments. In these events, the Fund
may lose money on the financial futures contracts or the options on financial
futures contracts. It is not certain that a secondary market for positions in
financial futures contracts or for options on financial futures contracts will
exist at all times. Although the Fund's investment adviser will consider
liquidity before entering into financial futures contracts or options on
financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
Fund's ability to establish and close out financial futures contracts and
options on financial futures contract positions depends on this secondary
market. If the Fund is unable to close out its position due to disruptions in
the market or lack of liquidity, the Fund may lose money on the futures contract
or option, and the losses to the Fund could be significant.

Derivatives. Derivatives are financial contracts whose value is based on an
underlying asset, such as a stock or a bond, or an underlying economic factor,
such as an index or an interest rate.

The Fund may invest in derivatives only if the expected risks and
rewards are consistent with its objectives and policies.

Losses from derivatives can sometimes be substantial. This is true
partly because small price movements in the underlying asset can result in
immediate and substantial gains or losses in the value of the derivative.
Derivatives can also cause the Fund to lose money if the Fund fails to correctly
predict the direction in which the underlying asset or economic factor will
move.

ORGANIZATION AND SERVICE PROVIDERS

<PAGE>

Organization

Fund Structure. The Fund is an investment pool, which invests shareholders'
money towards a specified goal. In technical terms, the Fund is a
non-diversified series of an open-end, management investment company, called
"Evergreen Municipal Trust" (the "Trust"). The Trust is a Delaware business
trust organized on September 17, 1997.

Board of Trustees. The Trust is supervised by a Board of Trustees that is
responsible for representing the interests of shareholders. The Trustees meet
periodically throughout the year to oversee the Fund's activities, reviewing,
among other things, the Fund's performance and its contractual arrangements with
various service providers.

Shareholder Rights. All shareholders participate in dividends and distributions
from the Fund's assets and have equal voting, liquidation and other rights.
Shareholders may exchange shares as described under "Exchanges," but will have
no other preference, conversion, exchange or preemptive rights. When issued and
paid for, shares will be fully paid and nonassessable. Shares of the Fund are
redeemable, transferable and freely assignable as collateral. The Fund may
establish additional classes or series of shares.

The Fund does not hold annual shareholder meetings; the Fund may,
however, hold special meetings for such purposes as electing or removing
Trustees, changing fundamental policies and approving investment advisory
agreements or 12b-1 plans. In addition, the Fund is prepared to assist
shareholders in communicating with one another for the purpose of convening a
meeting to elect Trustees. If any matters are to be voted on by shareholders,
each share owned as of the record date for the meeting would be entitled to one
vote for each dollar of net asset value applicable to each share.

Service Providers

Investment Adviser. The investment adviser to the Fund is the Capital Management
Group ("CMG") of First Union National Bank ("FUNB"), a subsidiary of First Union
Corporation. First Union Corporation and FUNB are located at 201 South College
Street, Charlotte, North Carolina 28288-0630. First Union Corporation and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States.

The Fund pays CMG an annual fee for its services equal to 0.50% of
average daily net assets.

<PAGE>

Portfolio Manager

Robert S. Drye is the Fund's portfolio manager. Mr. Drye
is a Vice President of FUNB and has been with FUNB since 1968.

Administrator

Evergreen Investment Services, Inc. ("EIS") serves as administrator to
the Fund. As administrator, and subject to the supervision and control of the
Trust's Board of Trustees, EIS provides the Fund with facilities, equipment and
personnel. For its services as administrator, EIS is entitled to receive a fee
based on the aggregate average daily net assets of the Fund at a rate based on
the total assets of all the mutual funds advised by First Union Corporation
subsidiaries. The administration fee is calculated in accordance with the
following schedule:

Administration Fee

0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion

Sub-administrator

BISYS Fund Services serves as sub-administrator to the Fund. For its
services, BISYS Fund Services is entitled to receive a fee from EIS calculated
on the aggregate average daily net assets of the Fund at a rate based on the
total assets of all mutual funds administered by EIS for which subsidiaries of
First Union Corporation also serve as investment adviser. The sub-administration
fee is calculated in accordance with the following schedule:

Sub-Administration Fee

0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% on assets in excess of $25 billion

Transfer Agent and Dividend Disbursing Agent. Evergreen Service Company ("ESC"),
200 Berkeley Street, Boston, Massachusetts 02116 acts as the Fund's transfer
agent and

<PAGE>

dividend disbursing agent. ESC is an indirect, wholly-owned subsidiary of First
Union Corporation.

Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827 acts as the Fund's custodian.

Principal Underwriter. Evergreen Distributor, Inc. ("EDI"), a subsidiary of The
BISYS Group, Inc., located at 125 West 55th Street, New York, New York 10019, is
the principal underwriter of the Fund.

Distribution Plans and Agreements

Distribution Plans. The Fund's Class A, Class B and Class C shares pay for the
expenses associated with the distribution of such shares according to
distribution plans adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "1940 Act") (each a "Plan" or collectively the "Plans"). Under
the Plans, the Fund may incur distribution- related and shareholder
servicing-related expenses which are based upon a maximum annual rate as a
percentage of the Fund's average daily net assets attributable to the Class, as
follows:

Class A shares 0.75% (currently limited to 0.25%)
Class B shares 1.00%
Class C shares 1.00%

Of the amount that each Class may pay under its respective Plan, up to
0.25% may constitute a service fee to be used to compensate organizations, which
may include the Fund's investment adviser or its affiliates, for personal
services rendered to shareholders and/or the maintenance of shareholder
accounts. The Fund may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above. Amounts paid under the
Distribution Plans are used to compensate the Fund's distributor pursuant to
Distribution Agreements entered into by the Fund.

Distribution Agreements. The Fund has also entered into distribution agreements
(each a "Distribution Agreement" or collectively the "Distribution Agreements")
with EDI. Pursuant to the Distribution Agreements, the Fund will compensate EDI
for its services as distributor based upon the maximum annual rate as a
percentage of the Fund's average daily net assets attributable to the Class, as
follows:

Class A shares 0.25%
Class B shares 1.00%

<PAGE>

Class C shares 1.00%

The Distribution Agreements provide that EDI will use the distribution
fee received from the Fund for payments (1) to compensate broker-dealers or
other persons for distributing shares of the Fund, including interest and
principal payments made in respect of amounts paid to broker-dealers or other
persons that have been financed (EDI may assign its rights to receive
compensation under the Plans to secure such financings), (2) to otherwise
promote the sale of shares of the Fund, and (3) to compensate broker-dealers,
depository institutions and other financial intermediaries for providing
administrative, accounting and other services with respect to the Fund's
shareholders. FUNB or its affiliates may finance the payments made by EDI to
compensate broker-dealers or other persons for distributing shares of the Fund.

In the event the Fund acquires the assets of other mutual funds,
compensation paid to EDI under the Distribution Agreements may be paid by EDI to
the distributors of the acquired funds.

Since EDI's compensation under the Distribution Agreements is not
directly tied to the expenses incurred by EDI, the amount of compensation
received by it under the Distribution Agreements during any year may be more or
less than its actual expenses and may result in a profit to EDI. Distribution
expenses incurred by EDI in one fiscal year that exceed the level of
compensation paid to EDI for that year may be paid from distribution fees
received from the Fund in subsequent fiscal years.

PURCHASE AND REDEMPTION OF SHARES

How to Buy Shares

You may purchase shares of the Fund through broker-dealers, banks or
other financial intermediaries, or directly through EDI. In addition, you may
purchase shares of the Fund by mailing to the Fund, c/o Evergreen Service
Company, P.O. Box 2121, Boston, Massachusetts 02106-2121, a complete Application
and a check payable to the Fund. You may also telephone 1-800-343-2898 to obtain
the number of an account to which you can wire or electronically transfer funds
and then send in a completed Application. The minimum initial investment is
$1,000, which may be waived in certain situations. Subsequent investments in any
amount may be made by check, by wiring federal funds, by direct deposit or by an
electronic funds transfer.

<PAGE>

There is no minimum amount for subsequent investments. Investments of $25
or more are allowed under the Systematic Investment Plan. See the Application
for more information. Only Class A, Class B and Class C shares are offered
through this Prospectus. (See "General Information - Other Classes of Shares.")

Class A Shares - Front-End Sales Charge Alternative. You may purchase Class A
shares of the Fund at net asset value plus an initial sales charge on purchases
under $1,000,000. You may purchase $1,000,000 or more of Class A shares without
a front-end sales charge; however, a contingent deferred sales charge ("CDSC")
equal to the lesser of 1% of the purchase price or the redemption value will be
imposed on shares redeemed during the month of purchase and the 12-month period
following the month of purchase. The schedule of charges for Class A shares is
as follows:

Initial Sales Charge

As a % of As a % Commission to
the Net of the Dealer/Agent
Amount Offering as a % of
Amount of Purchase Invested Price Offering
Price
Less than $50,000 4.99% 4.75% 4.25%
$50,000 - $99,999 4.71% 4.50% 4.25%
$100,000 - $249,999 3.90% 3.75% 3.25%
$250,000 - $499,999 2.56% 2.50% 2.00%
$500,000 - $999,999 2.04% 2.00% 1.75%
$1,000,000 or more None None 1.00% of the
amount
invested up
to
$2,999,999;
.50% of the
amount
invested over
$2,999,999,
up to
$4,999,999;
and .25% of
the excess
over
$4,999,999

No front-end sales charges are imposed on Class A shares purchased by
(a) institutional investors, which may include bank trust departments and
registered investment advisers; (b) investment advisers, consultants or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge such clients a management, consulting, advisory or
other fee; (c) clients of investment advisers or financial planners who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisers or financial planners on the books of the
broker-dealer through whom shares are purchased; (d) institutional clients of
broker-dealers, including retirement and deferred compensation plans and the
trusts used to fund these plans, which place trades through an omnibus account
maintained with the Fund by the broker-dealer; (e) shareholders of record on
October 12, 1990 in any series of Evergreen Investment Trust in existence on
that date, and the members of their immediate families; (f) current and retired
employees of FUNB and its affiliates, EDI and any broker-dealer with whom EDI
has entered into an agreement to sell shares of the Fund, and members of the
immediate families of such employees; (g) and upon the initial purchase of an
Evergreen fund by investors reinvesting the proceeds from a redemption within
the preceding thirty days of shares of other mutual funds, provided such shares
were initially purchased with a front-end sales charge or subject to a CDSC.
Certain broker-dealers or other financial institutions may impose a fee on
transactions in shares of the Fund.

Class A shares may also be purchased at net asset value by a
corporation or certain other qualified retirement plans or a non-qualified
deferred compensation plan or a Title I tax sheltered annuity or TSA plan
sponsored by an organization having 100 or more eligible employees, or a TSA
plan sponsored by a public education entity having 5,000 or more eligible
employees.

In connection with sales made to plans of the type described in the
preceding sentence EDI will pay broker-dealers and others concessions at the
rate of 0.50% of the net asset value of the shares purchased. These payments are
subject to reclaim in the event the shares are redeemed within twelve months
after purchase.

<PAGE>

charges for services performed on behalf of the customers of such banks in
connection with the purchase of shares of the Fund. In addition to compensation
paid at the time of sale, entities whose clients have purchased Class A shares
may receive a trailing commission equal to 0.25% of the average daily net asset
value on an annual basis of Class A shares held by their clients. Certain
purchases of Class A shares may qualify for reduced sales charges in accordance
with the Fund's Concurrent Purchases, Rights of Accumulation, Letter of Intent,
certain Retirement Plans and Reinstatement Privilege. Consult the Application
for additional information concerning these reduced sales charges.

Class B Shares - Deferred Sales Charge Alternative. You may purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a CDSC if you redeem shares within six years after the month of purchase. The
amount of the CDSC (expressed as a percentage of the lesser of the current net
asset value or original cost) will vary according to the number of years from
the month of purchase of Class B shares as set forth below.
CDSC
Redemption Timing Imposed

Month of purchase and the first twelve-month
period following the month of purchase........................5.00%
Second twelve-month period following the
month of purchase.............................................4.00%
Third twelve-month period following the
month of purchase.............................................3.00%
Fourth twelve-month period following the
month of purchase.............................................3.00%
Fifth twelve-month period following the
month of purchase.............................................2.00%
Sixth twelve-month period following the
month of purchase.............................................1.00%
No CDSC is imposed on amounts redeemed thereafter.

The CDSC is deducted from the amount of the redemption and is paid to
EDI. In the event the Fund acquires the assets of other mutual funds, the CDSC
may be paid by EDI to the distributors of the acquired funds. Class B shares are
subject to higher distribution and/or shareholder service fees than Class A
shares for a period of seven years after the month of purchase (after which it
is expected that they will convert to Class A shares without imposition of a
front-end sales charge). The higher fees mean a higher expense ratio, so Class B
shares pay correspondingly lower dividends and may have a lower net asset value
than Class A shares. The Fund

<PAGE>

will not normally accept any purchase of Class B shares in the amount of
$250,000 or more.

At the end of the period ending seven years after the end of the
calendar month in which the shareholder's purchase order was accepted, Class B
shares will automatically convert to Class A shares and will no longer be
subject to the higher distribution services fee imposed on Class B shares. Such
conversion will be on the basis of the relative net asset values of the two
Classes, without the imposition of any sales load, fee or other charge. The
purpose of the conversion feature is to reduce the distribution services fee
paid by holders of Class B shares that have been outstanding long enough for the
Distributor to have been compensated for the expenses associated with the sale
of such shares.

Class C Shares - Level-Load Alternative. Class C shares are only offered through
broker-dealers who have special distribution agreements with EDI. You may
purchase Class C shares at net asset value without any initial sales charge and,
therefore, the full amount of your investment will be used to purchase Fund
shares. However, you will pay a 1.00% CDSC, if you redeem shares during the
month of purchase and the 12-month period following the month of purchase. No
CDSC is imposed on amounts redeemed thereafter. Class C shares incur higher
distribution and/or shareholder service fees than Class A shares but, unlike
Class B shares, do not convert to any other class of shares of the Fund. The
higher fees mean a higher expense ratio, so Class C shares pay correspondingly
lower dividends and may have a lower net asset value than Class A shares. The
Fund will not normally accept any purchase of Class C shares in the amount of
$500,000 or more. No CDSC will be imposed on Class C shares purchased by
institutional investors, and through employee benefit and savings plans eligible
for the exemption from front-end sales charges described under "Class A Shares -
Front-End Sales Charge Alternative," above. Broker-dealers and other financial
intermediaries whose clients have purchased Class C shares may receive a
trailing commission equal to 0.75% of the average daily net asset value of such
shares on an annual basis held by their clients more than one year from the date
of purchase. The payment of trailing commissions will commence immediately with
respect to shares eligible for exemption from the CDSC normally applicable to
Class C shares.

<PAGE>

net asset value of the shares redeemed or (2) the net asset value at the time of
purchase of such shares.

No CDSC is imposed on a redemption of shares of the Fund in the event
of (1) death or disability of the shareholder; (2) a lump-sum distribution from
a 401(k) plan or other benefit plan qualified under the Employee Retirement
Income Security Act of 1974 ("ERISA"); (3) automatic withdrawals from ERISA
plans if the shareholder is at least 59 1/2 years old; (4) involuntary
redemptions of accounts having an aggregate net asset value of less than $1,000;
(5) automatic withdrawals under the Systematic Withdrawal Plan of up to 1.00%
per month of the shareholder's initial account balanced; (6) withdrawals
consisting of loan proceeds to a retirement plan participant; (7) financial
hardship withdrawals made by a retirement plan participant; or (8) withdrawals
consisting of returns of excess contributions or excess deferral amounts made to
a retirement plan participant.

The Fund may also sell Class A, Class B or Class C shares at net asset
value without any initial sales charge or CDSC to certain Directors, Trustees,
officers and employees of the Fund, Keystone, FUNB, Evergreen Asset Management
Corp. ("Evergreen Asset"), EDI and certain of their affiliates, and to members
of the immediate families of such persons, to registered representatives of
firms with dealer agreements with EDI, and to a bank or trust company acting as
a trustee for a single account.

How the Fund Values Its Shares. The net asset value of each Class of shares of
the Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in the Fund are valued at their current market values determined
on the basis of market quotations or, if such quotations are not readily
available, such other methods as the Trustees believe would accurately reflect
fair value. Non-dollar denominated securities will be valued as of the close of
the Exchange at the closing price of such securities in their principal trading
markets.

<PAGE>

your purchase is invested immediately and since such shares will convert to
Class A shares, which incur lower ongoing distribution and/or shareholder
service fees, after seven years. If you are unsure of the time period of your
investment, you might consider Class C shares since there are no initial sales
charges and, although there is no conversion feature, the CDSC only applies to
redemptions made during the first year after the month of purchase. Consult your
financial intermediary for further information. The compensation received by
broker-dealers and agents may differ depending on whether they sell Class A,
Class B or Class C shares. There is no size limit on purchases of Class A
shares.

In addition to the discount or commission paid to broker-dealers, EDI
may from time to time pay to broker-dealers additional cash or other incentives
that are conditioned upon the sale of a specified minimum dollar amount of
shares of the Fund and/or other Evergreen funds. Such incentives will take the
form of payment for attendance at seminars, lunches, dinners, sporting events or
theater performances, or payment for travel, lodging and entertainment incurred
in connection with travel by persons associated with a broker-dealer and their
immediate family members to urban or resort locations within or outside the
United States. Such a dealer may elect to receive cash incentives of equivalent
amount in lieu of such payments. EDI may also limit the availability of such
incentives to certain specified dealers. EDI from time to time sponsors
promotions involving First Union Brokerage Services, Inc., an affiliate of the
Fund's investment adviser, and select broker-dealers, pursuant to which
incentives are paid, including gift certificates and payments in amounts up to
1% of the dollar amount of shares of the Fund sold. Awards may also be made
based on the opening of a minimum number of accounts. Such promotions are not
being made available to all broker-dealers. Certain broker-dealers may also
receive payments from EDI or the Fund's investment adviser over and above the
usual trail commissions or shareholder servicing payments applicable to a given
Class of shares.

From time to time, affiliates of broker-dealers who offer and sell the
Fund's shares may make various benefits available to persons who purchase Fund
shares through such affiliate's cash management or similar type accounts. Such
benefits may include gifts of merchandise, services, or cash which is used to
purchase additional Fund shares.

<PAGE>

adviser incurs. If such investor is an existing shareholder, the Fund may redeem
shares from an investor's account to reimburse the Fund or its investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen funds. The Fund
will not accept third party checks other than those payable directly to a
shareholder whose account has been in existence at least 30 days.

How to Redeem Shares

You may "redeem" (i.e., sell) your shares in the Fund to the Fund for
cash at their net redemption value on any day the Exchange is open, either
directly by writing to the Fund, c/o ESC, or through your financial
intermediary. The amount you will receive is the net asset value adjusted for
fractions of a cent (less any applicable CDSC) next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, the Fund
will not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to 15 days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.

Redeeming Shares Through Your Financial Intermediary. The Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value (less any applicable CDSC). Your
financial intermediary is responsible for furnishing all necessary documentation
to the Fund and may charge you for this service. Certain financial
intermediaries may require that you give instructions earlier than 4:00 p.m.
(Eastern time).

Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to the Fund, c/o ESC; the registrar, transfer
agent and dividend-disbursing agent for the Fund. Stock power forms are
available from your financial intermediary, ESC, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
financial intermediaries, fiduciaries and surviving joint owners. Signature
guarantees are required for all redemption requests for shares with a value of
more than $50,000. Currently, the requirement for a signature guarantee has been
waived on redemptions of $50,000 or less when the account address of record has
been the same for a minimum period of 30 days. The Fund and ESC reserve the
right to withdraw this waiver at any time. A signature guarantee must be
provided by a bank or trust company (not a Notary Public), a member firm of a
domestic stock exchange or by other

<PAGE>

financial institutions whose guarantees are acceptable under the Securities
Exchange Act of 1934 and ESC's policies.

Shareholders may redeem amounts of $1,000 or more (up to $50,000) from
their accounts by calling the telephone number on the front page of this
Prospectus between the hours of 8:00 a.m. and 5:30 p.m.(Eastern time) each
business day (i.e., any weekday exclusive of days on which the Exchange or ESC's
offices are closed). The Exchange is closed on New Years Day, Martin Luther
King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Redemption requests received
after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. Such redemption requests must include the
shareholder's account name, as registered with the Fund, and the account number.
During periods of drastic economic or market changes, shareholders may
experience difficulty in effecting telephone redemptions. If you cannot reach
the Fund by telephone, you should follow the procedures for redeeming by mail or
through a broker-dealer as set forth herein. The telephone redemption service is
not made available to shareholders automatically. Shareholders wishing to use
the telephone redemption service must complete the appropriate sections on the
Application and choose how the redemption proceeds are to be paid. Redemption
proceeds will either (1) be mailed by check to the shareholder at the address in
which the account is registered or (2) be wired to an account with the same
registration as the shareholder's account in the Fund at a designated commercial
bank.

In order to insure that instructions received by ESC are genuine when
you initiate a telephone transaction, you will be asked to verify certain
criteria specific to your account. At the conclusion of the transaction, you
will be given a transaction number confirming your request, and written
confirmation of your transaction will be mailed the next business day. Your
telephone instructions will be recorded. Redemptions by telephone are allowed
only if the address and bank account of record have been the same for a minimum
period of 30 days. The Fund reserves the right at any time to terminate,
suspend, or change the terms of any redemption method described in this
Prospectus, except redemption by mail, and to impose fees.

<PAGE>

received over the Evergreen Express Line or by telephone are genuine. The Fund,
ESC, and EDI will not be liable when following instructions received over the
Evergreen Express Line or by telephone that ESC reasonably believes are genuine.

Evergreen Express Line. The Evergreen Express Line offers you specific fund
account information and price and yield quotations as well as the ability to do
account transactions, including investments, exchanges and redemptions. You may
access the Evergreen Express Line by dialing toll free 1-800- 346-3858 on any
touch-tone telephone, 24 hours a day, seven days a week.

General. The sale of shares is a taxable transaction for federal income tax
purposes. The Fund may temporarily suspend the right to redeem its shares when:
(1) the Exchange is closed, other than customary weekend and holiday closings;
(2) trading on the Exchange is restricted; (3) an emergency exists and the Fund
cannot dispose of its investments or fairly determine their value; or (4) the
Securities and Exchange Commission ("SEC") so orders. The Fund reserves the
right to close an account that through redemption has fallen below $1,000 and
has remained so for 30 days. Shareholders will receive 60 days' written notice
to increase the account value to at least $1,000 before the account is closed.
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which the Fund is obligated to redeem shares solely in cash, up to the lesser of
$250,000 or 1% of the Fund's total net assets, during any 90 day period for any
one shareholder.

Exchange Privilege

How to Exchange Shares. You may exchange some or all of your shares for shares
of the same class in the other Evergreen funds through your financial
intermediary, by calling or writing to ESC or by using the Evergreen Express
Line as described above. Once an exchange request has been telephoned or mailed,
it is irrevocable and may not be modified or canceled. Exchanges will be made on
the basis of the relative net asset values of the shares exchanged next
determined after an exchange request is received. An exchange which represents
an initial investment in another Evergreen fund is subject to the minimum
investment and suitability requirements of each fund.

<PAGE>

comply with the requirement for a redemption or repurchase order and must
specify the dollar value or number of shares to be exchanged. An exchange is
treated for federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon 60 days' notice to shareholders and is only available in
states in which shares of the fund being acquired may lawfully be sold.

No CDSC will be imposed in the event shares are exchanged for shares of
the same class of other Evergreen funds. If you redeem shares, the CDSC
applicable to the shares of the Evergreen fund originally purchased for cash is
applied. Also, Class B shares will continue to age following an exchange for the
purpose of conversion to Class A shares and for the purpose of determining the
amount of the applicable CDSC.

Exchanges Through Your Financial Intermediary. The Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service.

Exchanges By Telephone And Mail. Exchange requests received by the Fund after
4:00 p.m. (Eastern time) will be processed using the net asset value determined
at the close of the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach ESC by telephone. If you wish to use the telephone
exchange service you should indicate this on the Application. As noted above,
the Fund will employ reasonable procedures to confirm that instructions for the
redemption or exchange of shares communicated by telephone are genuine. A
telephone exchange may be refused by the Fund or ESC if it is believed advisable
to do so. Procedures for exchanging Fund shares by telephone may be modified or
terminated at any time. Written requests for exchanges should follow the same
procedures outlined for written redemption requests in the section entitled "How
to Redeem Shares;" however, no signature guarantee is required.

Shareholder Services

The Fund offers the following shareholder services. For more information
about these services or your account, contact

<PAGE>

your financial intermediary, ESC or call the toll-free number on the front page
of this Prospectus. Some services are described in more detail in the
Application.

Systematic Investment Plan. Under a Systematic Investment Plan, you may invest
as little as $25 per month to purchase shares of the Fund with no minimum
initial investment required.

Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 4:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Shares purchased under the Systematic Investment Plan or Telephone Investment
Plan may not be redeemed for ten days from the date of investment.

Systematic Withdrawal Plan. When an account of $10,000 or more is opened or when
an existing account reaches that size, you may participate in the Systematic
Withdrawal Plan by filling out the appropriate part of the Application. Under
this Plan, you may receive (or designate a third party to receive) a monthly or
quarterly fixed-withdrawal payment in a stated amount of at least $75 and as
much as 1.0% per month or 3.0% per quarter of the total net asset value of the
Fund shares in your account when the Plan was opened. Fund shares will be
redeemed as necessary to meet withdrawal payments. All participants must elect
to have their dividends and capital gains distributions reinvested
automatically.

Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified employee benefit and savings plans may make shares of the Fund and
the other Evergreen funds available to their participants. Investments made by
such employee benefit plans may be exempt from front-end sales charges if they
meet the criteria set forth under "Class A Shares - Front-End Sales Charge
Alternative." Evergreen Asset, Keystone or FUNB may provide compensation to
organizations providing administrative and recordkeeping services to plans which
make shares of the Evergreen funds available to their participants.

Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash

<PAGE>

at least three full business days prior to a given record date, the dividends
and/or distributions to be paid to a shareholder will be reinvested.

Dollar Cost Averaging. Through dollar cost averaging you can invest a fixed
dollar amount each month or each quarter in any Evergreen fund. This results in
more shares being purchased when the selected Fund's net asset value is
relatively low and fewer shares being purchased when the Fund's net asset value
is relatively high and may result in a lower average cost per share than a less
systematic investment approach.

Prior to participating in dollar cost averaging, you must establish an
account in an Evergreen fund. You should designate on the Application (1) the
dollar amount of each monthly or quarterly investment you wish to make, and (2)
the Fund in which the investment is to be made. Thereafter, on the first day of
the designated month, an amount equal to the specified monthly or quarterly
investment will automatically be redeemed from your initial account and invested
in shares of the designated fund.

Two Dimensional Investing. You may elect to have income and capital gains
distributions from any Evergreen fund shares you own automatically invested to
purchase the same class of shares of any other Evergreen fund. You may select
this service on your Application and indicate the Evergreen fund(s) into which
distributions are to be invested.

Tax Sheltered Retirement Plans. The Fund has various retirement plans available
to eligible investors, including Individual Retirement Accounts (IRAs); Rollover
IRAs; Simplified Employee Pension Plans (SEPs); Salary Incentive Match Plan for
Employees (SIMPLEs); Tax Sheltered Annuity Plans; 403(b)(7) Plans; 401(k) Plans;
Keogh Plans; Profit- Sharing Plans; Pension and Target Benefit and Money
Purchase Plans. For details, including fees and application forms, call toll
free 1-800-247-4075 or write to ESC.

Banking Laws

<PAGE>

investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. FUNB is
subject to and in compliance with the aforementioned laws and regulations.

Changes to applicable laws and regulations or future judicial or
administrative decisions could result in FUNB being prevented from continuing to
perform the services required under the investment advisory contract or from
acting as agent in connection with the purchase of shares of the Fund by its
customers. If FUNB were prevented from continuing to provide the services called
for under the investment advisory agreement, it is expected that the Trustees
would identify, and call upon the Fund's shareholders to approve, a new
investment adviser. If this were to occur, it is not anticipated that the
shareholders of the Fund would suffer any adverse financial consequences.

OTHER INFORMATION

Dividends, Distributions and Taxes

The Fund intends to declare dividends from net investment income daily
and distribute to its shareholders such dividends monthly. The Fund intends to
declare and distribute all net realized capital gains at least annually.
Shareholders receive Fund distributions in the form of additional shares of that
class of shares upon which the distribution is based or, at the shareholder's
option, in cash. Shareholders of the Fund who have not opted to receive cash
prior to the payable date for any dividend from net investment income or the
record date for any capital gains distribution will have the number of such
shares determined on the basis of the Fund's net asset value per share computed
at the end of that day after adjustment for the distribution. Net asset value is
used in computing the number of shares in both capital gains and income
distribution investments. There is a possibility that shareholders may lose the
tax-exempt status on accrued income on municipal bonds if shares of the Fund are
redeemed before a dividend has been declared.

<PAGE>

and income distributions paid by the Fund with respect to Class A shares will
generally be greater than those paid with respect to Class B and Class C shares.

Account statements and/or checks, as appropriate, will be mailed within
seven days after the Fund pays a distribution. Unless the Fund receives
instructions to the contrary before the record or payable date, as the case may
be, it will assume that a shareholder wishes to receive that distribution and
future capital gains and income distributions in shares. Instructions continue
in effect until changed in writing.

The Fund intends to qualify to be treated as a regulated investment
company under the Code. While so qualified, it is expected that the Fund will
not be required to pay any federal income taxes on that portion of its
investment company taxable income and any net realized capital gains it
distributes to shareholders. The Code imposes a 4% nondeductible excise tax on
regulated investment companies, such as the Fund, to the extent it does not meet
certain distribution requirements by the end of each calendar year. The Fund
anticipates meeting such distribution requirements.

The Fund will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax-exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of the Fund from their gross income
for federal income tax purposes, however, (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of the
"adjusted current earnings" for purposes of the federal corporate alternative
minimum tax.

Dividends paid from taxable income, if any, and distributions of any
net realized short-term capital gains (whether from tax-exempt or taxable
obligations) are taxable as ordinary income and long-term capital gains
distributions are taxable as long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investor's holding period
relating to the shares with respect to which such gains are distributed. Market
discount recognized on taxable and tax-exempt bonds is taxable as ordinary
income, not as excludable income. Under current law, the highest federal income
tax rate applicable to net long-term gains realized by individuals is 20% for
most assets held more than 18 months. The rate applicable to corporations is
35%.

<PAGE>

Since the Fund's gross income is ordinarily expected to be tax-exempt
interest income, it is not expected that the 70% dividends-received deduction
for corporations will be applicable. Specific questions should be addressed to
the investor's own tax adviser.

The Fund is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the Application, or on a
separate form supplied by the Fund's transfer agent, that the investor's social
security or taxpayer identification number is correct and that the investor is
not currently subject to backup withholding or is exempt from backup
withholding. A shareholder who acquires Class A shares of the Fund and sells or
otherwise disposes of such shares within 90 days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares for
purposes of calculating gain and loss realized upon a sale or exchange of shares
of the Fund.

Florida does not currently impose tax on individuals. Thus, individual
shareholders of the Fund will not be subject to any Florida state income tax on
distributions received from the Fund. However, certain distributions will be
taxable to corporate shareholders which are subject to Florida corporate income
tax. Florida currently imposes an intangible tax at the annual rate of 0.20% on
certain securities and other intangible assets owned by Florida residents.
Certain types of tax exempt securities of Florida issuers, U.S. government
securities and tax exempt securities issued by certain U.S. territories and
possessions are exempt from this intangible tax. Shares of the Fund will also be
exempt from the Florida intangible tax if the portfolio consists exclusively of
securities which are exempt on the last business day of the calendar year. If
the portfolio consists of any assets which are not so exempt on the last
business day of the calendar year, however, only the portion of the shares of
the Fund which relate to securities issued by the U.S. and its possessions and
territories will be exempt from the Florida intangible tax, and the remaining
portion of such shares will be fully subject to the intangible tax, even if they
partly relate to Florida tax exempt securities.

