EVERGREEN MUNICIPAL TRUST /DE/, 485BPOS, 1998-09-30

EVERGREEN MUNICIPAL TRUST /DE/
485BPOS, 1998-09-30

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 9 [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)

The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485

If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)

<PAGE>

EVERGREEN MUNICIPAL TRUST

CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 8
to
REGISTRATION STATEMENT

This Post-Effective Amendment No. 8 to Registrant's Registration Statement
No. 333-36033/811-08367 consists of the following pages, items of information
and documents:

The Facing Sheet

The Contents Page

The Cross-Reference Sheet

PART A
------

Prospectuses for Evergreen High Grade Tax Free Fund, Evergreen Short-
Intermediate Municipal Fund, and Evergreen Tax Free Fund are
contained herein.

Prospectuses for Evergreen California Tax Free Fund, Evergreen Connecticut
Municipal Bond Fund, Evergreen Massachusetts Tax Free Fund, Evergreen Missouri
Tax Free Fund, Evergreen New York Tax Free Fund, Evergreen Pennsylvania Tax Free
Fund, and Evergreen New Jersey Tax Free Income Fund contained in Post-
Effective Amendment No. 7 to Registration Statement No. 333-36033/811-08367
filed on July 31, 1998 are incorporated by reference herein.

Prospectuses for Evergreen Florida High Income Municipal Bond Fund, Evergreen
Florida Municipal Bond Fund, Evergreen Georgia Municipal Bond Fund, Evergreen
North Carolina Municipal Bond Fund, Evergreen South Carolina Municipal Bond
Fund, and Evergreen Virginia Municipal Bond Fund contained in Post-Effective
Amendment No. 5 to Registration Statement No. 333-36033/811-08367 filed on
February 6, 1998 are incorporated by reference herein.

PART B
------

Statement of Additional Information for Evergreen High Grade Tax Free Fund,
Evergreen Short-Intermediate Municipal Fund, and Evergreen Tax Free Fund is
contained herein.

Statement of Additional Information for Evergreen California Tax Free Fund,
Evergreen Connecticut Municipal Bond Fund, Evergreen Massachusetts Tax Free
Fund, Evergreen Missouri Tax Free Fund, Evergreen New York Tax Free Fund,
Evergreen Pennsylvania Tax Free Fund, and Evergreen New Jersey Tax Free Income
Fund contained in Post-Effective Amendment No. 7 to Registration Statement
No. 333-36033/811-08367 filed on July 31, 1998 is incorporated by reference
herein.

Statement of Additional Information for Evergreen Florida High Income Municipal
Bond Fund, Evergreen Florida Municipal Bond Fund, Evergreen Georgia Municipal
Bond Fund, Evergreen North Carolina Municipal Bond Fund, Evergreen South
Carolina Municipal Bond Fund, and Evergreen Virginia Municipal Bond Fund
contained in Post-Effective Amendment No. 5 to Registration
Statement No. 333-36033/811-08367 filed on February 6, 1998 is incorporated
by reference herein.

PART C
------

Financial Statements

Exhibits

Number of Holders of Securities

Indemnification

Business and Other Connections of Investment Adviser

Principal Underwriter

Location of Accounts and Records

Undertakings

Signatures

<PAGE>

EVERGREEN MUNICIPAL TRUST

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
N-1A Item No. Location in Prospectus(es)
<S> <C>
Part A

Item 1. Cover Page Cover Page

Item 2. Synopsis Expense Information

Item 3. Condensed Financial Information Financial Highlights

Item 4. General Description of Registrant Cover Page; Description of the Funds; Investment Objectives and Policies;
Investment Practices and Restrictions; Organization and Service Providers

Item 5. Management of the Fund Organization and Service Providers; Expense Information

Item 5A. Management's Discussion of Fund Not Applicable
Performance

Item 6. Capital Stock and Other Securities Description of the Funds; Organization; Purchase and Redemption of Shares;
Other Information

Item 7. Purchase of Securities Being Offered Organization and Service Providers; Purchase and Redemption of Shares

Item 8. Redemption or Repurchase Purchase and Redemption of Shares

Item 9. Pending Legal Proceedings Not Applicable

Location in Statement of
Part B Additional Information

Item 10. Cover Page Cover Page

Item 11. Table of Contents Table of Contents

Item 12. General Information and History Not Applicable

Item 13. Investment Objectives and Policies Investment Policies; Appendix

Item 14. Management of the Fund Management of the Trust

Item 15. Control Persons and Principal Principal Holders of Fund Shares
Holders of Securities

Item 16. Investment Advisory and Other Investment Advisory and Other Services
Services

Item 17. Brokerage Allocation and Other Brokerage Allocation and Other Services
Practices

Item 18. Capital Stock and Other Securities Trust Organization

Item 19. Purchase, Redemption and Pricing of Purchase, Redemption and Pricing of Fund Shares
Securities Being Offered

Item 20. Tax Status Additional Tax Information

Item 21. Underwriters Principal Underwriter

Item 22. Calculation of Performance Data Performance

Item 23. Financial Statements Financial Statements
</TABLE>

Part C

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.

<PAGE>

EVERGREEN MUNICIPAL TRUST

PART A

PROSPECTUSES
<PAGE>

- -------------------------------------------------------------------------------

PROSPECTUS October 1, 1998

- -------------------------------------------------------------------------------

EVERGREEN SM NATIONAL MUNICIPAL BOND FUNDS LOGO
- -------------------------------------------------------------------------------

EVERGREEN HIGH GRADE TAX FREE FUND
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND

CLASS A SHARES
CLASS B SHARES

EVERGREEN TAX FREE FUND

CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

The Evergreen National Municipal Bond Funds (each a "Fund," together the
"Funds") are designed to provide investors with income exempt from federal
income taxes. This prospectus provides information regarding the Class A and
Class B shares offered by EVERGREEN HIGH GRADE TAX FREE FUND and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND and the Class A, Class B and Class C shares
offered by EVERGREEN TAX FREE FUND. Each Fund is a diversified series of an
open-end management investment company. This prospectus sets forth information
about the Funds that a prospective investor should have before investing. The
address of the Funds is 200 Berkeley Street, Boston, Massachusetts 02116.

A Statement of Additional Information ("SAI") for the Funds dated October
1, 1998, as supplemented from time to time, has been filed with the Securities
and Exchange Commission ("SEC") and is incorporated by reference herein. The
SAI 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 Funds at (800) 343-2898. There can be
no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this prospectus carefully.

AN INVESTMENT IN A FUND IS NOT A DEPOSIT OR AN OBLIGATION OF OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES ARE NOT INSURED OR OTHERWISE PROTECTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND
INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

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

Keep This Prospectus For Future Reference

EVERGREEN SM is a Service Mark of Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
EXPENSE INFORMATION....................... 3
FINANCIAL HIGHLIGHTS...................... 5
DESCRIPTION OF THE FUNDS.................. 11
Investment Objectives and Policies..... 11
Investment Practices and Restrictions.. 13
ORGANIZATION AND SERVICE PROVIDERS........ 17
Organization........................... 17
Service Providers...................... 17
Distribution Plans and Agreements...... 19
</TABLE>
<TABLE>
<S> <C>
PURCHASE AND REDEMPTION OF SHARES...... 20
How to Buy Shares................... 20
How to Redeem Shares................ 23
Exchange Privilege.................. 24
Shareholder Services................ 25
Effect of Banking Laws.............. 26
OTHER INFORMATION...................... 26
Dividends, Distributions and Taxes.. 26
General Information................. 27
</TABLE>

2
<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 Funds. Shareholder transaction expenses are fees paid directly from
your account when you buy or sell shares of the Funds.

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION
EXPENSES CLASS A SHARES CLASS B SHARES CLASS C SHARES
----------------------- -------------- -------------- --------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases
(as a % of offering price):
Evergreen High Grade Tax Free
Fund......................... 4.75% None None
Evergreen Short-Intermediate
Municipal Fund............... 3.25% None None
Evergreen Tax Free Fund....... 4.75% None None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a %
of offering price)............ None None None
Maximum Contingent Deferred
Sales Charge
(as a % of original purchase
price or redemption proceeds,
whichever is lower)........... None(1) 5%(2) 1%(2)
</TABLE>

Annual operating expenses reflect the normal operating expenses of each
Fund, and include costs such as management, distribution and other fees. The
table below shows the annual operating expenses for the fiscal year ended May
31, 1998 for EVERGREEN HIGH GRADE TAX FREE FUND and estimated annual operating
expenses for the fiscal year ending May 31, 1999 for EVERGREEN SHORT-
INTERMEDIATE MUNICIPAL FUND and EVERGREEN TAX FREE FUND. The examples show
what you would pay if you invested $1,000 over the periods indicated. The
examples assume that you reinvest all of your dividends and that the Funds'
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 FUNDS' ACTUAL EXPENSES AND RETURNS WILL VARY. For a more
complete description of the various costs and expenses borne by the Funds see
"Organization and Service Providers."

EVERGREEN HIGH GRADE TAX FREE FUND
<TABLE>
<CAPTION>
EXAMPLES
----------------------------
ASSUMING
REDEMPTION AT ASSUMING NO
END OF PERIOD REDEMPTION
--------------- -----------
CLASS A CLASS B CLASS B
------- ------- -----------
<S> <C> <C> <C>
After 1 Year.......... $ 58 $ 69 $ 19
After 3 Years......... $ 81 $ 88 $ 58
After 5 Years......... $105 $120 $100
After 10 Years........ $174 $187 $187
</TABLE>

<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
- -------------------------
CLASS A CLASS B
------- -------
<S> <C> <C>
Management Fees.......... 0.50% 0.50%
12b-1 Fees(3)............ 0.25% 1.00%
Other Expenses........... 0.34% 0.34%
---- ----
Total.................... 1.09% 1.84%
==== ====
</TABLE>

EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND
<TABLE>
<CAPTION>
EXAMPLES
----------------------------
ASSUMING
REDEMPTION AT ASSUMING NO
END OF PERIOD REDEMPTION
--------------- -----------
CLASS A CLASS B CLASS B
------- ------- -----------
<S> <C> <C> <C>
After 1 Year.......... $ 40 $ 67 $ 17
After 3 Years......... $ 55 $ 82 $ 52
After 5 Years......... $ 72 $109 $ 89
After 10 Years........ $121 $159 $159
</TABLE>

<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
- -------------------------
CLASS A CLASS B
------- -------
<S> <C> <C>
Management Fees (After
Waivers)*............... 0.43% 0.43%
12b-1 Fees(3)............ 0.10% 1.00%
Other Expenses........... 0.21% 0.21%
---- ----
Total 0.74% 1.64%
==== ====
</TABLE>

3
<PAGE>

EVERGREEN TAX FREE FUND

<TABLE>
<CAPTION>
EXAMPLES
---------------------------------------
ASSUMING REDEMPTION AT ASSUMING NO
END OF PERIOD REDEMPTION
----------------------- ---------------
CLASS A CLASS B CLASS C CLASS B CLASS C
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
After 1 Year............ $ 57 $ 67 $ 27 $ 17 $ 17
After 3 Years........... $ 76 $ 83 $ 53 $ 53 $ 53
After 5 years........... $ 97 $111 $ 91 $ 91 $ 91
After 10 Years.......... $156 $169 $199 $169 $199
</TABLE>

<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES
-----------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Management
Fees........... 0.41% 0.41% 0.41%
12b-1 Fees(3)... 0.25% 1.00% 1.00%
Other Expenses.. 0.27% 0.27% 0.27%
---- ---- ----
Total........... 0.93% 1.25% 1.68%
==== ==== ====
</TABLE>
- -------

(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) Class A shares of the Fund can pay up to 0.75% of average daily net assets
as a 12b-1 fee. For the forseeable future, the Class A 12b-1 fees will be
limited to 0.25% of average daily net assets for EVERGREEN HIGH GRADE TAX
FREE FUND and EVERGREEN TAX FREE FUND and 0.10% for EVERGREEN SHORT-
INTERMEDIATE MUNICIPAL FUND. Long-term shareholders may pay more than the
economic equivalent front-end sales charges permitted by the National
Association of Securities Dealers, Inc.

* Expenses for EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND reflect a
management fee waiver of 0.07% of average net assets. Absent such waiver,
the management fee would be 0.50%. Total Annual Operating Expenses, absent
waiver of the management fee, would be 0.81% and 1.71% for the Fund's Class
A and Class B shares, respectively.

Evergreen Asset Management Corp. has agreed to reimburse EVERGREEN SHORT-
INTERMEDIATE MUNICIPAL FUND to the extent that its aggregate operating
expenses (including the investment advisor's fee, but excluding taxes,
interest, brokerage commissions, Rule 12b-1 distribution fees and
extraordinary expenses) exceed 1.0% of the average net assets. This
reimbursement may be discontinued at any time.

From time to time each Fund's investment advisor may, at its discretion,
reduce or waive its fees or reimburse these Funds for certain of their other
expenses in order to reduce their expense ratios. Each Fund's investment
advisor may cease these voluntary waivers and reimbursements at any time.

4
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS

- -------------------------------------------------------------------------------

The tables on the following pages present, for EVERGREEN HIGH GRADE TAX
FREE FUND, EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND and EVERGREEN TAX FREE
FUND, financial highlights for a share outstanding throughout each period
indicated. The information for EVERGREEN HIGH GRADE TAX FREE FUND and
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND has been audited by
PricewaterhouseCoopers LLP, the Funds' independent auditors. Information for
EVERGREEN HIGH GRADE TAX FREE FUND for the fiscal years or periods ended prior
to August 31, 1996 was audited by other auditors. Information for EVERGREEN
TAX FREE FUND has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors. The tables appear in the Funds' Annual Report to
shareholders and should be read in conjunction with each Fund's financial
statements and related notes, which also appear, together with the independent
auditors' reports, in the Funds' Annual Report to shareholders. The Funds'
financial statements, related notes, and independent auditors' reports are
incorporated by reference into the Funds' SAI.

Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained upon request and without
charge.

EVERGREEN HIGH GRADE TAX FREE FUND--CLASS A

<TABLE>
<CAPTION>
FEBRUARY 21,
1992
(COMMENCE-
MENT
OF CLASS
NINE MONTHS EIGHT MONTHS YEAR ENDED OPERATIONS)
YEAR ENDED ENDED YEAR ENDED ENDED DECEMBER 31, THROUGH
MAY 31, MAY 31, AUGUST 31, AUGUST 31, ----------------- DECEMBER 31,
1998 1997(A) 1996 1995(D) 1994 1993 1992
---------- ----------- ---------- ------------ ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $10.89 $10.72 $10.69 $9.79 $11.16 $10.42 $10.00
------- ------- ------- ------- ------- -------- -------
Income from investment
operations:
Net investment income.. 0.47 0.37 0.52 0.34 0.52 0.54 0.51
Net realized and
unrealized gain (loss)
on investments........ 0.48 0.17 0.03 0.90 (1.37) 0.81 0.42
------- ------- ------- ------- ------- -------- -------
Total from investment
operations............. 0.95 0.54 0.55 1.24 (0.85) 1.35 0.93
------- ------- ------- ------- ------- -------- -------
Less distributions from:
Net investment income.. (0.48) (0.37) (0.52) (0.34) (0.52) (0.54) (0.51)
Net realized gains on
investments........... 0 0 0 0 0 (0.07) 0
------- ------- ------- ------- ------- -------- -------
Total distributions..... (0.48) (0.37) (0.52) (0.34) (0.52) (0.61) (0.51)
------- ------- ------- ------- ------- -------- -------
Net asset value end of
year................... $11.36 $10.89 $10.72 $10.69 $9.79 $11.16 $10.42
======= ======= ======= ======= ======= ======== =======
TOTAL RETURN(C)......... 8.88% 5.13% 5.21% 12.83% (7.71%) 13.25% 9.48%
RATIOS/SUPPLEMENTAL
DATA:
Ratios to average net
assets:
Expenses............... 1.09% 1.03%(b) 0.89% 1.06%(b) 1.01% 0.85% 0.49%(b)
Expenses excluding
indirectly paid
expenses.............. 1.09% 1.03%(b) -- -- -- -- --
Expenses excluding
waivers and/or
reimbursements........ 1.09% 1.11%(b) 1.09% 1.09%(b) 1.02% 1.07% 1.11%(b)
Net investment income.. 4.25% 4.60%(b) 4.78% 4.93%(b) 5.04% 4.99% 5.79%(b)
Portfolio turnover
rate................... 127% 114% 65% 27% 53% 14% 7%
NET ASSETS END OF YEAR
(THOUSANDS)............ $64,526 $45,814 $50,569 $58,751 $57,676 $101,352 $90,738
</TABLE>
- -------

(a) The Fund changed its fiscal year end from August 31 to May 31.

(b) Annualized.

(d) The Fund changed its fiscal year end from December 31 to August 31.