Shareholders who are subject to the alternative minimum tax may be
required to include all or a portion of the Fund's dividends in calculating the
federal individual alternative minimum tax.

<PAGE>

Statements describing the tax status of shareholders' dividends and
distributions will be mailed annually by the Fund. These statements will set
forth the amount of income exempt from the federal and, if applicable, state
taxation, and the amount, if any, subject to federal and state taxation.
Moreover, to the extent necessary, these statements will indicate the amount of
exempt-interest dividends which are a specific preference item for purposes of
the federal individual and corporate alternative minimum taxes. The exemption of
interest income for federal income tax purposes does not necessarily result in
exemption under the income or other tax law of any state or local taxing
authority. Investors should consult their own tax advisers about the status of
distributions from the Fund in their states and localities. The Fund notifies
shareholders annually as to the interest exempt from federal taxes earned by the
Fund.

The foregoing discussion of federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the SAI.

General Information

Portfolio Turnover. The estimated portfolio turnover rate for the Fund is not
expected to exceed 100%. A portfolio turnover rate of 100% would occur if all of
the Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by the Fund directly affects the transaction costs
relating to the purchase and sale of securities which the Fund bears directly. A
high rate of portfolio turnover will increase such costs. See the SAI for
further information regarding the practices of the Fund affecting portfolio
turnover.

Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, the Fund may consider sales of its shares as a factor in the
selection of broker-dealers to enter into portfolio transactions with the Fund.

Other Classes of Shares. The Fund currently offers four classes of shares, Class
A, Class B, Class C and Class Y, and may in the future offer additional classes.
Class Y shares are not offered by this Prospectus and are only available to (1)
persons who at or prior to December 31, 1994, owned shares in

<PAGE>

a mutual fund advised by Evergreen Asset, (2) certain institutional investors
and (3) investment advisory clients of FUNB, Evergreen Asset, Keystone or their
affiliates. The dividends payable with respect to Class A, Class B and Class C
shares will be less than those payable with respect to Class Y shares due to the
distribution and shareholder servicing- related expenses borne by Class A, Class
B and Class C shares and the fact that such expenses are not borne by Class Y
shares.

Performance Information. From time to time, the Fund may quote its "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders. Total return and yield are computed separately
for Class A, Class B, Class C and Class Y shares. The Fund's total return for
each such period is computed by finding, through the use of a formula prescribed
by the SEC, the average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of the investment
at the end of the period. For purposes of computing total return, dividends and
capital gains distributions paid on shares of the Fund are assumed to have been
reinvested when paid and the maximum sales charges applicable to purchases of
the Fund's shares are assumed to have been paid.

Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. The Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, the Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment income
reported in the Fund's financial statements. To calculate yield, the Fund takes
the interest and dividend income it earned from its portfolio of investments (as
defined by the SEC formula) for a 30-day period (net of expenses), divides it by
the average number of shares entitled to receive dividends, and expresses the
result as an annualized percentage rate based on the Fund's share price at the
end of the 30-day period. This yield does not reflect gains or losses from
selling securities.

The Fund may also quote tax-equivalent yields which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing the Fund's tax-exempt
yield by the result of one minus a stated federal tax rate. If only a portion of
the Fund's income was tax-exempt, only that portion is adjusted in the
calculation.

<PAGE>

Performance data may be included in any advertisement or sales
literature of the Fund. These advertisements may quote performance rankings or
ratings of the Fund by financial publications or independent organizations such
as Lipper Analytical Services, Inc. and Morningstar, Inc. or compare a Fund's
performance to various indices. The Fund may also advertise in items of sales
literature an "actual distribution rate" which is computed by dividing the total
ordinary income distributed (which may include the excess of short-term capital
gains over losses) to shareholders for the latest twelve-month period by the
maximum public offering price per share on the last day of the period. Investors
should be aware that past performance may not be indicative of future results.

In marketing the Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen funds, products, and services, which may include: retirement
investing; brokerage products and services; the effects of periodic investment
plans and dollar cost averaging; saving for college; and charitable giving. In
addition, the information provided to investors may quote financial or business
publications and periodicals, including model portfolios or allocations, as they
relate to fund management, investment philosophy, and investment techniques. The
materials may also reprint, and use as advertising and sales literature,
articles from Evergreen Events, a quarterly magazine provided free of charge to
Evergreen fund shareholders.

Additional Information. This Prospectus and the SAI, which has been incorporated
by reference herein, do not contain all the information set forth in the
Registration Statement filed by the Trust with the SEC under the Securities Act
of 1933, as amended. Copies of the Registration Statement may be obtained at a
reasonable charge from the SEC or may be examined, without charge, at the
offices of the SEC in Washington, D.C.

<PAGE>

Investment Adviser

Capital Management Group of First Union National Bank, 201
South College Street, Charlotte, North Carolina 28228

Custodian

State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827

Transfer Agent

Evergreen Service Company, P.O. Box 2121, Boston,
Massachusetts 02106-2121

Legal Counsel

Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W.,
Washington, D.C. 20036

Independent Auditors

KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts
02110

Distributor

Evergreen Distributor, Inc., 125 W. 55th Street, New York, New
York 10019

<PAGE>

PROSPECTUS , 1997

EVERGREEN STATE TAX FREE FUNDS

Evergreen Florida Municipal Bond Fund (Evergreen Tree Logo)

CLASS Y SHARES

The Evergreen Florida Municipal Bond Fund (the "Fund") seeks current
income exempt from federal regular income tax and the Florida state intangibles
tax, consistent with the preservation of capital.

This Prospectus provides information regarding the Class Y shares
offered by the Fund. The Fund is a non-diversified series of an open-end,
management investment company. This Prospectus sets forth concise information
about the Fund that a prospective investor should know before investing. The
address of the Fund is 200 Berkeley Street, Boston, Massachusetts 02116.

Keep This Prospectus For Future Reference

<PAGE>

TABLE OF CONTENTS

EXPENSE INFORMATION.....................................................3

FINANCIAL HIGHLIGHTS....................................................3

DESCRIPTION OF THE FUND.................................................4
Investment Objective and Policies..............................4
Investment Practices and Restrictions..........................5

ORGANIZATION AND SERVICE PROVIDERS.....................................14
Organization..................................................14
Service Providers.............................................15

PURCHASE AND REDEMPTION OF SHARES......................................17
How to Buy Shares.............................................17
How to Redeem Shares .........................................18
Exchange Privilege............................................20
Shareholder Services..........................................21
Banking Laws..................................................23

OTHER INFORMATION......................................................24
Dividends, Distributions and Taxes............................24
General Information...........................................27

<PAGE>

EXPENSE INFORMATION

The table and example below are designed to help you understand the
various expenses that you will bear, directly or indirectly, when you invest in
the Fund. Shareholder transaction expenses are fees paid directly from your
account when you buy or sell shares of the Fund.

SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None

Annual operating expenses reflect the normal operating expenses of the
Fund, and include costs such as management, distribution and other fees. The
table below shows the Fund's estimated annual operating expenses for the fiscal
period ending August 31, 1998. The example shows what you would pay if you
invested $1,000 over periods indicated. The example assumes that you reinvest
all of your dividends and that the Fund's average annual return will be 5%. The
example is for illustration purposes only and should not be considered a
representation of past or future expenses or annual return. The Fund's actual
expenses and returns will vary. For a more complete description of the various
costs and expenses borne by the Fund see "Organization and Service Providers."

Annual
Operating
Expenses Example
Advisory Fees .50% After 1 Year $7
12b-1 Fees -- After 3 Years $22
Other Expenses .19%
Total .69%

FINANCIAL HIGHLIGHTS

As of the date of this Prospectus the Fund had not commenced
operations. Consequently, no financial highlights are currently available.

DESCRIPTION OF THE FUND

<PAGE>

Investment Objective and Policies

The Fund seeks current income exempt from federal regular income tax
and the Florida state intangibles tax, consistent with the preservation of
capital.

The Fund may make taxable investments and may, from time to time,
generate income subject to federal regular income tax.

The Fund will invest at least 80% of its assets in bonds that, at the
date of investment, are rated within the four

<PAGE>

highest categories by Standard and Poor's Ratings Group ("S&P") (AAA, AA, A and
BBB), by Moody's Investors Service ("Moody's") (Aaa, Aa, A and Baa), by Fitch
Investors Services, L.P. ("Fitch") (AAA, AA, A and BBB) or, if not rated or
rated under a different system, are of comparable quality to obligations so
rated as determined by another nationally recognized statistical ratings
organization or by the Fund's investment adviser. The Fund may invest the
remaining 20% of its assets in lower rated bonds, but it will not invest in
bonds rated below B. If S&P, Moody's or Fitch changes its ratings system, the
Fund will try to use comparable ratings as standards according to the Fund's
investment objective and policies.

In addition to the investment policies detailed above, the Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions."

Investment Practices and Restrictions

<PAGE>

Florida and its political subdivisions provides a greater level of risk than a
fund which is diversified across numerous states and municipal entities.

<PAGE>

Non-Diversification. The Fund is a non-diversified series of an investment
company and, as such, there is no limit on the percentage of assets which can be
invested in any single issuer. An investment in the Fund, therefore, will entail
greater risk than would exist in a diversified investment company because the
higher percentage of investments among fewer issuers may result in greater
fluctuation in the total market value of the Fund's portfolio. The Fund intends
to comply with Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code") which requires that at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
the total assets may be invested in the securities of a single issuer and that
with respect to the remainder of the Fund's total assets, no more than 25% of
its total assets are invested in the securities of a single issuer.

Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is an agreement by the Fund to sell a
security and repurchase it at a specified time and price. The Fund could lose
money if the market values of the securities it sold decline below their
repurchase prices. Reverse repurchase agreements may be considered a form of
borrowing and, therefore, a form of leverage. Leverage may magnify gains or
losses of the Fund.

When-Issued, Delayed-Delivery and Forward Commitment Transactions. The Fund may
enter into transactions whereby it commits to buying a security, but does not
pay for or take

<PAGE>

delivery of the security until some specified date in the future. The value of
these securities is subject to market fluctuation during this period and no
income accrues to the Fund until settlement. At the time of settlement, a when-
issued security may be valued at less than its purchased price. When entering
into these transactions, the Fund relies on the other party to consummate the
transaction; if the other party fails to do so, the Fund may be disadvantaged.

<PAGE>

Fund's ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by the Fund which are eligible for resale pursuant to Rule
144A will be monitored by the Fund's investment adviser on an ongoing basis,
subject to the oversight of the Board of Trustees. In the event that such a
security is deemed to be no longer liquid, the Fund's holdings will be reviewed
to determine what action, if any, is required to ensure that the retention of
such security does not result in the Fund having more than 15% of its net assets
invested in illiquid or not readily marketable securities.

<PAGE>

coupon debt securities can be very volatile when interest
rates change.

<PAGE>

all or a portion of any loss sustained from having to sell the security
elsewhere. The Fund intends to enter into put transactions solely to maintain
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes.

The Fund may write (i.e., sell) covered call and put options. By writing a
call option, the Fund becomes obligated

<PAGE>

during the term of the option to deliver the securities underlying the option
upon payment of the exercise price. By writing a put option, the Fund becomes
obligated during the term of the option to purchase the securities underlying
the option at the exercise price if the option is exercised. The Fund also may
write straddles (combinations of covered puts and calls on the same underlying
security). The Fund may only write "covered" options. This means that so long as
the Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option or, in the case of call options on U.S.
Treasury bills, the Fund might own substantially similar U.S. Treasury bills.
The Fund will be considered "covered" with respect to a put option it writes if,
so long as it is obligated as the writer of the put option, it deposits and
maintains with its custodian in a segregated account liquid assets having a
value equal to or greater than the exercise price of the option.

The Fund may also enter into financial futures contracts and write
options on such contracts. The Fund intends to enter into such contracts and
related options for hedging purposes.

<PAGE>

The Fund will enter into futures on securities or index-based futures contracts
in order to hedge against changes in interest rates or securities prices. A
futures contract on securities is an agreement to buy or sell securities during
a designated month at whatever price exists at that time. A futures contract on
a securities index does not involve the actual delivery of securities, but
merely requires the payment of a cash settlement based on changes in the
securities index. The Fund does not make payment or deliver securities upon
entering into a futures contract. Instead, it puts down a margin deposit, which
is adjusted to reflect changes in the value of the contract and which remains in
effect until the contract is terminated.

<PAGE>

When the Fund uses financial futures contracts and options on financial futures
contracts as hedging devices, there is a risk that the prices of the securities
subject to the financial futures contracts and options on financial futures
contracts may not correlate perfectly with the prices of the securities in the
Fund's portfolio. This may cause the financial futures contract and any related
options to react to market changes differently than the portfolio securities. In
addition, the Fund's investment adviser could be incorrect in its expectations
and forecasts about the direction or extent of market factors, such as interest
rates, securities price movements, and other economic factors. Even if the
Fund's investment adviser correctly predicts interest rate movements, a hedge
could be unsuccessful if changes in the value of the Fund's futures position did
not correspond to changes in the value of its investments. In these events, the
Fund may lose money on the financial futures contracts or the options on
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Fund's investment adviser will
consider liquidity before entering into financial futures contracts or options
on financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
Fund's ability to establish and close out financial futures contracts and
options on financial futures contract positions depends on this secondary
market. If the Fund is unable to close out its position due to disruptions in
the market or lack of liquidity, the Fund may lose money on the futures contract
or option, and the losses to the Fund could be significant.

Derivatives. Derivatives are financial contracts whose value is based on an
underlying asset, such as a stock or a bond, or an underlying economic factor,
such as an index or an interest rate.

The Fund may invest in derivatives only if the expected risks and
rewards are consistent with its objectives and policies.

<PAGE>

ORGANIZATION AND SERVICE PROVIDERS

Organization

Service Providers

<PAGE>

The Fund pays CMG an annual fee for its services equal to 0.50% of
average daily net assets.

Portfolio Manager

Robert S. Drye is the Fund's portfolio manager. Mr. Drye
is a Vice President of FUNB and has been with FUNB since 1968.

Administrator

Administration Fee

0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion

Sub-administrator

Sub-Administration Fee

0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% on assets in excess of $25 billion

<PAGE>

Transfer Agent and Dividend Disbursing Agent. Evergreen Service Company ("ESC"),
200 Berkeley Street, Boston, Massachusetts 02116 acts as the Fund's transfer
agent and dividend disbursing agent. ESC is an indirect, wholly-owned subsidiary
of First Union Corporation.

Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827 acts as the Fund's custodian.

Principal Underwriter. Evergreen Distributor, Inc. ("EDI"), a subsidiary of The
BISYS Group, Inc., located at 125 West 55th Street, New York, New York 10019, is
the principal underwriter of the Fund.

PURCHASE AND REDEMPTION OF SHARES

How to Buy Shares

Class Y shares are offered at net asset value without a front-end sales
charge or a contingent deferred sales load. Class Y shares are only offered to
(1) persons who at or prior to December 31, 1994, owned shares in a mutual fund
advised by Evergreen Asset Management Corp. ("Evergreen Asset"), (2) certain
institutional investors and (3) investment advisory clients of FUNB, Evergreen
Asset, Keystone or their affiliates.

Eligible investors may purchase Class Y shares of the Fund through
broker-dealers, banks or other financial intermediaries, or directly through
EDI. In addition, you may purchase Class Y shares of the Fund by mailing to the
Fund, c/o Evergreen Service Company, P.O. Box 2121, Boston, Massachusetts
02106-2121, a completed Application and a check payable to the Fund. You may
also telephone 1-800-343-2898 to obtain the number of an account to which you
can wire or electronically transfer funds and then send in a completed
Application. The minimum initial investment is $1,000, which may be waived in
certain situations. Subsequent investments in any amount may be made by check,
by wiring federal funds, by direct deposit or by an electronic funds transfer.

There is no minimum amount for subsequent investments. Investments of
$25 or more are allowed under the Systematic Investment Plan. See the
Application for more information. Only Class Y shares are offered through this
Prospectus (see "General Information" -- "Other Classes of Shares").

How the Fund Values Its Shares. The net asset value of each Class of shares of
the Fund is calculated by dividing the

<PAGE>

value of the amount of the Fund's net assets attributable to that Class by the
number of outstanding shares of that Class. Shares are valued each day the New
York Stock Exchange (the "Exchange") is open as of the close of regular trading
(currently 4:00 p.m. Eastern time). The securities in the Fund are valued at
their current market values determined on the basis of market quotations or, if
such quotations are not readily available, such other methods as the Trustees of
the Trust believe would accurately reflect fair value. Non-dollar denominated
securities will be valued as of the close of the Exchange at the closing price
of such securities in their principal trading markets.

Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss the Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, the Fund may redeem
shares from an investor's account to reimburse the Fund or its investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen funds. The Fund
will not accept third party checks other than those payable directly to a
shareholder whose account has been in existence at least 30 days.

How to Redeem Shares

You may "redeem" (i.e., sell) your Class Y shares in the Fund to the
Fund for cash at their net redemption value on any day the Exchange is open,
either directly by writing to the Fund, c/o ESC, or through your financial
intermediary. The amount you will receive is the net asset value adjusted for
fractions of a cent next calculated after the Fund receives your request in
proper form. Proceeds generally will be sent to you within seven days. However,
for shares recently purchased by check, the Fund will not send proceeds until it
is reasonably satisfied that the check has been collected (which may take up to
15 days). Once a redemption request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled.

Redeeming Shares Through Your Financial Intermediary. The Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service. Certain financial intermediaries may require that
you give instructions earlier than 4:00 p.m.
(Eastern time).

<PAGE>

In order to insure that instructions received by ESC are genuine when you
initiate a telephone transaction, you will be asked to verify certain criteria
specific to your account. At

<PAGE>

the conclusion of the transaction, you will be given a transaction number
confirming your request, and written confirmation of your transaction will be
mailed the next business day. Your telephone instructions will be recorded.
Redemptions by telephone are allowed only if the address and bank account of
record have been the same for a minimum period of 30 days. The Fund reserves the
right at any time to terminate, suspend, or change the terms of any redemption
method described in this Prospectus, except redemption by mail, and to impose
fees.

Except as otherwise noted, the Fund, ESC, and EDI will not assume
responsibility for the authenticity of any instructions received by any of them
from a shareholder in writing, over the Evergreen Express Line, or by telephone.
ESC will employ reasonable procedures to confirm that instructions received over
the Evergreen Express Line or by telephone are genuine. The Fund, ESC, and EDI
will not be liable when following instructions received over the Evergreen
Express Line or by telephone that ESC reasonably believes are genuine.

General. The sale of shares is a taxable transaction for federal income tax
purposes. The Fund may temporarily suspend the right to redeem its shares when:
(1) the Exchange is closed, other than customary weekend and holiday closings;
(2) trading on the Exchange is restricted; (3) an emergency exists and the Fund
cannot dispose of its investments or fairly determine their value; or (4) the
Securities and Exchange Commission ("SEC") so orders. The Fund reserves the
right to close an account that through redemption has fallen below $1,000 and
has remained so for 30 days. Shareholders will receive 60 days' written notice
to increase the account value to at least $1,000 before the account is closed.
The Fund has elected to be governed by Rule 18f-1 under the Investment Company
Act of 1940 (the "1940 Act") pursuant to which the Fund is obligated to redeem
shares solely in cash, up to the lesser of $250,000 or 1% of the Fund's total
net assets, during any 90 day period for any one shareholder.

Exchange Privilege

<PAGE>

How to Exchange Shares. You may exchange some or all of your Class Y shares for
shares of the same class in the other Evergreen funds through your financial
intermediary, by calling or writing to ESC or by using the Evergreen Express
Line as described above. Once an exchange request has been telephoned or mailed,
it is irrevocable and may not be modified or canceled. Exchanges will be made on
the basis of the relative net asset values of the shares exchanged next
determined after an exchange request is received. An exchange which represents
an initial investment in another Evergreen fund is subject to the minimum
investment and suitability requirements of each fund.

Each of the Evergreen funds has different investment objectives and
policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange order
must comply with the requirement for a redemption or repurchase order and must
specify the dollar value or number of shares to be exchanged. An exchange is
treated for federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon 60 days' notice to shareholders and is only available in
states in which shares of the fund being acquired may lawfully be sold.

<PAGE>

for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares;" however, no signature
guarantee is required.

Shareholder Services

The Fund offers the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, ESC or call the toll-free number on the front page of this
Prospectus. Some services are described in more detail in the Application.

Systematic Investment Plan. Under a Systematic Investment Plan, you may invest
as little as $25 per month to purchase shares of the Fund with no minimum
initial investment required.

<PAGE>

Two Dimensional Investing. You may elect to have income and capital gains
distributions from any Class Y Evergreen fund shares you own automatically
invested to purchase the same class of shares of any other Evergreen fund. You
may select this service on your Application and indicate the Evergreen fund(s)
into which distributions are to be invested.

Banking Laws

The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Fund. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. FUNB is

<PAGE>

subject to and in compliance with the aforementioned laws and
regulations.

OTHER INFORMATION

Dividends, Distributions and Taxes

The Fund intends to qualify to be treated as a regulated investment company
under the Code. While so qualified, it is

<PAGE>

expected that the Fund will not be required to pay any federal income taxes on
that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Fund, to
the extent it does not meet certain distribution requirements by the end of each
calendar year. The Fund anticipates meeting such distribution requirements.

Since the Fund's gross income is ordinarily expected to be tax exempt
interest income, it is not expected that the 70% dividends-received deduction
for corporations will be applicable. Specific questions should be addressed to
the investor's own tax adviser.

<PAGE>

number is correct and that the investor is not currently subject to backup
withholding or are exempt from backup withholding.

Shareholders who are subject to the alternative minimum tax may be
required to include all or a portion of the Fund's dividends in calculating the
federal individual alternative minimum tax.

<PAGE>

General Information

Other Classes of Shares. The Fund currently offers four classes of shares, Class
A, Class B, Class C and Class Y, and may in the future offer additional classes.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (1) persons who at or prior to December 31, 1994, owned shares
in a mutual fund advised by Evergreen Asset, (2) certain institutional investors
and (3) investment advisory clients of FUNB, Evergreen Asset, Keystone or their
affiliates. The dividends payable with respect to Class A, Class B and Class C
shares will be less than those payable with respect to Class Y shares due to the
distribution and shareholder servicing-related expenses borne by Class A, Class
B and Class C shares and the fact that such expenses are not borne by Class Y
shares.

<PAGE>

average annual compounded rate of return over the period that would equate an
assumed initial amount invested to the value of the investment at the end of the
period. For purposes of computing total return, dividends and capital gains
distributions paid on shares of the Fund are assumed to have been reinvested
when paid and the maximum sales charges applicable to purchases of the Fund's
shares are assumed to have been paid.

The Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing the Fund's tax-exempt
yield by the result of one minus a stated federal tax rate. If only a portion of
the Fund's income was tax-exempt, only that portion is adjusted in the
calculation.

Performance data may be included in any advertisement or sales
literature of the Fund. These advertisements may quote performance rankings or
ratings of the Fund by financial publications or independent organizations such
as Lipper Analytical Services, Inc. and Morningstar, Inc. or compare a Fund's
performance to various indices. The Fund may also advertise in items of sales
literature an "actual distribution rate" which is computed by dividing the total
ordinary income distributed (which may include the excess of short-term capital
gains over losses) to shareholders for the latest twelve month period by the
maximum public offering price per share on the last day of the period. Investors
should be aware that past performance may not be indicative of future results.

<PAGE>

Investment Adviser

Capital Management Group of First Union National Bank, 201
South College Street, Charlotte, North Carolina 28228

Custodian

State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827

Transfer Agent

Evergreen Service Company, P.O. Box 2121, Boston,
Massachusetts 02106-2121

Legal Counsel

Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W.,
Washington, D.C. 20036

Independent Auditors

KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts
02110

Distributor

Evergreen Distributor, Inc., 125 W. 55th Street, New York, New
York 10019

<PAGE>

PROSPECTUS , 1997

EVERGREEN TAX FREE FUNDS

Evergreen Tax Free Fund (Evergreen Tree Logo)

CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

The Evergreen Tax Free Fund (the "Fund") seeks the highest possible
current income, exempt from federal income taxes, while preserving capital.

This Prospectus provides information regarding the Class A, Class B and
Class C shares offered by the Fund. The Fund is a diversified series of an
open-end, management investment company. This Prospectus sets forth concise
information about the Fund that a prospective investor should know before
investing. The address of the Fund is 200 Berkeley Street, Boston, Massachusetts
02116.

Keep This Prospectus For Future Reference

<PAGE>

TABLE OF CONTENTS

EXPENSE INFORMATION...................................................3

FINANCIAL HIGHLIGHTS..................................................4

DESCRIPTION OF THE FUND...............................................4
Investment Objective and Policies............................4
Investment Practices and Restrictions........................6

ORGANIZATION AND SERVICE PROVIDERS...................................13
Organization................................................13
Service Providers...........................................14
Distribution Plans and Agreements...........................15

PURCHASE AND REDEMPTION OF SHARES....................................17
How to Buy Shares...........................................17
How to Redeem Shares .......................................23
Exchange Privilege..........................................26
Shareholder Services........................................27
Banking Laws................................................29

OTHER INFORMATION....................................................29
Dividends, Distributions and Taxes..........................30
General Information.........................................32

<PAGE>

EXPENSE INFORMATION

The table and examples below are designed to help you understand the
various expenses that you will bear, directly and indirectly, when you invest in
the Fund. Shareholder transaction expenses are fees paid directly from your
account when you buy or sell shares of the Fund.

SHAREHOLDER Class A Class B Class C
TRANSACTION EXPENSES Shares Shares Shares

Annual operating expenses reflect the normal operating expenses of the
Fund, and include costs such as management, distribution and other fees. The
table below shows the Fund's estimated annual operating expenses for the fiscal
period ending May 31, 1998. The examples show what you would pay if you invested
$1,000 over periods indicated. The examples assume that you reinvest all of your
dividends and that the Fund's average annual return will be 5%. The examples are
for illustration purposes only and should not be considered a representation of
past or future expenses or annual return. The Fund's actual expenses and returns
will vary. For a more complete description of the various costs and expenses
borne by the Fund see "Organization and Service Providers."

Annual Operating Expenses
Class A Class B Class C

<PAGE>

Annual Operating Expenses
Management Fees
.42% .42% .42%
12b-1 Fees(3) .25% 1.00% 1.00%
Other Expenses .16% .16% .16%
Total .83% 1.58% 1.58%
==== ===== =====

Examples
Assuming Redemption at Assuming no
End of Period Redemption
Class A Class B Class C Class B Class C
After 1 Year $56 $66 $26 $16 $16
After 3 Years $73 $80 $50 $50 $50
- ---------------

FINANCIAL HIGHLIGHTS

As of the date of this Prospectus the Fund had not commenced
operations. Consequently, no financial highlights are currently available.

DESCRIPTION OF THE FUND

Investment Objective and Policies

The Fund seeks the highest possible current income, exempt from federal
income taxes, while preserving capital.

<PAGE>

Since the Fund considers preservation of capital as well as the level
of tax exempt income, the Fund may realize less income than a fund willing to
expose shareholders' capital to greater risk.

The Fund's investment objective is nonfundamental; as a result the Fund
may change its objective without a shareholder vote. The Fund has also adopted
certain fundamental investment policies which are mainly designed to limit the
Fund's exposure to risk. The Fund's fundamental policies cannot be changed
without a shareholder vote. See the Statement of Additional Information ("SAI")
for more information regarding the Fund's fundamental investment policies or
other related investment policies. There can be no assurance that the Fund's
investment objective will be achieved.

Principal Investments and Investment Policies. Under ordinary circumstances, the
Fund invests substantially all and at least 80% of its assets in federally
tax-exempt obligations. These obligations include municipal bonds and notes and
tax-exempt commercial paper obligations that are issued by or on behalf of the
states, territories and possessions of the United States ("U.S."), the District
of Columbia and their political subdivisions, agencies and instrumentalities,
the interest from which is, in the opinion of counsel to the issuers, exempt
from federal income taxes including the alternative minimum tax.

The Fund will invest at least 80% of its assets in bonds that, at the
date of investment, are rated within the four highest categories by Standard and
Poor's Ratings Group

<PAGE>

("S&P") (AAA, AA, A and BBB), by Moody's Investors Service ("Moody's") (Aaa, Aa,
A and Baa), by Fitch Investors Services, L.P. ("Fitch") (AAA, AA, A and BBB) or,
if not rated or rated under a different system, are of comparable quality to
obligations so rated as determined by another nationally recognized statistical
ratings organization or by the Fund's investment adviser. The Fund may invest
the remaining 20% of its assets in lower rated bonds, but will not invest in
bonds rated below B. If S&P, Moody's or Fitch changes its ratings system, the
Fund will try to use comparable ratings as standards according to the Fund's
investment objective and policies.

Other Eligible Securities. The Fund also may invest in securities that pay
interest that is not exempt from federal income taxes, such as corporate and
bank obligations, obligations issued or guaranteed by the U.S. government or by
any of its agencies or instrumentalities, commercial paper and repurchase
agreements. Such securities must be rated at least BBB by S&P or Baa by Moody's
or, if not rated, must be determined by the Fund's investment adviser to be of
comparable quality. The Fund will not invest more than 20% of its total assets
under ordinary circumstances and up to 100% of its total assets for temporary or
defensive purposes in such securities.

In addition, the Fund may, but does not currently intend to, invest in
foreign securities or securities denominated in foreign currencies.

In addition to the investment policies detailed above, the Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions."

Investment Practices and Restrictions

Risk Factors. Bond prices move inversely to interest rates, i.e., as interest
rates decline the values of the bonds increase, and vice versa. The longer the
maturity of a bond, the greater the exposure to market price fluctuations. The
same market factors are reflected in the share price or net asset value of bond
funds which will vary with interest rates. In addition, certain of the
obligations in which the Fund may invest may be variable or floating rate
instruments, which may involve a conditional or unconditional demand feature,
and may include variable amount master demand notes. While these types of
instruments may, to a certain degree, offset the risk to principal associated
with rising interest rates, they would

<PAGE>

not be expected to appreciate in a falling interest rate
environment.

Repurchase Agreements. The Fund may invest in repurchase agreements. A
repurchase agreement is an agreement by which the Fund purchases a security
(usually U.S. government securities) for cash and obtains a simultaneous
commitment

<PAGE>

from the seller (usually a bank or broker/dealer) to repurchase the security at
an agreed-upon price and specified future date. The repurchase price reflects an
agreed-upon interest rate for the time period of the agreement. The Fund's risk
is the inability of the seller to pay the agreed-upon price on the delivery
date. However, this risk is tempered by the ability of the Fund to sell the
security in the open market in the case of a default. In such a case, the Fund
may incur costs in disposing of the security which would increase Fund expenses.
The Fund's investment adviser will monitor the creditworthiness of the firms
with which the Fund enters into repurchase agreements.

When-Issued, Delayed-Delivery and Forward Commitment Transactions. The Fund may
enter into transactions whereby it commits to buying a security, but does not
pay for or take delivery of the security until some specified date in the
future. The value of these securities is subject to market fluctuations during
this period and no income accrues to the Fund until settlement. At the time of
settlement, a when- issued security may be valued at less than its purchase
price. When entering into these transactions, the Fund relies on the other party
to consummate the transaction; if the other party fails to do so, the Fund may
be disadvantaged.

Securities Lending. To generate income and offset expenses, the Fund may lend
securities to broker-dealers and other financial institutions. Loans of
securities by the Fund may not exceed 30% of the value of the Fund's total
assets. While securities are on loan, the borrower will pay the Fund any income
accruing on the security. Also, the Fund may invest any collateral it receives
in additional securities. Gains or losses in the market value of a lent security
will affect the Fund and its shareholders. When the Fund lends its securities,
it runs the risk that it could not retrieve the securities on a timely basis
possibly losing the opportunity to sell the securities at a desirable price.
Also, if the borrower files for bankruptcy or becomes insolvent, the Fund's
ability to dispose of the securities may be delayed.