5
<PAGE>

EVERGREEN HIGH GRADE TAX FREE FUND--CLASS B

<TABLE>
<CAPTION>
JANUARY 11, 1993
(COMMENCEMENT OF
NINE MONTHS EIGHT MONTHS CLASS OPERATIONS)
YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED THROUGH
MAY 31, 1998 MAY 31, 1997(A) AUGUST 31, 1996 AUGUST 31, 1995(D) DECEMBER 31, 1994 DECEMBER 31, 1993
------------ --------------- --------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR.... $10.89 $10.72 $10.69 $9.79 $11.16 $10.42
------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment
income.............. 0.39 0.31 0.44 0.29 0.46 0.47
Net realized and
unrealized gain
(loss)
on investments...... 0.48 0.17 0.03 0.90 (1.37) 0.81
------- ------- ------- ------- ------- -------
Total from investment
operations........... 0.87 0.48 0.47 1.19 (0.91) 1.28
------- ------- ------- ------- ------- -------
Less distributions
from:
Net investment
income.............. (0.40) (0.31) (0.44) (0.29) (0.46) (0.47)
Net realized gain on
investments......... 0 0 0 0 0 (0.07)
------- ------- ------- ------- ------- -------
Total distributions... (0.40) (0.31) (0.44) (0.29) (0.46) (0.54)
------- ------- ------- ------- ------- -------
Net asset value end of
year................. $11.36 $10.89 $10.72 $10.69 $9.79 $11.16
======= ======= ======= ======= ======= =======
TOTAL RETURN(C)....... 8.07% 4.55% 4.42% 12.27% (8.24%) 12.52%
RATIOS/SUPPLEMENTAL
DATA
Ratios to average net
assets:
Expenses............. 1.84% 1.78%(b) 1.64% 1.81%(b) 1.58% 1.35%(b)
Expenses excluding
indirectly paid
expenses............ 1.84% 1.78%(b) -- -- -- --
Expenses excluding
waivers and/or
reimbursements...... 1.84% 1.86%(b) 1.84% 1.84%(b) 1.59% 1.57%(b)
Net investment
income.............. 3.51% 3.85%(b) 4.03% 4.18%(b) 4.47% 4.44%(b)
Portfolio turnover
rate................. 127% 114% 65% 27% 53% 14%
NET ASSETS END OF YEAR
(THOUSANDS).......... $32,822 $31,874 $32,221 $34,206 $32,435 $41,030
</TABLE>
- -------

(a) The Fund changed its fiscal year end from August 31 to May 31.

(b) Annualized.

(d) The Fund changed its fiscal year end from December 31 to August 31.

6
<PAGE>

EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND--CLASS A AND CLASS B

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------------------------------------------- ------------------------------------------------
JANUARY 5, 1995 JANUARY 5, 1995
(COMMENCEMENT (COMMENCEMENT
OF CLASS OF CLASS
NINE MONTHS OPERATIONS) YEAR NINE MONTHS YEAR OPERATIONS)
YEAR ENDED ENDED YEAR ENDED THROUGH ENDED ENDED ENDED THROUGH
MAY 31, MAY 31, AUGUST 31, AUGUST 31, MAY 31, MAY 31, AUGUST 31, AUGUST 31,
1998 1997(A) 1996 1995 1998 1997(A) 1996 1995
---------- ----------- ---------- --------------- ------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR..... $10.09 $10.08 $10.17 $9.97 $10.10 $10.08 $10.17 $9.97
------ ------ ------- ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income............... 0.41 0.30 0.43 0.30 0.32 0.23 0.34 0.24
Net realized and
unrealized gain
(loss) on
investments.......... 0.10 0.01 (0.09) 0.20 0.09 0.02 (0.09) 0.20
------ ------ ------- ------ ------ ------ ------ ------
Total from investment
operations............ 0.51 0.31 0.34 0.50 0.41 0.25 0.25 0.44
------ ------ ------- ------ ------ ------ ------ ------
Less distributions from
net investment
income................ (0.41) (0.30) (0.43) (0.30) (0.32) (0.23) (0.34) (0.24)
------ ------ ------- ------ ------ ------ ------ ------
Net asset value end of
year.................. $10.19 $10.09 $10.08 $10.17 $10.19 $10.10 $10.08 $10.17
====== ====== ======= ====== ====== ====== ====== ======
TOTAL RETURN(C)........ 5.11% 3.08% 3.37% 5.09% 4.07% 2.49% 2.44% 4.50%
RATIOS/SUPPLEMENTAL
DATA
Ratios to average net
assets
Expenses.............. 0.81% 0.84%(b) 0.80% 0.70%(b) 1.71% 1.73%(b) 1.67% 1.58%(b)
Expenses excluding
indirectly paid
expenses............. 0.81% 0.83%(b) -- -- 1.71% 1.73%(b) -- --
Expenses excluding
waivers and/or
reimbursements....... 0.85% 0.96%(b) 1.11% 1.14%(b) 1.74% 1.86%(b) 2.07% 2.26%(b)
Net investment
income............... 4.01% 3.94%(b) 4.05% 4.32%(b) 3.11% 3.04%(b) 3.28% 3.50%(b)
Portfolio turnover
rate.................. 78% 34% 29% 80% 78% 34% 29% 80%
NET ASSETS END OF YEAR
(THOUSANDS)........... $6,569 $6,072 $27,722 $6,820 $5,790 $6,742 $7,413 $6,050
</TABLE>
- -------

(a) The Fund changed its fiscal year end from August 31 to May 31.

(b) Annualized.

7
<PAGE>

EVERGREEN TAX FREE FUND--CLASS A

<TABLE>
<CAPTION>
JANUARY 20, 1998
(COMMENCEMENT
OF CLASS OPERATIONS)
THROUGH
MAY 31, 1998
--------------------
<S> <C>
NET ASSET VALUE BEGINNING OF PERIOD........................ $ 7.91
----------
Income from investment operations:
Net investment income..................................... 0.13 (c)
Net realized and unrealized loss on investments........... (0.13)
----------
Total from investment operations........................... 0
----------
Less distributions from net investment income.............. (0.13)
----------
Net asset value end of period.............................. $ 7.78
==========
TOTAL RETURN(B)............................................ 0.04%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Expenses.................................................. 0.93%(a)
Expenses excluding indirectly paid expenses............... 0.93%(a)
Net investment income..................................... 4.69%(a)
Portfolio turnover rate.................................... 77%
NET ASSETS END OF PERIOD (THOUSANDS)....................... $1,243,327
</TABLE>
- -------

(a) Annualized.

(b) Excluding applicable sales charges.

8
<PAGE>

EVERGREEN TAX FREE FUND--CLASS B

<TABLE>
<CAPTION>
FIVE MONTHS YEAR ENDED DECEMBER 31,
ENDED ----------------------------------------------
MAY 31, 1998(A) 1997 1996 1995 1994
--------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD.... $ 7.82 $ 7.71 $ 7.86 $ 7.10 $ 8.12
-------- ---------- ---------- ---------- ----------
Income from investment
operations:
Net investment income.. 0.12(d) 0.38 0.41 0.41 0.37
Net realized and
unrealized gain (loss)
on investments
and futures
contracts............. (0.03) 0.23 (0.17) 0.74 (0.96)
-------- ---------- ---------- ---------- ----------
Total from investment
operations............. 0.09 0.61 0.24 1.15 (0.59)
-------- ---------- ---------- ---------- ----------
Less distributions from:
Net investment income... (0.13) (0.40) (0.39) (0.39) (0.37)
In excess of net
investment income...... 0 0 0 0 (0.06)
Net realized gain on
investments............ 0 (0.10) 0 0 0
In excess of net
realized gain on
investments............ 0 0 0 0 0
-------- ---------- ---------- ---------- ----------
Total distributions..... (0.13) (0.50) (0.39) (0.39) (0.43)
-------- ---------- ---------- ---------- ----------
Net asset value end of
period................. $ 7.78 $ 7.82 $ 7.71 $ 7.86 $ 7.10
======== ========== ========== ========== ==========
TOTAL RETURN(C)......... 1.15% 8.15% 3.15% 16.61% (7.34%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 1.26%(b) 0.96% 0.87% 0.95% 1.55%
Expenses excluding
indirectly paid
expenses.............. 1.25%(b) 0.96% 0.86% 0.94% --
Net investment income.. 4.32%(b) 4.97% 5.34% 5.41% 4.92%
Portfolio turnover
rate................... 77% 126% 69% 56% 84%
NET ASSETS END OF PERIOD
(THOUSANDS)............ $124,664 $1,375,730 $1,557,886 $1,204,468 $1,197,727
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF PERIOD.... $ 8.04 $ 8.07 $ 7.90 $ 8.06 $ 8.18 $ 8.09
---------- ---------- ---------- ---------- -------- --------
Income from investment
operations:
Net investment income.. 0.39 0.46 0.46 0.52(d) 0.57 0.55
Net realized and
unrealized gain (loss)
on investments and
futures contracts..... 0.48 0.12 0.36 (0.01) 0.15 0.30
---------- ---------- ---------- ---------- -------- --------
Total from investment
operations............. 0.87 0.58 0.82 0.51 0.72 0.85
---------- ---------- ---------- ---------- -------- --------
Less distributions from:
Net investment income... (0.39) (0.46) (0.46) (0.52) (0.60) (0.63)
In excess of net
investment income...... (0.06) (0.04) (0.07) (0.03) 0 0
Net realized gain on
investments............ (0.33) (0.11) (0.12) (0.12) (0.24) (0.13)
In excess of net
realized gain on
investments............ (0.01) 0 0 0 0 0
---------- ---------- ---------- ---------- -------- --------
Total distributions..... (0.79) (0.61) (0.65) (0.67) (0.84) (0.76)
---------- ---------- ---------- ---------- -------- --------
Net asset value end of
period................. $ 8.12 $ 8.04 $ 8.07 $ 7.90 $ 8.06 $ 8.18
========== ========== ========== ========== ======== ========
TOTAL RETURN(C)......... 11.15% 7.55% 10.80% 6.66% 9.11% 10.89%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 1.66% 1.38% 1.75% 1.18% 1.23% 1.79%
Expenses excluding
indirectly paid
expenses.............. -- -- -- -- -- --
Net investment income.. 4.72% 5.71% 5.78% 6.54% 6.94% 6.74%
Portfolio turnover
rate................... 76% 78% 77% 64% 69% 61%
NET ASSETS END OF PERIOD
(THOUSANDS)............ $1,548,503 $1,453,199 $1,146,185 $1,060,826 $901,912 $903,132
</TABLE>
- -------

(a) The Fund changed in its fiscal year end from December 31 to May 31 during
the period.

(b) Annualized.

(d) Calculation based on average shares outstanding.

9
<PAGE>

EVERGREEN TAX FREE FUND--CLASS C

<TABLE>
<CAPTION>
JANUARY 26, 1998
(COMMENCEMENT
OF CLASS
OPERATIONS)
THROUGH
MAY 31,
1998
----------------
<S> <C>
NET ASSET VALUE BEGINNING OF PERIOD............................ $ 7.85
------
Income from investment operations:
Net investment income......................................... 0.11(c)
Net realized and unrealized loss on investments............... (0.07)
------
Total from investment operations............................... 0.04
------
Less distributions from net investment income.................. (0.11)
------
Net asset value end of period.................................. $ 7.78
------
TOTAL RETURN (B)............................................... 0.46%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets
Expenses...................................................... 1.68%(a)
Expenses excluding indirectly paid expenses................... 1.68%(a)
Net investment income......................................... 3.94%(a)
Portfolio turnover rate........................................ 77%
NET ASSETS END OF PERIOD (THOUSANDS)........................... $7,708
</TABLE>
- -------

(a) Annualized.

(b) Excluding applicable sales charges.

10
<PAGE>

- -------------------------------------------------------------------------------

DESCRIPTION OF THE FUNDS

- -------------------------------------------------------------------------------

INVESTMENT OBJECTIVES AND POLICIES

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

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

EVERGREEN HIGH GRADE TAX FREE FUND

EVERGREEN HIGH GRADE TAX FREE FUND seeks a high level of federally tax
free income that is consistent with preservation of capital. The Fund will
invest at least 65% of its total assets in municipal securities insured by a
municipal bond insurance company rated AAA by Standard & Poor's Ratings
Services ("S&P") or Aaa by Moody's Investors Service ("Moody's"). Municipal
bond insurance guarantees that the Fund will receive timely payment of
principal and interest due on a bond. Such insurance does not, however,
guarantee the value of such bonds or the value of Fund shares. See the section
entitled "Municipal Bond Insurance" under "Investment Practices and
Restrictions" for further information.

EVERGREEN HIGH GRADE TAX FREE FUND will invest at least 80% of its assets
in federally tax-exempt municipal securities, the interest from which is, in
the opinion of counsel to the issuers, exempt from federal income taxes,
including the federal alternative minimum tax ("AMT").

EVERGREEN HIGH GRADE TAX FREE FUND may also purchase instruments having
variable rates of interest. One example is variable amount master demand
notes. These notes represent a borrowing arrangement between a commercial
paper issuer (borrower) and an institutional lender, such as the Fund, and are
payable upon demand. The underlying amount of the loan may vary during the
course of the contract, as may the interest on the outstanding amount,
depending on a stated short-term interest rate index.

EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND

EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND seeks as high a level of
current income, exempt from federal income tax other than the AMT for
individuals and corporations, as is consistent with preserving capital and
providing liquidity. Under normal circumstances, it is anticipated that the
Fund will invest its assets so that at least 80% of its annual interest income
is exempt from federal income tax other than the AMT. The Fund will invest
substantially all of its assets in a diversified portfolio of short and
intermediate-term municipal securities the interest from which is, in the
opinion of counsel to the issuers, exempt from federal income tax other than
the AMT.

Under current tax law, a distinction is drawn between municipal
securities issued to finance certain "private activities" and other municipal
securities. Such private activity bonds include bonds issued to finance such
projects as airports, housing projects, resource recovery programs, solid
waste disposal facilities, student loan programs, and water and sewage
projects. Interest income from such "private activity bonds" ("AMT-Subject
Bonds") becomes an item of "tax preference" which is subject to the AMT when
received by a person in a tax year during which he is subject to that tax.
Because interest income on AMT-Subject Bonds is taxable to certain investors,
it is expected, although there can be no guarantee, that such municipal
securities generally will provide somewhat higher yields than other municipal
securities of comparable quality and maturity. The Fund may invest up to 50%
of its total assets in AMT-Subject Bonds.

The Fund intends to maintain a dollar-weighted average portfolio maturity
of two to five years. The Fund may consider an obligation's maturity to be
shorter than its stated maturity if the Fund has the right to sell the
obligation to the issuer or some third party at a price approximating par
value before its stated maturity date.

11
<PAGE>

EVERGREEN TAX FREE FUND

EVERGREEN TAX FREE FUND seeks the highest possible current income, exempt
from federal income taxes, while preserving capital. Since the Fund considers
preservation of capital as well as the level of tax exempt income as its
primary objective, the Fund may realize less income than a fund willing to
expose shareholders' capital to greater risk.

Under ordinary circumstances, the Fund invests at least 80% of its assets
in federally tax-exempt municipal securities, the interest from which is, in
the opinion of counsel to the issuers, exempt from federal income taxes,
including the AMT.

PRINCIPAL INVESTMENTS AND INVESTMENT POLICIES. Each 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 S&P (AAA, AA, A and BBB), by Moody's
(Aaa, Aa, A and Baa), by Fitch IBCA, Inc. ("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 ("SRO") or by the Fund's investment advisor.
Each 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, Each Fund will try to use comparable ratings as standards
according to its investment objective and policies.

EVERGREEN HIGH GRADE TAX FREE FUND and EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND may temporarily invest up to 20% of their total assets in
taxable securities and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND may
temporarily invest its assets so that no more than 20% of its annual income
will be derived from taxable securities, under any one or more of the
following circumstances: (a) pending investment of proceeds of sale of Fund
shares or of portfolio securities, (b) pending settlement of purchases of
portfolio securities, and (c) to maintain liquidity for the purpose of meeting
anticipated redemptions. In addition, each such Fund may temporarily invest
more than 20% of its total assets in taxable securities for defensive
purposes. Each Fund may invest for defensive purposes during periods when each
Fund's assets available for investment exceed the available municipal
securities that meet each Fund's quality and other investment criteria.
Taxable securities in which EVERGREEN HIGH GRADE TAX FREE FUND and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND may invest on a short-term basis include
obligations of the U.S. government, its agencies or instrumentalities,
including repurchase agreements with banks or securities dealers involving
such securities; time deposits maturing in not more than seven days; other
debt securities rated within the two highest ratings assigned by any major
rating service; commercial paper rated in the highest grade by Moody's, S&P or
any SRO; and certificates of deposit issued by U.S. branches of U.S. banks
with assets of $1 billion or more.

EVERGREEN TAX FREE 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 its investment advisor to be
of comparable quality. EVERGREEN TAX FREE FUND will not invest more than 20%
of its total assets under ordinary circumstances and up to 100% of its total
assets for temporary defensive purposes in such securities.

EVERGREEN TAX FREE FUND will limit its investments in qualified "private
activity" industrial development bonds to no more than 20% of the Fund's total
assets and does not currently intend to invest in "private activity" (capital
purpose) bonds. In addition, EVERGREEN TAX FREE FUND may, but does not
currently intend to, invest in foreign securities or securities denominated in
foreign currencies.

The Funds may also purchase municipal securities which are unrated at the
time of purchase, if such securities are determined by a Fund's investment
advisor to be of comparable quality to rated securities under the criteria set
forth above. Certain municipal securities (primarily variable rate demand
notes) may be entitled to the benefit of standby letters of credit or similar
commitments issued by banks and, in such instances, a Fund's investment
advisor will take into account the obligation of the bank in assessing the
quality of such security.