<PAGE>

Illiquid Securities. The Fund may invest up to 15% of its net assets in illiquid
securities and other securities which are not readily marketable. Repurchase
agreements with maturities longer than seven days will be included for the
purpose of the foregoing 15% limit. Securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, which have been determined to be
liquid, will not be considered by the Fund's investment adviser to be illiquid
or not readily marketable and, therefore, are not subject to the aforementioned
15% limit. The inability of the Fund to dispose of illiquid investments readily
or at a reasonable price could impair the Fund's ability to raise cash for
redemptions or other purposes. The liquidity of securities purchased by the Fund
which are eligible for resale pursuant to Rule 144A will be monitored by the
Fund's investment adviser on an ongoing basis, subject to the oversight of the
Board of Trustees. In the event that such a security is deemed to be no longer
liquid, the Fund's holdings will be reviewed to determine what action, if any,
is required to ensure that the retention of such security does not result in the
Fund having more than 15% of its net assets invested in illiquid or not readily
marketable securities.

Options and Futures. The Fund may engage in options and futures transactions.
Options and futures transactions are intended to enable the Fund to manage
market, interest rate or exchange rate risk, and the Fund does not use these
transactions for speculation or leverage.

<PAGE>

securities to attempt to increase its current income. The Fund will maintain its
positions in securities, option rights, and segregated cash subject to puts and
calls until the options are exercised, closed, or have expired. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series.

The Fund may write (i.e., sell) covered call and put options. By
writing a call option, the Fund becomes obligated during the term of the option
to deliver the securities underlying the option upon payment of the exercise
price. By writing a put option, the Fund becomes obligated during the term of
the option to purchase the securities underlying the option at the exercise
price if the option is exercised. The Fund also may write straddles
(combinations of covered puts and calls on the same underlying security). The
Fund may only write "covered" options. This means that so long as the Fund is
obligated as the writer of a call option, it will own the underlying securities
subject to the option or, in the case of call options on U.S. Treasury bills,
the Fund might own substantially similar U.S. Treasury bills. The Fund will be
considered "covered" with respect to a put option it writes if, so long as it is
obligated as the writer of the put option, it deposits and maintains with its
custodian in a segregated account liquid assets having a value equal to or
greater than the exercise price of the option.

<PAGE>

protect itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period. The Fund
would agree to purchase securities in the future at a predetermined price (i.e.,
"go long") to hedge against a decline in market interest rates.

The Fund may also enter into currency and other financial futures
contracts and write options on such contracts. The Fund intends to enter into
such contracts and related options for hedging purposes. The Fund will enter
into futures on securities, currencies, or index-based futures contracts in
order to hedge against changes in interest or exchange rates or securities
prices. A futures contract on securities or currencies is an agreement to buy or
sell securities or currencies during a designated month at whatever price exists
at that time. A futures contract on a securities index does not involve the
actual delivery of securities, but merely requires the payment of a cash
settlement based on changes in the securities index. The Fund does not make
payment or deliver securities upon entering into a futures contract. Instead, it
puts down a margin deposit, which is adjusted to reflect changes in the value of
the contract and which remains in effect until the contract is terminated.

The Fund may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by the Fund, the profit on the
contract will tend to rise when the value of the underlying securities or
currencies declines and to fall when the value of such securities or currencies
increases. Thus, the Fund sells futures contracts in order to offset a possible
decline in the profit on its securities or currencies. If a futures contract is
purchased by the Fund, the value of the contract will tend to rise when the
value of the underlying securities or currencies increases and to fall when the
value of such securities or currencies declines.

<PAGE>

case the Fund would continue to bear market risk on the
transaction.

Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Fund to manage market, exchange, or
interest rate risks, these investment devices can be highly volatile, and the
Fund's use of them can result in poorer performance (i.e., the Fund's returns
may be reduced). The Fund's attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Fund uses financial futures contracts and
options on financial futures contracts as hedging devices, there is a risk that
the prices of the securities subject to the financial futures contracts and
options on financial futures contracts may not correlate perfectly with the
prices of the securities in the Fund's portfolio. This may cause the financial
futures contract and any related options to react to market changes differently
than the portfolio securities. In addition, the Fund's investment adviser could
be incorrect in its expectations and forecasts about the direction or extent of
market factors, such as interest rates, securities price movements, and other
economic factors. Even if the Fund's investment adviser correctly predicts
interest rate movements, a hedge could be unsuccessful if changes in the value
of the Fund's futures position did not correspond to changes in the value of its
investments. In these events, the Fund may lose money on the financial futures
contracts or the options on financial futures contracts. It is not certain that
a secondary market for positions in financial futures contracts or for options
on financial futures contracts will exist at all times. Although the Fund's
investment adviser will consider liquidity before entering into financial
futures contracts or options on financial futures contracts transactions, there
is no assurance that a liquid secondary market on an exchange will exist for any
particular financial futures contract or option on a financial futures contract
at any particular time. The Fund's ability to establish and close out financial
futures contracts and options on financial futures contract positions depends on
this secondary market. If the Fund is unable to close out its position due to
disruptions in the market or lack of liquidity, the Fund may lose money on the
futures contract or option, and the losses to the Fund could be significant.

Derivatives. Derivatives are financial contracts whose value is based on an
underlying asset, such as a stock or a bond, or

<PAGE>

an underlying economic factor, such as an index or an interest
rate.

In addition to options and futures contracts, the Fund may also invest
in certain other types of derivative instruments, including structured
securities. The Fund may invest in derivatives only if the expected risks and
rewards are consistent with its objective and policies.

ORGANIZATION AND SERVICE PROVIDERS

Organization

Fund Structure. The Fund is an investment pool, which invests shareholders'
money towards a specified goal. In technical terms, the Fund is a diversified
series of an open-end, management investment company, called "Evergreen
Municipal Trust" (the "Trust"). The Trust is a Delaware business trust organized
on September 17, 1997.

<PAGE>

communicating with one another for the purpose of convening a meeting to elect
Trustees. If any matters are to be voted on by shareholders, each share owned as
of the record date for the meeting would be entitled to one vote for each dollar
of net asset value applicable to each share.

Service Providers

Investment Adviser. The investment adviser to the Fund is Keystone Investment
Management Company ("Keystone"). Keystone has provided investment advisory and
management services to investment companies and private accounts since it was
organized in 1932. Keystone is an indirect subsidiary of First Union National
Bank ("FUNB"). FUNB is a subsidiary of First Union Corporation. Both FUNB and
First Union Corporation are located at 201 South College Street, Charlotte,
North Carolina 28288-0630. First Union Corporation and its subsidiaries provide
a broad range of financial services to individuals and businesses throughout the
United States.

The Fund pays Keystone a fee, calculated on an annual basis, equal to
2.0% of gross dividend and interest income of the Fund plus 0.50% of the first
$100,000,000 of the aggregate net asset value of the shares of the Fund, plus
0.45% of the next $100,000,000, plus 0.40% of the next $100,000,000, plus 0.35%
of the next $100,000,000, plus 0.30% of the next $100,000,000, plus 0.25% of
amounts over $500,000,000, computed as of the close of business each business
day and paid monthly.

Portfolio Manager

The Portfolio Manager of the Fund is Betsy A. Hutchings, a Keystone Senior
Vice President since 1995 and Senior Portfolio Manager since 1993. Ms. Hutchings
joined Keystone in 1988 and has served as a portfolio manager since 1990.

Administrator

<PAGE>

Administration Fee

0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion

Sub-administrator

Sub-Administration Fee

0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% on assets in excess of $25 billion

Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827 acts as the Fund's custodian.

Principal Underwriter. Evergreen Distributor, Inc. ("EDI"), a subsidiary of The
BISYS Group, Inc., located at 125 West 55th Street, New York, New York 10019, is
the principal underwriter of the Fund.

Distribution Plans and Agreements

<PAGE>

"Plans"). Under the Plans, the Fund may incur distribution- related and
shareholder servicing-related expenses which are based upon a maximum annual
rate as a percentage of the Fund's average daily net assets attributable to the
Class, as follows:

Class A shares 0.75% (currently limited to 0.25%)
Class B shares 1.00%
Class C shares 1.00%

Class A shares 0.25%
Class B shares 1.00%
Class C shares 1.00%

In the event the Fund acquires the assets of other mutual funds,
compensation paid to EDI under the Distribution

<PAGE>

Agreements may be paid by EDI to the distributors of the acquired funds.

PURCHASE AND REDEMPTION OF SHARES

How to Buy Shares

There is no minimum amount for subsequent investments. Investments of
$25 or more are allowed under the Systematic Investment Plan. See the
Application for more information.

Initial Sales Charge

<PAGE>

Amount of Purchase As a % As a % Commission
of the of the to
Net Offering Dealer/Agent
Amount Price as a % of
Invested Offering
Price
Less than $50,000 4.99% 4.75% 4.25%
$50,000 - $99,999 4.71% 4.50% 4.25%
$100,000 - $249,999 3.90% 3.75% 3.25%
$250,000 - $499,999 2.56% 2.50% 2.00%
$500,000 - $999,999 2.04% 2.00% 1.75%
$1,000,000 or more None None 1.00% of the
amount
invested up
to
$2,999,999;
.50% of the
amount
invested
over
$2,999,999,
up to
$4,999,999;
and .25% of
the excess
over
$4,999,999

<PAGE>

Evergreen Investment Trust in existence on that date, and the members of their
immediate families; (f) current and retired employees of FUNB and its
affiliates, EDI and any broker-dealer with whom EDI has entered into an
agreement to sell shares of the Fund, and members of the immediate families of
such employees; (g) and upon the initial purchase of an Evergreen fund by
investors reinvesting the proceeds from a redemption within the preceding thirty
days of shares of other mutual funds, provided such shares were initially
purchased with a front-end sales charge or subject to a CDSC. Certain
broker-dealers or other financial institutions may impose a fee on transactions
in shares of the Fund.

When Class A shares are sold, EDI will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EDI may also pay fees to
banks from sales charges for services performed on behalf of the customers of
such banks in connection with the purchase of shares of the Fund. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to 0.25% of the average
daily net asset value on an annual basis of Class A shares held by their
clients. Certain purchases of Class A shares may qualify for reduced sales
charges in accordance with the Fund's Concurrent Purchases, Rights of
Accumulation, Letter of Intent, certain Retirement Plans and Reinstatement
Privilege. Consult the Application for additional information concerning these
reduced sales charges.

<PAGE>

the current net asset value or original cost) will vary according to the number
of years from the month of purchase of Class B shares as set forth below.
CDSC
Redemption Timing Imposed

Month of purchase and the first twelve-month
period following the month of purchase...........................5.00%
Second twelve-month period following the
month of purchase................................................4.00%
Third twelve-month period following the
month of purchase................................................3.00%
Fourth twelve-month period following the
month of purchase................................................3.00%
Fifth twelve-month period following the
month of purchase................................................2.00%
Sixth twelve-month period following the
month of purchase................................................1.00%
No CDSC is imposed on amounts redeemed thereafter.

Class C Shares - Level-Load Alternative. Class C shares are only offered through
broker-dealers who have special distribution agreements with EDI. You may
purchase Class C

<PAGE>

shares at net asset value without any initial sales charge and, therefore, the
full amount of your investment will be used to purchase Fund shares. However,
you will pay a 1.00% CDSC if you redeem shares during the month of purchase and
the 12-month period following the month of purchase. No CDSC is imposed on
amounts redeemed thereafter. Class C shares incur higher distribution and/or
shareholder service fees than Class A shares but, unlike Class B shares, do not
convert to any other class of shares of the Fund. The higher fees mean a higher
expense ratio, so Class C shares pay correspondingly lower dividends and may
have a lower net asset value than Class A shares. The Fund will not normally
accept any purchase of Class C shares in the amount of $500,000 or more. No CDSC
will be imposed on Class C shares purchased by institutional investors and
through employee benefit and savings plans eligible for the exemption from
front-end sales charges described under "Class A Shares - Front-End Sales Charge
Alternative," above. Broker-dealers and other financial intermediaries whose
clients have purchased Class C shares may receive a trailing commission equal to
0.75% of the average daily net asset value of such shares on an annual basis
held by their clients more than one year from the date of purchase. The payment
of trailing commissions will commence immediately with respect to shares
eligible for exemption from the CDSC normally applicable to Class C shares.

Contingent Deferred Sales Charge. Shares obtained from dividend or distribution
reinvestment are not subject to a CDSC. Any CDSC imposed upon the redemption of
Class A, Class B or Class C shares is a percentage of the lesser of (1) the net
asset value of the shares redeemed or (2) the net asset value at the time of
purchase of such shares.

No CDSC is imposed on a redemption of shares of the Fund in the event
of: (1) death or disability of the shareholder; (2) a lump-sum distribution from
a 401(k) plan or other benefit plan qualified under the Employee Retirement
Income Security Act of 1974 ("ERISA"); (3) automatic withdrawals from ERISA
plans if the shareholder is at least 59 1/2 years old; (4) involuntary
redemptions of accounts having an aggregate net asset value of less than $1,000;
(5) automatic withdrawals under the Systematic Withdrawal Plan of up to 1.00%
per month of the shareholder's initial account balanced; (6) withdrawals
consisting of loan proceeds to a retirement plan participant; (7) financial
hardship withdrawals made by a retirement plan participant; or (8) withdrawals
consisting of returns of excess contributions or excess deferral amounts made to
a retirement plan participant.

<PAGE>

General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution and/or shareholder service fees, after seven
years. If you are unsure of the time period of your investment, you might
consider Class C shares since there are no initial sales charges and, although
there is no conversion feature, the CDSC only applies to redemptions made during
the first year after the month of purchase. Consult your financial intermediary
for further information. The compensation received by broker-dealers and agents
may differ depending on whether they sell Class A, Class B or Class C shares.
There is no size limit on purchases of Class A shares.

<PAGE>

dinners, sporting events or theater performances, or payment for travel, lodging
and entertainment incurred in connection with travel by persons associated with
a broker-dealer and their immediate family members to urban or resort locations
within or outside the United States. Such a dealer may elect to receive cash
incentives of equivalent amount in lieu of such payments. EDI may also limit the
availability of such incentives to certain specified dealers. EDI from time to
time sponsors promotions involving First Union Brokerage Services, Inc., an
affiliate of the Fund's investment adviser, and select broker-dealers, pursuant
to which incentives are paid, including gift certificates and payments in
amounts up to 1% of the dollar amount of shares of the Fund sold. Awards may
also be made based on the opening of a minimum number of accounts. Such
promotions are not being made available to all broker-dealers. Certain
broker-dealers may also receive payments from EDI or the Fund's investment
adviser over and above the usual trail commissions or shareholder servicing
payments applicable to a given Class of shares.

How to Redeem Shares

<PAGE>

recently purchased by check, the Fund will not send proceeds until it is
reasonably satisfied that the check has been collected (which may take up to 15
days). Once a redemption request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled.

<PAGE>

the procedures for redeeming by mail or through a broker-dealer as set forth
herein. The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
complete the appropriate sections on the Application and choose how the
redemption proceeds are to be paid. Redemption proceeds will either (1) be
mailed by check to the shareholder at the address in which the account is
registered or (2) be wired to an account with the same registration as the
shareholder's account in the Fund at a designated commercial bank.

<PAGE>

determine their value; or (4) the Securities and Exchange Commission ("SEC") so
orders. The Fund reserves the right to close an account that through redemption
has fallen below $1,000 and has remained so for 30 days. Shareholders will
receive 60 days' written notice to increase the account value to at least $1,000
before the account is closed. The Fund has elected to be governed by Rule 18f-1
under the 1940 Act pursuant to which the Fund is obligated to redeem shares
solely in cash, up to the lesser of $250,000 or 1% of the Fund's total net
assets, during any 90 day period for any one shareholder.

Exchange Privilege

<PAGE>

Shareholder Services

Systematic Investment Plan. Under a Systematic Investment Plan, you may invest
as little as $25 per month to purchase shares of the Fund with no minimum
initial investment required.

Systematic Withdrawal Plan. When an account of $10,000 or more is opened or when
an existing account reaches that size, you

<PAGE>

may participate in the Systematic Withdrawal Plan by filling out the appropriate
part of the Application. Under this Plan, you may receive (or designate a third
party to receive) a monthly or quarterly fixed-withdrawal payment in a stated
amount of at least $75 and as much as 1.0% per month or 3.0% per quarter of the
total net asset value of the Fund shares in your account when the Plan was
opened. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gains
distributions reinvested automatically.

<PAGE>

be redeemed from your initial account and invested in shares
of the designated fund.

Banking Laws

Changes to applicable laws and regulations or future judicial or
administrative decisions could result in FUNB or Keystone being prevented from
continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of
the Fund by its customers. If Keystone were prevented from continuing to provide
the services called for under the investment advisory agreement, it is expected
that the Trustees would identify, and call upon the Fund's shareholders to
approve, a new investment adviser. If this were to occur, it is not anticipated
that the shareholders of the Fund would suffer any adverse financial
consequences.

<PAGE>

OTHER INFORMATION

Dividends, Distributions and Taxes

Because Class A shares bear most of the costs of distribution of such
shares through payment of a front-end sales charge while Class B and, when
applicable, Class C shares bear such expenses through a higher annual
distribution fee, expenses attributable to Class B shares and Class C shares
will generally be higher than those of Class A shares, and income distributions
paid by the Fund with respect to Class A shares will generally be greater than
those paid with respect to Class B and Class C shares.

The Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"). While so qualified, it
is expected that the Fund will not be required to pay any federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Fund, to
the extent it does not meet certain distribution requirements by the end of each

<PAGE>

calendar year. The Fund anticipates meeting such distribution
requirements.

<PAGE>

of calculating gain or loss realized upon a sale or exchange
of shares of the Fund.

Shareholders who are subject to the alternative minimum tax may be
required to include all of the Fund's dividends in calculating the federal
individual alternative minimum tax.

General Information

Portfolio Turnover. The estimated annual portfolio turnover rate for the Fund is
not expected to exceed 100%. A portfolio turnover rate of 100% would occur if
all of the Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by the Fund directly affects the transaction costs
relating to the purchase and sale of securities which the Fund bears directly. A
high rate of portfolio turnover will increase such costs. See the SAI for
further information regarding the practices of the Fund affecting portfolio
turnover.

Portfolio Transactions. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc., and
subject to seeking best price and execution, the Fund may
consider sales of its shares as a factor in the selection of

<PAGE>

broker-dealers to enter into portfolio transactions with the
Fund.

Performance Information. From time to time, the Fund may quote its "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders. Total return and yield are computed separately
for Class A, Class B and Class C shares. The Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
SEC, the average annual compounded rate of return over the period that would
equate an assumed initial amount invested to the value of the investment at the
end of the period. For purposes of computing total return, dividends and capital
gains distributions paid on shares of the Fund are assumed to have been
reinvested when paid and the maximum sales charges applicable to purchases of
the Fund's shares are assumed to have been paid.

<PAGE>

rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve-month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be indicative of future results.

<PAGE>

Investment Adviser

Keystone Investment Management Company, 200 Berkeley Street,
Boston, Massachusetts 02116-5034

Custodian

State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827

Transfer Agent

Evergreen Service Company, P.O. Box 2121, Boston,
Massachusetts 02106-2121

Legal Counsel

Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W.,
Washington, D.C. 20036

Independent Auditors

KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts
02110

Distributor

Evergreen Distributor, Inc., 125 W. 55th Street, New York, New
York 10019

<PAGE>

10/3/97 DRAFT

EVERGREEN MUNICIPAL BOND FUNDS
200 BERKELEY STREET, BOSTON, MASSACHUSETTS
(800) 343-2898

STATEMENT OF ADDITIONAL INFORMATION DATED
NOVEMBER __, 1997 FOR THE FOLLOWING SERIES OF THE
EVERGREEN MUNICIPAL TRUST (THE "TRUST"):

EVERGREEN CONNECTICUT MUNICIPAL BOND FUND
EVERGREEN FLORIDA MUNICIPAL BOND FUND
EVERGREEN TAX FREE FUND
(EACH A "FUND", TOGETHER THE "FUNDS")

This statement of additional information ("SAI") provides additional
information about all classes of shares of the Funds listed above. It is not a
prospectus and you should read it in conjunction with the prospectus of the
Funds dated ________, 1997, as supplemented from time to time. You may obtain a
copy of the prospectus from the Funds' principal underwriter, Evergreen
Distributor, Inc.

22159
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<PAGE>

TABLE OF CONTENTS

INVESTMENT POLICIES.........................................................3
Investment Restrictions And Guidelines .........................9

MANAGEMENT OF THE TRUST....................................................11
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES........................13
INVESTMENT ADVISORY AND OTHER SERVICES.....................................13
Investment Advisory Services......................................13

Distribution Plan.................................................15

Additional Service Providers......................................16

BROKERAGE ALLOCATION AND OTHER PRACTICES...................................17
Selection of Brokers..............................................17

Brokerage Commissions.............................................17

General Brokerage Policies........................................17

ORGANIZATION...............................................................17
Form of Organization..............................................17

Description of Shares.............................................18

Voting Rights.....................................................18

Limitation of Trustees' Liability.................................18

PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED...............18
How the Funds Offer Shares to the Public..........................18

Sales Charge Waivers or Reductions................................20

Exchanges.........................................................21

How The Funds Value Shares....................................... 22

Shareholder Services..............................................22

PRINCIPAL UNDERWRITER......................................................23
CALCULATION OF PERFORMANCE DATA............................................23
ADDITIONAL INFORMATION.....................................................24
Other Information.................................................24

FINANCIAL STATEMENTS.......................................................24
ADDITIONAL TAX INFORMATION.................................................24
Requirements for qualification as a registered investment
company...........................................................24
Taxes on Dividends................................................25
Taxes on the Sale or Exchange of Fund Shares......................26
General...........................................................27
APPENDIX A................................................................A-1
State Economy....................................................A-1

State Budgetary Process..........................................A-1

State Debt.......................................................A-3

Litigation.......................................................A-4

Local Government Debt............................................A-5

APPENDIX B................................................................B-1

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<PAGE>

APPENDIX C................................................................C-1

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3

<PAGE>

INVESTMENT POLICIES

SECURITIES AND INVESTMENT PRACTICES

The investment objectives of the Funds and a description of the
securities in which the Funds may invest are set forth in the Funds' prospectus.
The following expands upon the discussion in the prospectus regarding certain
investments of the Fund.

MUNICIPAL BONDS

The Funds may invest in municipal bonds of any state, territory or
possession of the United States ("U.S."), including the District of Columbia.
The funds may also invest in municipal bonds of any political subdivision,
agency or instrumentality (e.g., counties, cities, towns, villages, districts,
authorities) of the U.S. or its possessions. Municipal bonds are debt
instruments issued by or for a state or local government to support its general
financial needs or to pay for special projects such as airports, bridges,
highways, public transit, schools, hospitals, housing and water and sewer works.
Municipal bonds may also may be issued to refinance public debt.

Municipal bonds are mainly divided between "general obligation" and
"revenue" bonds. General obligation bonds are backed by the full faith and
credit of governmental issuers with the power to tax. They are repaid from the
issuer's general revenues. Payment, however, may be dependent upon legislative
approval and may be subject to limitations on the issuer's taxing power.
Enforcement of payments due under general obligation bonds varies according to
the law applicable to the issuer. In contrast, revenue bonds are supported only
by the revenues generated by the project or facility.

The Funds may also invest in industrial development bonds. Such bonds
are usually revenue bonds issued to pay for facilities with a public purpose
operated by private corporations. The credit quality of industrial development
bonds is usually directly related to the credit standing of the owner or user of
the facilities. To qualify as a municipal bond, the interest paid on an
industrial development bond must qualify as fully exempt from federal income
tax. However, the interest paid on an industrial development bond may be subject
to the federal alternative minimum tax.

The yields on municipal bonds depend on such factors as market
conditions, the financial condition of the issuer and the issue's size, maturity
date and rating. Municipal bonds are rated by Standard & Poor's Ratings Group,
Moody's Investors Service and Fitch Investor Services, L.P. Such ratings,
however, are opinions, not absolute standards of quality. Municipal bonds with
the same maturity, interest rates and rating may have different yields, while
municipal bonds with the same maturity and interest rate, but different ratings,
may have the same yield. Once purchased by a fund, a municipal bond may cease to
be rated or receive a new rating below the minimum required for purchase by the
Fund. Neither event would require a Fund to sell the bond, but a Fund's
investment adviser would consider such events in determining whether a Fund
should continue to hold it.

The ability of a Fund to achieve its investment objective depends upon
the continuing ability of issuers of municipal bonds to pay interest and
principal when due. Municipal bonds are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors. Such
laws extend the time for payment of principal and/or interest, and may otherwise
restrict a Fund's ability to enforce its rights in the event of default. Since
there is generally less information available on the financial condition of
municipal bond issuers compared to other domestic issuers of securities, the
Fund's investment adviser may lack sufficient knowledge of an issue's
weaknesses. Other influences, such as litigation, may also materially affect the
ability of an issuer to pay principal and interest when due. In addition, the
market for municipal bonds is often thin and can be temporarily affected by
large purchases and sales, including those by the Fund.

From time to time, Congress has considered restricting or eliminating
the federal income tax exemption for interest on municipal bonds. Such actions
could materially affect the availability of municipal bonds and

22159
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<PAGE>

the value of those already owned by a Fund. If such legislation were passed,
each Fund's Board of Trustees may recommend changes in a Fund's investment
objectives and policies or dissolution of a Fund.

U.S GOVERNMENT SECURITIES

Each Fund may invest in securities issued or guaranteed by U.S.
government agencies or instrumentalities.

These securities are backed by (1) the discretionary authority of the
U.S. government to purchase certain obligations of agencies or instrumentalities
or (2) the credit of the agency or instrumentality issuing the obligations.

Some government agencies and instrumentalities may not receive
financial support from the U.S. Government. Examples of such agencies are:

(i) Farm Credit System, including the National Bank for
Cooperatives, Farm Credit Banks and Banks for Cooperatives;

(ii) Farmers Home Administration;

(iii) Federal Home Loan Banks;

(iv) Federal Home Loan Mortgage Corporation;

(v) Federal National Mortgage Association; and

(vi) Student Loan Marketing Association.

SECURITIES ISSUED BY THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")

The Funds may invest in securities issued by the GNMA, a corporation
wholly-owned by the U.S. Government. GNMA securities or "certificates" represent
ownership in a pool of underlying mortgages. The timely payment of principal and
interest due on these securities is guaranteed.

Unlike conventional bonds, the principal on GNMA certificates is not
paid at maturity but over the life of the security in scheduled monthly
payments. While mortgages pooled in a GNMA certificate may have maturities of up
to 30 years, the certificate itself will have a shorter average maturity and
less principal volatility than a comparable 30-year bond.

The market value and interest yield of GNMA certificates can vary due
not only to market fluctuations, but also to early prepayments of mortgages
within the pool. Since prepayment rates vary widely, it is impossible to
accurately predict the average maturity of a GNMA pool. In addition to the
guaranteed principal payments, GNMA certificates may also make unscheduled
principal payments resulting from prepayments on the underlying mortgages.

Although GNMA certificates may offer yields higher than those available
from other types of U.S. Government securities, they may be less effective as a
means of locking in attractive long-term rates because of the prepayment
feature. For instance, when interest rates decline, prepayments are likely to
increase as the holders of the underlying mortgages seek refinancing. As a
result, the value of a GNMA certificate is not likely to rise as much as the
value of a comparable debt security would in response to same decline. In
addition, these prepayments can cause the price of a GNMA certificate originally
purchased at a premium to decline in price compared to its par value, which may
result in a loss.

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5

<PAGE>

WHEN-ISSUED, DELAYED-DELIVERY AND FORWARD COMMITMENT TRANSACTIONS

The Funds may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis.
Settlement of such transactions normally occurs within a month or more after the
purchase or sale commitment is made.

The Funds may purchase securities under such conditions only with the
intention of actually acquiring them, but may enter into a separate agreement to
sell the securities before the settlement date. Since the value of securities
purchased may fluctuate prior to settlement, the fund may be required to pay
more at settlement than the security is worth. In addition, the purchaser is not
entitled to any of the interest earned prior to settlement.

Upon making a commitment to purchase a security on a when-issued,
delayed delivery or forward commitment basis, a Fund will hold, in a segregated
account, liquid assets worth at least the equivalent of the amount due. The
segregated account will be monitored on a daily basis and adjusted as necessary
to maintain the necessary value.

Purchases made under such conditions are a form of leveraging and may
involve the risk that yields secured at the time of commitment may be lower than
otherwise available by the time settlement takes place, causing an unrealized
loss to the fund. In addition, when a Fund engages in such purchases, it relies
on the other party to consummate the sale. If the other party fails to perform
its obligations, the fund may miss the opportunity to obtain a security at a
favorable price or yield.

LOANS OF SECURITIES

To generate income, each Fund may lend to broker-dealers and other
financial institutions portfolio securities valued at up to 30% of a Fund's
total assets. A Fund will require borrowers to provide collateral in cash or
government securities at least equal to the value of the securities loaned. A
Fund may invest such collateral in additional portfolio securities, such as U.S.
Treasury notes, certificates of deposit, other high-grade, short-term
obligations or interest-bearing cash equivalents. While securities are on loan,
the borrower will pay a Fund any income accruing on the security.

Each Fund may make loans only to borrowers which meet credit standards
set by the Board of Trustees. Income to be earned from the loan must justify the
attendant risks. If a borrower fails financially, a Fund may have difficulty
recovering the securities lent or may lose its right to the collateral.

Each Fund has the right to call a loan and obtain the securities lent
upon giving notice of not more than five business days.

REPURCHASE AGREEMENTS

The Funds may enter into repurchase agreements with entities that are
registered as U.S. government securities dealers, including member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. government securities or other financial institutions believed by the
Adviser (as defined later) to be creditworthy. In a repurchase agreement, a Fund
obtains a security and simultaneously commits to return the security to the
seller at a set price (including principal and interest) within period of time
usually not exceeding seven days. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security.

A Fund or its custodian will take possession of the securities subject
to repurchase agreements, and these securities will be marked to market daily.
To the extent that the original seller does not repurchase the securities from a
Fund, a Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. Each Fund's Adviser believes that under the regular
procedures normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements,

22159
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<PAGE>

a court of competent jurisdiction would rule in favor of the Fund and allow
retention or disposition of such securities. The Funds will only enter into
repurchase agreements with banks and other recognized financial institutions,
such as broker-dealers, which are deemed by the investment adviser to be
creditworthy pursuant to guidelines established by the Board of Trustees.

REVERSE REPURCHASE AGREEMENTS

As described herein, the Funds may also enter into reverse repurchase
agreements. These transactions are similar to borrowing cash. In a reverse
repurchase agreement, a Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon rate.

The use of reverse repurchase agreements may enable a Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.

When effecting reverse repurchase agreements, liquid assets of a Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.

OPTIONS

The Funds may buy or sell (i.e., write) put and call options on
securities it holds or intends to acquire. The funds may also buy and sell
options on financial futures contracts. The Funds will use options as a hedge
against decreases or increases in the value of securities it holds or intends to
acquire. The Funds may purchase put and call options for the purpose of
offsetting previously written put and call options of the same series.

The Funds may write only covered options. With regard to a call option,
this means that a Fund will own, for the life of the option, the securities
subject to the call option. Each Fund will cover put options by holding, in a
segregated account, liquid assets having a value equal to or greater than the
price of securities subject to the put option. If a Fund is unable to effect a
closing purchase transaction with respect to the covered options it has sold, it
will not be able to sell the underlying securities or dispose of assets held in
a segregated account until the options expire or are exercised.

The Funds will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the aggregate,
the value of the open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the unrealized gain or loss on
those open positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is exceeded at
any time, each Fund will take prompt action to close out a sufficient number of
open contracts to bring its open futures and options positions within this
limitation.

FUTURES TRANSACTIONS

Each Fund may enter into currency and other financial futures contracts
and write options on such contracts. Each Fund intends to enter into such
contracts and related options for hedging purposes. Each Fund will enter into
futures on securities or currencies or index-based futures contracts in order to
hedge against changes in interest or exchange rates or securities prices. A
futures contract on securities or currencies is an agreement to buy or sell
securities or currencies at a specified price during a designated month. A
futures contract on a securities index does not involve the actual delivery of
securities, but merely requires the payment of a cash settlement based on
changes in the securities index. A Fund does not make payment or deliver
securities upon entering into a futures contract. Instead, it puts down a margin
deposit, which is adjusted to reflect changes in the value of the contract and
which continues until the contract is terminated.

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Each Fund may sell or purchase futures contracts. When a futures
contract is sold by a Fund, the value of the contract will tend to rise when the
value of the underlying securities or currencies declines and to fall when the
value of such securities or currencies increases. Thus, each Fund sells futures
contracts in order to offset a possible decline in the value of its securities
or currencies. If a futures contract is purchased by a Fund, the value of the
contract will tend to rise when the value of the underlying securities or
currencies increases and to fall when the value of such securities or currencies
declines. Each Fund intends to purchase futures contracts in order to establish
what is believed by the Adviser to be a favorable price and rate of return for
securities or favorable exchange rate for currencies the Fund intends to
purchase.

Each Fund also intends to purchase put and call options on futures
contracts for hedging purposes. A put option purchased by a Fund would give it
the right to assume a position as the seller of a futures contract. A call
option purchased by a Fund would give it the right to assume a position as the
purchaser of a futures contract. The purchase of an option on a futures contract
requires a Fund to pay a premium. In exchange for the premium, a Fund becomes
entitled to exercise the benefits, if any, provided by the futures contract, but
is not required to take any action under the contract. If the option cannot be
exercised profitably before it expires, a Fund's loss will be limited to the
amount of the premium and any transaction costs.

Each Fund may enter into closing purchase and sale transactions in
order to terminate a futures contract and may sell put and call options for the
purpose of closing out its options positions. A Fund's ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that a Fund will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If a
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the contract and to complete
the contract according to its terms, in which case it would continue to bear
market risk on the transaction.

Although futures and options transactions are intended to enable a Fund
to manage market, interest rate or exchange rate risk, unanticipated changes in
interest rates, exchange rates or market prices could result in poorer
performance than if it had not entered into these transactions. Even if the
Adviser correctly predicts interest or exchange rate movements, a hedge could be
unsuccessful if changes in the value of a Fund's futures position did not
correspond to changes in the value of its investments. This lack of correlation
between a Fund's futures and securities or currencies positions may be caused by
differences between the futures and securities or currencies markets or by
differences between the securities or currencies underlying a Fund's futures
position and the securities or currencies held by or to be purchased for a Fund.
Keystone will attempt to minimize these risks through careful selection and
monitoring of the Fund's futures and options positions.

The Funds do not intend to use futures transactions for speculation or
leverage. Each Fund has the ability to write options on futures, but currently
intends to write such options only to close out options purchased by a Fund.
Each Fund will not change these policies without supplementing the information
in the prospectus and SAI.

"MARGIN" IN FUTURES TRANSACTIONS

Unlike the purchase or sale of a security, the Funds do not pay or
receive money upon the purchase or sale of a futures contract. Rather, each Fund
is required to deposit an amount of "initial margin" in cash or U.S. Treasury
bills with its custodian (or the broker, if legally permitted). The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract initial margin does not involve
the borrowing of funds by a Fund to finance the transactions. Initial margin is
in the nature of a performance bond or good faith deposit on the contract which
is returned to a Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.

A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day, a Fund pays or
receives cash, called "variation margin", equal to the daily change in value of
the futures contract. This process is known as "marking to market". Variation
margin does not represent a borrowing or loan by a Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net

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<PAGE>

asset value, a Fund will mark-to-market its open futures positions. The Funds
are also required to deposit and maintain margin when it writes call options on
futures contracts.

The Funds may not buy or sell futures contracts or related options if,
immediately thereafter, the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets.

INVESTMENT RESTRICTIONS AND GUIDELINES

FUNDAMENTAL POLICIES

The Funds have adopted the fundamental investment restrictions set
forth below which may not be changed without the vote of a majority of each
Fund's outstanding shares, as defined in the Investment Company Act of 1940 (the
"1940 Act"). Unless otherwise stated, all references to the assets of a Fund are
in terms of current market value.

DIVERSIFICATION

Each Fund other than Tax Free Fund may not make any investment that is
inconsistent with its classification as a nondiversified investment company
under the 1940 Act.

Tax Free Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.

CONCENTRATION

Each Fund may not invest more than 25% of its total assets, taken at
market value, in the securities of issuers primarily engaged in a particular
industry. This restriction does not apply to securities that are issued or
guaranteed by the United States government or its agencies or instrumentalities.

ISSUING SENIOR SECURITIES

Except as permitted under in the 1940 Act, each Fund may not issue
senior securities.

BORROWING

Each Fund may not borrow money, except to the extent permitted by
applicable law and the guidelines set forth in each Fund's prospectus and SAI,
as they may be amended from time to time.

UNDERWRITING SECURITIES ISSUED BY OTHER PERSONS

Each Fund may not underwrite securities issued by other persons, except
insofar as each Fund may be deemed to be an underwriter in connection with the
disposition of its portfolio securities.

REAL ESTATE

Each Fund may not buy or sell real estate, except that, to the extent
permitted by law, each Fund may invest in (a) securities that are directly or
indirectly secured by real estate, or (b) securities issued by companies that
invest in real estate.

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COMMODITIES

Each Fund may not purchase or sell physical commodities or contracts on
commodities, except that each Fund may engage in financial futures contacts and
related options and currency contracts and related options on such contracts and
may otherwise do so in accordance with applicable law and each Fund's prospectus
and SAI, and without registering as a commodity pool operator under the
Commodity Exchange Act.

LOANS TO OTHER PERSONS

Each Fund may lend its portfolio securities to the extent permitted by
applicable law and the guidelines set forth in its current prospectus and
statement of additional information. Otherwise, each Fund may not make loans to
other persons. Each Fund do not consider the acquistion of investment
instruments in accordance with each Fund's prospectus and statement of
additional information to be the making of a loan.

GUIDELINES

Unlike the Fundamental Policies above, the following guidelines may be
changed by each Fund's Board of Trustees without shareholder approval.

BORROWINGS

Each Fund may borrow from banks in an amount up to 33 1/3% of its total
assets, taken at market value. Each Fund may only borrow as a temporary measure
for extraordinary or emergency purposes such as the redemption of Fund shares.
Each Fund will not purchase securities while borrowings are outstanding except
to exercise prior commitments and to exercise subscription rights. (as defined
in the 1940 Act) or enter into reverse repurchase agreements, in amounts up to
33 1/3 % of its total assets (including the amount borrowed). Each Fund may
borrow up to an additional 5% of its total assets for temporary purposes.

CONCENTRATION

For purposes of the investment restriction on concentration, the phrase
"securities of issuers primarily engaged in any particular industry" includes
industrial development bonds from the same facility or similar types of
facitilies. Otherwise, each Fund may invest more than 25% of its assets in
industrial development bonds. Also, governmental issuers are not considered to
be members of an industry for concentration purposes.

ILLIQUID AND RESTRICTED SECURITIES

Each Fund may not invest more than 15% of its net assets in securities
that are Illiquid. A security is Illiquid when a Fund cannot dispose of it in
the ordinary course of business within seven days at approxiately the value at
which each Fund has the investment on its books.

Each Fund may invest in "restricted" securities, i.e., securities
subject to restrictions on resale under federal securities laws. Rule 144A under
the Securities Act of 1933 ("Rule 144A") allows certain restricted securities to
trade freely among qualified institutional investors. Since Rule 144A securities
may have limited markets, the Board of Trustees will determine whether such
securities should be considered illiquid for the purpose of determining a Fund's
compliance with the the limit on illiquid securities indicated above. In
determing the liquidity of Rule 144A securities, the Trustees will consider: (1)
the frequency of trades and quotes for the security; (2) the number of dealers
willing to purchase or sell the security and the number of other potential
buyers; (3) dealer undertakings to make a market in the security; and (4) the
nature of the security and the nature of the marketplace trades.

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INVESTMENT IN OTHER INVESTMENT COMPANIES

Each Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, each Fund may not (1) own more
than 3% of the outstanding voting stock of another investment company, (2)
invest more than 5% of its assets in any single investment compnay, and (3)
invest more than 10% of its assets in investment compnaies. However, each Fund
may invest all of its investable assets in securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as each Fund.

SHORT SALES

Each Fund may not make short sales of securities or maintain a short
position unless, at all times when a short position is open, it owns an equal
amount of such securities or of securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short.

MANAGEMENT OF THE TRUST

Set forth below are the Trustees and officers of the Trust and their
principal occupations and some of their affiliations over the last five years.
Unless otherwise indicated, the address for each Trustee and officer is 200
Berkeley Street, Boston, Massachusetts 02116. Each Trustee is also a Trustee of
each of the other Trusts in the Evergreen Fund complex.

<TABLE>
<CAPTION>
NAME AND DATE OF BIRTH POSITION WITH TRUST PRINCIPAL OCCUPATIONS FOR LAST FIVE YEARS
- ------------------------------- -------------------------- -------------------------------------------------------------
<S> <C> <C>
Laurence B. Ashkin Trustee Real estate developer and construction consultant;
(DOB: 2/2/28) President of Centrum Equities and Centrum
Properties, Inc.

Charles A. Austin III Trustee Investment Counselor to Appleton Partners, Inc.;
(DOB: 10/23/34) former Managing Director, Seaward Management
Corporation (investment advice).

K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the Finance
(DOB: 10/12/38) Committee, Cambridge College; Chairman Emeritus
and Director, American Institute of Food and
Wine; Chairman and President, Oldways Preservation
and Exchange Trust (education); former Chairman of
the Board, Director, and Executive Vice President,
The London Harness Company; former Managing Partner,
Roscommon Capital Corp.; former Chief Executive Officer,
Gifford Gifts of Fine Foods; former Chairman, Gifford,
Drescher & Associates (environmental consulting); former
Director, Keystone Investments, Inc.

James S. Howell Chairman of the Former Chairman of the Distribution Foundation for
(DOB: 8/13/24) Board of Trustees the Carolinas; former Vice President of Lance Inc.
(food manufacturing).

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<PAGE>

NAME AND DATE OF BIRTH POSITION WITH TRUST PRINCIPAL OCCUPATIONS FOR LAST FIVE YEARS
- ------------------------------- -------------------------- -------------------------------------------------------------
Leroy Keith, Jr. Trustee Director of Phoenis Total Return Fund and Equifax,
Inc.; Trustee of Phoenix Series Fund, Phoenix
(DOB: 2/14/39) Multi-Portfolio Fund, and The Phoenix Big Edge
Series Fund; and former President, Morehouse
College.

Gerald M. McDonnell Trustee Sales Representative with Nucor-Yamoto, Inc.
(DOB: 7/14/39) (steel producer).

Thomas L. McVerry Trustee Former Vice President and Director of Rexham
(DOB: 8/2/39) Corporation; and former Director of Carolina
Cooperative Federal Credit Union.

*William Walt Pettit Trustee Partner in the law firm of Holcomb and Pettit, P.A.
(DOB: 8/26/55)

David M. Richardson Trustee Vice Chair and former Executive Vice President,
(DOB: 9/14/41) DHR International, Inc. (executive recruitment);
former Senior Vice President, Boyden International
Inc. (executive recruitment); and Director,
Commerce and Industry Association of New
Jersey, 411 International, Inc., and J&M Cumming
Paper Co.

Russell A. Salton, III MD Trustee Medical Director, U.S. Health Care/Aetna Health
(DOB: 6/2/47) Services; and former Managed Health Care
Consultant; former President, Primary Physician
Care.

Michael S. Scofield Trustee Attorney, Law Offices of Michael S. Scofield.
(DOB: 2/20/43)

Richard J. Shima Trustee Chairman, Environmental Warranty, Inc. (insurance
(DOB: 8/11/39) agency); Executive Consultant, Drake Beam Morin,
Inc. (executive outplacement); Director of Connecticut
Natural Gas Corporation, Hartford Hospital, Old State
House Association, Middlesex Mutual Assurance Company,
and Enhance Financial Services, Inc.; Chairman, Board of
Trustees, Hartford Graduate Center; Trustee, Greater
Hartford YMCA; former Director, Vice Chairman and Chief
Investment Officer, The Travelers Corporation; former
Trustee, Kingswood-Oxford School; and former
Managing Director and Consultant, Russell Miller, Inc.

John J. Pileggi President and Senior Managing Director, Furman Selz LLC since
Treasurer 1992; Managing Director from 1984 to 1992;
Consultant to BISYS Fund Services since 1996;
230 Park Avenue, Suite 910, New York, NY.

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<PAGE>

NAME AND DATE OF BIRTH POSITION WITH TRUST PRINCIPAL OCCUPATIONS FOR LAST FIVE YEARS
- ------------------------------- -------------------------- -------------------------------------------------------------
George O. Martinez Secretary Senior Vice President and Director of
Administration and Regulatory Services, BISYS
Fund Services; Vice President/Assistant General
Counsel, Alliance Capital Management from 1988
to 1995; 3435 Stelzer Road, Columbus, Ohio.
</TABLE>

*This Trustee may be considered an interested trustee within the
meaning of the 1940 Act.

The officers of the Trust are all officers and/or employees of BISYS
Fund Services ("BISYS"), except for Mr. Pileggi, who is a consultant to BISYS.
For more information on BISYS, see "Sub-Administrator" below.

Listed below are the Trustees of the Trust who received more than
$60,000 in aggregate compensation from the Evergreen mutual fund complex during
the fiscal period May 1, 1996 through April 30, 1997. The table also lists the
the aggregate compensation received by each such Trustees.

Aggregate Compensation Received From Evergreen
Trustee Mutual Fund Complex
- --------------------------- -----------------------------------------------
James. S. Howell $76,875
Russell A. Salton, III MD $71,325
Michael S. Scofield $71,325

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of the date of this SAI, the officers and Trustees of the Trust
owned as a group less than 1% of the outstanding Class A, Class B, Class C or
Class Y shares of any Fund. As of the same date, no person, to any Fund's
knowledge, owned beneficially or of record more than 5% of a class of a Fund's
outstanding shares.

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISORY SERVICES

INVESTMENT ADVISERS

The investment adviser to each Fund (the "Adviser") is a subsidiary of
First Union Corporation. First Union Corporation is a bank holding company
headquartered 301 South College Street, Charlotte, North Carolina 28288. First
Union Corporation and its subsidiaries provide a broad range of financial
services to individuals and businesses throughout the United States.

The Adviser to EVERGREEN CONNECTICUT MUNICIPAL BOND FUND and EVERGREEN
FLORIDA MUNICIPAL BOND FUND is the Capital Management Group of First Union
National Bank, 201 South College Street, Charlotte, North Carolina 28288. As
compensation therefor, it is entitled to receive an annual fee equal to 0.50 of
1% of each Fund's average daily net assets up to $500 milion, 0.45 of 1% of the
next $500 million of assets, 0.40 of 1% of assets in excess of $1 billion but
not exceeding $1.5 billion, and 0.35 of 1% of assets in excess of $1.5 billion.

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<PAGE>

The Adviser to EVERGREEN TAX FREE FUND is Keystone Investment
Management Company, 200 Berkeley Street, Boston, Massachusetts 02116. Each Fund
pays Keystone a fee for its services at the annual rate set forth below:

Aggregate
Net Asset Value
Of the Shares
Management Fee Of the Fund
- ---------------------- -------------------------------------------------
0.55% of the first $ 50,000,000, plus

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<PAGE>

Aggregate
Aggregate
Net Asset Value
Net Asset Value
Of the Shares
Of the Shares
Management Fee Of the Fund
- --------------------------- ----------------------------------------
0.50% of the next $ 50,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of the next $100,000,000, plus
0.35% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $500,000,000.

The Adviser's fee is computed as of the close of business each business day and
payable monthly.

INVESTMENT ADVISORY CONTRACTS

On behalf of each if its Funds, the Trust has entered into an
investment advisory agreement with each Adviser (the "Advisory Agreements") .
Under the Advisory Agreements, and subject to the supervision of the Trust's
Board of Trustees, each Adviser furnishes to the appropriate Fund investment
advisory, management and administrative services, office facilities, and
equipment in connection with its services for managing the investment and
reinvestment of the Fund's assets. The Adviser pays for all of the expenses
incurred in connection with the provision of its services. Each Fund pays for
all charges and expenses, other than those specifically referred to as being
borne by the Adviser, including, but not limited to, (1) custodian charges and
expenses; (2) bookkeeping and auditors' charges and expenses; (3) transfer agent
charges and expenses; (4) fees and expenses of Independent Trustees; (5)
brokerage commissions, brokers' fees and expenses; (6) issue and transfer taxes;
(7) costs and expenses under the Distribution Plan (as applicable) (8) taxes and
trust fees payable to governmental agencies; (9) the cost of share certificates;
(10) fees and expenses of the registration and qualification of such Fund and
its shares with the Securities and Exchange Commission or under state or other
securities laws; (11) expenses of preparing, printing and mailing prospectuses,
statements of additional information, notices, reports and proxy materials to
shareholders of the Fund; (12) expenses of shareholders' and Trustees' meetings;
(13) charges and expenses of legal counsel for the Fund and for the Independent
Trustees of the Trust on matters relating to such Fund; (14) charges and
expenses of filing annual and other reports with the Securities and Exchange
Commission and other authorities; and all extraordinary charges and expenses of
such Fund.

The Advisory Agreement continues in effect for two years from its
effective date and, thereafter, from year to year only if approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of
each Fund's outstanding shares. In either case, the terms of the Advisory
Agreement and continuance thereof must be approved by the vote of a majority of
the Independent Trustees (Trustees who are not interested persons of a Fund, as
defined in the 1940 Act) cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreement may be terminated, without
penalty, on 60 days' written notice by the Trust's Board of Trustees or by a
vote of a majority of outstanding shares. The Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.

GENERAL

The Trust has adopted procedures pursuant to Rule 17a-7 of the 1940 Act
("Rule 17a-7 Procedures"). The Rule 17a-7 Procedures permit a Fund to buy or
sell securities from another investment company for which a subsidiary of First
Union Corporation is an investment adviser. The Rule 17a-7 Procedures also allow
the Funds to buy or sell securities from other advisory clients for whom a
subsidiary of First Union Corporation is an investment adviser. The Funds may
engage in such transaction if they are equitable to each participant and
consistent with each participant's investment objective.

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<PAGE>

DISTRIBUTION PLANS AND AGREEMENTS

Distribution fees are accrued daily and paid monthly on Class A, Class
B and Class C shares and are charged as class expenses, as accrued. The
distribution fees attributable to the Class B shares and Class C shares are
designed to permit an investor to purchase such shares through broker-dealers
without the assessment of a front-end sales charge, and, in the case of Class C
shares, without the assessment of a contingent deferred sales charge after the
first year following the month of purchase, while at the same time permitting
the Distributor to compensate broker-dealers in connection with the sale of such
shares. In this regard, the purpose and function of the combined contingent
deferred sales charge and distribution services fee on the Class B shares and
the Class C shares are the same as those of the front-end sales charge and
distribution fee with respect to the Class A shares in that in each case the
sales charge and/or distribution fee provide for the financing of the
distribution of the Fund's shares.

Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A, Class B and Class C shares (each a
"Plan" and collectively, the "Plans"), the Treasurer of each Fund reports the
amounts expended under the Plans and the purposes for which such expenditures
were made to the Trustees of the Trust for their review on a quarterly basis.
Also, each Plan provides that the selection and nomination of the disinterested
Trustees are committed to the discretion of such disinterested Trustees then in
office.

Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the SEC make payments for distribution
services to the Distributor; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.

Each Plan and Distribution Agreement will continue in effect for
successive twelve-month periods provided, however, that such continuance is
specifically approved at least annually by the Trustees of each Trust or by vote
of the holders of a majority of the outstanding voting securities of that Class
and, in either case, by a majority of the Independent Trustees of the Trust who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related thereto.

The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B and Class C
shares. The Plans are designed to (i) stimulate brokers to provide distribution
and administrative support services to each Fund and holders of Class A, Class B
and Class C shares and (ii) stimulate administrators to render administrative
support services to the Fund and holders of Class A, Class B and Class C shares.
The administrative services are provided by a representative who has knowledge
of the shareholder's particular circumstances and goals, and include, but are
not limited to providing office space, equipment, telephone facilities, and
various personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding Class
A, Class B and Class C shares; assisting clients in changing dividend options,
account designations, and addresses; and providing such other services as the
Fund reasonably requests for its Class A, Class B and Class C shares.

In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.

All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of the Trust or the holders of the Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the disinterested Trustees, cast in person at a meeting called

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<PAGE>

for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular Class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. Any Plan, Shareholder Services
Plan or Distribution Agreement may be terminated (i) by a Fund without penalty
at any time by a majority vote of the holders of the outstanding voting
securities of the Fund, voting separately by Class or by a majority vote of the
disinterested Trustees, or (ii) by the Distributor. To terminate any
Distribution Agreement, any party must give the other parties 60 days' written
notice; to terminate a Plan only, the Fund need give no notice to the
Distributor. Any Distribution Agreement will terminate automatically in the
event of its assignment.

ADDITIONAL SERVICE PROVIDERS

ADMINISTRATOR

Evergreen Investment Services, Inc. ("EIS") serves as administrator to
the Funds, subject to the supervision and control of the Trust's Board of
Trustees. EIS provides the Funds with facilities, equipment and personnel and is
entitled to receiive a fee based on the aggregate average daily net assets of
the Fund based on the total assets of all mutual funds advised by First Union
subsidiaries. The fee paid to EIS is calculated in accordance with the following
schedule: 0.50% on the first $7 billion; 0.035% on the next $3 billion; 0.030%
on the next $5 billion; 0.020% on the next $10 billion; 0.015% on the next $5
bilion and 0.010% on assets in excess of $30 billion.

SUB-ADMINISTRATOR

BISYS provides such personnel and certain administrative services to
the Funds pursuant to a sub- administrator agreement. For its services under
that agreement, BISYS receives a fee from EIS based on the aggregate average
daily net assets of the Fund at a rate based on the total assets of all mutual
funds for which First Union National Bank ("FUNB") affiliates serve as
investment adviser and BISYS serves as sub-administrator. The sub-administrator
fee is calculated in accordance with the following schedule: 0.0100% on the
first $7 billion; 0.0075% on the next $3 billion; 0.0050% on the next $15
billion; 0.0040% on assets in excess of $25 billion. BISYS is an affiliate of
Evergreen Distributor, Inc., the distributor of the Funds.

TRANSFER AGENT

Evergreen Service Company, a subsidiary of First Union Corporation, is
the Funds' transfer agent. Under an agreement with the Adviser, the transfer
agent issues and redeems shares, pays dividends and performs other duties in
connection with the maintenance of shareholder accounts. The transfer agent's
address is 200 Berkeley Street, Boston, Massachusetts 02116.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP audits each Fund's financial statement. The
auditor's address is 99 High Street, Boston, Massachusetts 02110.

CUSTODIAN

State Street Bank and Trust Company is the Funds' custodian. Under an
agreement with the Adviser, the bank keeps custody of each Fund's securities and
cash and performs other related duties. The custodian's address is 225 Franklin
Street, Boston, Massachusetts 02110.

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<PAGE>

LEGAL COUNSEL

Sullivan & Worcester LLP provides legal advice to the Funds. Its
address is 1025 Connecticut Avenue, N.W., Washington, D.C. 20036.

BROKERAGE ALLOCATION AND OTHER PRACTICES

SELECTION OF BROKERS

In effecting transactions in portfolio securities for each Fund, the
Adviser seeks the best execution of orders at the most favorable prices. The
Adviser determines whether a broker has provided each Fund with best execution
and price in the execution of a securities transaction by evaluating, among
other things, the broker's ability to execute large or potentially difficult
transactions, and the financial strength and stability of the broker.

BROKERAGE COMMISSIONS

The Fund expects to buy and sell their fixed-income securities through
principal transactions that is directly from the issuer or from an underwriter
or market maker for the securities. Generally, the Fund will not pay brokerage
commissions for such purchases. Usually, when a Fund buys a security from an
underwriter, the purchase price will include underwriting commission or
concession. The purchase price for securities bought from dealers serving as
market makers will similarly include the dealer's mark up or reflect a dealer's
mark down. When a Fund executes transactions in the over-the-counter market, it
will deal with primary market makers unless more favorable prices are otherwise
obtainable.

GENERAL BROKERAGE POLICIES

The Adviser makes investment decisions for each Fund independently from
those of its other clients. It may frequently develop, however, that the Adviser
will make the same investment decision for more than one client. Simultaneous
transactions are inevitable when the same security is suitable for the
investment objective of more than one account. When two or more of its clients
are engaged in the purchase or sale of the same security, the Adviser will
allocate the transactions according to a formula that is equitable to each of
its clients. Although, in some cases, this system could have a detrimental
effect on the price or volume of a Fund's securities, each Fund believes that in
other cases its ability to participate in volume transactions will produce
better executions. In order to take advantage of the availability of lower
purchase prices, the Funds may occasionally participate in group bidding for the
direct purchase from an issuer of certain securities.

The Board of Trustees periodically reviews each Fund's brokerage
policy. Because of the possibility of further regulatory developments affecting
the securities exchanges and brokerage practices generally, the Board of
Trustees may change, modify or eliminate any of the foregoing practices.

ORGANIZATION

FORM OF ORGANIZATION

Each Fund is a series of an open-end management investment company,
known as "EVERGREEN MUNICIPAL TRUST" (the "Trust"). The Trust was formed as a
Delaware business trust on September 17, 1997 (the "Declaration of Trust"). A
copy of the Declaration of Trust is on file as an exhibit to the Trust's
Registration Statement, of which this statement of additional information is a
part. This summary is qualified in its entirety by reference to the Declaration
of Trust.

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DESCRIPTION OF SHARES

The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and classes of shares. Each share of
each Fund represents an equal proportionate interest with each other share of
that series and/or class. Upon liquidation, shares are entitled to a pro rata
share of the Trust based on the relative net assets of each series and/or class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.

VOTING RIGHTS

Under the terms of the Declaration of Trust, the Trust is not required
to hold annual meetings. However, the Trust intends to hold meetings at least
annually. At meetings called for the initial election of Trustees or to consider
other matters, shares are entitled to one vote per share. Shares generally vote
together as one class on all matters. Classes of shares of each Fund have equal
voting rights. No amendment may be made to the Declaration of Trust that
adversely affects any class of shares without the approval of a majority of the
shares of that class. Shares have non-cumulative voting rights, which means that
the holders of more than 50% of the shares voting for the election of Trustees
can elect 100% of the Trustees to be elected at a meeting and, in such event,
the holders of the remaining 50% or less of the shares voting will not be able
to elect any Trustees.

After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time, the Trustees
then in office will call a shareholders' meeting for the election of Trustees.

LIMITATION OF TRUSTEES' LIABILITY

The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.

PURCHASE, REDEMPTION AND PRICING OF SHARES

HOW THE FUNDS OFFER SHARES TO THE PUBLIC

You may buy shares of a Fund through the Funds' distributor,
broker-dealers that have entered into special agreements with the Funds'
distributor or certain other financial institutions. Each Fund offers four
classes of shares that differ primarily with respect to sales charges and
distribution fees. Depending upon the class of shares, you will pay an initial
sales charge when you buy a Fund's shares, a contingent deferred sales charge (a
"CDSC") when you redeem a Fund's shares or no sales charges at all.

PURCHASE ALTERNATIVES

CLASS A SHARES

With certain exceptions, when you purchase Class A shares you will pay
a maximum sales charge of 4.75%. (The prospectus contains a complete table of
applicable sales charges and a discussion of sales charge reductions or waivers
that may apply to purchases.) If you purchase Class A shares in the amount

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of $1 million or more, without an initial sales charge, the Funds will charge a
CDSC of 1.00% if you redeem during the month of your purchase and the 12-month
period following the month of your purchase.
See "Calculation of Contingent Deferred Sales Charge" below.

CLASS B SHARES

The Funds offer Class B shares at net asset value (without a front-end
load). With certain exceptions, however, the Funds will charge a CDSC of 1.00%
on shares you redeem within 72 months after the month of your purchase. The
Funds will charge CDSCs at the following rate:

REDEMPTION TIMING CDSC RATE
Month of purchase and the first twelve-month
period following the month of purchase................5.00%
Second twelve-month
period following the month of purchase................4.00%
Third twelve-month
period following the month of purchase................3.00%
Fourth twelve-month
period following the month of purchase................3.00%
Fifth twelve-month
period following the month of purchase................2.00%
Sixth twelve-month
period following the month of purchase................1.00%
Thereafter.................................................0.00%

Class B shares that have been outstanding for seven years after the month of
purchase will automatically convert to Class A shares without imposition of a
front-end sales charge or exchange fee. (Conversion of Class B shares
represented by stock certificates will require the return of the stock
certificate to Evergreen Service Company (formerly Keystone Investor Resource
Center, Inc.) ("ESC"), the Funds' transfer and dividend disbursing agent.)

CLASS C SHARES

Class C shares are available only through broker-dealers who have
entered into special distribution agreements with the Underwriter. The Funds
offer Class C shares at net asset value (without an initial sales charge). With
certain exceptions, however, the Funds will charge a CDSC of 1.00% on shares you
redeem within 12-months after the month of your purchase. See "Contingent
Deferred Sales Charge" below.

CLASS Y SHARES

No CDSC is imposed on the redemption of Class Y shares. Class Y shares
are not offered to the general public and are available only to (1) persons who
at or prior to December 31, 1994 owned shares in a mutual fund advised by
Evergreen Asset Management Corp. ("Evergreen Asset"), (2) certain institutional
investors and (3) investment advisory clients of The Capital Management Group of
First Union National Bank, Evergreen Asset, Keystone, or their affiliates. Class
Y shares are offered at net asset value without a front-end or back-end sales
charge and do not bear any Rule 12b-1 distribution expenses.

CONTINGENT DEFERRED SALES CHARGE

The Funds charge a CDSC as reimbursement for certain expenses, such as
commissions or shareholder servicing fees, that it has incurred in connection
with the sale of its shares (see "Distribution

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Plan"). If imposed, the Funds deduct the CDSC from the redemption proceeds you
would otherwise receive. The CDSC is a percentage of the lesser of (1) the net
asset value of the shares at the time of redemption or (2) the shareholder's
original net cost for such shares. Upon request for redemption, to keep the CDSC
a shareholder must pay as low as possible, a Fund will first seek to redeem
shares not subject to the CDSC and/or shares held the longest, in that order.
The CDSC on any redemption is, to the extent permitted by the National
Association of Securities Dealers, Inc. ("NASD"), paid to the Principal
Underwriter or its predecessor.

SALES CHARGE WAIVERS OR REDUCTIONS

REDUCING CLASS A FRONT-END LOADS

With a larger purchase, there are several ways that you can combine
multiple purchases of Class A shares in Evergreen funds and take advantage of
lower sales charges.

COMBINED PURCHASES

You can reduce your sales charge by combining purchases of Class A
shares of multiple Evergreen funds. For example, if you invested $75,000 in each
of two different Evergreen funds, you would pay a sales charge based on a
$150,000 purchase (i.e., 3.75% of the offering price, rather than 4.75%).

RIGHTS OF ACCUMULATION

You can reduce your sales charge by adding the value of Class A shares
of Evergreen funds you already own to the amount of your next Class A
investment. For example, if you hold Class A shares valued at $99,999 and
purchase an additional $5,000, the sales charge for the $5,000 purchase would be
at the next lower sales charge of 3.75%, rather than 4.75%.

LETTER OF INTENT

You can, by completing the "Letter of Intent" section of the
application, purchase Class A shares over a 13-month period and receive the same
sales charge as if you had invested all the money at once. All purchases of
Class A shares of an Evergreen fund during the period will qualify as Letter of
Intent purchases.