12
<PAGE>

somewhat higher than prevailing market rates, and in periods of rising
interest rates, the yield of a Fund will tend to be somewhat lower. Also, when
interest rates are falling, the inflow of net new money to a Fund from the
continuous sale of its shares will likely be invested in portfolio instruments
producing lower yields than the balance of the Fund's portfolio, thereby
reducing the current yield of the Fund. In periods of rising interest rates,
the opposite can be expected to occur.

INVESTMENT PRACTICES AND RESTRICTIONS

Municipal Securities. As noted above, each Fund will invest substantially all
of its assets in municipal securities. These include municipal bonds, short-
term municipal notes and tax-exempt commercial paper. Municipal securities are
debt obligations issued by states, territories and possessions of the United
States ("U.S."), including the District of Columbia, and their political
subdivisions, agencies and instrumentalities. They are used to raise money for
various public purposes. The two principal classifications of municipal
securities are "general obligation" and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue bonds are payable
only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or
other specific source such as from the user of the facility being financed.

A 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 a Fund. In addition, the market
for municipal bonds is often thin and can be temporarily affected by large
purchases and sales, including those by a 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 a Fund and the
value of the Fund's portfolio. In the event of such legislation, each Fund
would re-evaluate its investment objective and policies and consider changes
in the structure of the Fund or dissolution.

Municipal Bond Insurance. The purpose of municipal bond insurance is to
guarantee the timely payment of principal at maturity and interest. Securities
in EVERGREEN HIGH GRADE TAX FREE FUND'S portfolio may be insured in one of two
ways: (1) by a policy applicable to a specific security, obtained by the
issuer of the security or by a third party ("Issuer-Obtained Insurance") or
(2) under master insurance policies issued by municipal bond insurers,
purchased by the Fund (the "Policies"). If a security's coverage is Issuer-
Obtained, then that security does not need to be covered in the Policies. The
Fund may purchase Policies from Municipal Bond Investors Assurance Corp.,
AMBAC Indemnity Corporation, and Financial Guaranty Insurance Company, or any
other municipal bond insurer which is rated Aaa by Moody's or AAA by S&P. A
more detailed description of these insurers may be found in the SAI. Annual
premiums for these Policies are paid by the Fund and are estimated to range
from 0.10% to 0.25% of the value of the municipal securities covered under the
Policies, with an average annual premium rate of approximately 0.175%. While
the insurance feature reduces financial risk, the cost thereof and the
restrictions on investments imposed by the guidelines in the Policies reduce
the yield to shareholders.

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

13
<PAGE>

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. The Funds will not invest in bonds rated below B.

Downgrades. If any security in which a Fund invests 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.

Floating Rate and Variable Rate Obligations. Municipal securities also include
certain variable rate and floating rate municipal obligations with or without
demand features. These variable rate securities do not have fixed interest
rates; rather, those rates fluctuate based upon changes in specified market
rates, such as the prime rate, or are adjusted at predesignated periodic
intervals. Certain of these obligations may carry a demand feature that gives
a Fund the right to demand prepayment of the principal amount of the security
prior to its maturity date. The demand obligation may or may not be backed by
letters of credit or other guarantees of banks or other financial
institutions. Such guarantees may enhance the quality of the security. Each
Fund will limit the value of its investments in any floating or variable rate
security which is not readily marketable to 10% or less of its net assets.

When-Issued, Delayed-Delivery and Forward Commitment Transactions. Each 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, a Fund relies on the other party
to consummate the transaction; if the other party fails to do so, the Fund may
be disadvantaged.

EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND does not expect that
commitments to purchase when-issued securities will normally exceed 25% of its
total assets and EVERGREEN HIGH GRADE TAX FREE FUND does not expect that such
commitments will exceed 20% of its total assets. Each Fund does not intend to
purchase when-issued or delayed delivery securities for speculative purposes
but only in furtherance of its investment objective.

Stand-by Commitments. Each Fund may also acquire stand-by commitments with
respect to municipal securities held in its portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at a Fund's option, specified
municipal securities at a specified price. Failure of the dealer to purchase
such municipal securities may result in a Fund incurring a loss or missing an
opportunity to make an alternative investment. The Funds expect that stand-by
commitments generally will be available without the payment of direct or
indirect consideration. However, if necessary and advisable, a Fund may pay
for stand-by commitments either separately in cash or by paying a higher price
for portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities).
The total amount paid in either manner for outstanding stand-by commitments
held in each Fund's portfolio will not exceed 10% of the value of the Fund's
total assets calculated immediately after each stand-by commitment is
acquired. A Fund will maintain cash or liquid high grade debt obligations in a
segregated account with its custodian in an amount equal to such commitments.
A Fund will enter into stand-by commitments only with banks and broker-dealers
that, in the judgment of the Fund's investment advisor, present minimal credit
risks.

Repurchase Agreements. Each Fund may invest in repurchase agreements. A
repurchase agreement is an agreement by which a 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. A 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 a
Fund to sell the security in the open market in the case of a default. In such
a case, a Fund may incur costs in disposing of the security which would
increase Fund expenses. A Fund's investment advisor will monitor the
creditworthiness of the firms with which the Fund enters into repurchase
agreements.

EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND may not enter into repurchase
agreements if, as a result, more than 15% of the Fund's net assets would be
invested in repurchase agreements maturing in more than seven days. EVERGREEN
HIGH GRADE TAX FREE FUND may not so invest more than 10% of its net assets.

14
<PAGE>

Reverse repurchase agreements may be considered a form of borrowing, and,
therefore, a form of leverage. Leverage may magnify gains or losses of a Fund.

Illiquid Securities. Each 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. The inability of a Fund to dispose
of illiquid investments readily or at a reasonable price could impair its
ability to raise cash for redemptions or other purposes.

Restricted Securities. Each Fund may invest in restricted securities,
including securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 (the "1933 Act"). Generally, Rule 144A establishes a
safe harbor from the registration requirements of the 1933 Act for resale by
large institutional investors of securities not publicly traded in the U.S.
Each Fund's investment advisor determines the liquidity of Rule 144A
securities according to guidelines and procedures adopted by the Trust's Board
of Trustees. (See "Organization.") The Board of Trustees monitors each
investment advisor's application of those guidelines and procedures.
Securities eligible for resale pursuant to Rule 144A, which a Fund's
investment advisor has determined to be liquid or readily marketable, are not
subject to the 15% limit on illiquid securities.

Borrowing. 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 also borrow an additional
5% of its total assets from banks or others. The Funds may only borrow as a
temporary measure for extraordinary or emergency purposes such as the
redemption of Fund shares. A Fund will not purchase securities while
outstanding borrowings exceed 5% of its total assets except to exercise prior
commitments and to exercise subscription rights.

Securities Lending. To generate income and offset expenses, a Fund may lend
securities to broker-dealers and other financial institutions. Loans of
securities by a Fund may not exceed 33 1/3% of the value of the Fund's total
assets. While securities are on loan, the borrower will pay a Fund any income
accruing on the security. Also, a Fund may invest any collateral it receives
in additional securities. Gains or losses in the market value of a lent
security will affect a Fund and its shareholders. When a 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, a Fund's ability to dispose of the securities may be delayed.

Investing in Securities of Other Investment Companies. Each Fund may invest in
the securities of other investment companies. As a shareholder of another
investment company, a Fund would pay its portion of the other investment
company's expenses. These expenses would be in addition to the expenses that a
Fund currently bears concerning its own operations and may result in some
duplication of fees.

Options and Futures. EVERGREEN TAX FREE 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 will not
use these transactions for speculation or leverage.

EVERGREEN TAX FREE 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.

EVERGREEN TAX FREE 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.

15
<PAGE>

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 enters 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.

EVERGREEN TAX FREE 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 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.

EVERGREEN TAX FREE FUND may sell or purchase 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 its
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.

EVERGREEN TAX FREE 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 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 EVERGREEN TAX FREE 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 advisor 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 advisor 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 advisor will consider liquidity before entering into
financial futures contracts or options on

16
<PAGE>

financial futures contracts, 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.

In addition to options and futures contracts, EVERGREEN TAX FREE 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.

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

- -------------------------------------------------------------------------------

ORGANIZATION

Fund Structure. Each Fund is an investment pool, which invests shareholders'
money toward a specified goal. In technical terms, each 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 18, 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 Funds' activities, reviewing,
among other things, each Fund's performance and its contractual arrangements
with various service providers.

Shareholder Rights. All shareholders have equal voting, liquidation and other
rights. Each share owned is entitled to one vote for each dollar of net asset
value applicable to such share. 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 Funds are redeemable, transferable and freely
assignable as collateral. The Trust may establish additional classes or series
of shares.

The Funds do not hold annual shareholder meetings; a 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 Funds are prepared to assist shareholders in
communicating with one another for the purpose of convening a meeting to elect
Trustees.

SERVICE PROVIDERS

Investment Advisor. The investment advisor to EVERGREEN HIGH GRADE TAX FREE
FUND is the Capital Management Group of First Union National Bank ("FUNB"), a
subsidiary of First Union Corporation ("First Union"). First Union is located
at 301 South College Street, and FUNB at 201 South College Street, Charlotte,
North Carolina 28288-0630. First Union and its subsidiaries provide a broad
range of financial services to individuals and businesses throughout the U.S.

The investment advisor to EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND is
Evergreen Asset Management Corp. ("Evergreen Asset"), which is a wholly-owned
subsidiary of First Union. Evergreen Asset, with its predecessors, has served
as investment advisor to certain Evergreen mutual funds since 1971. Evergreen
Asset is located at 2500 Westchester Avenue, Purchase, New York 10577.

The investment advisor to EVERGREEN TAX FREE FUND is Keystone Investment
Management Company ("Keystone"). Keystone has provided investment advisory and
management services to investment companies

17
<PAGE>

and private accounts since it was organized in 1932. Keystone is an indirect
subsidiary of FUNB. Keystone is located at 200 Berkeley Street, Boston,
Massachusetts 02116-5034.

FUNB manages investments and supervises the daily business affairs of
EVERGREEN HIGH GRADE TAX FREE FUND and, as compensation therefor, is entitled
to receive an annual fee equal to 0.50% of average daily net assets of the
Fund.

Evergreen Asset manages investments and supervises the daily business
affairs of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND, and, as compensation
therefor, is entitled to receive an annual fee equal to 0.50% of the Fund's
average daily net assets.

EVERGREEN TAX FREE 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.

Portfolio Manager. The portfolio manager of EVERGREEN HIGH GRADE TAX FREE FUND
is James T. Colby, III. Mr. Colby is a Vice President of FUNB. Mr. Colby has
also been associated with Evergreen Asset and its predecessor since 1992, and
with Keystone since 1998. He has served as portfolio manager of the Fund since
1995 and was portfolio manager of Evergreen National Tax Free Fund, whose
assets were acquired by the Fund on July 7, 1995, since that fund's inception
in 1992.

EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND is co-managed by Richard K.
Marrone and Diane C. Beaver. Since joining FUNB in 1993, Mr. Marrone has been
a Vice President and Senior Fixed Income Portfolio Manager, with over 15 years
of investment and market experience. Mr. Marrone has also been associated with
Evergreen Asset since 1997. Prior to joining FUNB, Mr. Marrone was employed at
Woodbridge Capital Management where he served as a portfolio manager for
mutual and common trust funds from 1982 to 1993. Ms. Beaver is an Assistant
Vice President of FUNB and a Portfolio Manager with over 14 years of
investment experience. She also purchases municipal bonds for individual
accounts. Mr. Marrone began as manager of the Fund in November 1997. Ms.
Beaver joined him as co-manager in March 1998.

EVERGREEN TAX FREE FUND is co-managed by George J. Kimball and James T.
Colby, III. Mr. Kimball has been employed by Keystone or one of its affiliates
since 1991, and was an Analyst prior to becoming a Vice President and
Portfolio Manager. He has more than 10 years of investment experience. He has
served as co-portfolio manager of the Fund since March 1998. Mr. Colby is a
Vice President of FUNB. Mr. Colby has also been associated with Evergreen
Asset and its predecessor since 1992, and with Keystone since 1998. Both Mr.
Colby and Mr. Kimball have co-managed the Fund since March 1998.

Sub-Advisor. Evergreen Asset has entered into a sub-advisory agreement with
Lieber & Company which provides that Lieber & Company's research department
and staff will furnish Evergreen Asset with information, investment
recommendations, advice and assistance, and will be generally available for
consultation on the portfolio of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND.
Lieber & Company will be reimbursed by Evergreen Asset in connection with the
rendering of services on the basis of the direct and indirect costs of
performing such services. There is no additional charge to EVERGREEN SHORT-
INTERMEDIATE MUNICIPAL FUND for the services provided by Lieber & Company. The
address of Lieber & Company is 2500 Westchester Avenue, Purchase, New York
10577. Lieber & Company is an indirect, wholly-owned, subsidiary of First
Union.

Administrator. Evergreen Investment Services, Inc. ("EIS") serves as
administrator to EVERGREEN HIGH GRADE TAX FREE FUND, subject to the
supervision and control of the 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
administered by EIS for which any affiliate of FUNB serves as investment
advisor. The administration fee is calculated in accordance with the following
schedule:

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

18
<PAGE>

EIS also provides facilities, equipment and personnel to EVERGREEN TAX
FREE FUND on behalf of the Fund's investment advisor.

Transfer Agent and Dividend Disbursing Agent. Evergreen Service Company
("ESC"), 200 Berkeley Street, Boston, Massachusetts 02116-5034, acts as the
Funds' transfer agent and dividend disbursing agent. ESC is an indirect,
wholly-owned subsidiary of First Union.

Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, acts as the Funds' 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 Funds' principal underwriter.

DISTRIBUTION PLANS AND AGREEMENTS

Distribution Plans. Each Fund's Class A, Class B and, where applicable, 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, each Fund may incur distribution-related and
shareholder servicing-related expenses which are based upon a maximum annual
rate as a percentage of each Fund's average daily net assets attributable to
the Class, as follows:

Class A shares 0.75%
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 advisor or its affiliates, for
personal services rendered to shareholders and/or the maintenance of
shareholder accounts. The Funds may not pay any distribution or service fees
during any fiscal period in excess of the amounts set forth above. Amounts
paid under the Distribution Plans are used to compensate the Funds'
distributor pursuant to the Distribution Agreements (as defined below) entered
into by each Fund.

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

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

* Currently limited to 0.10% for EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND.

The Distribution Agreements provide that EDI will use the distribution
fee received from each 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 a Fund.

In the event a 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 or their predecessors.

Since EDI's compensation under the Distribution Agreements is not
directly tied to the expenses incurred by EDI, the amount of compensation
received by EDI 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 a Fund in subsequent fiscal years.

19
<PAGE>

- -------------------------------------------------------------------------------

PURCHASE AND REDEMPTION OF SHARES

- -------------------------------------------------------------------------------

HOW TO BUY SHARES

You may purchase shares of each Fund through broker-dealers, banks or
other financial intermediaries, or directly through EDI. In addition, you may
purchase shares of a Fund by mailing to the Fund, c/o Evergreen Service
Company, 200 Berkeley Street, Boston, Massachusetts 02116-5034, 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 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 each 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

EVERGREEN HIGH GRADE TAX FREE FUND
EVERGREEN TAX FREE FUND

<TABLE>
<CAPTION>
COMMISSION TO
DEALER/AGENT
AS A % OF THE AS A % OF THE AS A % OF
AMOUNT OF PURCHASE NET AMOUNT INVESTED OFFERING PRICE OFFERING PRICE
------------------ ------------------- -------------- --------------
<S> <C> <C> <C>
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-$2,999,999........ None None 1.00%
$3,000,000-$4,999,999........ None None .50%
Over $5,000,000.............. None None .25%

EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND
<CAPTION>
COMMISSION TO
DEALER/AGENT
AS A % OF THE AS A % OF THE AS A % OF
AMOUNT OF PURCHASE NET AMOUNT INVESTED OFFERING PRICE OFFERING PRICE
------------------ ------------------- -------------- --------------
<S> <C> <C> <C>
Less than $50,000............ 3.36% 3.25% 2.75%
$ 50,000--$99,999.......... 3.09% 3.00% 2.75%
$ 100,000--$249,999......... 2.56% 2.50% 2.25%
$ 250,000--$499,999......... 2.04% 2.00% 1.75%
$ 500,000--$999,999......... 1.52% 1.50% 1.25%
$1,000,000--$2,999,999....... None None 1.00%
$3,000,000--$4,999,999....... None None .50%
Over $5,000,000.............. None None .25%
</TABLE>

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 advisors; (b) investment advisors, 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 advisors or financial planners

20
<PAGE>

who place trades for their own accounts if the accounts are linked to the
master account of such investment advisors 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 a 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
Funds, and members of the immediate families of such employees; (g) 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; and (h) all qualified plan customers holding
Evergreen Class Y shares in connection with a rollover into an individual
retirement account. Certain broker-dealers or other financial institutions may
impose a fee on transactions in shares of the Funds.

Class A shares may also be purchased at net asset value by a corporation
or certain other qualified retirement plan 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.