SHARES THAT ARE NOT SUBJECT TO A SALES CHARGE OR CDSC

WAIVER OF SALES CHARGES

The Funds may sell their shares at net asset value without an initial
sales charge to:

1. purchases of shares in the amount of $1 million or more;

2. a corporate or certain other qualified retirement plan or a
non-qualified deferred compensation plan or a Title 1 tax
sheltered annuity or TSA plan sponsored by an organization
having 100 or more eligible employees (a "Qualifying Plan") or
a TSA plan sponsored by a public educational entity having
5,000 or more eligible employees (an "Educational TSA Plan");

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3. institutional investors, which may include bank trust
departments and registered investment advisers;

4. investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their
clients and who charge such clients a management, consulting,
advisory or other fee;

5. clients of investment advisers or financial planners who place
trades for their own accounts if the accounts are linked to
the master account of such investment advisers or financial
planners on the books of the broker-dealer through whom shares
are purchased;

6. institutional clients of broker-dealers, including retirement
and deferred compensation plans and the trusts used to fund
these plans, which place trades through an omnibus account
maintained with a Fund by the broker-dealer;

7. employees of FUN, its affiliates, Evergreen Distributor, Inc.,
any broker-dealer with whom Evergreen Distributor, Inc., has
entered into an agreement to sell shares of the Funds, and
members of the immediate families of such employees;

8. certain Directors, Trustees, officers and employees of the
Evergreen Funds, the Principal Underwriter or their affiliates
and to the immediate families of such persons; or

9. a bank or trust company in a single account in the name of
such bank or trust company as trustee if the initial
investment in or any Evergreen Fund made pursuant to this
waiver is at least $500,000 and any commission paid at the
time of such purchase is not more than 1% of the amount
invested.

With respect to items 8 and 9 above, each Fund will only sell shares to
these parties upon the purchasers written assurance that the purchase is for
their personal investment purposes only. Such purchasers may not resell the
securities except through redemption by the Fund. The Funds will not charge any
CDSC on redemptions by such purchasers.

WAIVER OF CDSCS

The Funds do not impose a CDSC when the shares you are redeeming
represent:

1. an increase in the share value above the net cost of such
shares;

2. certain shares for which the Fund did not pay a commission on
issuance, including shares acquired through reinvestment of
dividend income and capital gains distributions;

3. shares that are in the accounts of a shareholder who has died
or become disabled;

4. a lump-sum distribution from a 401(k) plan or other benefit
plan qualified under the Employee Retirement Income Security
Act of 1974 ("ERISA");

5. an automatic withdrawal from the ERISA plan of a shareholder
who is a least 59 1/2 years old;

6. shares in an account that we have closed because the account
has an aggregate net asset value of less than $1,000;

7. an automatic withdrawals under an Systematic Income Plan of up
to 1.0% per month of your initial account balance;

8. a withdrawal consisting of loan proceeds to a retirement plan
participant;

9. a financial hardship withdrawals made by a retirement plan
participant;

10. a withdrawal consisting of returns of excess contributions or
excess deferral amounts made to a retirement plan; or

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11. a redemption by an individual participant in a Qualifying Plan
that purchased Class C shares (this waiver is not available in
the event a Qualifying Plan, as a whole, redeems substantially
all of its assets).

EXCHANGES

Investors may exchange shares of a Fund for shares of the same class of
any other Evergreen fund, as described under the section entitled "Exchanges" in
a Fund's prospectus. Before you make an exchange, you should read the prospectus
of the Evergreen fund into which you want to exchange. Each Fund's Board of
Trustees reserves the right to discontinue, alter or limit the exchange
privilege at any time.

HOW THE FUNDS VALUE SHARES

HOW AND WHEN A FUND CALCULATES ITS NET ASSET VALUE PER SHARE ("NAV")

Each Fund computes its net asset value once daily on Monday through
Friday, as described in the Prospectus. A Fund will not compute its NAV on the
day the following legal holidays are observed: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.

The net asset value per share of each Fund is calculated by dividing
the value of a Fund's net assets attributable to that class by all of the shares
issued for that class.

HOW A FUND VALUES THE SECURITIES IT OWNS

Current values for a Fund's portfolio securities are determined as
follows:

(1) Securities that are traded on a national securities exchange or the
over-the-counter National Market System ("NMS") are valued on the basis
of the last sales price on the exchange where primarily traded or on
the NMS prior to the time of the valuation, provided that a sale has
occurred.

(2) Securities traded in the over-the-counter market, other than on
NMS, are valued at the mean of the bid and asked prices at the time of
valuation.

(3) Short-term investments maturing in more than sixty days for which
market quotations are readily available, are valued at current market
value.

(4) Short-term investments maturing in sixty days or less (including
all master demand notes) are valued at amortized cost (original
purchase cost as adjusted for amortization of premium or accretion of
discount), which, when combined with accrued interest, approximates
market.

(5) short-term investments maturing in more than sixty days when
purchased that are held on the sixtieth day prior to maturity are
valued at amortized cost (market value on the sixtieth day adjusted for
amortization of premium or accretion of discount), which, when combined
with accrued interest, approximates market.

(6) Securities, including restricted securities, for which complete
quotations are not readily available; listed securities or those on NMS
if, in the Fund's opinion, the last sales price does not reflect a
current market value or if no sale occurred; and other assets are
valued at prices deemed in good faith to be fair under procedures
established by the Board of Trustees.

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SHAREHOLDER SERVICES

As described in the prospectus, a shareholder may elect to receive
their dividends and capital grains distributions in cash instead of shares.
However, Evergreen Service Company, the Funds' transfer agent, will
automatically convert a shareholder's distribution option so that the
shareholder reinvests all dividends and distributions in additional shares when
it learns that the postal or other delivery service is unable to deliver checks
or transaction confirmations to the shareholder's address of record. The Funds
will hold the returned distribution or redemption proceeds in a non
interest-bearing account in the shareholder's name until the shareholder updates
their address. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.

PRINCIPAL UNDERWRITER

Evergreen Distributor, Inc., 125 W. 55th Street, New York, New York
10019 is the principal underwriter for the Trust and with respect to each class
of each Fund. The Trust has entered into a Principal Underwriting Agreement (
"Underwriting Agreement") with the Distributor with respect to each class of
each Fund. The Distributor is a subsidiary of The BISYS Group, Inc.

The Distributor, as agent, has agreed to use its best efforts to find
purchasers for the shares. The Distributor may retain and employ representatives
to promote distribution of the shares and may obtain orders from broker-dealers,
and others, acting as principals, for sales of shares to them. The Underwriting
Agreement provides that the Distributor will bear the expense of preparing,
printing, and distributing advertising and sales literature and prospectuses
used by it.

All subscriptions and sales of shares by the Distributor are at the
public offering price of the shares, which is determined in accordance with the
provisions of the Trust's Declaration of Trust, By-Laws, current prospectuses
and statement of additional information. All orders are subject to acceptance by
the Trust and the Trust reserves the right, in its sole discretion, to reject
any order received. Under the Underwriting Agreement, the Trust is not liable to
anyone for failure to accept any order.

The Distributor has agreed that it will, in all respects, duly conform
with all state and federal laws applicable to the sale of the shares. The
Distributor has also agreed that it will indemnify and hold harmless the Trust
and each person who has been, is, or may be a Trustee or officer of the Trust
against expenses reasonably incurred by any of them in connection with any
claim, action, suit, or proceeding to which any of them may be a party that
arises out of or is alleged to arise out of any misrepresentation or omission to
state a material fact on the part of the Distributor or any other person for
whose acts the Distributor is responsible or is alleged to be responsible,
unless such misrepresentation or omission was made in reliance upon written
information furnished by the Trust.

The Underwriting Agreement provides that it will remain in effect as
long as its terms and continuance are approved annually (i) by a vote of a
majority of the Trust's Independent Trustees, and (ii) by vote of a majority of
the Trust's Trustees, in each case, cast in person at a meeting called for that
purpose.

The Underwriting Agreement may be terminated, without penalty, on 60
days' written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its "assignment," as that term is defined in the
1940 Act.

From time to time, if, in the Distributor's judgment, it could benefit
the sales of shares, the Distributor may provide to selected broker-dealers
promotional materials and selling aids, including, but not limited to, personal
computers, related software, and data files.

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CALCULATION OF PERFORMANCE DATA

Total return quotations for a class of shares of the Funds as they may
appear from time to time in advertisements are calculated by finding the average
annual compounded rates of return over one, five and ten year periods, or the
time periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. To the initial
investment all dividends and distributions are added, and all recurring fees
charged to all shareholder accounts are deducted. The ending redeemable value
assumes a complete redemption at the end of the relevant periods.

Current yield quotations as they may appear, from time to time, in
advertisements will consist of a quotation based on a 30-day period ended on the
date of the most recent balance sheet of a Fund, computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the base period.

Any given yield or total return quotation should not be considered
representative of a Fund's yield or total return for any future period.

ADDITIONAL INFORMATION

OTHER INFORMATION

Except as otherwise stated in its prospectus or required by law, each
Fund reserves the right to change the terms of the offer stated in its
prospectus without shareholder approval, including the right to impose or change
fees for services provided.

No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in a Fund's prospectus,
statement of additional information or in supplemental sales literature issued
by such Fund or the Distributor, and no person is entitled to rely on any
information or representation not contained therein.

Each Fund's prospectus and SAI omit certain information contained in
its registration statement. The Funds have filed this SAI with the Securities
and Exchange Commission and you may get a copy of the SAI by writing to the
Securities and Exchange Commission's principal office in Washington, D.C. To get
a copy of the SAI from the Securities and Exchange Commission, you will have to
pay the fee prescribed by their rules and regulations.

FINANCIAL STATEMENTS

Attached are the audited statement of assets and liabilities and the
reports thereon of KPMG Peat Marwick LLP for the Funds will be filed by
amendment.

ADDITIONAL TAX INFORMATION

REQUIREMENTS FOR QUALIFICATION AS A REGISTERED INVESTMENT COMPANY

Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to regulated investment companies ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). (Such qualification does not involve supervision of

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management or investment practices or policies by the Internal Revenue Service.)
In order to qualify as a regulated investment company, a Fund must, among other
things, (i) derive at least 90% of its gross income from dividends, interest,
payments with respect to proceeds from securities loans, gains from the sale or
other disposition of securities or foreign currencies and other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in such securities; (ii) derive less than
30% of its gross income from the sale or other disposition of securities,
options, futures or forward contracts (other than those on foreign currencies),
or foreign currencies (or options, futures or forward contracts thereon) that
are not directly related to the RIC's principal business of investing in
securities (or options and futures with respect thereto) held for less than
three months; and (iii) diversify its holdings so that, at the end of each
quarter of its taxable year, (a) at least 50% of the market value of the Fund's
total assets is represented by cash, U.S. government securities and other
securities limited in respect of any one issuer, to an amount not greater than
5% of the Fund's total assets and 10% of the outstanding voting securities of
such issuer, and (b) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. government
securities and securities of other regulated investment companies). By so
qualifying, a Fund is not subject to federal income tax if it timely distributes
its investment company taxable income and any net realized capital gains. A 4%
nondeductible excise tax will be imposed on a Fund to the extent it does not
meet certain distribution requirements by the end of each calendar year. Each
Fund anticipates meeting such distribution requirements.

TAXES ON DIVIDENDS

Distributions will be taxable to shareholders whether made in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share of a Fund on the
reinvestment date.

To calculate ordinary income for federal income tax purposes,
shareholders must generally include dividends paid by the Fund from its
investment company taxable income (net investment income plus net realized
short-term capital gains, if any). Since none of a Fund's income will consist of
corporate dividends, no distributions will qualify for the 70% corporate
dividends received deduction.

From time to time, the Fund will distribute the excess of its net
long-term capital gains over its short-term capital loss to shareholders. For
federal tax purposes, shareholders must include such distributions when
calculating their long-term capital gains. Distributions of long-term capital
gains are taxable to a shareholder, no matter how long the shareholder has held
the shares.

Distributions by The Fund reduce its NAV. A distribution that reduces
the Fund's NAV below a shareholder's cost basis is taxable as described above,
although from an investment standpoint, it is a return of capital. In
particular, if a shareholder buys Fund shares just before the Fund makes a
distribution, when the Fund makes the distribution the shareholder will receive
what is in effect a return of capital. Nevertheless, the shareholder must pay
taxes on the distribution. Therefore, shareholders should carefully consider the
tax consequences of buying Fund shares just before a distribution.

All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her Federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.

If more than 50% of the value of a Fund's total assets at the end of a
fiscal year is represented by securities of foreign corporations and a Fund
elects to make foreign tax credits available to its shareholders, a shareholder
will be required to include in his gross income both cash dividends and the
amount a Fund advises him is his pro rata portion of income taxes withheld by
foreign governments from interest and dividends paid on a Fund's investments.
The shareholder will be entitled, however, to take the amount of such foreign
taxes withheld as a credit against his U.S. income tax, or to treat the foreign
tax withheld as an itemized deduction from his gross income, if that should be
to his advantage. In substance, this policy enables the shareholder to benefit
from the same foreign tax credit or deduction that he would have

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received if he had been the individual owner of foreign securities and had paid
foreign income tax on the income therefrom. As in the case of individuals
receiving income directly from foreign sources.

Each Fund expects that substantially all of its dividends will be
"exempt interest dividends," which should be treated as excludable from federal
gross income. In order to pay exempt interest dividends, at least 50% of the
value of the Fund's assets must consist of federally tax-exempt obligations at
the close of each quarter. An exempt interest dividend is any dividend or part
thereof (other than a capital gain dividend) paid by the Fund with respect to
its net federally excludable municipal obligation interest and designated as an
exempt interest dividend in a written notice mailed to each shareholder not
later than

60 days after the close of its taxable year. The percentage of the total
dividends paid by a Fund with respect to any taxable year that qualifies as
exempt interest dividends will be the same for all shareholders of the Fund
receiving dividends with respect to such year. If a shareholder receives an
exempt interest dividend with respect to any share and such share has been held
for six months or less, any loss on the sale or exchange of such share will be
disallowed to the extent of the exempt interest dividend amount.

Any shareholder of a Fund who may be a "substantial user" of a facility
financed with an issue of tax-exempt obligations or a "related person" to such a
user should consult his tax adviser concerning his qualification to receive
exempt interest dividends should the Fund hold obligations financing such
facility.

Under regulations to be promulgated, to the extent attributable to
interest paid on certain private activity bonds, a Fund's exempt interest
dividends, while otherwise tax-exempt, will be treated as a tax preference item
for alternative minimum tax purposes. Corporate shareholders should also be
aware that the receipt of exempt interest dividends could subject them to
alternative minimum tax under the provisions of Section 56(g) of the Code
(relating to "adjusted current earnings").

Under particularly unusual circumstances, such as when a Fund is in a
prolonged defensive investment position, it is possible that no portion of a
Fund's distributions of income to its shareholders for a fiscal year would be
exempt from federal income tax. The Trusts do not presently anticipate, however,
that such unusual circumstances will occur.

Each Fund intends to distribute its net capital gains as capital gains
dividends. Shareholders should treat such dividends as long-term capital gains.
Each Fund will designate capital gains distributions as such by a written notice
mailed to each shareholder no later than 60 days after the close of the Fund's
taxable year. If a shareholder receives a capital gain dividend and holds his
shares for six months or less, then any allowable loss on disposition of such
shares will be treated as a long-term capital loss to the extent of such capital
gain dividend.

Interest on indebtedness incurred or continued by shareholders to
purchase or carry shares of a Fund will not be deductible for federal income tax
purposes to the extent of the portion of the interest expense relating to exempt
interest dividends. Such portion is determined by multiplying the total amount
of interest paid or accrued on the indebtedness by a fraction, the numerator of
which is the exempt interest dividends received by a shareholder in his taxable
year and the denominator of which is the sum of the exempt interest dividends
and the taxable distributions out of the Fund's investment income and long-term
capital gains received by the shareholder.

TAXES ON THE SALE OR EXCHANGE OF FUND SHARES

Upon a sale or exchange of Fund shares, a shareholder will realize a
taxable gain or loss depending on his or her basis in the shares. A shareholder
must treat such gains or losses as a capital gain or loss if the shareholder
held the shares as capital assets. Also, a shareholder must treat as long-term
capital gains or losses any capital gains or losses on Fund shares held for more
than one year. Generally, the Code will not allow a shareholder to realize a
loss on shares he or she has sold or exchanges and replaced within a
sixty-one-day period beginning thirty days before and ending thirty days after
he or she sold or exchanged the shares. The Code will not allow a shareholder to
realize a loss on the sale of Fund shares held by the shareholder for six months
or less to the extent the shareholder received exempt interest dividends on such
shares. Moreover, the Code will treat the shareholder's loss as a

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long-term capital loss to the extent the shareholder received distributions of
net capital gains on such shares.

Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisers about the applicability of the backup withholding provisions.

GENERAL

The foregoing discussion relates solely to U.S. federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
domestic corporations, partnerships, trusts and estates). It does not reflect
the special tax consequences to certain taxpayers (e.g., banks, insurance
companies, tax exempt organizations and foreign persons). Shareholders are
encouraged to consult their own tax advisers regarding specific questions
relating to federal, state and local tax consequences of investing in shares of
a Fund. Each shareholder who is not a U.S. person should consult his or her tax
adviser regarding the U.S. and foreign tax consequences of ownership of shares
of a Fund, including the possibility that such a shareholder may be subject to a
U.S. withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.

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APPENDIX A

EVERGREEN CONNECTICUT TAX FREE FUND

As described in the prospectus, the Fund will generally invest in
Connecticut municipal obligations. The performance of the Fund is therefore
susceptible to political, economical and regulatory factors affecting the State
of Connecticut and governmental bodies within the State of Connecticut. The
information summarized below briefly describes some of the more significant
factors that could affect the performance of the Fund or the ability of the
obligors to pay debt service on certain of the securities. Such information is
derived from sources that are generally available to investors and is believed
to be accurate. It is based on information from official statements of issuers
located in the State of Connecticut as well as other publicly available
documents. The Fund has not independently verified any of the information
contained in such statements and documents.

STATE ECONOMY

GENERAL. Connecticut, the southernmost of the New England States, is
located on the northeast coast and is bordered by Long Island Sound, New York,
Massachusetts and Rhode Island. Connecticut is situated directly between the
financial centers of Boston and New York and is a highly developed and urbanized
state. One-third of the total population of the United States and approximately
60% of the Canadian population live within 500 miles of the State. The State's
population grew at a rate which exceeded the United States' rate of population
growth during the period 1940 to 1970, slowed substantially during the 1970s and
1980s, and declined in the years 1992, 1993 and 1994.

Connecticut's economic performance is measured by personal income which
has been and is expected to remain among the highest in the nation; gross state
product (the current market value of all final goods and services produced by
labor and property located within the State) which demonstrated stronger output
growth than the nation in general during the 1980s and a decline in the 1990s;
and employment which has declined overall since the mid-1980s as manufacturing
employment has declined and non-manufacturing employment has risen.

DEFENSE INDUSTRY. One important component of the manufacturing sector
in Connecticut is defense related business. Approximately one-quarter of
manufacturing establishments and total manufacturing employees in Connecticut
are involved in defense related businesses. Due to the scaling back of the
national defense budget in the past decade, spending on defense procurement as
well as outlays for personnel, research and development and construction has
been dramatically reduced. In fiscal year 1995, Connecticut received $2,718
million of prime contact awards. This accounted for 3.0% of national total
awards and ranked twelfth in total defense dollars awarded and fifth in per
capita dollars awarded among the 50 states. As measured by defense contract
awards as a percent of Gross State Product (GSP), awards to Connecticut based
firms has fallen to 2.5% of GSP in fiscal year 1995, down from over 12% of GSP
as recently as fiscal year 1982.

Similar to other states with a dependence on the defense budget, these
cuts not only negatively affect Connecticut's defense employment but also other
sectors that provide "support" activities to defense related businesses. These
budget cuts ultimately impact other industries in the manufacturing sector and
further extend to the nonmanufacturing sector such as grocery stores, gas
stations, and real estate, etc.

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STATE BUDGETARY PROCESS

BALANCED BUDGET REQUIREMENT. In November 1992, State electors approved
an amendment to the State Constitution providing that the amount of general
budget expenditures authorized for any fiscal year shall not exceed the
estimated amount of revenue for such fiscal year. This amendment also provides
for a cap on budget expenditures. The General Assembly is precluded from
authorizing an increase in general budget expenditures for any fiscal year above
the amount of general budget expenditures authorized for the previous fiscal
year by a percentage which exceeds the greater of the percentage increase in
personal income or the percentage increase in inflation, unless the Governor
declares an emergency or the existence of extraordinary circumstances and at
least three-fifths of the members of each house of the General Assembly vote to
exceed such limit for the purposes of such emergency or extraordinary
circumstances. The limitation on general budget expenditures does not include
expenditures for the payment of bonds, notes or other evidences of indebtedness.
There is no statutory or constitutional prohibition against bonding for general
budget expenditures.

BIENNIUM BUDGET. The State's fiscal year begins on July 1 and ends June
30. The Connecticut General Statutes require that the budgetary process be on a
biennium basis. The Governor is required to transmit a budget document in
February of each odd-numbered year setting forth the financial program for the
ensuing biennium with a separate budget for each of the two fiscal years and a
report which sets forth estimated revenues and expenditures for the three fiscal
years after the biennium to which the budget document relates. In each
even-numbered year, the Governor must prepare a report on the status of the
budget enacted in the previous year with any recommendations for adjustments and
revisions, and a report, with revisions, if any, which sets forth estimated
revenues and expenditures for the three fiscal years after the biennium in
progress.

LINE ITEM VETO. Under the State Constitution, the Governor has the
power to veto any line of any itemized appropriations bill while at the same
time approving the remainder of the bill. A statement identifying the items so
disapproved and explaining the reasons therefor must be transmitted with the
bill to the Secretary of the State and, when in session, the General Assembly.
The General Assembly may separately reconsider and re-pass such disapproved
appropriation items by a two-thirds vote of each house.

State General Fund

The State finances most of its operations through the General Fund.
However, certain State functions are financed through other State funds.

1995-96 OPERATIONS. The Comptroller's August 30, 1996 annual report
indicated a 1995-96 General Fund surplus of $250.0 million. This surplus was
primarily the result of higher than anticipated revenue collections of $274.1
million above original budget projections. The most significant contributor to
this increase was the personal income tax for which estimates were revised
upward by $182.4 million. The improved revenue results are offset somewhat by
Medicaid expenditures higher than appropriations, the cost of a negotiated
settlement in a lawsuit and additional expenditures required in the Department
of Children and Families to comply with a 1991 consent decree.

1996-97 OPERATIONS. The adopted budget for fiscal 1996-97 anticipated
General Fund revenues of $9,049.7 million and General Fund expenditures of
$9,049.4 million resulting in a projected surplus of $0.3 million.

The Comptroller's monthly report for the period ending June 30, 1997,
indicated a projected General Fund surplus of $255.3 million. This surplus is
primarily the result of revenue collections which exceeded the original
estimates adopted by the General Assembly by $516.8 million. Higher than
expected personal income tax collections combined with much lower than expected
refunds of taxes were responsible for $346.5 million of the revenue increase.
Expenditures for the fiscal year were also revised upward by $249.1 million, of
which $137.1 million were additional requirements of the current year with the
remainder used primarily to prepay certain other expenditures. For example, an
early retirement incentive package, offered as part of the upcoming biennial
budget, is anticipated to result in an increase in expenditures of $51.5 million
for payments to employees for accrued sick and vacation time. In addition,

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the appropriation for debt service was increased by $44 million and will be
utilized for debt service payments during the upcoming biennium. Medicaid
expenditures were also increased by $30.2 million by paying the June capitation
payment in fiscal year 1996-97 as opposed to fiscal year 1997-98.

No assurance can be given that the final year-end report of the
Comptroller will not indicate changes in the anticipated General Fund result.
Per legislative action, $166.7 million of the fiscal 1996-97 surplus will be
reserved for the final two payments of the state's Economic Recovery Notes. The
remaining unappropriated surplus will be deposited into the Budget Reserve Fund
pursuant to the Connecticut General Statutes, which contains a balance of $241
million prior to any transfer for fiscal year 1996-97.

ADOPTED BUDGET 1997-98 AND 1998-99. The Governor submitted his proposed
budget document to the legislature on February 13, 1997. Special Act 97-21,
adopted by the legislature on June 3, 1997 and signed by the Governor on June 6,
1997, as amended, made General Fund appropriations and set forth estimated
revenues for each of the 1997-98 and 1998-99 fiscal years, and constitutes the
adopted budget.

The adopted budget for fiscal 1997-98 anticipates General Fund revenues
of $9,342.4 million and General Fund expenditures of $9,342.2 million. For
fiscal 1998-99, the adopted budget anticipates General Fund revenues of $9,496.0
million and General Fund expenditures of $9,495.9 million. The adopted budget is
within the expenditure limits proscribed by the Constitution of the State of
Connecticut, $213.1 million below the cap in fiscal 1997-98 and $325.1 million
below the cap in fiscal 1998-99.

STATE DEBT

CONSTITUTIONAL PROVISIONS. The State has no constitutional limit on its
power to issue obligations or incur debt other than it may borrow only for
public purposes. There are no reported court decisions relating to State bonded
debt other than two cases validating the legislative determination of the public
purpose for improving employment opportunities and related activities. The State
Constitution has never required a public referendum on the question of incurring
debt. Therefore, the authorization and issuance of State debt, including the
purpose, amount and nature thereof, the method and manner of the incidence of
such debt, the maturity and terms of repayment thereof, and other related
matters are statutory.

TYPES OF STATE DEBT. Pursuant to various public and special acts the
State has authorized a variety of types of debt. These types fall generally into
the following categories: direct general obligation debt, which is payable from
the State's General Fund; special tax obligation debt, which is payable from
specified taxes and other funds which are maintained outside the State's General
Fund; and special obligation and revenue debt, which is payable from specified
revenues or other funds which are maintained outside the State's General Fund.
In addition, the State has a number of programs under which the State is
contingently liable on the debt of certain State quasi-public agencies and
political subdivisions.

STATUTORY AUTHORIZATION AND SECURITY PROVISIONS FOR STATE GENERAL
OBLIGATION DEBT. In general the State issues general obligation bonds pursuant
to specific statutory bond acts and Section 3-20 of the Connecticut General
Statues, the State general obligation bond procedure act. That act provides that
such bonds shall be general obligations of the State and that the full faith and
credit of the State of Connecticut are pledged for the payment of the principal
of an interest on such bonds as the same become due. Such act further provides
that, as a part of the contract of the State with the owners of such bonds,
appropriation of all amounts necessary for the punctual payment of such
principal and interest is made, and the Treasurer shall pay such principal and
interest as the same become due. As of August 1, 1997, there was legislatively
authorized general obligation bond indebtedness in the aggregate amount of
$11,104,515,000, of which $9,625,344,000 had been approved for issuance and
$8,649,420,000 had been issued. As of August 1, 1997, $6,297,760,000 was
outstanding.

There are no State Constitutional provisions precluding the exercise of
State power by statute to impose any taxes, including taxes on taxable property
in the State or on income, in order to pay debt service on bonded debt now or
thereafter incurred. The constitutional limit on increases in general fund
expenditures for any fiscal year does not include expenditures for the payment
of bonds, notes or other

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evidences of indebtedness. There are also no constitutional or statutory
provisions requiring or precluding the enactment of liens on or pledges of State
general fund revenues or taxes, or the establishment of priorities for payment
of debt service on the State's general obligation bonds. There are no express
statutory provisions establishing any priorities in favor of general obligation
bondholders over other valid claims against the State.

STATUTORY DEBT LIMIT. Section 3-21 of the Connecticut General Statutes
provides that no bonds, notes or other evidences of indebtedness for borrowed
money payable from General Fund tax receipts of the State shall be authorized by
the General Assembly except to the extent such authorization shall cause the
aggregate amount of (1) the total amount of bonds, notes or other evidences of
indebtedness payable from General Fund tax receipts authorized by the General
Assembly but which have not been issued and (2) the total amount of such
indebtedness which has been issued and remains outstanding, to exceed 1.6 times
the total estimated General Fund tax receipts of the State for the fiscal year
in which any such authorization will become effective, as estimated for such
fiscal year by the joint standing committee of the General Assembly having
cognizance of finance, revenue and bonding. However, in computing the aggregate
amount of indebtedness at any time, there shall be excluded or deducted revenue
anticipation notes having a maturity of one year or less, refunded indebtedness,
bond anticipation notes, borrowings payable solely from the revenues of a
particular project, the balances of debt retirement funds associated with
indebtedness subject to the debt limit as certified by the Treasurer, the amount
of federal grants certified by the Secretary of the Office of Policy and
Management as receivable to meet the principal of certain indebtedness, all
authorized and issued indebtedness to fund any budget deficits of the State for
any fiscal year ending on or before June 30, 1991, and all authorized debt to
fund the Connecticut Development Authority's tax increment bond program under
Section 32-285 of the Connecticut General Statutes. For purpose of the debt
limit statute, all bonds and notes issued or guaranteed by the State and payable
from General Fund tax receipts are counted against the limit, except for the
exclusions or deductions described above.

In accordance with Section 2-27b of the Connecticut General Statutes,
the Treasurer shall compute the aggregate amount of indebtedness as of January 1
and July 1 of each year and shall certify the results of such computation to the
Governor and the General Assembly. If the aggregate amount of indebtedness
reaches 90% of the statutory debt limit, the Governor shall review each bond act
for which no bonds, notes or other evidences of indebtedness have been issued,
and recommend to the General Assembly priorities for repealing authorizations
for remaining projects.

OBLIGATIONS OF OTHER STATE ISSUERS. The State conducts certain of its
operations through State funds other than the General Fund and pursuant to
legislation may issue debt secured by special taxes or revenues pledged to such
funds. In addition, there are a number of state agencies and instrumentalities
of the State that issue conduit revenue obligations payable from payments by
private borrowers. These entities are subject to various economic risks
uncertainties, and the credit quality of the securities issued by them may vary
considerably from the credit quality of obligations backed by the full faith and
credit of the State.

LITIGATION

The State, its officers and employees are defendants in numerous
lawsuits. The ultimate disposition and fiscal consequences of these lawsuits are
not presently determinable. In the cases described below the fiscal impact of an
adverse decision might be significant but is not determinable at this time. The
cases described in this section generally do not include any individual case
where the fiscal impact of an adverse judgment is expected to be less than $15
million, but adverse judgments in a number of such cases could, in the aggregate
and in certain circumstances, have a significant impact.

Connecticut Criminal Defense Lawyers Association v. Forst is an action
brought in 1989 in Federal Court alleging a pervasive campaign by the State and
various State Police officials of illegal electronic surveillance, wiretapping
and bugging for a number of years at Connecticut State Police facilities. The
plaintiffs seek compensatory damages, punitive damages, as well as other damages
and costs and attorneys fees, as well as temporary and permanent injunctive
relief. In November 1991, the court issued

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an order which will allow the plaintiffs to represent a class of all persons who
participated in wire or oral communications to, from, or within State Police
facilities between January 1, 1974 and November 9, 1989 and whose communications
were intercepted, recorded and/or used by the defendants in violation of the
law. This class includes a sub-class of the Connecticut State Police Union,
current and former Connecticut State Police officers who are not defendants in
this or any consolidated case, and other persons acting on behalf of the State
Police who participated in oral or wire communications to, from or within State
Police facilities between such dates.

Sheff v. O'Neill is a Superior Court action brought in 1989 on behalf
of black and Hispanic school children in the Hartford school district. The
plaintiffs sought a declaratory judgment that the public schools in the greater
Hartford metropolitan area are segregated de facto by race and ethnicity and are
inherently unequal to their detriment. They also sought injunctive relief
against state officials to provide them with an "integrated education." On April
12, 1995, the Superior Court entered judgment for the State. On July 9, 1996,
the State Supreme Court reversed the Superior Court judgment and remanded the
case with direction to render a declaratory judgment in favor of the plaintiffs.
The Court directed the legislature to develop appropriate measures to remedy the
racial and ethnic segregation in the Hartford public schools. The Supreme Court
also directed the Superior Court to retain jurisdiction of this matter. In
response to the Supreme Court decision, the 1997 General Assembly enacted P.A.
97-290, an Act Enhancing Educational Choices and Opportunities.

The Connecticut Traumatic Brain Injury Association, Inc. v. Hogan is a
Federal District Court civil rights action brought in 1990 on behalf of all
persons with retardation or traumatic brain injury who have been, or may be,
placed in Norwich, Fairfield Hills or Connecticut Valley Hospitals. The
plaintiffs claim that the treatment and training they need is unavailable in
state hospitals for the mentally ill and that placement in those hospitals
violates their constitutional rights. The plaintiffs seek relief which would
require that the plaintiff class members be transferred to community residential
settings with appropriate support services. This case has been settled as to all
persons with mental retardation by their eventual discharge from Norwich and
Fairfield Hills Hospital. The case is still proceeding as to those persons with
traumatic brain injury.