Certain employer-sponsored retirement or savings plans, including
eligible 401(k) plans, may purchase Class A shares at net asset value provided
that such plans meet a certain required minimum number of eligible employees
or required amount of assets. Additional information concerning the waiver of
sales charges is set forth in the SAI.

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 Funds. In
addition to compensation paid at the time of sale, entities whose clients have
purchased Class A shares may receive a service fee 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 a Fund's Concurrent Purchases, Rights of
Accumulation, Letter of Intent, certain Retirement Plans and Reinstatement
Privilege. See "Sales Charge Waivers or Reductions" in the SAI 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 will vary according to the number of years from the
month of purchase of Class B shares as set forth below.

<TABLE>
<CAPTION>
CDSC
REDEMPTION TIMING IMPOSED
----------------- -------
<S> <C>
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%
</TABLE>
No CDSC is imposed on amounts redeemed thereafter.

The CDSC is deducted from the amount of the redemption and is paid to EDI
or its predecessor. In the event a 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 Funds will not normally
accept any purchase of Class B shares in the amount of $250,000 or more.

21
<PAGE>

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
EDI to have been compensated for the expenses associated with the sale of such
shares. The CDSC applicable to Class B shares will be waived on redemptions
made by certain employer-sponsored retirement or savings plans, including
eligible 401(k) plans. See "Sales Charge Waivers or Reductions" in the SAI for
additional information.

Class C Shares (EVERGREEN TAX FREE FUND). Class C shares are offered only
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 service fee 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 service fees will
commence immediately with respect to shares eligible for exemption from the
CDSC normally applicable to Class C shares.

Contingent Deferred Sales Charge. Certain shares with respect to which a Fund
did not pay a commission on issuance, including 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 a 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 balance; (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 Funds may also sell Class A, Class B or, if applicable, Class C
shares at net asset value without any initial sales charge or a CDSC to
certain Directors, Trustees, officers and employees of the Funds, FUNB,
Keystone, Evergreen Asset, EDI, Meridian Investment Company, First
International Advisors, Inc., 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 Funds Value Their Shares. The net asset value of each class of shares
of a 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 a Fund are valued at their current market value 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.

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, if available through

22
<PAGE>

your broker-dealer, 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. Consult your financial intermediary for further
information. The compensation received by 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 a 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 U.S. 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 each Fund's investment advisor, 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 a 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 a Fund's investment
advisor over and above the usual service fees or shareholder servicing
payments applicable to a given Class of shares.

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

HOW TO REDEEM SHARES

You may "redeem" (i.e., sell) your shares in a 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. A 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. You may redeem by mail by
sending a signed letter of instruction or stock power form to the Fund, c/o
ESC, (the registrar, transfer agent and dividend-disbursing agent for each
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.
Each 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 financial
institutions whose guarantees are acceptable under the Securities Exchange Act
of 1934 and ESC's policies.

23
<PAGE>

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 a 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 (i) be
mailed by check to the shareholder at the address in which the account is
registered or (ii) be wired to an account with the same registration as the
shareholder's account in a 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. Each 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 Funds, 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 (described
below), or by telephone. ESC will employ reasonable procedures to confirm that
instructions received over the Evergreen Express Line or by telephone are
genuine. The Funds, 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 Funds may temporarily suspend the right to redeem their 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 Funds cannot dispose of their investments or fairly determine their
value; or (4) the SEC so orders. The Funds reserve the right to close an
account that through redemption has fallen below $1,000 and has remained so
for thirty days. Shareholders will receive sixty days' written notice to
increase the account value to at least $1,000 before the account is closed.
The Funds have elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which each 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
ninety-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 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 more 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 a Fund upon sixty 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.

24
<PAGE>

Exchanges Through Your Financial Intermediary. A 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 a 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, each 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
a 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 Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary, ESC
or 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 a 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.

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 (the "Withdrawal Plan") by filling out the
appropriate part of the Application. Under this Withdrawal 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 Withdrawal 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 benefit and savings plans may make shares of the Funds and 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 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 (i) the
dollar amount of each monthly or quarterly investment you wish to make and
(ii) 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.

25
<PAGE>

Two Dimensional Investing. You may elect to have income and capital gains
distributions from any class of 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 Funds have various retirement plans
available to eligible investors, including Individual Retirement Accounts
(IRAs); Rollover IRAs; Simplified Employee Pension Plans (SEPs); Savings
Incentive Match Plan for Employees (SIMPLEs); Tax Sheltered Annuity; 403(b)(7)
Plans; 401(k) Plans; Keogh Plans; Profit-Sharing Plans; and Money Purchase
Pension Plans. For details, including fees and application forms, call toll
free 1-800-247-4075 or write to ESC.

EFFECT OF 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 Funds. 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 advisor, 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 their customer. FUNB
and its affiliates are 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 and its affiliates 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 a Fund by its customers. If FUNB and its affiliates 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 each Fund's shareholders to approve, a new investment
advisor. If this were to occur, it is not anticipated that the shareholders of
any Fund would suffer any adverse financial consequences.

- -------------------------------------------------------------------------------

OTHER INFORMATION

- -------------------------------------------------------------------------------

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each Fund intends to declare dividends from net investment income daily
and distribute to its shareholders such dividends monthly. The Funds intend 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 a 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 a Fund are redeemed before a dividend has been
declared.

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 a 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 a 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.

26
<PAGE>

income and any net realized gains to shareholders, it is expected that the
Funds will not be required to pay any federal income taxes. A 4% nondeductible
excise tax will be imposed on a Fund if it does not meet certain distribution
requirements by the end of each calendar year. Each Fund anticipates meeting
such distribution requirements.

The Funds 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 a 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 AMT 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 AMT.

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 gain
distributions are taxable as long-term capital gains, even though received in
additional shares of a 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 12 months. The rate
applicable to corporations is 35%.

Since each 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 advisor.

Each 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.

Statements describing the tax status of shareholders' dividends and
distributions will be mailed annually by the Funds. These statements will set
forth the amount of income exempt from 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 AMT. 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 advisors about the status of distributions from
the Funds in their states and localities. Each 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 annual portfolio turnover rate for each Fund
is not expected to exceed 100%. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The
portfolio turnover rate experienced by a 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 each 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, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.

Other Classes of Shares. EVERGREEN HIGH GRADE TAX FREE FUND and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND currently offer Class A, Class B and Class Y
shares, and may in the future offer additional classes. EVERGREEN TAX FREE
FUND currently offers Class A, Class B and Class C shares. Class Y shares are
not offered by this prospectus and are only available to (i) persons who at or
prior to December 31, 1994, owned

27
<PAGE>

shares in a mutual fund advised by Evergreen Asset, (ii) certain institutional
investors and (iii) investment advisory clients of FUNB 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 service 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. The Funds may quote their "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. Performance data for one or more Classes may be
included in any advertisement or sales literature using performance data of a
Fund. Each 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 a 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 a Fund earns on its
investments as a percentage of its share price. A 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, a 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, a 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 Funds may also quote tax-equivalent yields which show the taxable
yields an investor would have to earn before taxes to equal the Funds' tax-
free yields. A tax-equivalent yield is calculated by dividing a Fund's tax-
exempt yield by the result of one minus a stated federal tax rate. If only a
portion of a 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 Funds. These advertisements may quote performance rankings or ratings
of a 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 Funds 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 a 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. EDI 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.

Year 2000 Risks. Like other investment companies, financial and business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the Funds' investment advisors and
the Funds' other service providers do not properly process and calculate date-
related information and data from and after January 1, 2000. This is commonly
known as the "Year 2000 Problem." The Funds' investment advisors are taking
steps to address the Year 2000 Problem with respect to the computer systems
that they use and to obtain assurances that comparable steps are being taken
by the Funds' other major service providers. At

28
<PAGE>

this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Funds.

Registration Statement. This prospectus and SAI, which has been incorporated
by reference herein, do not contain all the information set forth in the
Registration Statements filed by the Trust with the SEC under the Securities
Act of 1933, as amended. Copies of the Registration Statements 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.

29
<PAGE>

INVESTMENT ADVISOR

Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288-0630

Evergreen High Grade Tax Free Fund

Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577

Evergreen Short-Intermediate Municipal Fund

Keystone Investment Management Company, 200 Berkeley Street, Boston,
Massachusetts 02116
Evergreen Tax Free Fund

CUSTODIAN

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

TRANSFER AGENT

Evergreen Service Company, 200 Berkeley Street, Boston, Massachusetts 02116-
5034

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

INDEPENDENT AUDITORS

PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036

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

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

- -------------------------------------------------------------------------------

PROSPECTUS October 1, 1998

- -------------------------------------------------------------------------------

EVERGREEN SM NATIONAL MUNICIPAL BOND FUNDS LOGO
- -------------------------------------------------------------------------------

EVERGREEN HIGH GRADE TAX FREE FUND
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND

CLASS Y SHARES

The Evergreen National Municipal Bond Funds (each a "Fund," together the
"Funds") are designed to provide investors with income exempt from federal
income taxes. This prospectus provides information regarding the Class Y
shares offered by the Funds. Each Fund is a diversified series of an open-end
management investment company. This prospectus sets forth information about
the Funds that a prospective investor should have before investing. The
address of the Funds is 200 Berkeley Street, Boston, Massachusetts 02116.

Keep This Prospectus For Future Reference

EVERGREEN SM is a Service Mark of Evergreen Asset Management Corp.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
EXPENSE INFORMATION....................... 3
FINANCIAL HIGHLIGHTS...................... 4
DESCRIPTION OF THE FUNDS.................. 6
Investment Objectives and Policies..... 6
Investment Practices and Restrictions.. 7
ORGANIZATION AND SERVICE PROVIDERS........ 10
Organization........................... 10
Service Providers...................... 10
</TABLE>
<TABLE>
<S> <C>
PURCHASE AND REDEMPTION OF SHARES...... 12
How to Buy Shares................... 12
How to Redeem Shares................ 12
Exchange Privilege.................. 13
Shareholder Services................ 14
Effect of Banking Laws.............. 15
OTHER INFORMATION...................... 15
Dividends, Distributions and Taxes.. 15
General Information................. 16
</TABLE>

2
<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 a Fund. Shareholder transaction expenses are fees paid directly from your
account when you buy or sell shares of a Fund.

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases..... None
Sales Charge on Dividend Reinvestments........ None
Contingent Deferred Sales Charge.............. None
Redemption Fee................................ None
</TABLE>

Annual operating expenses reflect the normal operating expenses of each
Fund, and include costs such as management, distribution and other fees. The
table below shows the Funds' annual operating expenses for the fiscal year
ended May 31, 1998 for EVERGREEN HIGH GRADE TAX FREE FUND and estimated annual
operating expenses for the fiscal year ending May 31, 1999 for EVERGREEN SHORT-
INTERMEDIATE MUNICIPAL FUND. The examples show what you would pay if you
invested $1,000 over the periods indicated. The examples assume that you
reinvest all of your dividends and that the Funds' 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
FUNDS' ACTUAL EXPENSES AND RETURNS WILL VARY. For a more complete description
of the various costs and expenses borne by the Funds see "Organization and
Service Providers."

EVERGREEN HIGH GRADE TAX FREE FUND

<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES
----------------
<S> <C>
Management Fees......... .50%
Other Expenses.......... .34%
----
Total................... .84%
====
</TABLE>
<TABLE>
<CAPTION>

EXAMPLE
-------
<S> <C>
After 1 Year $ 9
After 3 Years $ 27
After 5 Years $ 47
After 10 Years $104
</TABLE>

EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND

<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES
----------------
<S> <C>
Management Fees (After
Waivers)*.............. .43%
Other Expenses.......... .21%
----
Total................... .64%
====
</TABLE>
<TABLE>
<CAPTION>

EXAMPLE
-------
<S> <C>
After 1 Year $ 7
After 3 Years $20
After 5 Years $36
After 10 Years $80
</TABLE>
- -------

Evergreen Asset Management Corp. has agreed to reimburse EVERGREEN SHORT-
INTERMEDIATE MUNICIPAL FUND to the extent that its aggregate operating
expenses (including the investment advisor's fee, but excluding taxes,
interest, brokerage commissions, Rule 12b-1 distribution fees and shareholder
servicing fees and extraordinary expenses) exceed 1.0% of the average net
assets. This reimbursement may be discontinued at any time.

From time to time, each Fund's investment advisor may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses
in order to reduce their expense ratios. Each Fund's investment advisor may
cease these voluntary waivers and reimbursements at any time.

3
<PAGE>

- -------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS

- -------------------------------------------------------------------------------

The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the table has been audited by PricewaterhouseCoopers LLP, the
Funds' independent auditors. Information for EVERGREEN HIGH GRADE TAX FREE
FUND for the fiscal years or periods prior to August 31, 1996 was audited by
other auditors. The tables appear in the Fund's Annual Report to shareholders
and should be read in conjunction with each Fund's financial statements and
related notes, which also appear, together with the independent auditor's
report, in the Funds' Annual Report to shareholders. The Funds' financial
statements, related notes, and independent auditor's report are incorporated
by reference into the Funds' SAI.

Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained upon request and without
charge.

EVERGREEN HIGH GRADE TAX FREE FUND--CLASS Y SHARES

<TABLE>
<CAPTION>
FEBRUARY 28, 1994
(COMMENCEMENT OF
NINE MONTHS EIGHT MONTHS CLASS OPERATIONS)
YEAR ENDED ENDED YEAR ENDED ENDED THROUGH
MAY 31, MAY 31, AUGUST 31, AUGUST 31, DECEMBER 31,
1998 1997(A) 1996 1995(C) 1994
---------- ----------- ---------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $10.89 $10.72 $10.69 $9.79 $10.93
------- ------- ------- ------- ------
Income from investment
operations
Net investment income... 0.51 0.39 0.55 0.36 0.46
Net realized and
unrealized gain (loss)
on investments......... 0.47 0.17 0.03 0.90 (1.14)
------- ------- ------- ------- ------
Total from investment
operations............. 0.98 0.56 0.58 1.26 (0.68)
------- ------- ------- ------- ------
Less distributions from
net investment income.. (0.51) (0.39) (0.55) (0.36) (0.46)
------- ------- ------- ------- ------
Net asset value end of
year................... $11.36 $10.89 $10.72 $10.69 $9.79
======= ======= ======= ======= ======
TOTAL RETURN............ 9.15% 5.32% 5.47% 13.02% (6.29%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 0.84% 0.78%(b) 0.64% 0.81%(b) 0.76%(b)
Expenses excluding
indirectly paid
expenses.............. 0.84% 0.78%(b) -- -- --
Expenses excluding
waivers and/or
reimbursements........ 0.84% 0.86%(b) 0.84% 0.84%(b) 0.77%(b)
Net investment income.. 4.51% 4.85%(b) 5.03% 5.18%(b) 5.46%(b)
Portfolio turnover
rate................... 127% 114% 65% 27% 53%
NET ASSETS END OF YEAR
(THOUSANDS)............ $24,976 $24,441 $25,112 $25,079 $4,318
</TABLE>
- -------

(a) The Fund changed its fiscal year end from August 31 to May 31.

(b) Annualized.

4
<PAGE>

EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND--CLASS Y SHARES

<TABLE>
<CAPTION>
JULY 17, 1991
(COMMENCEMENT OF
NINE MONTHS CLASS OPERATIONS)
YEAR ENDED ENDED YEAR ENDED AUGUST 31, THROUGH
MAY 31, MAY 31, ------------------------------------------- AUGUST 31,
1998 1997(A) 1996 1995 1994 1993 1992(C) 1991(C)
---------- ----------- ------- ------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $10.10 $10.07 $10.17 $10.21 $10.58 $10.33 $10.00 $10.00
-------- ------- ------- ------- ------- ------- ------- ------
Income from investment
operations
Net investment income.. 0.42 0.30 0.43 0.46 0.47 0.49 0.51 0.06
Net realized and
unrealized gain (loss)
on investments........ 0.09 0.03 (0.10) (0.04) (0.32) 0.25 0.33 0
-------- ------- ------- ------- ------- ------- ------- ------
Total from investment
operations............. 0.51 0.33 0.33 0.42 0.15 0.74 0.84 0.06
-------- ------- ------- ------- ------- ------- ------- ------
Less distributions from
Net investment income.. (0.42) (0.30) (0.43) (0.46) (0.47) (0.49) (0.51) (0.06)
In excess of net
investment income..... 0 0 0 0 (0.03) 0 0 0
Net realized gain on
investments........... 0 0 0 0 (0.02) 0 0 0
-------- ------- ------- ------- ------- ------- ------- ------
Total distributions..... (0.42) (0.30) (0.43) (0.46) (0.52) (0.49) (0.51) (0.06)
-------- ------- ------- ------- ------- ------- ------- ------
Net asset value end of
year................... $10.19 $10.10 $10.07 $10.17 $10.21 $10.58 $10.33 $10.00
======== ======= ======= ======= ======= ======= ======= ======
TOTAL RETURN............ 5.11% 3.36% 3.30% 4.20% 1.40% 7.40% 8.56% 0.62%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 0.66% 0.74%(b) 0.70% 0.74% 0.58% 0.40% 0.17% 0.00%(b)
Expenses excluding
indirectly paid
expenses.............. 0.66% 0.73%(b) -- -- -- -- -- --
Expenses excluding
waivers and/or
reimbursements........ 0.70% 0.86%(b) 0.90% 0.86% 0.83% 0.81% 0.86% 1.40%(b)
Net investment income.. 4.18% 4.04%(b) 4.27% 4.52% 4.54% 4.73% 4.85% 4.93%(b)
Portfolio turnover
rate................... 78% 34% 29% 80% 32% 37% 57% --
NET ASSETS END OF YEAR
(THOUSANDS)............ $167,905 $32,293 $34,893 $40,581 $53,417 $66,607 $54,470 $4,025
</TABLE>
- -------

(a) The Fund changed its fiscal year end from August 31 to May 31.

(b) Annualized.

(c) On November 18, 1991, the Fund was changed to a diversified municipal bond
fund with a fluctuating net asset value per share from a non-diversified
money market fund with a stable net asset value per share. The shares
outstanding and the related per share data as of August 31, 1991 are
restated to reflect both a 1 for 2 reverse share split on October 30, 1991
and a 1 for 5 reverse share split on August 19, 1992. Total return
calculated after November 18, 1991 reflects the fluctuation in net asset
value per share.

5
<PAGE>

- -------------------------------------------------------------------------------

DESCRIPTION OF THE FUNDS

- -------------------------------------------------------------------------------

INVESTMENT OBJECTIVES AND POLICIES

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

EVERGREEN HIGH GRADE TAX FREE FUND

EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND

EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND seeks as high a level of
current income, exempt from federal income tax other than AMT for individuals
and corporations, as is consistent with preserving capital and providing
liquidity. Under normal circumstances, it is anticipated that the Fund will
invest its assets so that at least 80% of its annual interest income is exempt
from federal income tax other than the AMT. The Fund will invest substantially
all of its assets in a diversified portfolio of short and intermediate-term
municipal securities the interest from which is, in the opinion of counsel to
the issuers, exempt from federal income tax other than the AMT.

6
<PAGE>

Principal Investments and Investment Policies. Each 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 S&P (AAA, AA, A and BBB), by Moody's (Aaa, Aa,
A and Baa), by Fitch IBCA, Inc. ("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 ("SRO") or by its investment adviser. Each
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 rating
system, each Fund will try to use comparable ratings as standards according to
its investment objective and policies.

EVERGREEN HIGH GRADE TAX FREE FUND and EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND may temporarily invest up to 20% of their total assets in
taxable securities and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND may
temporarily invest its assets so that no more than 20% of its annual income
will be derived from taxable securities, under any one or more of the
following circumstances: (a) pending investment of proceeds of sale of Fund
shares or of portfolio securities, (b) pending settlement of purchases of
portfolio securities, and (c) to maintain liquidity for the purpose of meeting
anticipated redemptions. In addition, each such Fund may temporarily invest
more than 20% of its total assets in taxable securities for defensive
purposes. Each Fund may invest for defensive purposes during periods when each
Fund's assets available for investment exceed the available municipal
securities that meet each Fund's quality and other investment criteria.
Taxable securities in which the EVERGREEN HIGH GRADE TAX FREE FUND and
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND may invest on a short-term basis
include obligations of the U.S. government, its agencies or instrumentalities,
including repurchase agreements with banks or securities dealers involving
such securities; time deposits maturing in not more than seven days; other
debt securities rated within the two highest ratings assigned by any major
rating service; commercial paper rated in the highest grade by Moody's, S&P or
any SRO; and certificates of deposit issued by U.S. branches of U.S. banks
with assets of $1 billion or more.

The ability of each Fund to meet its investment objectives is necessarily
subject to the ability of municipal issuers to meet their payment obligations.
In addition, the portfolio of each Fund will be affected by general changes in
interest rates which will result in increases or decreases in the value of the
obligations held by the Funds. Investors should recognize that, in periods of
declining interest rates, the yield of a Fund will tend to be somewhat higher
than prevailing market rates, and in periods of rising interest rates, the
yield of a Fund will tend to be somewhat lower. Also, when interest rates are
falling, the inflow of net new money to a Fund from the continuous sale of its
shares will likely be invested in portfolio instruments producing lower yields
than the balance of the Fund's portfolio, thereby reducing the current yield
of the Fund. In periods of rising interest rates, the opposite can be expected
to occur.

INVESTMENT PRACTICES AND RESTRICTIONS

7
<PAGE>

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, each Fund
would re-evaluate its investment objective and policies and consider changes
in the structure of the Fund or dissolution.

Bonds Rated Below Investment Grade. Bonds rated lower than BBB by S&P or
Fitch, or lower than Baa by Moody's, are considered below investment grade.
Such bonds are surrounded by a degree of doubt with respect to 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. The
Funds will not invest in bonds rated below B.

8
<PAGE>

Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is an agreement by a Fund to sell a
security and repurchase it at a specified time and price. A 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 a Fund.

9
<PAGE>

- -------------------------------------------------------------------------------

ORGANIZATION AND SERVICE PROVIDERS

- -------------------------------------------------------------------------------

ORGANIZATION

The Funds do 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 Funds are 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 Advisor. The investment advisor to HIGH GRADE TAX FREE FUND is the
Capital Management Group of First Union National Bank ("FUNB"), a subsidiary
of First Union Corporation ("First Union"). First Union is located at 301
South College Street, and FUNB at 201 South College Street, Charlotte, North
Carolina 28288-0630. First Union and its subsidiaries provide a broad range of
financial services to individuals and businesses throughout the U.S.

10
<PAGE>

Portfolio Manager. The portfolio manager of EVERGREEN HIGH GRADE TAX FREE FUND
is James T. Colby, III. Mr. Colby is a Vice President of FUNB. Mr. Colby has
also been associated with Evergreen Asset and its predecessor since 1992. He
has served as portfolio manager of the Fund since 1995 and was portfolio
manager of Evergreen National Tax Free Fund, whose assets were acquired by the
Fund on July 7, 1995, since that fund's inception in 1992.

Administrator. Evergreen Investment Services, Inc. ("EIS") serves as
administrator to EVERGREEN HIGH GRADE TAX FREE FUND, subject to the
supervision and control of the 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 and
administered by EIS for which any affiliate of FUNB serves as investment
advisor. The administration fee is calculated in accordance with the following
schedule:

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

Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827 acts as the Funds' 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 Funds' principal underwriter.

11
<PAGE>

- -------------------------------------------------------------------------------

PURCHASE AND REDEMPTION OF SHARES

- -------------------------------------------------------------------------------

HOW TO BUY SHARES

Eligible investors may purchase Fund shares at net asset value by mail or
wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this prospectus and are
only available to (i) persons who at or prior to December 31, 1994 owned
shares in a mutual fund advised by Evergreen Asset, (ii) certain institutional
investors and (iii) investment advisory clients of FUNB affiliates.

You may purchase shares of each Fund through broker-dealers, banks or
other financial intermediaries, or directly through EDI. In addition, you may
purchase shares of a Fund by mailing to each Fund, c/o Evergreen Service
Company, 200 Berkeley Street, Boston, Massachusetts 02106-5034, 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.

HOW TO REDEEM SHARES

You may "redeem" (i.e., sell) your shares in a 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. A 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).

Redeeming Shares Directly by Mail or Telephone. You may redeem by mail by
sending a signed letter of instruction or stock power form to the Fund, c/o
ESC (the registrar, transfer agent and dividend-disbursing agent for each
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

12
<PAGE>

redemptions of $50,000 or less when the account address of record has been the
same for a minimum period of 30 days. Each 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 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 6:00 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 Year's Day, Martin
Luther King 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 a 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 (i) be mailed by check to the
shareholder at the address in which the account is registered or (ii) be wired
to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank.

EXCHANGE PRIVILEGE

13
<PAGE>

SHAREHOLDER SERVICES

Systematic Investment Plan. Under a Systematic Investment Plan you may invest
as little as $25 per month to purchase shares of a 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 may participate in the
Systematic Withdrawal Plan (the "Withdrawal Plan") by filling out the
appropriate part of the application. Under this Withdrawal 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 Withdrawal 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 benefit and savings plans may make shares of the Funds and other
Evergreen funds available to their participants. Evergreen Asset 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.

14
<PAGE>

EFFECT OF BANKING LAWS

- -------------------------------------------------------------------------------

OTHER INFORMATION

- -------------------------------------------------------------------------------

DIVIDENDS, DISTRIBUTIONS AND TAXES

15
<PAGE>

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

GENERAL INFORMATION

16
<PAGE>

Other Classes of Shares. EVERGREEN HIGH GRADE TAX FREE FUND and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND currently offer Class A, Class B and Class Y
shares, and may in the future offer additional classes. Class A and Class B
shares are not offered by this prospectus. The dividends payable with respect
to Class A and Class B 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 and Class B shares and the fact that such expenses
are not borne by Class Y shares.

Performance Information. The Funds may quote their "total return" or "yield"
for a specified period in advertisements, reports or other communications to
shareholders. Total return and yield are computed separately for each class of
shares. Performance data for one or more classes may be included in any
advertisement or sales literature using performance data of a Fund. Each
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.

In marketing a 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 EDI 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.

17
<PAGE>

from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." The Funds' investment advisors are taking steps to address the Year
2000 Problem with respect to the computer systems that they use and to obtain
assurances that comparable steps are being taken by the Funds' other major
service providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact on the Funds.

18
<PAGE>

INVESTMENT ADVISOR
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288

Evergreen High Grade Tax Free Fund

Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577

Evergreen Short-Intermediate Municipal Fund

CUSTODIAN

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

TRANSFER AGENT

Evergreen Service Company, 200 Berkeley Street, Boston, Massachusetts 02116-
5034

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

INDEPENDENT AUDITORS

PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036

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

<PAGE>

EVERGREEN MUNICIPAL TRUST

PART B

STATEMENT OF ADDITIONAL INFORMATION

<PAGE>

EVERGREEN MUNICIPAL TRUST

200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700

EVERGREEN NATIONAL MUNICIPAL BOND FUNDS

STATEMENT OF ADDITIONAL INFORMATION

October 1, 1998

Evergreen High Grade Tax Free Fund ("High Grade")
Evergreen Short-Intermediate Municipal Fund ("Short-Intermediate")
Evergreen Tax Free Fund ("Tax Free")

Each Fund is a series of an open-end management
investment company known as Evergreen
Municipal Trust (the "Trust").

This Statement of Additional Information ("SAI") pertains to all
classes of shares of the Funds listed above. It is not a prospectus but should
be read in conjunction with the prospectuses dated October 1, 1998 for the Fund
in which you are making or contemplating an investment. The Funds are offered
through two separate prospectuses: one offering Class A and Class B shares of
each Fund and Class C shares of Tax Free and one offering Class Y shares of High
Grade and Short Intermediate. You may obtain either of these prospectuses from
Evergreen Distributor, Inc.

24544

<PAGE>

TABLE OF CONTENTS

INVESTMENT POLICIES........................................................ 3
Fundamental Investment Policies................................... 3
Additional Information on Securities and Investment Practices..... 5
MANAGEMENT OF THE TRUST.................................................... 12
PRINCIPAL HOLDERS OF FUND SHARES........................................... 15
INVESTMENT ADVISORY AND OTHER SERVICES..................................... 17
Investment Advisors............................................... 17
Investment Advisory Agreements.................................... 18
Distributor....................................................... 18
Distribution Plans and Agreements................................. 18
Additional Service Providers...................................... 20
BROKERAGE.................................................................. 21
Selection of Brokers............................................ 21
Brokerage Commissions............................................. 21
General Brokerage Policies........................................ 21
TRUST ORGANIZATION......................................................... 22
Form of Organization.............................................. 22
Description of Shares............................................. 22
Voting Rights..................................................... 22
Limitation of Trustees' Liability................................. 22
PURCHASE, REDEMPTION AND PRICING OF SHARES................................. 23
How the Funds Offer Shares to the Public.......................... 23
Contingent Deferred Sales Charge.................................. 24
Sales Charge Waivers or Reductions................................ 24
Exchanges......................................................... 26
Calculation of Net Asset Value Per Share ("NAV").................. 26
Valuation of Portfolio Securities................................. 27
Shareholder Services.............................................. 27
PRINCIPAL UNDERWRITER...................................................... 27
ADDITIONAL TAX INFORMATION
Requirements for Qualification as a Regulated Investment Company.. 28
Taxes on Distributions............................................ 29
Taxes on the Sale or Exchange of Fund Shares...................... 30
Other Tax Considerations.......................................... 30
EXPENSES................................................................... 31
PERFORMANCE................................................................ 33
METHOD OF COMPUTING OFFERING PRICE FOR CLASS A SHARES...................... 34
FINANCIAL STATEMENTS....................................................... 35
ADDITIONAL INFORMATION..................................................... 35
APPENDIX A................................................................. A-1

24544
3

<PAGE>

INVESTMENT POLICIES

FUNDAMENTAL INVESTMENT POLICIES

Each Fund has adopted the fundamental investment restrictions set forth
below which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined in the Investment Company Act of 1940 (the"1940
Act"). Where necessary, an explanation beneath a fundamental policy describes a
Fund's practices with respect to that policy, as allowed by current law. If the
law governing a policy changes, the Fund's practices may change accordingly
without a shareholder vote. Unless otherwise stated, all references to the
assets of a Fund are in terms of current market value.

1. Diversification

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

Further Explanation of Diversification Policy:

To remain classified as a diversified investment company under the 1940
Act, each Fund must conform with the following: With respect to 75% of its total
assets, a diversified investment company may not invest more than 5% of its
total assets, determined at market or other fair value at the time of purchase,
in the securities of any one issuer, or invest in more than 10% of the
outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to investments in securities issued or
guaranteed by the United States ("U.S.") government or its agencies or
instrumentalities.

2. Concentration

Each Fund may not concentrate its investments in the securities of
issuers primarily engaged in any particular industry (other than securities that
are issued or guaranteed by the U.S. government or its agencies or
instrumentalities).

Further Explanation of Concentration Policy:

Each Fund may not invest more than 25% of its total assets, taken at
market value, in the securities of issuers primarily engaged in any particular
industry (other than securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities).

3. Issuing Senior Securities

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

4. Borrowing

Each Fund may not borrow money, except to the extent permitted by
applicable law.

24544
4

<PAGE>

Further Explanation of Borrowing Policy:

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 also borrow up to an additional 5%
of its total assets from banks or others. Each Fund may borrow only as a
temporary measure for extraordinary or emergency purposes such as the redemption
of Fund shares. A Fund will not purchase securities while outstanding borrowings
exceed 5% of its total assets 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 obtain such short-term credit as may
be necessary for the clearance of purchases and sales of portfolio securities.
Each Fund may purchase securities on margin and engage in short sales to the
extent permitted by applicable law.

5. Underwriting

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

6. Real Estate

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

7. Commodities

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

8. Lending

Each Fund may not make loans to other persons, except that each Fund
may lend its portfolio securities in accordance with applicable law. The
acquisition of investment securities or other investment instruments shall not
be deemed to be the making of a loan.

Further Explanation of Lending Policy:

To generate income and offset expenses, each Fund may lend portfolio
securities to broker-dealers and other financial institutions in an amount up to
33 1/3% of its total assets, taken at market value. While securities are on
loan, the borrower will pay each Fund any income accruing on the security. Each
Fund may invest any collateral it receives in additional portfolio securities,
such as U.S. Treasury notes, certificates of deposit, other high-grade,
short-term obligations or interest bearing cash equivalents. Gains or losses in
the market value of a security lent will affect each Fund and its shareholders.

When a Fund lends its securities, it will require the borrower to give
the Fund collateral in cash or government securities. Each Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. Each Fund has the right to call
a loan and obtain the securities lent any time on notice of not more than five
business days. Each Fund may pay reasonable fees in connection with such loans.

<PAGE>

9. Investment in Federally Tax Exempt Securities

Each Fund will, during periods of normal market conditions, invest its
assets in accordance with applicable guidelines issued by the Securities and
Exchange Commission or its staff concerning investment in tax-exempt securities
for funds with the words tax exempt, tax free or municipal in their names.

ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES

The investment objective of each Fund and a description of the
securities in which each Fund may invest is set forth in the Funds'
prospectuses. The following expands upon the discussion in the prospectuses
regarding certain investments of each Fund.

Municipal Bonds

The Funds may invest in municipal bonds of any state, territory or
possession of the 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 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 Service
("S&P"), Moody's Investors Service ("Moody's") and Fitch IBCA, Inc. ("Fitch").
Such ratings, however, are opinions, not absolute standards of quality.
Municipal bonds with the same maturity, interest rate 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 a Fund. Neither event would require a Fund to sell the
bond, but a Fund's investment advisor (the "Advisor") 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.

<PAGE>

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, a Fund's Advisor 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 a 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 the value of
those already owned by a Fund. If such legislation were passed, the Trust'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

<PAGE>

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 the 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.

Virgin Islands, Guam and Puerto Rico

Each Fund may invest in obligations of the governments of the Virgin
Islands, Guam and Puerto Rico. Each Fund does not presently intend to invest
more than (a) 5% of its net assets in the obligations of each of the Virgin
Islands and Guam or (b) 25% of its net assets in the obligations of Puerto Rico.
Accordingly, a Fund may be adversely affected by local political and economic
conditions and developments within the Virgin Islands, Guam and Puerto Rico
affecting the issuers of such obligations.