Several suits have been filed since 1977 in the Federal District Court
and the Connecticut Superior Court on behalf of alleged Indian Tribes in various
parts of the State, claiming monetary recovery as well as ownership to land in
issue. Some of these suits have been settled or dismissed. The plaintiff group
in the remaining suits is the alleged Golden Hill Paugussett Tribe and the lands
involved are generally located in Bridgeport, Trumbull, Orange, Shelton and
Seymour.

LOCAL GOVERNMENT DEBT

GENERAL. Numerous governmental units, cities, school districts and
special taxing districts, issue general obligation bonds backed by their taxing
power. Under Connecticut statutes, such entities have the power to levy ad
valorem taxes on all taxable property without limit as to rate or amount, except
as to certain classified property such as certified forest land taxable at a
limited rate and dwelling houses of qualified elderly persons of low income or
qualified disabled persons taxable at limited amounts. Under existing statutes,
the State is obligated to pay to such entities the amount of tax revenue which
it would have received except for the limitation on its power to tax such
dwelling houses.

Payment of principal and interest on such general obligations is not
limited to property tax revenues or any other revenue source, but certain
revenues may be restricted as to use and therefore may not be available to pay
debt service on such general obligations.

Local government units may also issue revenue obligations, which are
supported by the revenues generated from particular projects or enterprises.

DEBT LIMIT. Pursuant to the Connecticut General Statutes, local
governmental units are prohibited from incurring indebtedness in any of the
following categories if such indebtedness would cause the aggregate indebtedness
in that category to exceed, excluding sinking fund contributions, the multiple
for

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such category times the aggregate annual tax receipts of such local governmental
unit for the most recent fiscal year ending prior to the date of issue:

DEBT CATEGORY MULTIPLE

(i) all debt other than urban renewal projects,

water pollution control projects and school

building projects.................................... 2 1/4

(ii) urban renewal projects............................... 3 1/4

(iii) water pollution control projects.................... 3 3/4

(iv) school building projects............................. 4 1/2

(v) total debt, including (i), (ii), (iii) and (iv)

above................................................ 7

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APPENDIX B

EVERGREEN FLORIDA TAX FREE FUND

REVENUES

The State accounts for its receipts using fund accounting. It has
established the General Revenue Fund, the Working Capital Fund and various other
trust funds, which are maintained for the receipt of monies which under law or
trust agreements must be maintained separately.

The General Revenue Fund consists of all monies received by the State
from every source whatsoever which are not allocable to the other funds. Major
sources of tax revenues for the General Revenue Fund are the sales and use tax,
the corporate income tax, and the intangible personal property tax, which are
projected for fiscal year 1997-98 to amount to 71%, 8% and 4%, respectively, of
the total receipts of that fund.

The Florida Constitution and its statutes mandate that the State budget
as a whole and each separate fund within the State budget be kept in balance
from currently available revenues for each fiscal year.

SALES AND USE TAX

The greatest single source of tax receipts in Florida is the sales and
use tax, which is projected to amount to $11.7 billion for fiscal year 1997-98.
The sales tax is 6% of the sales price of tangible personal property sold at
retail in the state. The use tax is 6% of the cash price or fair market value of
tangible personal property when it is not sold but is used, or stored for use,
in the State. In other words, the use tax applies to the use of tangible
personal property in Florida, which was purchased in another state but would
have been subject to the sales tax if purchased in Florida. Approximately 10% of
the sales tax is designated for local governments and is distributed to the
respective counties in which collected for use by such counties and
municipalities therein. In addition to this distribution, local governments may
(by referendum) assess a 1% sales surtax within their county. Proceeds from this
local option sales surtax can be earmarked for funding countywide bus and rapid
transit systems, local infrastructure construction and maintenance, medical care
for indigents and capital projects for county school districts as set forth in
Section 212.055(2), of the Florida Statutes.

The two taxes, sales and use, stand as complements to each other, and
taken together provide a uniform tax upon either the sale at retail or the use
of all tangible personal property irrespective of where it may have been
purchased. The sales tax also includes a levy on the following: (I) rentals on
tangible personal property and accommodations in hotels, motels, some
apartments, offices, real estate, parking and storage places in parking lots,
garages and marinas for motor vehicles or boats; (ii) admissions to places of
amusements, most sports and recreation events; (iii) utilities, except those
used in homes; and (iv) restaurant meals and expendables used in radio and
television broadcasting. Exemptions include: groceries; medicines; hospital
rooms and meals; seeds, feeds, fertilizers and farm crop protection materials;
purchases by religious, charitable and educational nonprofit institutions;
professional services, insurance and certain personal service transactions;
newspapers; apartments used as permanent dwellings; and kindergarten through
community college athletic contests or amateur plays.

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OTHER STATE TAXES

Other taxes which Florida levies include the motor fuel tax, corporate
income tax, intangible property tax, documentary stamp tax, gross receipts
utilities tax and severance tax on the production of oil and gas and the mining
of solid minerals, such as phosphate and sulfur.

LOCAL GOVERNMENT DEBT

Numerous government units, counties, cities, school districts and
special taxing districts, issue general obligation bonds backed by their taxing
power. State and local government units may issue revenue obligations, which are
supported by the revenues generated from the particular projects or enterprises.
Examples include obligations issued to finance the construction of water and
sewer systems, health care facilities and educational facilities. In some cases,
sewer or water revenue obligations may be additionally secured by the full faith
and credit of the State.

OTHER FACTORS

The performance of the obligations issued by Florida, its
municipalities, subdivisions and instrumentalities are in part tied to
state-wide, regional and local conditions within Florida. Adverse changes to
state-wide, regional or local economies may adversely affect the
creditworthiness of Florida, its municipalities, etc. Also, some revenue
obligations may be issued to finance construction of capital projects which are
leased to nongovernmental entities. Adverse economic conditions might affect
those lessees' ability to meet their obligations to the respective governmental
authority which in turn might jeopardize the repayment of the principal of, or
the interest on, the revenue obligations.

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APPENDIX C

CORPORATE AND MUNICIPAL BOND RATINGS

S&P Corporate and Municipal Bond Ratings

A. Municipal Notes

An S&P note rating reflects the liquidity concerns and market access
risks unique to notes. Notes due in three years or less will likely receive a
note rating. Notes maturing beyond three years will most likely receive a
long-term debt rating. The following criteria are used in making that
assessment:

a. Amortization schedule (the larger the final maturity relative to
other maturities the more likely it will be treated as a note), and

b. Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).

Note ratings are as follows:

1. SP-1 - Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation.

2. SP-2 - Satisfactory capacity to pay principal and interest.

3. SP-3 - Speculative capacity to pay principal and interest.

B. Tax Exempt Demand Bonds

S&P assigns "dual" ratings to all long-term debt issues that have as
part of their provisions a demand or double feature.

The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols are used to denote the put
option (for example, "AAA/A-1+"). For the newer "demand notes," S&P note rating
symbols, combined with the commercial paper symbols, are used (for example,
"SP-1+/A-1+" ).

C. Corporate and Municipal Bond Ratings

An S&P corporate or municipal bond rating is a current assessment of
the creditworthiness of an obligor, including obligors outside the U.S., with
respect to a specific obligation. This assessment may take into consideration
obligors such as guarantors, insurers or lessees. Ratings of foreign obligors do
not take into account currency exchange and related uncertainties. The ratings
are based on current information furnished by the issuer or obtained by S&P from
other sources it considers reliable.

The ratings are based, in varying degrees, on the following
considerations:

a. Likelihood of default and capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in accordance with
the terms of the obligation;

b. Nature of and provisions of the obligation; and

c. Protection afforded by and relative position of the obligation in
the event of bankruptcy reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.

PLUS (+) OR MINUS (-): To provide more detailed indications of credit
quality, ratings from "AA" to "BBB" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.

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A provisional rating is sometimes used by S&P. It assumes the
successful completion of the project being financed by the debt being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default upon
failure of, such completion.

C. Bond ratings are as follows:

a. AAA - Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.

b. AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small degree.

3. A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

4. BBB - Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.

5. BB, B, CCC, CC and C - Debt rated BB, B, CCC, CC and C is regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

D. Moody's Corporate and Municipal Bond Ratings

Moody's ratings are as follows:

1. Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." 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, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

2. Aa - Bonds which are rated Aa are 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 in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.

3. A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

4. Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

5. Ba - Bonds which are rated Ba are judged to have speculative
elements. Their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.

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6. B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through Baa in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

Con. (---) - Municipal bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.

Those municipal bonds in the Aa, A, and Baa groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa 1, A 1, and Baa 1.

MONEY MARKET INSTRUMENTS

Money market securities are instruments with remaining maturities of
one year or less such as bank certificates of deposit, bankers' acceptances,
commercial paper (including variable rate master demand notes), and obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
some of which may be subject to repurchase agreements.

Commercial Paper

Commercial paper will consist of issues rated at the time of purchase
A-1, by Standard & Poor's Ratings Group (S&P), or Prime-1 by Moody's Investors
Service, Inc., (Moody's) or F-1 by Fitch Investors Services, L.P. (Fitch's); or,
if not rated, will be issued by companies which have an outstanding debt issue
rated at the time of purchase Aaa, Aa or A by Moody's, or AAA, AA or A by S&P,
or will be determined by a Fund's investment adviser to be of comparable
quality.

A. S&P Ratings

An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest. The top category is as
follows:

1. A: Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety.

2. A-1: This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.

B. Moody's Ratings

The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following designation, judged to be investment
grade, to indicate the relative repayment capacity of rated issuers.

1. The rating Prime-1 is the highest commercial paper rating assigned
by Moody's. Issuers rated Prime-1 (or related supporting institutions) are
deemed to have a superior capacity for repayment of short term promissory
obligations. Repayment capacity of Prime-1 issuers is normally evidenced by the
following characteristics:

1) leading market positions in well-established industries;

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<PAGE>

2) high rates of return on funds employed;

3) conservative capitalization structures with moderate reliance
on debt and ample asset protection;

4) broad margins in earnings coverage of fixed financial charges
and high internal cash generation; and

5) well established access to a range of financial markets and
assured sources of alternate liquidity.

In assigning ratings to issuers whose commercial paper obligations are
supported by the credit of another entity or entities, Moody's evaluates the
financial strength of the affiliated corporations, commercial banks, insurance
companies, foreign governments or other entities, but only as one factor in the
total rating assessment.

EVERGREEN MUNICIPAL TRUST

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits.

(a) Financial Statements (To be filed by amendment).

Statement of Assets and Liabilities as of , 1997

Report of Independent Auditors

(b) Exhibits. Each of the Exhibits listed below, except as indicated, is
filed herewith.

Exhibit
Number Description
- ------- -----------

1 Declaration of Trust
2 By-laws
3 Not applicable
4 Provisions of instruments defining the
rights of holders of the securities
being registered are contained in the
Declaration of Trust Articles II,
III.(6)(c), IV.(3), IV.(8), V, VI, VII,
VIII and By-laws Articles II, III and
VIII included as part of Exhibits 1 and
2 of this Registration Statement
5(a) Form of Investment Advisory Agreement
between the Registrant and Keystone
Investment Management Company (To be
filed by amendment)
5(b) Form of Investment Advisory Agreement
between the Registrant and the Capital
Management Group of First Union
National Bank (To be filed by
amendment)
6(a) Form of Principal Underwriting
Agreement between the Registrant and
Evergreen Distributor, Inc. (To be
filed by amendment)
6(b) Form of Dealer Agreement for Class A, Class B and Class C
shares used by Evergreen Distributor, Inc. (To be filed by
amendment)
7 Deferred Compensation Plan (To be filed
by amendment)

<PAGE>

Exhibit
Number Description
- ------- -----------
8 Form of Custodian Agreement between the
Registrant and State Street Bank and
Trust Company (To be filed by
amendment)
9(a) Form of Administration Agreement
between Evergreen Investment Services,
Inc. and the Registrant (To be filed by
amendment)
9(b) Form of Sub-Administrator Agreement
between BISYS Fund Services and
Evergreen Investment Services, Inc. (To
be filed by amendment)
9(c) Form of Transfer Agent Agreement
between the Registrant and Evergreen
Service Company (To be filed by
amendment)
10 Opinion and Consent of Sullivan &
Worcester LLP (To be filed by
amendment)
11 Independent Auditors' Consent (To be
filed by amendment)
12 Not applicable.
13 Subscription Agreement (To be filed by
amendment)
14 Retirement Plans (To be filed by
amendment)
15 Distribution Plans for Class A, Class B and Class C (To be
filed by amendment)
16 Not applicable.
17 Not applicable.
18 Multiple Class Plan (To be filed by
amendment)
19 Powers of Attorney

Item 25. Persons Controlled by or Under Common Control with
Registrant.

None

Item 26. Number of Holders of Securities (as of September 18,
1997).

Number of Record
Title of Class Shareholders

Shares of Beneficial

<PAGE>

Interest without par
value:

Evergreen Tax Free Fund 0

Evergreen Florida Municipal
Bond Fund 0

Item 27. Indemnification.

Provisions for the indemnification of the Registrant's
Trustees and officers are contained in the Registrant's Declaration of Trust, a
copy of which is filed herewith.

Provisions for the indemnification of Evergreen Distributor,
Inc., the Registrant's principal underwriter, are contained in the Principal
Underwriting Agreement between Evergreen Distributor, Inc. and the Registrant.

Item 28. Business or Other Connections of Investment
Advisers.

(a) The information required by this item with
respect to Keystone Investment Management
Company is incorporated by reference to the
Form ADV (File No. 801-08327)

(b) For the information required by this item with
respect to the Capital Management Group of First
Union National Bank, see the section entitled
"Management of the Fund - Investment Adviser" in Part
A.

The Directors and principal executive officers of First Union
National Bank are:

Edward E. Crutchfield, Jr. Chairman and Chief
Executive Officer, First
Union Corporation; Chief
Executive Officer and
Chairman, First Union
National Bank
Anthony P. Terracciano President, First Union
Corporation; President,
First Union National
Bank

<PAGE>

Edward E. Crutchfield, Jr. Chairman and Chief
Executive Officer, First
Union Corporation; Chief
Executive Officer and
Chairman, First Union
National Bank
John R. Georgius Vice Chairman, First
Union Corporation; Vice
Chairman, First Union
National Bank
Marion A. Cowell, Jr. Executive Vice
President, Secretary &
General Counsel, First
Union Corporation;
Secretary and Executive
Vice President, First
Union National Bank
Robert T. Atwood Executive Vice President
and Chief Financial
Officer, First Union
Corporation; Chief
Financial Officer and
Executive Vice President

First Union National Bank
Executive Officers

Edward E. Crutchfield, Jr. Chairman & CEO, First Union
Corporation
John R. Georgius Vice Chairman, First Union
Corporation
Marion A. Cowell, Jr. Secretary and EVP, First Union
Corporation
Robert T. Atwood EVP & CFO, First Union
Corporation
Anthony P. Terracciano President, First Union
Corporation
All of the above persons are located at the
following address: First Union National Bank, One First
Union Center, Charlotte, NC 28288.

Item 29. Principal Underwriters.

<PAGE>

Evergreen Distributor, Inc. The Director and
principal executive officers are:

Director Michael C. Petrycki
Officers Robert A. Hering President
Michael C. Petrycki Vice President
Lawrence Wagner VP, Chief Financial Officer
Steven J. Blechor VP, Treasurer, Secretary
Elizabeth Q. Solazzo Assistant Secretary

Evergreen Distributor, Inc. acts as principal underwriter for
each registered investment company or series thereof that is a part of the
Evergreen "fund complex" as such term is defined in Item 22(a) of Schedule 14A
under the Securities Exchange Act of 1934.

Item 30. Location of Accounts and Records.

All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1 through 31a-3
promulgated thereunder are maintained at one of the following locations:

Keystone Investment Management Company, 200 Berkeley
Street, Boston, Massachusetts 02116-5034

Evergreen Investment Services, Inc. and Evergreen
Service Company, 200 Berkeley Street, Boston,
Massachusetts 02116-5034

First Union National Bank, One First Union Center,
301 S. College Street, Charlotte, North Carolina
28288

Iron Mountain, 3431 Sharp Slot Road, Swansea,
Massachusetts 02720

State Street Bank and Trust Company, 2 Heritage
Drive, North Quincy, Massachusetts 02171

Item 31. Management Services.

Not Applicable.

Item 32. Undertakings

The undersigned Registrant hereby undertakes to file
with the Securities and Exchange Commission a Post-Effective

<PAGE>

Amendment to this Registration Statement using financial statements of its
Evergreen Tax Free Fund and Evergreen Florida Municipal Bond Fund series, which
need not be audited, within four to six months from the effective date of
Registrant's Registration Statement.

Registrant hereby undertakes to comply with the provisions of Section
16(c) of the Investment Company Act of 1940 with respect to the removal of
Trustees and the calling of special shareholder meetings by shareholders.

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.

<PAGE>

SIGNATURES

As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of New York and State
of New York, on the 7th day of October, 1997.

EVERGREEN MUNICIPAL TRUST

By: /s/ John J. Pileggi
----------------------
Name: John J. Pileggi
Title: President

As required by the Securities Act of 1933, the following persons have
signed this Registration Statement in the capacities on the 7th day of October,
1997.

Signatures Title
- ---------- -----

/s/John J. Pileggi President and
- ------------------ Treasurer (Principal Financial
John J. Pileggi and Accounting Officer)

/s/Laurence B. Ashkin* Trustee
- ---------------------
Laurence B. Ashkin

/s/Charles A. Austin III* Trustee
- -------------------------
Charles A. Austin III

/s/K. Dun Gifford* Trustee
- -----------------
K. Dun Gifford

/s/James S. Howell* Trustee
- ------------------
James S. Howell

/s/Leroy Keith, Jr.* Trustee
- -------------------
Leroy Keith, Jr.

/s/Gerald M. McDonnell* Trustee
- ----------------------
Gerald M. McDonnell

<PAGE>

/s/Thomas L. McVerry* Trustee
- --------------------
Thomas L. McVerry

/s/William Walt Pettit* Trustee
- ---------------------
William Walt Pettit

/s/David M. Richardson* Trustee
- ----------------------
David M. Richardson

/s/Russell A. Salton III* Trustee
- -------------------------
Russell A. Salton III

/s/Michael S. Scofield* Trustee
- ----------------------
Michael S. Scofield

/s/Richard J. Shima* Trustee
- -------------------
Richard J. Shima

*By: /s/Martin J. Wolin
------------------
Martin J. Wolin
Attorney-in-Fact

Martin J. Wolin, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons and included as Exhibit 19 to this
Registration Statement.

<PAGE>

AGREEMENT AND DECLARATION OF TRUST

EVERGREEN MUNICIPAL TRUST

a Delaware Business Trust

Principal Place of Business:

200 Berkeley Street
Boston, Massachusetts 02116

Agent for Service of
Process in Delaware:

Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801

<PAGE>

TABLE OF CONTENTS

AGREEMENT AND DECLARATION OF TRUST

ARTICLE I Name and Definitions.....................................1

1. Name.....................................................
1
2. Definitions..............................................1
(a) By-Laws..........................................1
(b) Certificate of Trust.............................1
(c) Class............................................1
(d) Commission.......................................2
(e) Declaration of Trust.............................2
(f) Delaware Act.....................................2
(g) Interested Person................................2
(h) Adviser(s).......................................2
(i) 1940 Act.........................................2
(j) Person...........................................2
(k) Principal Underwriter............................2
(l) Series...........................................2
(m) Shareholder......................................2
(n) Shares...........................................2
(o) Trust............................................2
(p) Trust Property...................................2
(q) Trustees.........................................2

ARTICLE II Purpose of Trust.................................3

ARTICLE III Shares...........................................3

1. Division of Beneficial Interest..........................3
2. Ownership of Shares......................................4
3. Transfer of Shares.......................................4
4. Investments in the Trust.................................5
5. Status of Shares and Limitation of Personal
Liability 5
6. Establishment, Designation, Abolition or
Termination, etc. of Series or Class.....................5
(a) Assets Held with Respect to a
Particular Series................................5
(b) Liabilities Held with Respect to a
Particular Series................................6
(c) Dividends, Distributions, Redemptions,
and Repurchases..................................7
(d) Equality.........................................7
(e) Fractions........................................7
(f) Exchange Privilege...............................7

<PAGE>

(g) Combination of Series............................7

ARTICLE IV Trustees.........................................8

1. Number, Election, and Tenure.............................8
2. Effect of Death, Resignation, etc. of a
Trustee..................................................8
3. Powers...................................................9
4. Payment of Expenses by the Trust.........................12
5. Payment of Expenses by Shareholders. . . . . . . .
. . . . . . . . . . . 13..................................................6.
Ownership of Assets of the Trust......................................13
7. Service Contracts........................................13
8. Trustees and Officers as Shareholders....................14
9. Compensation.............................................15

ARTICLE V Shareholders' Voting Powers and Meetings.................15

1. Voting Powers, Meetings, Notice and
Record Dates.............................................15
2. Quorum and Required Vote.................................15
3. Record Dates.............................................16
4. Additional Provisions....................................16

ARTICLE VI Net Asset Value, Distributions and
Redemptions......................................16

1. Determination of Net Asset Value, Net Income
and Distributions........................................16
2. Redemptions and Repurchases..............................16

ARTICLE VII Limitation of Liability; Indemnification.........17
1. Trustees, Shareholders, etc. Not Personally
Liable; Notice...........................................17
2. Trustees' Good Faith Action; Expert Advice;
No Bond or Surety........................................18
3. Indemnification of Shareholders..........................19
4. Indemnification of Trustees, Officers, etc...............19
5. Compromise Payment.......................................20
6. Indemnification Not Exclusive, etc.......................20
7. Liability of Third Persons Dealing with
Trustees.................................................20
8. Insurance................................................21

ARTICLE VIII Miscellaneous

1. Termination of the Trust or Any Series
or Class.................................................21

<PAGE>

2. Reorganization...........................................21
3. Amendments...............................................22
4. Filing of Copies; References; Headings...................23
5. Applicable Law...........................................23
6. Provisions in Conflict with Law or
Regulations..............................................24
7. Business Trust Only......................................24

<PAGE>

AGREEMENT AND DECLARATION OF TRUST

EVERGREEN MUNICIPAL TRUST

THIS AGREEMENT AND DECLARATION OF TRUST is made and entered into as of
the date set forth below by the Trustees named hereunder for the purpose of
forming a Delaware business trust in accordance with the provisions hereinafter
set forth.

NOW, THEREFORE, the Trustees hereby direct that the Certificate of
Trust be filed with the Office of the Secretary of State of the State of
Delaware and do hereby declare that the Trustees will hold IN TRUST all cash,
securities, and other assets which the Trust now possesses or may hereafter
acquire from time to time in any manner and manage and dispose of the same upon
the following terms and conditions for the benefit of the holders of Shares of
this Trust.

ARTICLE I

Name and Definitions

Section 1. Name. This Trust shall be known as Evergreen Municipal Trust
and the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.

Section 2. Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided:

(a) "Adviser(s)" means a party or parties furnishing services to the
Trust pursuant to any investment advisory or investment management contract
described in Article IV, Section 6(a) hereof;

(b) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time, which By-Laws are expressly herein incorporated by reference as part of
the "governing instrument" within the meaning of the Delaware Act;

(c) "Certificate of Trust" means the certificate of trust, as amended
or restated from time to time, filed by the Trustees in the Office of the
Secretary of State of the State of Delaware in accordance with the Delaware Act;

<PAGE>

(d) "Class" means a class of Shares of a Series of the Trust
established in accordance with the provisions of Article III hereof;

(e) "Commission" shall have the meaning given such term in the 1940
Act;

(f) "Declaration of Trust" means this Agreement and Declaration of
Trust, as amended or restated from time to time;

(g) "Delaware Act" means the Delaware Business Trust Act,
12 Del. C. ss.ss. 3801 et seq., as amended from time to time;

(h) "Interested Person" shall have the meaning given it in Section
2(a)(19) of the 1940 Act;

(i) "1940 Act" means the Investment Company Act of 1940 and the rules
and regulations thereunder, all as amended from time to time;

(j) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures, estates, and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof, whether domestic or foreign;

(k) "Principal Underwriter" shall have the meaning given such term in
the 1940 Act;

(l) "Series" means each Series of Shares established and designated
under or in accordance with the provisions of Article III hereof; and where the
context requires or where appropriate, shall be deemed to include "Class" or
"Classes";

(m) "Shareholder" means a record owner of outstanding Shares;

(n) "Shares" means the shares of beneficial interest into which the
beneficial interest in the Trust shall be divided from time to time and includes
fractions of Shares as well as whole Shares;

(o) "Trust" means the Delaware Business Trust established under the
Delaware Act by this Declaration of Trust and the filing of the Certificate of
Trust in the Office of the Secretary of State of the State of Delaware;

<PAGE>

(p) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is from time to time owned or held by or for the
account of the Trust; and

(q) "Trustees" means the Person or Persons who have signed this
Declaration of Trust and all other Persons who may from time to time be duly
elected or appointed to serve as Trustees in accordance with the provisions
hereof, in each case so long as such Person shall continue in office in
accordance with the terms of this Declaration of Trust, and reference herein to
a Trustee or the Trustees shall refer to such Person or Persons in his or her or
their capacity as Trustees hereunder.

ARTICLE II

Purpose of Trust

The purpose of the Trust is to conduct, operate and carry on the
business of an investment company registered under the 1940 Act through one or
more Series and to carry on such other business as the Trustees may from time to
time determine. The Trustees shall not be limited by any law limiting the
investments which may be made by fiduciaries.

ARTICLE III

Section 1. Division of Beneficial Interest. The beneficial interest in
the Trust shall be divided into one or more Series. The Trustees may divide each
Series into Classes. Subject to the further provisions of this Article III and
any applicable requirements of the 1940 Act, the Trustees shall have full power
and authority, in their sole discretion, and without obtaining any authorization
or vote of the Shareholders of any Series or Class thereof, (i) to divide the
beneficial interest in each Series or Class thereof into Shares, with or without
par value as the Trustees shall determine, (ii) to issue Shares without
limitation as to number (including fractional Shares) to such Persons and for
such amount and type of consideration, including cash or securities, subject to
any restriction set forth in the By-Laws, at such time or times and on such
terms as the Trustees may deem appropriate, (iii) to establish and designate and
to change in any manner any Series or Class thereof and to fix such preferences,
voting powers, rights, duties and privileges and business purpose of each Series
or

<PAGE>

Class thereof as the Trustees may from time to time determine, which
preferences, voting powers, rights, duties and privileges may be senior or
subordinate to (or in the case of business purpose, different from) any existing
Series or Class thereof and may be limited to specified property or obligations
of the Trust or profits and losses associated with specified property or
obligations of the Trust, (iv) to divide or combine the Shares of any Series or
Class thereof into a greater or lesser number without thereby materially
changing the proportionate beneficial interest of the Shares of such Series or
Class thereof in the assets held with respect to that Series, (v) to classify or
reclassify any issued Shares of any Series or Class thereof into shares of one
or more Series or Classes thereof; (vi) to change the name of any Series or
Class thereof; (vii) to abolish or terminate any one or more Series or Classes
thereof; (viii) to refuse to issue Shares to any Person or class of Persons; and
(ix) to take such other action with respect to the Shares as the Trustees may
deem desirable.

Subject to the distinctions permitted among Classes of the same Series
as established by the Trustees, consistent with the requirements of the 1940
Act, each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series, and each holder of Shares of a Series
shall be entitled to receive such Shareholder's pro rata share of distributions
of income and capital gains, if any, made with respect to such Series and upon
redemption of the Shares of any Series, such Shareholder shall be paid solely
out of the funds and property of such Series of the Trust.

All references to Shares in this Declaration of Trust shall be deemed
to be Shares of any or all Series or Classes thereof, as the context may
require. All provisions herein relating to the Trust shall apply equally to each
Series of the Trust and each Class thereof, except as the context otherwise
requires.

All Shares issued hereunder, including, without limitation, Shares
issued in connection with a dividend or other distribution in Shares or a split
or reverse split of Shares, shall be fully paid and nonassessable. Except as
otherwise provided by the Trustees, Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.

<PAGE>

Section 2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or those of a transfer or similar agent for
the Trust, which books shall be maintained separately for the Shares of each
Series or Class of the Trust. No certificates certifying the ownership of Shares
shall be issued except as the Trustees may otherwise determine from time to
time. The Trustees may make such rules as they consider appropriate for the
issuance of Share certificates, the transfer of Shares of each Series or Class
of the Trust and similar matters. The record books of the Trust as kept by the
Trust or any transfer or similar agent, as the case may be, shall be conclusive
as to the identity of the Shareholders of each Series or Class of the Trust and
as to the number of Shares of each Series or Class of the Trust held from time
to time by each Shareholder.

Section 3. Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the books of the Trust only by the
record holder thereof or by his or her duly authorized agent upon delivery to
the Trustees or the Trust's transfer agent of a duly executed instrument of
transfer, together with a Share certificate if one is outstanding, and such
evidence of the genuineness of each such execution and authorization and of such
other matters as may be required by the Trustees. Upon such delivery, and
subject to any further requirements specified by the Trustees or contained in
the By-Laws, the transfer shall be recorded on the books of the Trust. Until a
transfer is so recorded, the holder of record of Shares shall be deemed to be
the holder of such Shares for all purposes hereunder and neither the Trustees
nor the Trust, nor any transfer agent or registrar or any officer, employee, or
agent of the Trust, shall be affected by any notice of a proposed transfer.

Section 4. Investments in the Trust. Investments may be accepted by the
Trust from Persons, at such times, on such terms, and for such consideration as
the Trustees from time to time may authorize.

Section 5. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof. The
death, incapacity, dissolution, termination, or bankruptcy of a Shareholder
during the existence of the Trust shall not operate to terminate the Trust, nor
entitle the representative of any such Shareholder to an accounting or

<PAGE>

to take any action in court or elsewhere against the Trust or the Trustees, but
shall entitle such representative only to the rights of such Shareholder under
this Trust. Ownership of Shares shall not entitle the Shareholder to any title
in or to the whole or any part of the Trust Property or any right to call for a
participation or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders as partners. No Shareholder
shall be personally liable for the debts, liabilities, obligations and expenses
incurred by, contracted for, or otherwise existing with respect to, the Trust or
any Series. Neither the Trust nor the Trustees, nor any officer, employee, or
agent of the Trust shall have any power to bind personally any Shareholder, nor,
except as specifically provided herein, to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.

Section 6. Establishment, Designation, Abolition or Termination etc. of
Series or Class. The establishment and designation of any Series or Class of
Shares of the Trust shall be effective upon the adoption by a majority of the
Trustees then in office of a resolution that sets forth such establishment and
designation and the relative rights and preferences of such Series or Class of
the Trust, whether directly in such resolution or by reference to another
document including, without limitation, any registration statement of the Trust,
or as otherwise provided in such resolution. The abolition or termination of any
Series or Class of Shares of the Trust shall be effective upon the adoption by a
majority of the Trustees then in office of a resolution that abolishes or
terminates such Series or Class.

Shares of each Series or Class of the Trust established pursuant to
this Article III, unless otherwise provided in the resolution establishing such
Series or Class, shall have the following relative rights and preferences:

(a) Assets Held with Respect to a Particular Series. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof from whatever source derived
(including, without limitation, any proceeds derived from the sale, exchange or
liquidation of such assets and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be) shall
irrevocably be held separate with respect to that Series for

<PAGE>

all purposes, and shall be so recorded upon the books of account of the Trust.
Such consideration, assets, income, earnings, profits and proceeds thereof, from
whatever source derived, (including, without limitation) any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds), in whatever form the same may
be, are herein referred to as "assets held with respect to" that Series. In the
event that there are any assets, income, earnings, profits and proceeds thereof,
funds or payments which are not readily identifiable as assets held with respect
to any particular Series (collectively "General Assets"), the Trustees shall
allocate such General Assets to, between or among any one or more of the Series
in such manner and on such basis as the Trustees, in their sole discretion, deem
fair and equitable, and any General Assets so allocated to a particular Series
shall be held with respect to that Series. Each such allocation by the Trustees
shall be conclusive and binding upon the Shareholders of all Series for all
purposes. Separate and distinct records shall be maintained for each Series and
the assets held with respect to each Series shall be held and accounted for
separately from the assets held with respect to all other Series and the General
Assets of the Trust not allocated to such Series.