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, a 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 liquid assets
worth at least the equivalent of the amount due. The liquid assets 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 a 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, a Fund may miss the opportunity to obtain a security at a favorable
price or yield.

<PAGE>

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
Advisor 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 a 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.

The Funds' custodian or a third party 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, the 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 a Fund
might be delayed pending court action. Each Fund's Advisor believes that under
the regular procedures normally in effect for custody of a Fund's portfolio
securities subject to repurchase agreements, 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 Advisor 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 (Tax Free)

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

<PAGE>

The Fund may write only covered options. With regard to a call option,
this means that the Fund will own, for the life of the option, the securities
subject to the call option. The 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 the 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.

Futures Transactions (Tax Free)

The Fund may 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 contracts on
securities or index-based futures contracts in order to hedge against changes in
interest or exchange rates or securities prices. A futures contract on
securities is an agreement to buy or sell securities 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. 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 continues until the contract is terminated.

The Fund may sell or purchase futures contracts. When a futures
contract is sold by the Fund, the value of 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 would sell futures contracts in order
to offset a possible decline in the value of its 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 intends to purchase futures contracts in
order to establish what is believed by the the Advisor to be a favorable price
and rate of return for securities the Fund intends to purchase.

The Fund also intends to purchase put and call options on futures
contracts for hedging purposes. A put option purchased by the Fund would give it
the right to assume a position as the seller of a futures contract. A call
option purchased by the 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 the Fund to pay a premium. In exchange for the premium, the 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, the Fund's loss will be
limited to the amount of the premium and any transaction costs.

The 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. 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.

Although futures and options transactions are intended to enable the
Fund to manage market, interest rate or exchange rate risk, unanticipated
changes in interest rates or market prices could result in poorer performance
than if it had not entered into these transactions. Even if the Advisor
correctly

<PAGE>

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. This lack of correlation between the Fund's futures
and securities positions may be caused by differences between the futures and
securities markets or by differences between the securities underlying the
Fund's futures position and the securities held by or to be purchased for the
Fund. The Fund's Advisor will attempt to minimize these risks through careful
selection and monitoring of the Fund's futures and options positions.

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

The Fund 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, the 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.

"Margin" in Futures Transactions (Tax Free)

Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather, the 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 the 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 the Fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied.

A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day, the 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 the Fund but is instead a
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 asset value, the
Fund will mark-to-market its open futures positions. The Fund is also required
to deposit and maintain margin when it writes call options on futures contracts.

Below Investment Grade Bonds

Each Fund may invest up to 20% of its assets in lower rated bonds but
will not invest in bonds rated below B. (For more information about bond
ratings, see Appendix A.) Bonds rated below BBB by S&P or Fitch or below Baa by
Moody's, commonly known as "junk bonds," offer high yield, but also high risk.
While investments in junk bonds provide opportunities to maximize return over
time, they are considered predominantly speculative with respect to the ability
of the issuer to meet principal and interest payments. Investors should be aware
of the following risks:

<PAGE>

(1) The lower ratings of junk bonds reflect a greater possibility that
adverse changes in the financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates may impair the
ability of the issuer to make payments of interest and principal, especially if
the issuer is highly leveraged. Such issuer's ability to meet its debt
obligations may also be adversely affected by the issuer's inability to meet
specific forecasts or the unavailability of additional financing. Also, an
economic downturn or an increase in interest rates may increase the potential
for default by the issuers of these securities.

(2) The value of junk bonds may be more susceptible to real or
perceived adverse economic or political events than is the case for higher
quality municipal bonds.

(3) The value of junk bonds, like that of other fixed income
securities, fluctuates in response to changes in interest rates, generally
rising when interest rates decline and falling when interest rates rise. For
example, if interest rates increase after a fixed income security is purchased,
the security, if sold prior to maturity, may return less than its cost. The
prices of junk bonds, however, are generally less sensitive to interest rate
changes than the prices of higher-rated bonds, but are more sensitive to news
about an issuer or the economy which is, or investors perceive as, negative.

(4) The secondary market for junk bonds may be less liquid at certain
times than the secondary market for higher quality bonds, which may adversely
effect (a) the bond's market price, (b) a Fund's ability to sell the bond, and
(c) a Fund's ability to obtain accurate market quotations for purposes of
valuing its assets.

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 approximately the value at
which the 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
be traded 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 limit on illiquid securities indicated
above. In determining 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.

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 company; and (3)
invest more than 10% of its assets in investment companies. 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 the Fund.

<PAGE>

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. Each Fund may
effect a short sale in connection with an underwriting in which a Fund is the
participant.

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 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) and President of Centrum Equities and Centrum
Properties, Inc.

Charles A. Austin III Trustee Investment Counselor to Appleton Partners, Inc.;
(DOB: 10/23/34) former Director, Executive Vice President and
Treasurer, State Street Research & Management
Company (investment advice); Diector,
The Andover Companies(Insurance);
and Trustee, Arthritis Foundation
of New England.

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;
and former Chairman, Gifford,
Drescher & Associates (environmental
consulting).

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

Leroy Keith, Jr. Trustee Chairman of the Board and Chief Executive Officer,
(DOB: 2/14/39) Carson Products Company; Director of Phoenix
Total Return Fund and Equifax, Inc.;
Trustee of Phoenix Series Fund, Phoenix
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).

<PAGE>

Name Position with Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
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 William Walt 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; former Managed Health Care Consultant;
and former President, Primary Physician Care.
Michael S. Scofield Trustee Attorney, Law Offices of Michael S. Scofield.
(DOB: 2/20/43)

Richard J. Shima Trustee Former Chairman, Environmental Warranty, Inc.
(DOB: 8/11/39) (insurance 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.

William J. Tomko* President and Senior Vice President and Operations Executive,
(DOB:8/30/58) Treasurer BISYS Fund Services.

Nimish S. Bhatt* Vice President and Vice President, Tax, BISYS Fund Services; former
(DOB: 6/6/63) Assistant Treasurer Assistant Vice President, Evergreen Asset
Management Corp./First Union Bank;
former Senior Tax Consulting/Acting
Manager, Investment Companies
Group, Price Waterhouse LLP, NY.

Bryan Haft* Vice President Team Leader, Fund Administration, BISYS Fund
(DOB: 1/23/65) Services

D'Ray Moore* Secretary Vice President, Client Services, BISYS Fund
(DOB: 3/30/59) Services

14
</TABLE>

<PAGE>

*Address: BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219-8001

Trustee Compensation

Listed below is the Trustee compensation for the fiscal year ended May 31,
1998. The Trustees do not receive pension or retirement benefits from the Funds.

Trustee Aggregate Total Compensation
Compensation from from Trust and Fund
Trust Complex Paid to
Trustees**
Laurence B. Ashkin $6,901 $70,370
Charles A. Austin, III $6,725 $52,343
K. Dun Gifford $6,253 $49,231
James S. Howell $8,725 $104,002
Leroy Keith Jr. $6,529 $50,711
Gerald M. McDonnell $7,919 $87,149
Thomas L. McVerry $7,899 $91,037
William Walt Pettit $7,041 $78,845
David M. Richardson $6,604 $50,886
Russell A. Salton, III $7,434 $87,502
Michael S. Scofield $7,901 $90,266
Richard J. Shima $6,702 $65,844
Robert J. Jeffries* $1,300 $20,932
Foster Bam* $4,904 $49,987

*Former Trustee; retired as of December 31, 1997
**Certain Trustees have elected to defer all or part of their
total compensation for the twelve months ended May 31, 1998.
The amounts listed below will be payable in later years to the
respective Trustees:

Austin $4,763
McVerry $90,742
Howell $74,036
Salton $87,025
Petit $78,625
McDonnell $86,183
Scofield $28,593

<PAGE>

PRINCIPAL HOLDERS OF FUND SHARES

As of the date of this SAI, the officers and Trustees of the Trust owned
as a group less than 1% of the outstanding shares of any class of each Fund.

Set forth below is information with respect to each person who, to each
Fund's knowledge, owned beneficially or of record more than 5% of the
outstanding shares of any class of each fund as of August 31, 1998.

High Grade Class A
Heather Agency Inc. FBO 7.377%
Alletta Laird Downs Trustee FBO
Alletta Larid Downs Trust
Dtd 3/29/89
P.O. Box 3666
Wilmington, DE 19807

Charles Schwab & Co. Inc. 5.178%
Special Custody Account
FBO Exclusive Benefit of
Customers
Reinvest Account Attn Mutual Fd
101Montgomery Street
San Francisco, CA 94104-4122

High Grade Class B
None

High Grade Class Y

First Union National Bank 26.717%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28202-1910

Foster & Foster 17.086%
P.O. Box 1669
Greenwich, CT 06836-1669

First Union National Bank 7.302%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28202-1910
Short-Intermediate Class A

<PAGE>

Joseph Romano 27.664%
2164 Troon Road
Houston, TX 77019-6352

First Union Brokerage Services 16.897%
Haywood D. Cochrane Jr.
21 Castlewood Court
Nashville, TN 37215

FUBS & CO. 6.072%
Anthony M. Truscello Sr. and
Carolyn A. Truscello
878 Taylor Drive
Folcroft, PA 19032-1523

First Union Brokerage Services 5.260%
Lena Pressburger and
Sally Pressburger JTWROS
200 Vandelinda Avenue
Teaneck, NJ 07666

Short-Intermediate Class B
FUBS & CO. FEBO 7.195%
Carl R. Nodine and
Linda F. Nodine
P.O. Box 210086
Nashville, TN 37221-0086

FUBS & CO. FEBO 5.578%
Shirley L. Roberts
2770 S Garden Drive
210 Building 21
Lake Worth, FL 33461-6280

Arthur I. Roe Jr. 5.033%
Tod Gail A. Strickland
P.O. Box 510
Arcadia, FL 34266
Short-Intermediate Class Y

First Union National Bank/EB/INT 79.706%
Cash Account
Attn: Trust Operations Fd Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 28202-1911

Tax Free Class A
MLPF&S for the Sole Benefit of 11.976%
Its Customers
Attn: Fund Administration
4800 Deer Lake Drive E 2nd Flr.
Jacksonville, FL 32246-6484

Tax Free Class B

<PAGE>

MLPF&S for the Sole Benefit of 19.033%
Its Customers
Attn: Fund Administration
4800 Deer Lake Drive E 2nd Flr.
Jacksonville, FL 32246-6484

Tax Free Class C
MLPF&S For the Sole Benefit of 44.195%
Its Customers
Attn: Fund Administration
4800 Deer Lake Drive E 2nd Flr.
Jacksonville, FL 32246-6484

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISORS

Each Fund's Advisor is a subsidiary of First Union Corporation ("First
Union"), a bank holding company headquartered at 301 South College Street,
Charlotte, North Carolina 28288-0630. First Union and its subsidiaries provide a
broad range of financial services to individuals and businesses througout the
United States.

The Advisor to High Grade is the Capital Management Group of First
Union National Bank ("FUNB"), 201South College Street, Charlotte, North Carolina
28288-0630. FUNB is entitled to receive from High Grade an annual fee equal to
0.50% of the Fund's average daily net assets.

The Advisor to Short-Intermediate is Evergreen Asset Management Corp.
("Evergreen Asset"), 2500 Westchester Avenue, Purchase, New York 10577.
Evergreen Asset is entitled to receive from Short-Intermediate an annual fee
equal to 0.50% of the Fund's average daily net assets. Lieber and Company, 2500
Westchester Avenue, Purchase, New York 10577, a First Union subsidiary, is the
Fund's subadvisor. Lieber and Company is reimbursed by Evergreen Asset for the
direct and indirect costs of providing subadvisory services to the Fund.

The Advisor to Tax Free is Keystone Investment Management Company
("Keystone"), 200 Berkeley Street, Boston, MA 02116. Keystone is entitled to
receive an annual fee equal to 2.0% of Tax Free's gross dividend and interest
income plus a percentage of the aggregate net asset value of Fund shares, as
follows:

0.50% of the first $100 million, plus
0.45% of the next $100 million, plus
0.40% of the next $100 million, plus
0.35% of the next $100 million, plus
0.30% of the next $100 million, plus
0.25% of amounts over $500 million.

<PAGE>

INVESTMENT ADVISORY AGREEMENTS

On behalf of each of its Funds, the Trust has entered into an
investment advisory agreement with each Advisor (the "Advisory Agreements").
Under the Advisory Agreements, and subject to the supervision of the Trust's
Board of Trustees, each Advisor 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 Advisor 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 Advisor, 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 (Trustees
who are not interested persons of a Fund as defined in the 1940 Act); (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 ("SEC") or
under state or other securities laws; (11) expenses of preparing, printing and
mailing prospectuses, SAIs, notices, reports and proxy materials to shareholders
of such Fund; (12) expenses of shareholders' and Trustees' meetings; (13)
charges and expenses of legal counsel for such 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 SEC and other authorities;
and (15) all extraordinary charges and expenses of such Fund. (See also the
section entitled "Financial Information.")

Each 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 cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreements 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. Each Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.

Transactions Among Advisory Affiliates

The Trust has adopted procedures pursuant to Rule 17a-7 under 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 is an Advisor. 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
is an Advisor. The Funds may engage in such transactions if they are equitable
to each participant and consistent with each participant's investment objective.

DISTRIBUTOR

Evergreen Distributor, Inc. (the "Distributor") markets the Funds through
broker-dealers and other financial representatives. Its address is 125 W. 55th
Street, New York, NY 10019.

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 and Class

<PAGE>

C shares are designed to permit an investor to purchase such shares through
broker-dealers without the assessment of a front-end sales charge, 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 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.

The National Association of Securities Dealers, Inc. ("NASD") limits
the amount that a mutual fund may pay annually in distribution costs for sale of
its shares and shareholder service fees. The NASD limits annual expenditures to
1.00% of the aggregate average daily net asset value of its shares, of which
0.75% may be used to pay such distribution costs and 0.25% may be used to pay
shareholder services fees. The NASD also limits the aggregate amount that a Fund
may pay for such distribution costs to 6.25% of gross share sales since the
inception of the distribution plan, plus interest at the prime rate plus 1.00%
on such amounts remaining unpaid from time to time.

Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A and Class B shares, and with respect to
Tax Free, 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 Independent Trustees are committed to the discretion of
such Independent Trustees then in office.

Each Advisor may from time to time 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 the 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 service and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B and Class C
shares (as applicable). The Plans are designed to (i) stimulate brokers to
provide distribution and administrative support services to each Fund and
holders of such Class A, Class B and Class C shares and (ii) stimulate
administrators to render administrative support services to a Fund and holders
of such 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 such Class A, Class B and Class C
shares; assisting clients in changing dividend options, account designations,
and addresses; and providing such other services as a Fund reasonably requests
for its Class A, Class B and Class C shares, as applicable.

FUNB or its affiliates may finance the payments made by the Distributor
to compensate broker/dealers or other persons for distributing shares of a Fund.

In the event that a Plan or Distribution Agreement is terminated or
not continued with respect

<PAGE>

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 a Fund to the Distributor
with respect to that class or classes, and (ii) a 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 service 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 a Fund's
outstanding voting securities, voting separately by class, and in either case,
by a majority of the Independent Trustees, cast in person at a meeting called
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 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 Independent 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, a Fund
need give no notice to the Distributor. Any Distribution Agreement will
terminate automatically in the event of its assignment. (See also the section
entitled "Financial Information.")

ADDITIONAL SERVICE PROVIDERS

Administrator

Evergreen Investment Services, Inc. ("EIS"), 200 Berkeley Street,
Boston, Massachusetts 02116- 5034, serves as administrator to High Grade,
subject to the supervision and control of the Trust's Board of Trustees. EIS
provides the Fund with facilities, equipment and personnel and is entitled to
receive a fee based on the aggregate average daily net assets of the Funds at a
rate based on the total assets of all mutual funds administered by EIS for which
any affiliate of FUNB serves as Advisor, as follows:

0.050% of the first $7 billion, plus
0.035% of the next $3 billion, plus
0.030% of the next $5 billion, plus
0.020% of the next $10 billion, plus
0.015% of the next $5 billion, plus
0.010% of amounts over $30 billion.

Transfer Agent

Evergreen Service Company ("ESC") a subsidiary of First Union, is the
Funds' transfer agent. 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 02116-5034.

Independent Auditors

PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New
York 10036 audits the financial statements of High Grade and Short-Intermediate.
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110 audits the
financial statements of Tax Free.

<PAGE>

Custodian

State Street Bank and Trust Company is the Funds' custodian. The bank
keeps custody of each Fund's securities and cash and performs other related
duties. The custodian's address is P.O. Box 9021, Boston, Massachusetts 02205-
9827.

Legal Counsel

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

BROKERAGE

SELECTION OF BROKERS

In effecting transactions in portfolio securities for a Fund, each
Advisor seeks the best execution of orders at the most favorable prices. Each
Advisor determines whether a broker has provided a 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

Each Fund expects to buy and sell its fixed-income securities through
principal transactions, that is, directly from the issuer or from an underwriter
or market maker for the securities. Generally, a Fund will not pay brokerage
commissions for such purchases. Usually, when a Fund buys a security from an
underwriter, the purchase price will include an 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

Each Advisor makes investment decisions for a Fund independently from
those of its other clients. It may frequently develop, however, that an Advisor
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, an Advisor 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.

<PAGE>

TRUST 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 18, 1997 pursuant to an Agreement and
Declaration of Trust (the "Declaration of Trust"). A copy of the Declaration of
Trust is on file at the SEC as an exhibit to the Trust's Registration Statement,
of which this SAI is a part. This summary is qualified in its entirety by
reference to the Declaration of Trust.

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. At meetings called for the initial election of Trustees
or to consider other matters, each share is entitled to one vote for each dollar
of net asset value applicable to such 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 votes
applicable to the shares of that class. Shares have non-cumulative voting
rights, which means that the holders of more than 50% of the votes applicable to
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 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.

<PAGE>

PURCHASE, REDEMPTION AND PRICING OF SHARES

HOW THE FUNDS OFFER SHARES TO THE PUBLIC

You may buy shares of a Fund through the Distributor, broker-dealers
that have entered into special agreements with the Distributor or certain other
financial institutions. Each Fund offers three or 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.

Class A Shares

With certain exceptions, when you purchase Class A shares you will pay
a maximum sales charge of 3.25% for Short-Intermediate, 4.75% for the other
Funds. (The prospectus contains a complete table of applicable sales charges and
a discussion of sales charge reductions or waivers that may apply to purchases.
See also the section in this SAI entitled "Method of Computing Offering Price
for Class A Shares." If you purchase Class A shares in the amount 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 "Contingent Deferred Sales Charge"
below).

Class B Shares

The Funds offer Class B shares at net asset value without an initial
sales charge. With certain exceptions, however, the Funds will charge a CDSC on
shares you redeem within 72 months after the month of your purchase, in
accordance with the following schedule:

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 ESC).

Class C Shares (Tax Free)

Class C shares are available only through broker-dealers who have
entered into special distribution agreements with the Distributor. The Funds
offer Class C shares at net asset value without an initial sales charge. With
certain exceptions, however, the Fund will charge a CDSC of 1.00% on

<PAGE>

shares you redeem within 12-months after the month of your purchase. (See
"Contingent Deferred Sales Charge" below).

Class Y Shares (High Grade and Short-Intermediate)

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 Management Corp. ("Evergreen Asset"), owned
shares in a mutual fund advised by Evergreen Asset, (2) certain institutional
investors and (3) investment advisory clients of FUNB, Evergreen Asset,
Keystone, Meridian Investment Company, First Investment Advisors, Inc., 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 Plans and Agreements," above). 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. If a shareholder requests a redemption, the Fund will
seek to minimize the CDSC the shareholder is required to pay by first redeeming
shares not subject to a CDSC and, thereafter, redeeming shares held the longest.
The CDSC on any redemption is, to the extent permitted by the NASD, paid to the
Distributor 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

<PAGE>

once. All purchases of Class A shares of an Evergreen fund during the period
will qualify as Letter of Intent purchases.

Waiver of Initial Sales Charges

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

1. purchasers 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");

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

4. investment advisors, 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 advisors or financial planners who place
trades for their own accounts if the accounts are linked to a
master account of such investment advisors 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 FUNB, its affiliates, the Distributor, any
broker-dealer with whom the Distributor, 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 Distributor or their affiliates and 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 a Fund. The Funds will not charge any
CDSC on redemptions by such purchasers.

<PAGE>

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 a 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 a Fund has closed because the
account has an aggregate net asset value of less than $1,000;

7. an automatic withdrawal under a Systematic Withdrawal 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 withdrawal 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

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. The Trust's Board of
Trustees reserves the right to discontinue, alter or limit the exchange
privilege at any time.

CALCULATION OF NET ASSET VALUE PER SHARE ("NAV")

Each Fund computes its NAV once daily on Monday through Friday, as
described in the prospectuses. 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 NAV 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.

<PAGE>

VALUATION OF PORTFOLIO SECURITIES

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

(1) An independent pricing service values each Fund's municipal bonds
at fair value using a variety of factors which may include yield, liquidity,
interest rate risk, credit quality, coupon, maturity and type of issue.

(2) Short-term investments with remaining maturities of 60 days or less
are carried at amortized cost, which approximates market value.

(3) Short-term investments maturing in more than 60 days for which
market quotations are readily available are valued at current market value.

(4) Securities for which valuations are not available from an
independent pricing service, including restricted securities, are valued at fair
value according to procedures established by the Trust's Board of Trustees.

SHAREHOLDER SERVICES

As described in the prospectuses, a shareholder may elect to receive
dividends and capital gains distributions in cash instead of shares. However,
ESC 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 his or
her address. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.

PRINCIPAL UNDERWRITER

The Distributor 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 SAI. 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.

<PAGE>

The Distributor has agreed that it will, in all respects, duly comply
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.

ADDITIONAL TAX INFORMATION

REQUIREMENTS FOR QUALIFICATION AS A REGULATED INVESTMENT COMPANY

Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to a regulated investment company ("RIC")
under Subchapter M of the Internal Revenue Code ("the Code"). (Such
qualification does not involve supervision of management or investment practices
or policies by the Internal Revenue Service.) In order to qualify as a RIC, 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; and (ii)
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.

<PAGE>

TAXES ON DISTRIBUTIONS

Distributions out of taxable income or capital gains 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 a Fund from its investment
company taxable income (net investment income plus net realized short-term
capital gains, if any).

From time to time, a Fund will distribute the excess of its net
long-term capital gains over its short-term capital losses to shareholders. For
federal tax purposes, shareholders must include such distributions when
calculating their long-term capital gains. Each Fund will inform its
shareholders of the portion, if any, of a long-term capital gain distribution
which is subject to tax at the maximum 28% rate and the portion, if any, of a
long term capital gain distribution which is subject to tax at the maximum 20%
rate. Distributions of long-term capital gains are taxable as such to a
shareholder, no matter how long the shareholder has held the shares.

Distributions by a Fund reduce its NAV. A distribution that reduces a
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 a 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.

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 a Fund's assets must consist of federally tax-exempt obligations at the
close of each quarter. An exempt-interest 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 advisor 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

<PAGE>

for a fiscal year would be exempt from federal income tax. The Funds 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. Capital gain on assets held for more than
twelve months is generally subject to a maximum federal income tax rate of 20%
for an individual. Generally, the Code will not allow a shareholder to realize a
loss on shares he or she has sold or exchanged 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 a shareholder's loss on shares held for
six months or less as a 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
advisors about the applicability of the backup withholding provisions.

OTHER TAX CONSIDERATIONS

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 advisors 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
advisor 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 30% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.

<PAGE>

EXPENSES

The table below shows the total dollar amounts paid by each Fund for
services rendered during the fiscal periods specified. For more information on
specific expenses, see "Investment Advisory and Other Services," "Distribution
Plans and Agreements," "Principal Underwriter" and "Purchase, Redemption and
Pricing of Shares."

Investment Advisory Fees

Below are the investment advisory fees paid by each Fund for each
fiscal year or period indicated. For more information, see "Investment Advisors"
and " Investment Advisory Agreements" under "Investment Advisory and Other
Services" above.

Year and Fund Advisory Fee Waiver
============================= ============================= ===================
1998

High Grade (a) $542,365 0
Short-Intermediate (a) $622,594 $45,432
Tax Free (b) $2,410,469 0
1997
High Grade (c) $399,929 $64,199
Short-Intermediate (c) $248,564 $60,003
Tax Free (d) $6,029,348 0
1996
High Grade (e) $575,456 $228,548
Short-Intermediate(e) $287,149 $140,581
Tax Free (f) $6,642,609 0

(a) Year ended 5/31/98
(b) Five months ended 5/31/98
(c) Nine months ended 5/31/97
(d) Year ended 12/31/97
(e) Year ended 8/31/96
(f) Year ended 12/31/96

12b-1 Fees

Below are the 12b-1 fees paid by each Fund for its respective fiscal year
or period ended 5/31/98. For more information, see "Distribution Plans and

<PAGE>

Agreements" under "Investment Advisory and Other Services" above.

Class A Class B Class C

Distribution Service Fees Distribution Service Distribution Service
Fund fees Fees Fees Fees Fees
============= ============= ============= ============= =========== ============ =========
<S> <C> <C> <C> <C> <C> <C>
High Grade $127,730 0 $243,971 $81,324 N/A N/A
Short-
Intermediate $5,615 0 $47,636 $15,878 N/A N/A
Tax Free $1,157,033 0 $421,288 $284,060 $20,909 $6,970

</TABLE>

Underwriting Commissions

Below are the total underwriting commissions paid and underwriting
commissions retained for each fiscal year or period indicated. For more
information, see "Principal Underwriter" above.

Year and Fund Total Underwriting Underwriting
Commissions Commissions Retained
======================= ====================== =======================
1998

High Grade (a) $2,497,757 $107,759
Short-Intermediate (a) $2,384,015 $18,533
Tax Free (b) $1,137,406 $45,491
1997
High Grade (c) $46,714 $6,389
Short-Intermediate (c) $26,752 $3,820
Tax Free (d) $1,208,779 $27,849
1996
High Grade (e) $73,014 $9,050
Short-Intermediate(e) $33,816 $8,464
Tax Free (f) $2,402,158 $632,014

(a) Year ended 5/31/98
(b) Five months ended 5/31/98
(c) Nine months ended 5/31/97
(d) Year ended 12/31/97
(e) Year ended 8/31/96
(f) Year ended 12/31/96

<PAGE>

Brokerage Comissions Paid

Each Fund paid no brokerage commissions during its respective fiscal
year or period ended 1998, 1997 or 1996. For more information, see "Brokerage"
above.

PERFORMANCE
Total Return

Total return quotations for a class of shares of a Fund 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. All dividends and
distributions are added to the initial investment, 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.

The annual total returns for each class of shares of the Funds
(including applicable sales charges) as of May 31, 1998 are as follows:

<TABLE>
<CAPTION>
Ten Years or
Since Inception
Fund One Year Five Years Inception Date
================== ========================== =================== =================== ===================
<S> <C> <C> <C> <C>
High Grade
Class A 3.71% 5.04% 6.45% 2/21/92
Class B 3.07% 5.02% 5.84% 1/11/93
Class Y 9.15% N/A 6.05% 2/28/94
Short-Intermediate
Class A 1.69% N/A 3.89% 1/5/95
Class B (0.93%)* N/A 3.16% 1/5/95
Class Y 5.11% 3.88% 4.92% 7/17/91**
Tax Free
Class A N/A N/A 0.04% 1/20/98
Class B 2.72% 4.91% 7.25% 1/19/78
Class C N/A N/A 0.46% 1/26/98
================== =========================== =================== =================== ==================
</TABLE>

* Loss.
** Performance calculated since 1/18/92, prior to which Class Y
shares of Short-Intermediate were shares of a money market
fund.

<PAGE>

Current and Tax Equivalent Yields

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. Such yield will include
income from sources other than municipal obligations, if any. Tax equivalent
yield is, in general, the current yield divided by a factor equal to one minus a
stated income tax rate and reflects the yield a taxable investment would have to
achieve in order to equal on an after-tax basis a tax-exempt yield. For the
30-day period ended May 31, 1998, the current and tax-equivalent yields of the
Funds are shown below. Any given yield or total return quotation should not be
considered representative of the Fund's yield or total return for any future
period.

30-Day Yield Tax-Equivalent Yield
==================================== ==================================== ================================================
Federal
Fund Tax Rate
(1) Class A Class B Class C Class Y Class A Class B Class C Class Y
=============== =========== ========= =========== ========== ========== ============ ============ ============ ==========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Grade 39.6% 4.01% 3.47% N/A 4.46% 6.64% 5.75% N/A 7.38%
Short-Intermediate 39.6% 3.51% 2.74% N/A 3.73% 5.81% 4.54% N/A 6.18%
Tax Free 39.6% 4.26% 3.73% 3.73% N/A 7.05% 6.18% 6.18% N/A
=============== =========== ========= ========= =========== =========== ============ ============ ============ =========

</TABLE>

(1) Assumed for purposes of this chart. Your tax may vary.

METHOD OF COMPUTING OFFERING PRICE
FOR CLASS A SHARES

Class A shares are sold at the NAV plus a sales charge. Below is an
example of the method of computing the offering price of the Class A shares of
each Fund. The example assumes a purchase aggregating less than $50,000 based
upon the NAV of each Fund's Class A shares as of May 31, 1998. For more
information, see "Purchase, Redemption and Pricing of Shares" above.

Fund Net Asset Value Maximum Per Offering Price Per
Share Sales Charge Share
High Grade $11.36 4.75% $11.93
Short-Intermediate $10.19 3.25% $10.53
Tax Free $7.78 4.75% $8.17
================== ================= ================== ==================

<PAGE>

FINANCIAL STATEMENTS

The audited financial statements and the independent auditors' reports
thereon are hereby incorporated by reference to the Funds' Annual Report, a copy
of which may be obtained without charge by writing to ESC, P.O. Box 2121,
Boston, Massachusetts 02106-2121, or by calling ESC toll-free at 1-800-343-2898.

ADDITIONAL INFORMATION

Except as otherwise stated in its prospectuses or required by law, each
Fund reserves the right to change the terms of the offer stated in its
prospectuses 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
prospectuses, SAI 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 prospectuses and SAI omit certain information contained in
the Trust's registration statement, which you may obtain for a fee from the SEC
in Washington, D.C.

<PAGE>

Appendix A

BOND RATINGS

Each Fund relies on ratings provided by independent rating services to
help determine the credit quality of bonds and other obligations a Fund intends
to purchase or already owns. A rating is an opinion of an issuer's ability to
pay interest and/or principal when due. Ratings reflect an issuer's overall
financial strength and whether it can meet its financial commitments under
various economic conditions.

The principal rating services, commonly used by the Funds and investors
generally, are Standard & Poor's Ratings Services (S&P) and Moody's Investors
Service (Moody's). A Fund may also rely on ratings provided by Fitch IBCA, Inc.
(Fitch). Rating systems are similar among the different services. As an example,
the chart below compares basic ratings for long-term bonds. The "Credit Quality"
terms in the chart are for quick reference only. Following the chart are the
specific definitions each service provides for its ratings.

COMPARISON OF LONG-TERM BOND RATINGS

MOODY'S S&P FITCH Credit Quality
========= =========== =============== ==========================================
Aaa AAA AAA Excellent Quality (lowest risk)
Aa AA AA Almost Excellent Quality (very low risk)
A A A Good Quality (low risk)
Baa BBB BBB Satisfactory Quality (some risk)
Ba BB BB Questionable Quality (definite risk)
B B B Low Quality (high risk)
Caa/Ca/C CCC/CC/C CCC/CC/C In or Near Default
D DDD/DD/D In Default
========= =========== ============== ==========================================

LONG-TERM BOND RATINGS

Moody's Long-Term Bond Ratings

Aaa Bonds 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.

Aa Bonds 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

A-1

<PAGE>

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 risk appear somewhat larger than
the Aaa securities.

A Bonds 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 some time in the future.

Baa Bonds 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.

Ba Bonds 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.

B Bonds 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.

Caa Bonds rated Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest.

Ca Bonds rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.

C Bonds rated C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range raking and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.

S&P Long-Term Bond Ratings

AAA An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.

AA An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

A An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

A-2

<PAGE>

BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC,
CC, and C are regarded as having significant speculative characteristics. BB
indicates the least degree of speculation and C the highest. While such
obligations will likely have some quality and protective characteristics, these
may be outweighed by large uncertainties or major exposures to adverse
conditions.

BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions, which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.

B An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet it financial
commitment on the obligation.

CCC An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.

CC An obligation rated CC is currently highly vulnerable to nonpayment.

C The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.

D An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.

Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.

Fitch Long-Term Bond Ratings

Investment Grade

AAA Highest credit quality. AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.

AA Very high credit quality. AA ratings denote a very low expectation of credit
risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not sign significantly vulnerable to forseeable

A-3

<PAGE>

events. A High credit quality. A ratings denote a lower expectation of credit
risk. The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.

BBB Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.

Speculative Grade

BB Speculative. BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not investment
grade.

B Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.

CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A CC rating indicates that default of some
kind appears probable. C ratings signal imminent default.

DDD, DD, D Default. Securities are not meeting current obligations and are
extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. DD designates lower recovery
potential and D the lowest.

+ or - may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the AAA rating category or to
categories below CCC.

SHORT-TERM RATINGS

Moody's Short-Term Issuer Ratings

Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidence by many of the following characteristics.

- -- Leading market positions in well-established industries.

- -- High rates of return on funds employed.

- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

- -- Broad margins in earnings coverage of fixed financial changes and high
internal cash generation.

A-4

<PAGE>

- -- Well-established access to a range of financial markets and assured sources
of alternate liquidity.

Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

Not Prime Issuers rated Not Prime do not fall within any of the Prime rating
categories.

Moody's Short-Term Loan Ratings

MIG 1 This designation denotes best quality. There is strong protection by
established cash flows, superior liquidity support, or demonstrated broad-based
access to the market for refinancing.

MIG 2 This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.

MIG 3 This designation denotes favorable quality. Liquidity and cash-flow
protection may be narrow and market access for refinancing is likely to be less
well established.

SG This designation denotes speculative quality. Debt instruments in this
category may lack margins of protection.