(b) Liabilities Held with Respect to a Particular Series. The assets of
the Trust held with respect to each particular Series shall be charged against
the liabilities of the Trust held with respect to that Series and all expenses,
costs, charges, and reserves attributable to that Series, except that
liabilities and expenses allocated solely to a particular Class shall be borne
by that Class. Any general liabilities of the Trust which are not readily
identifiable as being held with respect to any particular Series or Class shall
be allocated and charged by the Trustees to and among any one or more of the
Series or Classes in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. All liabilities, expenses, costs, charges,
and reserves so charged to a Series or Class are herein referred to as
"liabilities held with respect to" that Series or Class. Each allocation of
liabilities, expenses, costs, charges, and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Series or Classes for all
purposes. Without limiting the foregoing, but subject to the right of the
Trustees to allocate general liabilities, expenses, costs, charges or reserves
as herein provided, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Series

<PAGE>

shall be enforceable against the assets held with respect to such Series only
and not against the assets of the Trust generally or against the assets held
with respect to any other Series. Notice of this contractual limitation on
liabilities among Series may, in the Trustees' discretion, be set forth in the
Certificate of Trust and upon the giving of such notice in the Certificate of
Trust, the statutory provisions of Section 3804 of the Delaware Act relating to
limitations on liabilities among Series (and the statutory effect under Section
3804 of setting forth such notice in the certificate of trust) shall become
applicable to the Trust and each Series. Any person extending credit to,
contracting with or having any claim against any Series may look only to the
assets of that Series to satisfy or enforce any debt, with respect to that
Series. No Shareholder or former Shareholder of any Series shall have a claim on
or any right to any assets allocated or belonging to any other Series.

(c) Dividends, Distributions. Redemptions, and Repurchases.
Notwithstanding any other provisions of this Declaration of Trust, including,
without limitation, Article Vl, no dividend or distribution, including, without
limitation, any distribution paid upon termination of the Trust or of any Series
or Class with respect to, nor any redemption or repurchase of, the Shares of any
Series or Class, shall be effected by the Trust other than from the assets held
with respect to such Series, nor shall any Shareholder or any particular Series
or Class otherwise have any right or claim against the assets held with respect
to any other Series except to the extent that such Shareholder has such a right
or claim hereunder as a Shareholder of such other Series. The Trustees shall
have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as capital, and
each such determination and allocation shall be conclusive and binding upon the
Shareholders.

(d) Equality. All the Shares of each particular Series shall represent
an equal proportionate interest in the assets held with respect to that Series
(subject to the liabilities held with respect to that Series or Class thereof
and such rights and preferences as may have been established and designated with
respect to any Class within such Series), and each Share of any particular
Series shall be equal to each other Share of that Series. With respect to any
Class of a Series, each such Class shall represent interests in the assets held
with respect to that Series and shall have identical voting, dividend,
liquidation and other rights and

<PAGE>

the same terms and conditions, except that expenses allocated to a Class may be
borne solely by such Class as determined by the Trustees and a Class may have
exclusive voting rights with respect to matters affecting only that Class.

(e) Fractions. Any fractional Share of a Series or Class thereof shall
carry proportionately all the rights and obligations of a whole Share of that
Series or Class, including rights with respect to voting, receipt of dividends
and distributions, redemption of Shares and termination of the Trust.

(f) Exchange Privilege. The Trustees shall have the authority to
provide that the holders of Shares of any Series or Class shall have the right
to exchange said Shares for Shares of one or more other Series of Shares or
Class of Shares of the Trust or of other investment companies registered under
the 1940 Act in accordance with such requirements and procedures as may be
established by the Trustees.

(g) Combination of Series. The Trustees shall have the authority,
without the approval of the Shareholders of any Series or Class unless otherwise
required by applicable law, to combine the assets and liabilities held with
respect to any two or more Series or Classes into assets and liabilities held
with respect to a single Series or Class.

<PAGE>

ARTICLE IV

Trustees

Section 1. Number, Election and Tenure. The number of Trustees shall
initially be 12, who shall be Laurence B. Ashkin, Charles A. Austin, III, K. Dun
Gifford, James S. Howell, Leroy Keith, Jr., Gerald M. McDonnell, Thomas L.
McVerry, David M. Richardson, Russell A. Salton, III, Michael S. Scofield,
Richard J. Shima, and William W. Pettit. Thereafter, the number of Trustees
shall at all times be at least one and no more than such number as determined,
from time to time, by the Trustees pursuant to Section 3 of this Article IV.
Each Trustee shall serve during the lifetime of the Trust until he or she dies,
resigns, has reached any mandatory retirement age as set by the Trustees, is
declared bankrupt or incompetent by a court of appropriate jurisdiction, or is
removed, or, if sooner, until the next meeting of Shareholders called for the
purpose of electing Trustees and until the election and qualification of his or
her successor. In the event that less than a majority of the Trustees holding
office have been elected by the Shareholders, the Trustees then in office shall
take such actions as may be necessary under applicable law for the election of
Trustees. Any Trustee may resign at any time by written instrument signed by him
or her and delivered to any officer of the Trust or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal. The
Shareholders may elect Trustees at any meeting of Shareholders called by the
Trustees for that purpose. Any Trustee may be removed at any meeting of
Shareholders by a vote of two-thirds of the outstanding Shares of the Trust.

Section 2. Effect of Death. Resignation. etc. of a Trustee. The death,
declination to serve, resignation, retirement, removal or incapacity of one or
more Trustees, or all of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Declaration of Trust.
Whenever there shall be fewer than the designated number of Trustees, until
additional Trustees are elected or appointed as provided herein to bring the
total number of Trustees equal to the designated number, the

<PAGE>

Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by this Declaration of Trust. As conclusive evidence of such vacancy, a
written instrument certifying the existence of such vacancy may be executed by
an officer of the Trust or by a majority of the Trustees. In the event of the
death, declination, resignation, retirement, removal, or incapacity of all the
then Trustees within a short period of time and without the opportunity for at
least one Trustee being able to appoint additional Trustees to replace those no
longer serving, the Trust's Adviser(s) are empowered to appoint new Trustees
subject to the provisions of the 1940 Act.

Section 3. Powers. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees, and the
Trustees shall have all powers necessary or convenient to carry out that
responsibility including the power to engage in transactions of all kinds on
behalf of the Trust as described in this Declaration of Trust. Without limiting
the foregoing, the Trustees may: adopt By-Laws not inconsistent with this
Declaration of Trust providing for the management of the affairs of the Trust
and may amend and repeal such By-Laws to the extent that such By-Laws do not
reserve that right to the Shareholders; enlarge or reduce the number of
Trustees; remove any Trustee with or without cause at any time by written
instrument signed by at least two-thirds of the number of Trustees prior to such
removal, specifying the date when such removal shall become effective, and fill
vacancies caused by enlargement of their number or by the death, resignation,
retirement or removal of a Trustee; elect and remove, with or without cause,
such officers and appoint and terminate such agents as they consider
appropriate; appoint from their own number and establish and terminate one or
more committees, consisting of two or more Trustees, that may exercise the
powers and authority of the Board of Trustees to the extent that the Trustees so
determine; employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities or
with a Federal Reserve Bank; employ an administrator for the Trust and may
authorize such administrator to employ subadministrators; employ an investment
adviser or investment advisers to the Trust and may authorize such Advisers to
employ subadvisers; retain a transfer agent or a shareholder servicing agent, or
both; provide for the issuance and distribution of Shares by the

<PAGE>

Trust directly or through one or more Principal Underwriters or otherwise;
redeem, repurchase and transfer Shares pursuant to applicable law; set record
dates for the determination of Shareholders with respect to various matters;
declare and pay dividends and distributions to Shareholders of each Series from
the assets of such Series; and in general delegate such authority as they
consider desirable to any officer of the Trust, to any committee of the Trustees
and to any agent or employee of the Trust or to any such custodian, transfer or
shareholder servicing agent, or Principal Underwriter. Any determination as to
what is in the interests of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. Unless
otherwise specified herein or in the By-Laws or required by law, any action by
the Trustees shall be deemed effective if approved or taken by a majority of the
Trustees present at a meeting of Trustees at which a quorum of Trustees is
present, within or without the State of Delaware.

Without limiting the foregoing, the Trustees shall have the power and
authority to cause the Trust (or to act on behalf of the Trust):

(a) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold,
pledge, sell, assign, transfer, exchange, distribute, write options on, lend or
otherwise deal in or dispose of contracts for the future acquisition or delivery
of fixed income or other securities, and securities of every nature and kind,
including, without limitation, all types of bonds, debentures, stocks,
negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial papers,
repurchase agreements, bankers' acceptances, and other securities of any kind,
issued, created, guaranteed, or sponsored by any and all Persons, including
without limitation, states, territories, and possessions of the United States
and the District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political subdivision of
the United States Government or any foreign government, or any international
instrumentality, or by any bank or savings institution, or by any corporation or
organization organized under the laws of the United States or of any state,
territory, or possession thereof, or by any corporation or organization
organized under any foreign law, or in "when issued" contracts for any such
securities, to change the

<PAGE>

investments of the assets of the Trust; and to exercise any and all rights,
powers, and privileges of ownership or interest in respect of any and all such
investments of every kind and description, including, without limitation, the
right to consent and otherwise act with respect thereto, with power to designate
one or more Persons to exercise any of said rights, powers, and privileges in
respect of any of said instruments;

(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options (including, options on futures contracts) with respect to or
otherwise deal in any property rights relating to any or all of the assets of
the Trust or any Series;

(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such Person or Persons as the Trustees shall
deem proper, granting to such Person or Persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;

(d) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;

(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its own
name or in the name of a custodian or subcustodian or a nominee or nominees or
otherwise;

(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;

(g) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and

<PAGE>

compensation of such committee, depositary or trustee as the
Trustees shall deem proper;

(h) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including, but not limited to,
claims for taxes;

(i) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;

(j) To borrow funds or other property in the name of the Trust
exclusively for Trust purposes and in connection therewith to issue notes or
other evidences of indebtedness; and to mortgage and pledge the Trust Property
or any part thereof to secure any or all of such indebtedness;

(k) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge the
Trust Property or any part thereof to secure any of or all of such obligations;

(l) To purchase and pay for entirely out of Trust Property such
insurance as the Trustees may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies insuring the
assets of the Trust or payment of distributions and principal on its portfolio
investments, and insurance polices insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters, or
independent contractors of the Trust, individually against all claims and
liabilities of every nature arising by reason of holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such Person as Trustee, officer, employee, agent,
investment adviser, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such Person against
liability;

(m) To adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans and trusts, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits, for any or
all of the Trustees, officers, employees and agents of the Trust;

<PAGE>

(n) To operate as and carry out the business of an investment company,
and exercise all the powers necessary or appropriate to the conduct of such
operations;

(o) To enter into contracts of any kind and description;

(p) To employ as custodian of any assets of the Trust one or more
banks, trust companies or companies that are members of a national securities
exchange or such other entities as the Commission may permit as custodians of
the Trust, subject to any conditions set forth in this Declaration of Trust or
in the By-Laws;

(q) To employ auditors, counsel or other agents of the Trust, subject
to any conditions set forth in this Declaration of Trust or in the By-Laws;

(r) To interpret the investment policies, practices, or
limitations of any Series or Class;

(s) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes, and with
separate Shares representing beneficial interests in such Series, and to
establish separate Classes, all in accordance with the provisions of Article
III;

(t) To the full extent permitted by the Delaware Act, to allocate
assets, liabilities and expenses of the Trust to a particular Series and Class
or to apportion the same between or among two or more Series or Classes,
provided that any liabilities or expenses incurred by a particular Series or
Class shall be payable solely out of the assets belonging to that Series or
Class as provided for in Article III;

(u) To invest all of the assets of the Trust, or any Series or any
Class thereof in a single investment company;

(v) Subject to the 1940 Act, to engage in any other lawful act or
activity in which a business trust organized under the Delaware Act may engage.

The Trust shall not be limited to investing in obligations maturing
before the possible termination of the Trust or one or more of its Series. The
Trust shall not in any way be bound or limited by any present or future law or
custom in regard to investment by fiduciaries. The Trust shall not be

<PAGE>

required to obtain any court order to deal with any assets of the Trust or take
any other action hereunder.

Section 4. Payment of Expenses by the Trust. The Trustees are
authorized to pay or cause to be paid out of the principal or income of the
Trust, or partly out of the principal and partly out of income, as they deem
fair, all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees, Advisers, Principal
Underwriter, auditors, counsel, custodian, transfer agent, shareholder servicing
agent, and such other agents or independent contractors and such other expenses
and charges as the Trustees may deem necessary or proper to incur, which
expenses, fees, charges, taxes and liabilities shall be allocated in accordance
with Article III, Section 6 hereof.

Section 5. Payment of Expenses by Shareholders. The Trustees shall have
the power, as frequently as they may determine, to cause each Shareholder, or
each Shareholder of any particular Series, to pay directly, in advance or
arrears, expenses of the Trust as described in Section 4 of this Article IV
("Expenses"), in an amount fixed from time to time by the Trustees, by setting
off such Expenses due from such Shareholder from declared but unpaid dividends
owed such Shareholder and/or by reducing the number of Shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such Expenses due from such Shareholder,
provided that the direct payment of such Expenses by Shareholders is permitted
under applicable law.

Section 6. Ownership of Assets of the Trust. Title to all of the assets
of the Trust shall at all times be considered as vested in the Trust, except
that the Trustees shall have power to cause legal title to any Trust Property to
be held by or in the name of one or more of the Trustees, or in the name of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine. The right, title and interest of the Trustees in the
Trust Property shall vest automatically in each Person who may hereafter become
a Trustee. Upon the resignation, removal or death of a Trustee, he or she shall
automatically cease to have any right, title or interest in any of the Trust

<PAGE>

Property, and the right, title and interest of such Trustee in the Trust
property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.

Section 7. Service Contracts.

(a) Subject to such requirements and restrictions as may be set forth
under federal and/or state law and in the By-Laws, including, without
limitation, the requirements of Section 15 of the 1940 Act, the Trustees may, at
any time and from time to time, contract for exclusive or nonexclusive advisory,
management and/or administrative services for the Trust or for any Series (or
Class thereof) with any Person and any such contract may contain such other
terms as the Trustees may determine, including, without limitation, authority
for the Adviser(s) or administrator to delegate certain or all of its duties
under such contracts to other qualified investment advisers and administrators
and to determine from time to time without prior consultation with the Trustees
what investments shall be purchased, held sold or exchanged and what portion, if
any, of the assets of the Trust shall be held uninvested and to make changes in
the Trust's investments, or such other activities as may specifically be
delegated to such party.

(b) The Trustees may also, at any time and from time to time, contract
with any Person, appointing such Person exclusive or nonexclusive distributor or
Principal Underwriter for the Shares of one or more of the Series (or Classes)
or other securities to be issued by the Trust.

(c) The Trustees are also empowered, at any time and from time to
time, to contract with any Person, appointing such Person or Persons the
custodian, transfer agent and/or shareholder servicing agent for the Trust or
one or more of its Series.

(d) The Trustees are further empowered, at any time and from time to
time, to contract with any Person to provide such other services to the Trust or
one or more of the Series, as the Trustees determine to be in the best interests
of the Trust and the applicable Series.

(e) The fact that:

(i) any of the Shareholders, Trustees, or officers
of the Trust is a shareholder, director,

<PAGE>

officer, partner, trustee, employee, Adviser,
Principal Underwriter, distributor, or affiliate or
agent of or for any Person, or for any parent or
affiliate of any Person with which an advisory,
management, or administration contract, or Principal
Underwriter's or distributor's contract, or transfer
agent, shareholder servicing agent or other type of
service contract may have been or may hereafter be
made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has an
interest in the Trust; or that

(ii) any Person with which an advisory, management,
or administration contract or Principal
Underwriter's or distributor's contract, or
transfer agent or shareholder servicing agent
contract may have been or may hereafter be made
also has an advisory, management, or
administration contract, or Principal
Underwriter's or distributor's or other service
contract with one or more other Persons, or has
other business or interests,

shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same, or create any liability or accountability to the Trust or its
shareholders.

Section 8. Trustees and Officers as Shareholders. Any Trustee, officer
or agent of the Trust may acquire, own and dispose of Shares to the same extent
as if he or she were not a Trustee, officer or agent; and the Trustees may issue
and sell and cause to be issued and sold Shares to, and redeem such Shares from,
any such Person or any firm or company in which such Person is interested,
subject only to the general limitations contained herein or in the By-Laws
relating to the sale and redemption of such Shares.

Section 9. Compensation. The Trustees in such capacity shall be
entitled to reasonable compensation from the Trust and they may fix the amount
of such compensation. Nothing herein shall in any way prevent the employment of
any Trustee for advisory, management, legal, accounting, investment banking or
other services and payment for such services by the Trust.

<PAGE>

ARTICLE V

Shareholders' Voting Powers and Meetings

Section 1. Voting Powers. Meetings. Notice. and Record Dates. The
Shareholders shall have power to vote only: (i) for the election or removal of
Trustees as provided in Article IV, Section 1 hereof, and (ii) with respect to
such additional matters relating to the Trust as may be required by applicable
law, this Declaration of Trust, the By-Laws or any registration statement of the
Trust with the Commission (or any successor agency) or as the Trustees may
consider necessary or desirable. Shareholders shall be entitled to one vote for
each dollar, and a fractional vote for each fraction of a dollar, of net asset
value per Share for each Share held, as to any matter on which the Share is
entitled to vote. Notwithstanding any other provision of this Declaration of
Trust, on any matters submitted to a vote of the Shareholders, all shares of the
Trust then entitled to vote shall be voted in aggregate, except: (i) when
required by the 1940 Act, Shares shall be voted by individual Series; (ii) when
the matter involves any action that the Trustees have determined will affect
only the interests of one or more Series, then only Shareholders of such Series
shall be entitled to vote thereon; and (iii) when the matter involves any action
that the Trustees have determined will affect only the interests of one or more
Classes, then only the Shareholders of such Class or Classes shall be entitled
to vote thereon. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. A proxy may be given in
writing. The By-Laws may provide that proxies may also, or may instead, be given
by an electronic or telecommunications device or in any other manner. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and may
take any action required by law, this Declaration of Trust or the By-Laws to be
taken by the Shareholders. Meetings of the Shareholders shall be called and
notice thereof and record dates therefor shall be given and set as provided in
the By-Laws.

Section 2. Quorum and Required Vote. Except when a larger quorum is
required by applicable law, by the By-Laws or by this Declaration of Trust,
twenty-five percent (25%) of the Shares issued and outstanding shall constitute
a quorum at a Shareholders' meeting but any lesser number shall be sufficient
for adjourned sessions. When any one or more Series (or Classes) is to vote as a
single Series (or Class) separate from any other Shares, twenty-five percent
(25%) of the Shares

<PAGE>

of each such Series (or Class) issued and outstanding shall constitute a quorum
at a Shareholders' meeting of that Series (or Class). Except when a larger vote
is required by any provision of this Declaration of Trust or the By-Laws or by
applicable law, when a quorum is present at any meeting, a majority of the
Shares voted shall decide any questions and a plurality of the Shares voted
shall elect a Trustee, provided that where any provision of law or of this
Declaration of Trust requires that the holders of any Series shall vote as a
Series (or that holders of a Class shall vote as a Class), then a majority of
the Shares of that Series (or Class) voted on the matter (or a plurality with
respect to the election of a Trustee) shall decide that matter insofar as that
Series (or Class) is concerned.

Section 3. Record Dates. For the purpose of determining the
Shareholders of any Series (or Class) who are entitled to receive payment of any
dividend or of any other distribution, the Trustees may from time to time fix a
date, which shall be before the date for the payment of such dividend or such
other payment, as the record date for determining the Shareholders of such
Series (or Class) having the right to receive such dividend or distribution.
Without fixing a record date, the Trustees may for distribution purposes close
the register or transfer books for one or more Series (or Classes) at any time
prior to the payment of a distribution. Nothing in this Section shall be
construed as precluding the Trustees from setting different record dates for
different Series (or Classes).

Section 4. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.

ARTICLE VI

Net Asset Value, Distributions and Redemptions

Section 1. Determination of Net Asset Value, Net Income and
Distributions. Subject to applicable law and Article III, Section 6 hereof, the
Trustees, in their absolute discretion, may prescribe and shall set forth in the
By-Laws or in a duly adopted vote of the Trustees such bases and time for
determining the per Share or net asset value of the Shares of any Series or
Class or net income attributable to the Shares of any Series or Class, or the
declaration and payment of dividends and distributions on the Shares of any
Series or Class, as they may deem necessary or desirable.

<PAGE>

Section 2. Redemptions and Repurchases.

(a) The Trust shall purchase such Shares as are offered by any
Shareholder for redemption, upon the presentation of a proper instrument of
transfer together with a request directed to the Trust, or a Person designated
by the Trust, that the Trust purchase such Shares or in accordance with such
other procedures for redemption as the Trustees may from time to time authorize;
and the Trust will pay therefor the net asset value thereof as determined by the
Trustees (or on their behalf), in accordance with any applicable provisions of
the By-Laws, any registration statement of the Trust and applicable law. Unless
extraordinary circumstances exist, payment for said Shares shall be made by the
Trust to the Shareholder in accordance with the 1940 Act and any rules and
regulations thereunder or as otherwise required by the Commission. The
obligation set forth in this Section 2(a) is subject to the provision that,
during any emergency which makes it impracticable for the Trust to dispose of
the investments of the applicable Series or to determine fairly the value of the
net assets held with respect to such Series, such obligation may be suspended or
postponed by the Trustees. In the case of a suspension of the right of
redemption as provided herein, a Shareholder may either withdraw the request for
redemption or receive payment based on the net asset value per share next
determined after the termination of such suspension.

(b) The redemption price may in any case or cases be paid wholly or
partly in kind if the Trustees determine that such payment is advisable in the
interest of the remaining Shareholders of the Series or Class thereof for which
the Shares are being redeemed. Subject to the foregoing, the fair value,
selection and quantity of securities or other property so paid or delivered as
all or part of the redemption price may be determined by or under authority of
the Trustees. In no case shall the Trust be liable for any delay of any Adviser
or other Person in transferring securities selected for delivery as all or part
of any payment-in-kind.

(c) If the Trustees shall, at any time and in good faith, determine
that direct or indirect ownership of Shares of any Series or Class thereof has
or may become concentrated in any Person to an extent that would disqualify any
Series as a regulated investment company under the Internal Revenue Code of
1986, as amended (or any successor statute thereof), then the Trustees shall
have the power (but not the obligation) by such means as they deem equitable (i)
to call for the

<PAGE>

redemption by any such Person of a number, or principal amount, of Shares
sufficient to maintain or bring the direct or indirect ownership of Shares into
conformity with the requirements for such qualification, (ii) to refuse to
transfer or issue Shares of any Series or Class thereof to such Person whose
acquisition of the Shares in question would result in such disqualification, or
(iii) to take such other actions as they deem necessary and appropriate to avoid
such disqualification. Any such redemption shall be effected at the redemption
price and in the manner provided in this Article VI.

(d) The holders of Shares shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of Shares
as the Trustees deem necessary to comply with the provisions of the Internal
Revenue Code of 1986, as amended (or any successor statute thereto), or to
comply with the requirements of any other taxing authority.

ARTICLE VII

Limitation of Liability; Indemnification

Section 1. Trustees, Shareholders, etc. Not Personally Liable; Notice.
The Trustees, officers, employees and agents of the Trust, in incurring any
debts, liabilities or obligations, or in limiting or omitting any other actions
for or in connection with the Trust, are or shall be deemed to be acting as
Trustees, officers, employees or agents of the Trust and not in their own
capacities. No Shareholder shall be subject to any personal liability whatsoever
in tort, contract or otherwise to any other Person or Persons in connection with
the assets or the affairs of the Trust or of any Series, and subject to Section
4 of this Article VII, no Trustee, officer, employee or agent of the Trust shall
be subject to any personal liability whatsoever in tort, contract, or otherwise,
to any other Person or Persons in connection with the assets or affairs of the
Trust or of any Series, save only that arising from his or her own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office or the discharge of his or her
functions. The Trust (or if the matter relates only to a particular Series, that
Series) shall be solely liable for any and all debts, claims, demands,
judgments, decrees, liabilities or obligations of any and every kind, against or
with respect to the Trust or such Series in tort, contract or otherwise in
connection with the

<PAGE>

assets or the affairs of the Trust or such Series, and all Persons dealing with
the Trust or any Series shall be deemed to have agreed that resort shall be had
solely to the Trust Property of the Trust (or if the matter relates only to a
particular Series, that of such Series), for the payment or performance thereof.

The Trustees may provide that every note, bond, contract, instrument,
certificate or undertaking made or issued by the Trustees or by any officers or
officer shall give notice that a Certificate of Trust in respect of the Trust is
on file with the Secretary of State of the State of Delaware and may recite to
the effect that the same was executed or made by or on behalf of the Trust or by
them as Trustees or Trustee or as officers or officer, and not individually, and
that the obligations of any instrument made or issued by the Trustees or by any
officer of officers of the Trust are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust, or the particular Series in question, as the case may be. The
omission of any statement to such effect from such instrument shall not operate
to bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually, or to subject the assets of any Series to the
obligations of any other Series.

Section 2. Trustees' Good Faith Action; Expert Advice; No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. Subject to Section 4 of this Article
VII, a Trustee shall be liable for his or her own willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall not be liable
for errors of judgment or mistakes of fact or law. Subject to the foregoing, (i)
the Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, consultant, Adviser, administrator,
distributor or Principal Underwriter, custodian or transfer agent, dividend
disbursing agent, shareholder servicing agent or accounting agent of the Trust,
nor shall any Trustee be responsible for the act or omission of any other
Trustee; (ii) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice; and (iii) in
discharging their duties, the Trustees, when acting in good

<PAGE>

faith, shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a contracting
party employed by the Trust. The Trustees as such shall not be required to give
any bond or surety or any other security for the performance of their duties.

Section 3. Indemnification of Shareholders. If any Shareholder (or former
Shareholder) of the Trust shall be charged or held to be personally liable for
any obligation or liability of the Trust solely by reason of being or having
been a Shareholder and not because of such Shareholder's acts or omissions or
for some other reason, the Trust (upon proper and timely request by the
Shareholder) may assume the defense against such charge and satisfy any judgment
thereon or may reimburse the Shareholders for expenses, and the Shareholder or
former Shareholder (or the heirs, executors, administrators or other legal
representatives thereof, or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled (but solely out of the
assets of the Series of which such Shareholder or former Shareholder is or was
the holder of Shares) to be held harmless from and indemnified against all loss
and expense arising from such liability.

Section 4. Indemnification of Trustees, Officers, etc. Subject to the
limitations, if applicable, hereinafter set forth in this Section 4, the Trust
shall indemnify (from the assets of one or more Series to which the conduct in
question relates) each of its Trustees, officers, employees and agents
(including Persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise (hereinafter, together with such Person's
heirs, executors, administrators or personal representative, referred to as a
"Covered Person")) against all liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such Covered Person may
be or may have been threatened, while in office or thereafter, by reason of
being or having been such a

<PAGE>

Trustee or officer, director or trustee, except with respect to any matter as to
which it has been determined that such Covered Person (i) did not act in good
faith in the reasonable belief that such Covered Person's action was in or not
opposed to the best interests of the Trust; or (ii) had acted with willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office; and (iii) for a
criminal proceeding, had reasonable cause to believe that his or her conduct was
unlawful (the conduct described in (i), (ii) and (iii) being referred to
hereafter as "Disabling Conduct"). A determination that the Covered Person is
entitled to indemnification may be made by (i) a final decision on the merits by
a court or other body before whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding against a Covered
Person for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
the Trustees who are neither "interested persons" of the Trust as defined in the
1940 Act nor parties to the proceeding (the "Disinterested Trustees"), or (b) an
independent legal counsel in a written opinion. Expenses, including accountants'
and counsel fees so incurred by any such Covered Person (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines or penalties), may
be paid from time to time by one or more Series to which the conduct in question
related in advance of the final disposition of any such action, suit or
proceeding; provided that the Covered Person shall have undertaken to repay the
amounts so paid to such Series if it is ultimately determined that
indemnification of such expenses is not authorized under this Article VII and
(i) the Covered Person shall have provided security for such undertaking, (ii)
the Trust shall be insured against losses arising by reason of any lawful
advances, or (iii) a majority of a quorum of the Disinterested Trustees, or an
independent legal counsel in a written opinion, shall have determined, based on
a review of readily available facts (as opposed to a full trial type inquiry),
that there is reason to believe that the Covered Person ultimately will be found
entitled to indemnification.

Section 5. Compromise Payment. As to any matter
disposed of by a compromise payment by any such Covered Person
referred to in Section 4 of this Article VII, pursuant to a
consent decree or otherwise, no such indemnification either

<PAGE>

for said payment or for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of a quorum of the
Disinterested Trustees or (ii) by an independent legal counsel in a written
opinion. Approval by the Trustees pursuant to clause (i) or by independent legal
counsel pursuant to clause (ii) shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in accordance with either of
such clauses as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's action was in or not opposed
to the best interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the Covered Person's
office.

Section 6. Indemnification Not Exclusive, etc. The right of indemnification
provided by this Article VII shall not be exclusive of or affect any other
rights to which any such Covered Person or shareholder may be entitled. As used
in this Article VII, a "disinterested" Person is one against whom none of the
actions, suits or other proceedings in question, and no other action, suit or
other proceeding on the same or similar grounds is then or has been pending or
threatened. Nothing contained in this Article VII shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other Persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such Person.

Section 7. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.

Section 8. Insurance. The Trustees shall be entitled and empowered to
the fullest extent permitted by law to purchase with Trust assets insurance for
liability and for all expenses reasonably incurred or paid or expected to be
paid by a Trustee, officer, employee, or agent of the Trust in connection with
any claim, action, suit, or proceeding in which he or she may become involved by
virtue of his or her capacity or former capacity as a Trustee of the Trust.

<PAGE>

ARTICLE VIII

Miscellaneous

Section 1. Termination of the Trust or Any Series or Class.

(a) Unless terminated as provided herein, the Trust shall continue
without limitation of time. The Trustees in their sole discretion may terminate
the Trust.

(b) Upon the requisite action by the Trustees to terminate the Trust or
any one or more Series of Shares or any Class thereof, after paying or otherwise
providing for all charges, taxes, expenses, and liabilities, whether due or
accrued or anticipated, of the Trust or of the particular Series or any Class
thereof as may be determined by the Trustees, the Trust shall in accordance with
such procedures as the Trustees may consider appropriate reduce the remaining
assets of the Trust or of the affected Series or Class to distributable form in
cash or Shares (if any Series remain) or other securities, or any combination
thereof, and distribute the proceeds to the Shareholders of the Series or
Classes involved, ratably according to the number of Shares of such Series or
Class held by the Shareholders of such Series or Class on the date of
distribution. Thereupon, the Trust or any affected Series or Class shall
terminate and the Trustees and the Trust shall be discharged from any and all
further liabilities and duties relating thereto or arising therefrom, and the
right, title, and interest of all parties with respect to the Trust or such
Series or Class shall be canceled and discharged.

(c) Upon termination of the Trust, following completion of winding up
of its business, the Trustees shall cause a certificate of cancellation of the
Trust's Certificate of Trust to be filed in accordance with the Delaware Act,
which certificate of cancellation may be signed by any one Trustee.

Section 2. Reorganization.

(a) Notwithstanding anything else herein, the Trustees may, without
Shareholder approval unless such approval is required by applicable law, (i)
cause the Trust to merge or consolidate with or into or transfer its assets and
any liabilities to one or more trusts (or series thereof to the extent permitted
by law), partnerships, associations, corporations or other business entities
(including trusts,

<PAGE>

partnerships, associations, corporations or other business entities created by
the Trustees to accomplish such merger or consolidation or transfer of assets
and any liabilities) so long as the surviving or resulting entity is an
investment company as defined in the 1940 Act, or is a series thereof, that will
succeed to or assume the Trust's registration under the 1940 Act and that is
formed, organized, or existing under the laws of the United States or of a
state, commonwealth, possession or colony of the United States, unless otherwise
permitted under the 1940 Act, (ii) cause any one or more Series (or Classes) of
the Trust to merge or consolidate with or into or transfer its assets and any
liabilities to any one or more other Series (or Classes) of the Trust, one or
more trusts (or series or classes thereof to the extent permitted by law),
partnerships, associations, corporations, (iii) cause the Shares to be exchanged
under or pursuant to any state or federal statute to the extent permitted by law
or (iv) cause the Trust to reorganize as a corporation, limited liability
company or limited liability partnership under the laws of Delaware or any other
state or jurisdiction.

(b) Pursuant to and in accordance with the provisions of Section
3815(f) of the Delaware Act, and notwithstanding anything to the contrary
contained in this Declaration of Trust, an agreement of merger or consolidation
or exchange or transfer of assets and liabilities approved by the Trustees in
accordance with this Section 2 may (i) effect any amendment to the governing
instrument of the Trust or (ii) effect the adoption of a new governing
instrument of the Trust if the Trust is the surviving or resulting trust in the
merger or consolidation.

(c) The Trustees may create one or more business trusts to which all or
any part of the assets, liabilities, profits, or losses of the Trust or any
Series or Class thereof may be transferred and may provide for the conversion of
Shares in the Trust or any Series or Class thereof into beneficial interests in
any such newly created trust or trusts or any series or classes thereof.

Section 3. Amendments. Except as specifically provided in this Section
3, the Trustees may, without Shareholder vote, restate, amend, or otherwise
supplement this Declaration of Trust. Shareholders shall have the right to vote
on (i) any amendment that would affect their right to vote granted in Article V,
Section 1 hereof, (ii) any amendment to this Section 3 of Article VIII; (iii)
any amendment that may require their vote under applicable law or

<PAGE>

by the Trust's registration statement, as filed with the Commission, and (iv)
any amendment submitted to them for their vote by the Trustees. Any amendment
required or permitted to be submitted to the Shareholders that, as the Trustees
determine, shall affect the Shareholders of one or more Series shall be
authorized by a vote of the Shareholders of each Series affected and no vote of
Shareholders of a Series not affected shall be required. Notwithstanding
anything else herein, no amendment hereof shall limit the rights to insurance
provided by Article VII hereof with respect to any acts or omissions of Persons
covered thereby prior to such amendment nor shall any such amendment limit the
rights to indemnification referenced in Article VIl hereof as provided in the
By-Laws with respect to any actions or omissions of Persons covered thereby
prior to such amendment. The Trustees may, without Shareholder vote, restate,
amend, or otherwise supplement the Certificate of Trust as they deem necessary
or desirable.

Section 4. Filing of Copies; References; Headings. The original or a
copy of this instrument and of each restatement and/or amendment hereto shall be
kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such restatements and/or amendments have been
made and as to any matters in connection with the Trust hereunder; and, with the
same effect as if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any such restatements
and/or amendments. In this instrument and in any such restatements and/or
amendments, references to this instrument, and all expressions such as "herein,"
"hereof," and "hereunder," shall be deemed to refer to this instrument as
amended or affected by any such restatements and/or amendments. Headings are
placed herein for convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or effect of this
instrument. Whenever the singular number is used herein, the same shall include
the plural; and the neuter, masculine and feminine genders shall include each
other, as applicable. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.

Section 5. Applicable Law.

(a) The Trust is created under, and this Declaration of
Trust is to be governed by, and construed and enforced in

<PAGE>

accordance with, the laws of the State of Delaware. The Trust shall be of the
type commonly called a business trust, and without limiting the provisions
hereof, the Trust specifically reserves the right to exercise any of the powers
or privileges afforded to business trusts or actions that may be engaged in by
business trusts under the Delaware Act, and the absence of a specific reference
herein to any such power, privilege, or action shall not imply that the Trust
may not exercise such power or privilege or take such actions.

(b) Notwithstanding the first sentence of Section 5(a) of this Article
VIII, there shall not be applicable to the Trust, the Trustees, or this
Declaration of Trust either the provisions of Section 3540 of Title 12 of the
Delaware Code or any provisions of the laws (statutory or common) of the State
of Delaware (other than the Delaware Act) pertaining to trusts that relate to or
regulate: (i) the filing with any court or governmental body or agency of
Trustee accounts or schedules of trustee fees and charges; (ii) affirmative
requirements to post bonds for trustees, officers, agents, or employees of a
trust; (iii) the necessity for obtaining a court or other governmental approval
concerning the acquisition, holding, or disposition of real or personal
property; (iv) fees or other sums applicable to trustees, officers, agents or
employees of a trust; (v) the allocation of receipts and expenditures to income
or principal; (vi) restrictions or limitations on the permissible nature,
amount, or concentration of trust investments or requirements relating to the
titling, storage, or other manner of holding of trust assets; or (vii) the
establishment of fiduciary or other standards or responsibilities or limitations
on the acts or powers or liabilities or authorities and powers of trustees that
are inconsistent with the limitations or liabilities or authorities and powers
of the Trustees set forth or referenced in this Declaration of Trust; or (viii)
activities similar to those referenced in the foregoing items (i) through (vii).

<PAGE>

Section 6. Provisions in Conflict with Law or Regulations.

(a) The provisions of this Declaration of Trust are severable, and if
the Trustees shall determine, with the advice of counsel, that any such
provision is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code of 1986, as amended (or any successor
statute thereto), and the regulations thereunder, the Delaware Act or with other
applicable laws and regulations, the conflicting provision shall be deemed never
to have constituted a part of this Declaration of Trust; provided, however, that
such decision shall not affect any of the remaining provisions of this
Declaration of Trust or render invalid or improper any action taken or omitted
prior to such determination.

(b) If any provision of this Declaration of Trust shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall, not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration of Trust in any jurisdiction.

Section 7. Business Trust Only. It is the intention of the Trustees to
create a business trust pursuant to the Delaware Act. It is not the intention of
the Trustees to create a general partnership, limited partnership, joint stock
association, corporation, bailment, or any form of legal relationship other than
a business trust pursuant to the Delaware Act. Nothing in this Declaration of
Trust shall be construed to make the Shareholders, either by themselves or with
the Trustees, partners, or members of a joint stock association.

<PAGE>

IN WITNESS WHEREOF, the Trustees named below do hereby make and enter
into this Agreement and Declaration of Trust as of the 18th day of September,
1997.

/s/ Laurence B. Ashkin /s/ Thomas L. McVerry
Laurence B. Ashkin Thomas L. McVerry
Trustee and not individually Trustee and not individually

/s/ Charles A. Austin, III /s/ David M. Richardson
Charles A. Austin, III David M. Richardson
Trustee and not individually Trustee and not individually

/s/ K. Dun Gifford /s/ Russell A. Salton, III
K. Dun Gifford Russell A. Salton, III
Trustee and not individually Trustee and not individually

/s/ James S. Howell /s/ Michael S. Scofield
James S. Howell Michael S. Scofield
Trustee and not individually Trustee and not individually

/s/ Leroy Keith, Jr. /s/ Richard J. Shima
Leroy Keith, Jr. Richard J. Shima
Trustee and not individually Trustee and not individually

/s/ Gerald M. McDonnell /s/ William W. Pettit
Gerald M. McDonnell William W. Pettit
Trustee and not individually Trustee and not individually

THE PRINCIPAL PLACE OF BUSINESS
OF THE TRUST IS:

200 Berkeley Street
Boston, Massachusetts 02116

<PAGE>

BY-LAWS

EVERGREEN MUNICIPAL TRUST

a Delaware Business Trust

<PAGE>

TABLE OF CONTENTS

INTRODUCTION..............................................................1
A. Agreement and Declaration of Trust............................1
B. Definitions...................................................1

ARTICLE I OFFICES........................................................1
Section 1. Principal Office......................................1
Section 2. Delaware Office.......................................1
Section 3. Other Offices.........................................1

ARTICLE II MEETINGS OF SHAREHOLDERS......................................1
Section 1. Place of Meetings.....................................1
Section 2. Call of Meetings......................................2
Section 3. Notice of Meetings of Shareholders....................2
Section 4. Manner of Giving Notice: Affidavit
of Notice.....................................2
Section 5. Adjourned Meeting; Notice.............................3
Section 6. Voting................................................3
Section 7. Waiver of Notice; Consent of Absent
Shareholders..................................3
Section 8. Shareholder Action by Written Consent
Without a Meeting.............................4
Section 9. Record Date for Shareholder Notice;
Voting and Giving Consents....................4
Section 10. Proxies..............................................5
Section 11. Inspectors of Election...............................5

ARTICLE III TRUSTEES.....................................................6
Section 1. Powers................................................6
Section 2. Number of Trustees....................................6
Section 3. Vacancies.............................................6
Section 4. Chair.................................................6
Section 5. Place of Meetings and Meetings by
Telephone.....................................7
Section 6. Regular Meetings......................................7
Section 7. Special Meetings......................................7
Section 8. Quorum................................................7
Section 9. Waiver of Notice......................................8
Section 10. Adjournment..........................................8
Section 11. Notice of Adjournment................................8
Section 12. Action Without a Meeting.............................8
Section 13. Fees and Compensation of Trustees....................8
Section 14. Delegation of Power to Other Trustees................8

ARTICLE IV COMMITTEES....................................................9
Section 1. Committees of Trustees................................9
Section 2. Meetings and Action of Committees.....................9

<PAGE>

ARTICLE V OFFICERS......................................................10
Section 1. Officers.............................................10
Section 2. Election of Officers.................................10
Section 3. Subordinate Officers.................................10
Section 4. Removal and Resignation of Officers..................10
Section 5. Vacancies in Offices.................................10
Section 6. President............................................10
Section 7. Vice Presidents......................................11
Section 8. Secretary............................................11
Section 9. Treasurer............................................11

ARTICLE VI INSPECTION OF RECORDS AND REPORTS............................12
Section 1. Inspection by Shareholders...........................12
Section 2. Inspection by Trustees...............................12

ARTICLE VII GENERAL MATTERS.............................................12
Section 1. Checks, Drafts, Evidences of Indebtedness............12
Section 2. Contracts and Instruments: How
Executed.....................................13
Section 3. Fiscal Year..........................................13
Section 4. Seal.................................................13

ARTICLE VIII AMENDMENTS.................................................13
Section 1. Amendment............................................13

<PAGE>

BY-LAWS

EVERGREEN MUNICIPAL TRUST

a Delaware Business Trust

INTRODUCTION

A. Agreement and Declaration of Trust. These By-Laws shall be subject
to the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Evergreen Municipal Trust, a Delaware business trust
(the "Trust"). In the event of any inconsistency between the terms hereof and
the terms of the Declaration of Trust, the terms of the Declaration of Trust
shall control.

B. Definitions. Capitalized terms used herein and not herein defined are
used as defined in the Declaration of Trust.

ARTICLE I OFFICES

Section 1. Principal Office. The Trustees shall fix and, from time to
time, may change the location of the principal executive office of the Trust at
any place within or outside the State of Delaware.

Section 2. Delaware Office. The Trustees shall establish a registered
office in the State of Delaware and shall appoint as the Trust's registered
agent for service of process in the State of Delaware an individual who is a
resident of the State of Delaware or a Delaware corporation or a corporation
authorized to transact business in the State of Delaware; in each case the
business office of such registered agent for service of process shall be
identical with the registered Delaware office of the Trust.

Section 3. Other Offices. The Trustees may at any time establish branch or
subordinate offices at any place or places within or outside the State of
Delaware where the Trust intends to do business.

ARTICLE II MEETINGS OF SHAREHOLDERS

<PAGE>

Section 1. Place of Meetings. Meetings of Shareholders shall be held at
any place designated by the Trustees. In the absence of any such designation,
Shareholders' meetings shall be held at the principal executive office of the
Trust.

Section 2. Call of Meetings. There shall be no annual Shareholders'
meetings. Special meetings of the Shareholders may be called at any time by the
Trustees, the President or any other officer designated for the purpose by the
Trustees, for the purpose of seeking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or provided in the
Declaration of Trust or upon any other matter as to which such vote or authority
is deemed by the Trustees or the President to be necessary or desirable. To the
extent required by the Investment Company Act of 1940, as amended ("1940 Act"),
meetings of the Shareholders for the purpose of voting on the removal of any
Trustee shall be called promptly by the Trustees.

Section 3. Notice of Meetings of Shareholders. All notices of meetings
of Shareholders shall be sent or otherwise given to Shareholders in accordance
with Section 4 of this Article II not less than ten (10) nor more than ninety
(90) days before the date of the meeting. The notice shall specify (i) the
place, date and hour of the meeting, and (ii) the general nature of the business
to be transacted.

Section 4. Manner of Giving Notice: Affidavit of Notice. Notice of any
meeting of Shareholders shall be (i) given either by hand delivery, first-class
mail, telegraphic or other written communication, charges prepaid, and (ii)
addressed to the Shareholder at the address of that Shareholder appearing on the
books of the Trust or its transfer agent or given by the Shareholder to the
Trust for the purpose of notice. If no such address appears on the Trust's books
or is not given to the Trust, notice shall be deemed to have been given if sent
to that Shareholder by first class mail or telegraphic or other written
communication to the Trust's principal executive office, or if published at
least once in a newspaper of general circulation in the county where that office
is located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication or, where notice is given by publication, on the date of
publication.

An affidavit of the mailing or other means of giving any notice of any
meeting of Shareholders shall be filed and maintained in the minute book of the
Trust.

<PAGE>

Section 5. Adjourned Meeting; Notice. Any meeting of Shareholders, whether
or not a quorum is present, may be adjourned from time to time by: (a) the vote
of the majority of the Shares represented at that meeting, either in person or
by proxy; or (b) in his or her discretion by the chair of the meeting.

When any meeting of Shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed. Notice of any
such adjourned meeting shall be given to each Shareholder of record entitled to
vote at the adjourned meeting in accordance with the provisions of Sections 3
and 4 of this Article II. At any adjourned meeting, any business may be
transacted which might have been transacted at the original meeting.

Section 6. Voting. The Shareholders entitled to vote at any meeting of
Shareholders shall be determined in accordance with the provisions of the
Declaration of Trust of the Trust, as in effect at such time. The Shareholders'
vote may be by voice vote or by ballot, provided, however, that any election for
Trustees must be by ballot if demanded by any Shareholder before the voting has
begun.

Section 7. Waiver of Notice; Consent of Absent Shareholders. The
transaction of business and any actions taken at a meeting of Shareholders,
however called and noticed and wherever held, shall be as valid as though taken
at a meeting duly held after regular call and notice provided a quorum is
present either in person or by proxy at the meeting of Shareholders and if
either before or after the meeting, each Shareholder entitled to vote who was
not present in person or by proxy at the meeting of the Shareholders signs a
written waiver of notice or a consent to a holding of the meeting or an approval
of the minutes. The waiver of notice or consent need not specify either the
business to be transacted or the purpose of any meeting of Shareholders.

Attendance by a Shareholder at a meeting of Shareholders shall
constitute a waiver of notice of that meeting, except if the Shareholder objects
at the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened and except that attendance at a
meeting of Shareholders is not a waiver of any right to object to the
consideration of matters not included in the notice of the meeting of
Shareholders if that objection is expressly made at the beginning of the
meeting.

<PAGE>

Section 8. Shareholder Action by Written Consent Without a Meeting.
Except as provided in the Declaration of Trust, any action that may be taken at
any meeting of Shareholders may be taken without a meeting and without prior
notice if a consent in writing setting forth the action to be taken is signed by
the holders of outstanding Shares having not less than the minimum number of
votes that would be necessary to authorize or take that action at a meeting at
which all Shares entitled to vote on that action were present and voted,
provided, however, that the Shareholders receive any necessary Information
Statement or other necessary documentation in conformity with the requirements
of the Securities Exchange Act of 1934 or the rules or regulations thereunder.
All such consents shall be filed with the Secretary of the Trust and shall be
maintained in the Trust's records. Any Shareholder giving a written consent or
the Shareholder's proxy holders or a transferee of the Shares or a personal
representative of the Shareholder or their respective proxy holders may revoke
the Shareholder's written consent by a writing received by the Secretary of the
Trust before written consents of the number of Shares required to authorize the
proposed action have been filed with the Secretary.

If the consents of all Shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
Shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the Shareholders without a meeting. This notice
shall be given in the manner specified in Section 4 of this Article II.

Section 9. Record Date for Shareholder Notice; Voting and
Giving Consents.

(a) For purposes of determining the Shareholders entitled to vote or
act at any meeting or adjournment thereof, the Trustees may fix in advance a
record date which shall not be more than ninety (90) days nor less than ten (10)
days before the date of any such meeting. Without fixing a record date for a
meeting, the Trustees may for voting and notice purposes close the register or
transfer books for one or more Series (or Classes) for all or any part of the
period between the earliest date on which a record date for such meeting could
be set in accordance herewith and the date of such meeting.

If the Trustees do not so fix a record date or close the register or
transfer books of the affected Series or Classes, the record date for
determining Shareholders entitled to notice of or to vote at a meeting of
Shareholders shall be the close of business on the business day next preceding
the day on which notice is given or if notice is waived, at the close

<PAGE>

of business on the business day next preceding the day on
which the meeting is held.

(b) The record date for determining Shareholders entitled to give
consent to action in writing without a meeting, (a) when no prior action of the
Trustees has been taken, shall be the day on which the first written consent is
given, or (b) when prior action of the Trustees has been taken, shall be (i)
such date as determined for that purpose by the Trustees, which record date
shall not precede the date upon which the resolution fixing it is adopted by the
Trustees and shall not be more than twenty (20) days after the date of such
resolution, or (ii) if no record date is fixed by the Trustees, the record date
shall be the close of business on the day on which the Trustees adopt the
resolution relating to that action. Nothing in this Section shall be constituted
as precluding the Trustees from setting different record dates for different
Series or Classes. Only Shareholders of record on the record date as herein
determined shall have any right to vote or to act at any meeting or give consent
to any action relating to such record date, notwithstanding any transfer of
Shares on the books of the Trust after such record date.

Section 10. Proxies. Subject to the provisions of the Declaration of
Trust, every Person entitled to vote for Trustees or on any other matter shall
have the right to do so either in person or by proxy, provided that either (i)
an instrument authorizing such a proxy to act is executed by the Shareholder in
writing and dated not more than eleven (11) months before the meeting, unless
the instrument specifically provides for a longer period or (ii) the Trustees
adopt an electronic, telephonic, computerized or other alternative to the
execution of a written instrument authorizing the proxy to act, and such
authorization is received not more than eleven (11) months before the meeting. A
proxy shall be deemed executed by a Shareholder if the Shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the Shareholder or the Shareholder's
attorney-in-fact. A valid proxy which does not state that it is irrevocable
shall continue in full force and effect unless (i) revoked by the Person
executing it before the vote pursuant to that proxy is taken, (a) by a writing
delivered to the Trust stating that the proxy is revoked, or (b) by a subsequent
proxy executed by such Person, or (c) attendance at the meeting and voting in
person by the Person executing that proxy, or (d) revocation by such Person
using any electronic, telephonic, computerized or other alternative means
authorized by the Trustees for authorizing the proxy to act; or (ii) written
notice of the death or incapacity of the maker of that proxy is received by the
Trust

<PAGE>

before the vote pursuant to that proxy is counted. A proxy with respect to
Shares held in the name of two or more Persons shall be valid if executed by any
one of them unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of the two or more Persons.
A proxy purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger.

Section 11. Inspectors of Election. Before any meeting of
Shareholders, the Trustees may appoint any persons other than nominees for
office to act as inspectors of election at the meeting or its adjournments. If
no inspectors of election are so appointed, the Chairman of the meeting may
appoint inspectors of election at the meeting. The number of inspectors shall be
two (2). If any person appointed as inspector fails to appear or fails or
refuses to act, the Chairman of the meeting may appoint a person to fill the
vacancy.

These inspectors shall:

(a) Determine the number of Shares outstanding and the voting
power of each, the Shares represented at the meeting, the
existence of a quorum and the authenticity, validity and
effect of proxies;

(b) Receive votes, ballots or consents;

(d) Count and tabulate all votes or consents;

(e) Determine when the polls shall close;

(f) Determine the result; and

(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all Shareholders.

ARTICLE III TRUSTEES

Section 1. Powers. Subject to the applicable provisions of the 1940 Act,
the Declaration of Trust and these By-Laws relating to action required to be
approved by the Shareholders, the business and affairs of the Trust shall be

<PAGE>

managed and all powers shall be exercised by or under the direction of the
Trustees.

Section 2. Number of Trustees. The exact number of Trustees within the
limits specified in the Declaration of Trust shall be fixed from time to time by
a resolution of the Trustees.

Section 3. Vacancies. Vacancies in the authorized number of Trustees may be
filled as provided in the Declaration of Trust.

Section 4. Chair. The Trustees shall have the power to appoint from
among the members of the Board of Trustees a Chair. Such appointment shall be by
majority vote of the Trustees. Such Chair shall serve until his or her successor
is appointed or until his or her earlier death, resignation or removal. The
Chair shall preside at meetings of the Trustees and shall, subject to the
control of the Trustees, perform such other powers and duties as may be from
time to time assigned to him or her by the Trustees or prescribed by the
Declaration of Trust or these By-Laws, consistent with his or her position. The
Chair need not be a Shareholder.

Section 5. Place of Meetings and Meetings by Telephone. All meetings of
the Trustees may be held at any place that has been selected from time to time
by the Trustees. In the absence of such an election, regular meetings shall be
held at the principal executive office of the Trust. Subject to any applicable
requirements of the 1940 Act, any meeting, regular or special, may be held by
conference telephone or similar communication equipment, so long as all Trustees
participating in the meeting can hear one another and all such Trustees shall be
deemed to be present in person at the meeting.

Section 6. Regular Meetings. Regular meetings of the Trustees shall be held
without call at such time as shall from time to time be fixed by the Trustees.
Such regular meetings may be held without notice.

Section 7. Special Meetings. Special meetings of the Trustees for any
purpose or purposes may be called at any time by the Chair, the President or
Secretary or any two (2) Trustees.

Notice of the time and place of special meetings shall be delivered
personally or by telephone to each Trustee or sent by first-class mail, by
telegram or telecopy (or similar electronic means) or, by nationally recognized
overnight courier, charges prepaid, addressed to each Trustee at that

<PAGE>

Trustee's address as it is shown on the records of the Trust. If the notice is
mailed, it shall be deposited in the United States mail at least seven (7)
calendar days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone or by telegram, telecopy (or similar
electronic means), or overnight courier, it shall be given at least forty eight
(48) hours before the time of the holding of the meeting. Any oral notice given
personally or by telephone must be communicated only to the Trustee. The notice
need not specify the purpose of the meeting or the place of the meeting, if the
meeting is to be held at the principal executive office of the Trust. Notice of
a meeting need not be given to any Trustee if a written waiver of notice,
executed by such Trustee before or after the meeting, is filed with the records
of the meeting, or to any Trustee who attends the meeting without protesting,
prior thereto or at its commencement, the Iack of notice to such Trustee.

Section 8. Quorum. Twenty-five percent (25%) of the Trustees shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the Trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Trustees, subject to the
provisions of the Declaration of Trust. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
Trustees if any action taken is approved by at least a majority of the required
quorum for that meeting.

Section 9. Waiver of Notice. Notice of any meeting need not be given to
any Trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any Trustee who attends the meeting without protesting,
prior to or at its commencement, the lack of notice to that Trustee.

Section 10. Adjournment. A majority of the Trustees present, whether or not
constituting a quorum, may adjourn any meeting to another time and place.

Section 11. Notice of Adjournment. Notice of the time and place of holding
an adjourned meeting need not be given.

Section 12. Action Without a Meeting. Unless the 1940 Act requires that a
particular action be taken only at a meeting

<PAGE>

at which the Trustees are present in person, any action to be taken by the
Trustees at a meeting may be taken without such meeting by the written consent
of a majority of the Trustees then in office. Any such written consent may be
executed and given by telecopy or similar electronic means. Such written
consents shall be filed with the minutes of the proceedings of the Trustees. If
any action is so taken by the Trustees by the written consent of less than all
of the Trustees, prompt notice of the taking of such action shall be furnished
to each Trustee who did not execute such written consent, provided that the
effectiveness of such action shall not be impaired by any delay or failure to
furnish such notice.

Section 13. Fees and Compensation of Trustees. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Trustees. This Section 13 of Article III shall not be construed to preclude any
Trustee from serving the Trust in any other capacity as an officer, agent,
employee, or otherwise and receiving compensation for those services.

Section 14. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his or her power for a period not exceeding one (1)
month at any one time to any other Trustee. Except where applicable law may
require a Trustee to be present in person, a Trustee represented by another
Trustee, pursuant to such power of attorney, shall be deemed to be present for
purpose of establishing a quorum and satisfying the required majority vote.

ARTICLE IV COMMITTEES

Section 1. Committees of Trustees. The Trustees may by resolution
designate one or more committees, each consisting of two (2) or more Trustees,
to serve at the pleasure of the Trustees. The Trustees may designate one or more
Trustees as alternate members of any committee who may replace any absent member
at any meeting of the committee. Any committee, to the extent provided for by
resolution of the Trustees, shall have the authority of the Trustees, except
with respect to:

(a) the approval of any action which under applicable
law requires approval by a majority of the Trustees
or certain Trustees;

(b) the filling of vacancies of Trustees;

<PAGE>

(d) the amendment or termination of the Declaration of Trust or
any Series or Class or the amendment of the By-Laws or the
adoption of new By-Laws;

(e) the amendment or repeal of any resolution of the Trustees
which by its express terms is not so amendable or repealable;

(f) a distribution to the Shareholders of the Trust, except at a
rate or in a periodic amount or within a designated range
determined by the Trustees; or

(g) the appointment of any other committees of the Trustees or the
members of such new committees.

Section 2. Meetings and Action of Committees. Meetings and action of
committees shall be governed by, held and taken in accordance with the
provisions of Article III of these ByLaws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Trustees generally, except that the time of regular meetings of committees may
be determined either by resolution of the Trustees or by resolution of the
committee. Special meetings of committees may also be called by resolution of
the Trustees. Alternate members shall be given notice of meetings of committees
and shall have the right to attend all meetings of committees. The Trustees may
adopt rules for the governance of any committee not inconsistent with the
provisions of these By-Laws.

ARTICLE V OFFICERS

Section 1. Officers. The officers of the Trust shall be a President, a
Secretary, and a Treasurer. The Trust may also have, at the discretion of the
Trustees, one or more Vice Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article V. Any number of
offices may be held by the same person. Any officer may be, but need not be, a
Trustee or Shareholder.

Section 2. Election of Officers. The officers of the Trust, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the Trustees, and each shall
serve at

<PAGE>

the pleasure of the Trustees, subject to the rights, if any,
of an officer under any contract of employment.

Section 3. Subordinate Officers. The Trustees may appoint and may
empower the President to appoint such other officers as the business of the
Trust may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these By-Laws or as the
Trustees may from time to time determine.

Section 4. Removal and Resignation of Officers. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the Trustees at any regular or special
meeting of the Trustees or by such officer upon whom such power of removal may
be conferred by the Trustees.

Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a party.

Section 5. Vacancies in Offices. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled in
the manner prescribed in these By-Laws for regular appointment to that office.
The President may make temporary appointments to a vacant office pending action
by the Trustees.

Section 6. President. The President shall be the chief operating and
chief executive officer of the Trust and shall, subject to the control of the
Trustees, have general supervision, direction and control of the business and
the officers of the Trust. He or she or his or her designee, shall preside at
all meetings of the Shareholders. He or she shall have the general powers and
duties of a president of a corporation and shall have such other powers and
duties as may be prescribed by the Trustees, the Declaration of Trust or these
By-Laws.

Section 7. Vice Presidents. In the absence or disability of the President,
any Vice President, unless there is an Executive Vice President, shall perform
all the duties of the President and when so acting shall have all powers of and
be subject to all the restrictions upon the President. The Executive Vice
President or Vice Presidents, whichever the

<PAGE>

case may be, shall have such other powers and shall perform such other duties as
from time to time may be prescribed for them respectively by the Trustees or the
President or by these By-Laws.

Section 8. Secretary. The Secretary shall keep or cause to be kept at
the principal executive office of the Trust, or such other place as the Trustees
may direct, a book of minutes of all meetings and actions of Trustees,
committees of Trustees and Shareholders with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at Trustees' meetings or committee meetings, the
number of Shares present or represented at meetings of Shareholders and the
proceedings of the meetings.

The Secretary shall keep or cause to be kept at the principal
executive office of the Trust or at the office of the Trust's transfer agent or
registrar, a share register or a duplicate share register showing the names of
all Shareholders and their addresses, the number and classes of Shares held by
each, the number and date of certificates issued for the same and the number and
date of cancellation of every certificate surrendered for cancellation.

The Secretary shall give or cause to be given notice of all meetings of
the Shareholders and of the Trustees (or committees thereof) required to be
given by these By-Laws or by applicable law and shall have such other powers and
perform such other duties as may be prescribed by the Trustees or by these
By-Laws.

Section 9. Treasurer. The Treasurer shall be the chief financial
officer and chief accounting officer of the Trust and shall keep and maintain or
cause to be kept and maintained adequate and correct books and records of
accounts of the properties and business transactions of the Trust and each
Series or Class thereof, including accounts of the assets, liabilities,
receipts, disbursements, gains, losses, capital and retained earnings of all
Series or Classes thereof. The books of account shall at all reasonable times be
open to inspection by any Trustee.

The Treasurer shall deposit all monies and other valuables in the name
and to the credit of the Trust with such depositaries as may be designated by
the Board of Trustees. He or she shall disburse the funds of the Trust as may be
ordered by the Trustees, shall render to the President and Trustees, whenever
they request it, an account of all of his or her transactions as chief financial
officer and of the financial

<PAGE>

condition of the Trust and shall have other powers and perform such other duties
as may be prescribed by the Trustees or these By-Laws.

ARTICLE VI INSPECTION OF RECORDS AND REPORTS

Section 1. Inspection by Shareholders. The Trustees shall from time to
time determine whether and to what extent, and at what times and places, and
under what conditions and regulations the accounts and books of the Trust or any
of them shall be open to the inspection of the Shareholders; and no Shareholder
shall have any right to inspect any account or book or document of the Trust
except as conferred by law or otherwise by the Trustees or by resolution of the
Shareholders.

Section 2. Inspection by Trustees. Every Trustee shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a Trustee may be made in person or by an agent or attorney and the
right of inspection includes the right to copy and make extracts of documents.

ARTICLE VII GENERAL MATTERS

Section 1. Checks, Drafts, Evidences of Indebtedness. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed in such manner and by such person or persons as shall be designated
from time to time in accordance with the resolution of the Board of Trustees.

Section 2. Contracts and Instruments: How Executed. The Trustees,
except as otherwise provided in these By-Laws, may authorize any officer or
officers, agent or agents, to enter into any contract or execute any instrument
in the name of and on behalf of the Trust and this authority may be general or
confined to specific instances; and unless so authorized or ratified by the
Trustees or within the agency power of an officer, no officer, agent, or
employee shall have any power or authority to bind the Trust by any contract or
engagement or to pledge its credit or to render it liable for any purpose or for
any amount.

Section 3. Fiscal Year. The fiscal year of each series of the Trust shall
be fixed and refixed or changed from time to time by the Trustees.

<PAGE>

Section 4. Seal. The seal of the Trust shall consist of a flat-faced
dye with the name of the Trust cut or engraved thereon. However, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.

ARTICLE VIII AMENDMENTS

Section 1. Amendment. Except as otherwise provided by applicable law or by
the Declaration of Trust, these By-Laws may be restated, amended, supplemented
or repealed by a majority vote of the Trustees.

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.