S&P Commercial Paper Ratings

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

A-2 Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.

A-3 Issues carrying this designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.

B Issues rated B are regarded as having only speculative capacity for timely
payment.

C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.

D Debt rated D is in payment default. The D rating category is used when
interest payments of

A-5

<PAGE>

principal payments are not made on the date due, even if the applicable grace
period has not expired, unless S&P believes such payments will be made during
such grace period.

S&P Short-Term Obligation Ratings

SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

SP-3 Speculative capacity to pay principal and interest.

Fitch Short-Term Obligation Ratings

F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.

F2 Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.

F3 Fair credit quality. The capacity for timely payment of financial commitments
is adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.

B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.

C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.

D Default. Denotes actual or imminent payment default.

A-6

<PAGE>

EVERGREEN MUNICIPAL TRUST

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

Item 24(a). Financial Statements

The financial statements listed below are included in Part A of this
Amendment to the Registration Statement:
<TABLE>
<CAPTION>
<S> <C>
EVERGREEN HIGH-GRADE TAX FREE FUND

Class A Financial Highlights For the year ended May 31, 1998; for the nine-month period ended May 31, 1997;
for the year ended August 31, 1996; for the eight months ended August 31, 1995;
for each of the years in two-year period ended December 31, 1994; and for the
period from February 21, 1992 (Commencement of Operations) to December 31, 1992.

Class B Financial Highlights For the year ended May 31, 1998; for the nine-month period ended May 31, 1997;
for the year ended August 31, 1996; for the eight months ended August 31, 1995;
for the year ended December 31, 1994; and for the period from January 11, 1993
(Commencement of Operations) to December 31, 1993.

Class Y Financial Highlights For the year ended May 31, 1998; for the nine-month period ended May 31, 1997;
for the year ended August 31, 1996; for the eight months ended August 31, 1995;
and for the period from February 28, 1994 (Commencement of Operations) to
December 31, 1994.

EVERGREEN SHORT-INTERMEDIATE TAX FREE FUND

Class A Financial Highlights For the year ended May 31, 1998, for the nine-month period ended May 31, 1997; for
the year ended August 31, 1996; and for the period from January 5, 1995
(Commencement of Operations) to August 31, 1995.

Class B Financial Highlights For the year ended May 31, 1998, for the nine-month period ended May 31, 1997; for
the year ended August 31, 1996; and for the period from January 5, 1995
(Commencement of Operations) to August 31, 1995.

Class Y Financial Highlights For the year ended May 31, 1998; for the nine-month period ended May 31, 1997; for
each of the years in the five-year period ended August 31, 1996; and for the
period from July 17, 1991 (Commencement of Operations) to August 31, 1991.

EVERGREEN TAX FREE FUND

Class A Financial Highlights For the period from January 20, 1998 (Commencement of Operations) to May 31, 1998.

Class B Financial Highlights For the five-month period ended May 31, 1998; and for each of years in the
ten-year ended December 31, 1997.

Class C Financial Highlights For the period from January 26, 1998 (Commencement of Operations) to May 31, 1998.

</TABLE>

The financial statements listed below are incorporated by reference in Part
B of this Amendment to the Registration Statement:

Financial Highlights for the years or periods described above.

Schedule of Investments of Evergreen High Grade Tax Free Fund, Evergreen
Short-Intermediate Municipal Fund and Evergreen Tax Free Fund as of May 31,
1998

Statements of Assets and Liabilities of Evergreen High Grade Tax Free Fund,
Evergreen Short-Intermediate Municipal Fund and Evergreen Tax Free Fund as
of May 31, 1998

Statements of Operations of Evergreen High Grade Tax Free Fund and
Evergreen Short-Intermediate Municipal Fund for the fiscal year ended
May 31, 1998 and of Evergreen Tax Free Fund for the fiscal year ended
December 31, 1997 and the five months ended May 31, 1998.

Statements of Changes in Net Assets of Evergreen High Grade Tax Free Fund
and Evergreen Short-Intermediate Municipal Fund for the fiscal year ended
August 31, 1996, the nine months ended May 31, 1997 and the year ended
May 31, 1998 and of Evergreen Tax Free Fund for the each of the years in
the two-year period ended December 31, 1997 and for the five months ended
May 31, 1998.

Notes to Financial Statements of Evergreen High Grade Tax Free Fund, Ever
green Short-Intermediate Municipal Fund and Evergreen Tax Free Fund

Independent Auditors' Report for Evergreen Tax Free Fund dated July 3, 1998

Independent Auditors' Report for Evergreen High Grade Tax Free Fund and
Evergreen Short-Intermediate Municipal Fund dated July 6, 1998.

The information required by this item for Evergreen California Tax Free
Fund, Evergreen Connecticut Municipal Bond Fund, Evergreen Massachusetts Tax
Free Fund, Evergreen Missouri Tax Free Fund, Evergreen New York Tax Free Fund,
Evergreen Pennsylvania Tax Free Income Fund and Evergreen New Jersey Tax Free
Income Fund contained in Post Effective Amendment No.7 to Registration
Statement No. 333-36033/811-08367 filed on July 31, 1998 is incorporated by
reference herein.

The information required by this item for Evergreen Florida High Income
Municipal Bond Fund, Evergreen Florida Municipal Bond Fund, Evergreen Georgia
Municipal Bond Fund, Evergreen Maryland Municipal Bond Fund, Evergreen North
Carolina Municipal Bond Fund, Evergreen South Carolina Municipal Bond Fund, and
Evergreen Virginia Municipal Bond Fund contained in Post-Effective Amendment No.
5 to Registration Statement No. 333-36033/811-08367 filed on February 6, 1998 is
incorporated by reference herein.

Item 24(b). Exhibits

Unless otherwise noted, the exhibits listed below are contained herein.

<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------- ----------- -----------
<S> <C> <C>
1 Declaration of Trust Incorporated by reference to
Registrant's Pre-Effective Amendment No. 1
Filed on October 8, 1997

2 By-laws Incorporated by reference to
Registrant's Pre-Effective Amendment No. 1
Filed on October 8, 1997
3 Not applicable

4 Provisions of instruments defining the rights Incorporated by reference to
of holders of the securities being registered Registrant's Post-Effective Amendment No. 1
are contained in the Declaration of Trust Filed on July 31, 1998
Articles II, III.(6)(c), VI.(3), IV.(8), V, VI,
VII, VIII and By-laws Articles II, III and VIII
included as part of Exhibits 1 and 2, above.

5(a) Investment Advisory and Management Incorporated by reference to
Agreement between the Registrant and First Registrant's Post-Effective Amendment No. 7
Union National Bank Filed on July 31, 1998

5(b) Investment Advisory and Management Incorporated by reference to
Agreement between the Registrant and Evergreen Registrant's Post-Effective Amendment No. 7
Asset Management Corp. Filed on July 31, 1998

5(c) Investment Advisory and Management Incorporated by reference to
Agreement between the Registrant and Keystone Registrant's Post-Effective Amendment No. 7
Investment Management Company Filed on July 31, 1998.

6(a) Class A and Class C Principal Underwriting Incorporated by reference to
Agreement between the Registrant and Evergreen Registrant's Post-Effecive Amendment No. 7
Distributor, Inc. Filed on July 31, 1998.

6(b) Class B Principal Underwriting Agreement Incorporated by reference to
between the Registrant and Evergreen Distributor Registrant's Post-Effective Amendment No. 7
Inc. (B-1) Filed on July 31, 1998.

6(c) Class B Principal Underwriting Agreement Incorporated by reference to
between the Registrant and Evergreen Distributor, Registrant's Post-Effective Amendment No. 7
Inc. (B-2) Filed on July 31, 1998.

6(d) Class B Principal Underwriting Agreement Incorporated by reference to
between the Registrant and Evergreen Distributor, Registrant's Post-Effective Amendment No. 7
Inc. (Evergreen/KCF) Filed on July 31, 1998.

6(e) Class Y Principal Underwriting Agreement Incorporated by reference to
between the Registrant and Evergreen Distributor, Registrant's Post-Effective Amendment No. 7
Inc. Filed on July 31, 1998.

6(f) Specimen copy of Dealer Agreement used by Incorporated by reference to
Evergreen Distributor, Inc. Registrant's Pre-Effective Amendment No. 1
filed November 12, 1997

7 Form of Deferred Compensation Plan Incorporated by reference to
Registrant's Pre-Effective Amendment No. 2
Filed on November 10, 1997

8 Custodian Agreement between the Registrant Incorporated by reference to
and State Street Bank and Trust Company Registrant's Post-Effective Amendment No. 7
Filed on July 31, 1998

9(a) Administration Agreement between Evergreen Incorporated by reference to
Investment Services, Inc. and the Registrant Registrant's Post-Effective Amendment No. 7
Filed on July 31, 1998.

9(b) Transfer Agent Agreement between the Incorporated by reference to
Registrant and Evergreen Service Company Registrant's Post-Effective Amendment No. 7
Filed on July 31, 1998.

10 Opinion and Consent of Sullivan & Worcester LLP Incorporated by reference to
Registrant's Post-Effective Amendment No. 2
Filed on December 12, 1997

11(a) Consent of PricewaterhouseCoopers LLP

11(b) Consent of KPMG Peat Marwick LLP

12 Not applicable

13 Not applicable

15(a) 12b-1 Distribution Plan for Class A Incorporated by reference to
Registrant's Post-Effective Amendment No. 7
Filed on July 31, 1998.

15(b) 12b-1 Distribution Plan for Class B Incoporated by reference to
Registrant's Post-Effective Amendment No. 7
Filed on July 31, 1998

15(b) 12b-1 Distribution Plan for Class B Incorporated by reference to
(KAF B-1) Registrant's Post-Effective Amendment No. 7
Filed on July 31, 1998.

15(c) 12b-1 Distribution Plan for Class B Incorporated by reference to
(KAF B-2) Registrant's Post-Effective Amendment No. 7
Filed on July 31, 1998

15(d) 12b-1 Distribution Plan for Class B Incorporated by reference to
(KCF/Evergreen) Registrant's Post-Effective Amendment No. 7
Filed on July 31, 1998.

15(e) 12b-1 Distribution Plan for Class C Incorporated by reference to
Registrant's Post-Effective Amendment No. 7
Filed on July 31, 1998
16 Performance Calculations

17 Financial Data Schedules

18 Multiple Class Plan Incorporated by reference to
Registrant's Pre-Effective Amendment No. 2
Filed on November 10, 1997

19 Powers of Attorney Incorporated by reference to
Registrant's Post-Effective Amendment No. 7
Filed on July 31, 1998

</TABLE>

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

None

Item 26. Number of Holders of Securities (as of August 31, 1998)

Evergreen High Grade Tax Free Fund
Class A 1,804
Class B 932
Class y 456
Evergreen Short-Intermediate Municipal Fund
Class A 91
Class B 157
Class Y 970
Evergreen Tax Free Fund
Class A 27,103
Class B 3,675
Class C 127

Item 27. Indemnification.

Provisions for the indemnification of the Registrant's Trustees and
officers are contained the Registrant's Declaration of Trust.

Provisions for the indemnification of Registrant's Investment Advisors are
contained in their Investment Advisory and Management Agreements.

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

Item 28. Business or Other Connections of Investment Adviser.

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

John R. Georgius President, First Union Corporation; Vice
Chairman and President, 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

All of the above persons are located at the following address: First Union
National Bank, One First Union Center, Charlotte, NC 28288.

The information required by this item with respect to Evergreen Asset
Management Corp. is incorporated by reference to the Form ADV (File No.
801-46522) of Evergreen Asset Management Corp.

The information required by this item with respect to Keystone Investment
Management Company is incorporated by reference to the Form ADV (File No.
801-8327) of Keystone Investment Management Company.

Item 29. Principal Underwriters.

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

Lynn C. Mangum Director, Chairman and Chief Executive
Officer

Robert J. McMullan Director, Executive Vice President and
Treasurer

J. David Huber President

Kevin J. Dell Vice President, General Counsel and Secretary

All of the above persons are located at the following address: Evergreen
Distributor, Inc., 125 West 55th Street, New York, New York 10019.

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 the Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Evergreen Investment Services, Inc., Evergreen Service Company and Keystone
Investment Management Company, all located at 200 Berkeley Street, Boston,
Massachusetts 02110

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

Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase,
New York 10577

Iron Mountain, 3431 Sharp Slot Road, Swansea, Massachusetts 02777

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

Item 31. Management Services.

Not Applicable

Item 32. Undertakings.

The 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

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Columbus, and State of Ohio, on the 30th day of
September, 1998.

EVERGREEN MUNICIPAL TRUST

By: /s/ William J. Tomko
-----------------------------
Name: William J. Tomko
Title: President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 30th day of September, 1998.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/William J. Tomko /s/ Laurence B. Ashkin /s/ Charles A. Austin, III
- ------------------------- ----------------------------- --------------------------------
William J. Tomko Laurence B. Ashkin* Charles A. Austin III*
President and Treasurer (Principal Trustee Trustee
Financial and Accounting Officer)

/s/ K. Dun Gifford /s/ James S. Howell /s/ William Walt Pettit
- ---------------------------- ---------------------------- --------------------------------
K. Dun Gifford* James S. Howell* William Walt Pettit*
Trustee Trustee Trustee

/s/Gerald M. McDonnell /s/ Thomas L. McVerry /s/ Michael S. Scofield
- ------------------------------- ----------------------------- --------------------------------
Gerald M. McDonell* Thomas L. McVerry* Michael S. Scofield*
Trustee Trustee Trustee

/s/ David M. Richardson /s/ Russell A. Salton, III MD
- ------------------------------ -------------------------------
David M. Richardson* Russell A. Salton, III MD*
Trustee Trustee

/s/ Richard J. Shima
- ------------------------------
Richard J. Shima*
Trustee
</TABLE>

*By: /s/ Catherine Foley
- -------------------------------
Catherine Foley
Attorney-in-Fact

*Catherine Foley, by signing her 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.

<PAGE>

INDEX TO EXHIBITS

Exhibit Number Exhibit
- -------------- -------

11(a) Consent of PricewaterhouseCoopers LLP

11(b) Consent of KPMG Peat Marwick LLP

16 Performance Calculations

17 Financial Data Schedules

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 8 to the registration statement on Form N-1A (the "Registration
Statement") of Evergreen Municipal Trust of our report dated July 6, 1998,
relating to the financial statements and financial highlights of Evergreen High
Grade Tax Free Fund and Evergreen Short-Intermediate Municipal Fund (the
"Funds"), appearing in the Funds' May 31, 1998 Annual Report to Shareholders,
which is also incorporated by reference into the Registration Statement. We also
consent to the references to us under the heading "Financial Highlights" in the
Prospectuses and under the heading "Independent Auditors" in such Statement of
Additional Information.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
September 28, 1998

CONSENT OF INDEPENDENT AUDITORS

The Trustees and Shareholders
Evergreen Municipal Trust:

We consent to the use of our report dated July 3, 1998 for Evergreen Tax
Free Fund incorporated herein by reference and to the references to our
firm under the captions "FINANCIAL HIGHLIGHTS" in the prospectus and
"Independent Auditors" in the Statement of Additional Information.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Boston, Massachusetts
September 28, 1998

Evergreen High Grade Tax Free Fund

CLASS A

PRICING 35976

30 DAY Y 0.040747

PRICE ST VARIABLE ZERO LONG TERM TOTAL DIV ADJUSTED
DATE INCOME COUPON INCOME INCOME FACTOR INCOME

35946
1 35947 4.15 0 17730.1 17734.25 52.75752 9356.15
2 35948 30.03 0 17668.67 17698.7 52.69385 9326.13
3 35949 22.15 0 17676.81 17698.96 52.71294 9329.64
4 35950 80.97 0 17625.18 17706.15 52.67617 9326.92
5 35951 64.42 0 17478.7 17543.12 52.63859 9234.45
6 35952 64.42 0 17478.7 17543.12 52.63859 9234.45
7 35953 64.42 0 17478.7 17543.12 52.63859 9234.45
8 35954 191.92 0 17481.02 17672.94 52.5086 9279.81
9 35955 175.83 0 17482.28 17658.11 52.47176 9265.52
10 35956 184.8 0 17453.7 17638.5 52.49703 9259.69
11 35957 189.01 0 17440.41 17629.42 52.48884 9253.48
12 35958 167.11 0 17439.05 17606.16 52.527 9247.99
13 35959 167.11 0 17439.05 17606.16 52.527 9247.99
14 35960 167.11 0 17439.05 17606.16 52.527 9247.99
15 35961 174.79 0 17381.5 17556.29 52.51941 9220.46
16 35962 128.47 0 17401.01 17529.48 52.31581 9170.69
17 35963 133.54 0 17465.87 17599.41 52.27529 9200.14
18 35964 0 0 17669.7 17669.7 52.27747 9237.27
19 35965 0.01 0 17637.16 17637.17 52.25992 9217.17
20 35966 0.01 0 17637.16 17637.17 52.25992 9217.17
21 35967 0.01 0 17637.16 17637.17 52.25992 9217.17
22 35968 6.21 0 17636.27 17642.48 52.25201 9218.55
23 35969 2.88 0 17638.81 17641.69 52.23995 9216.01
24 35970 0.06 0 17643.99 17644.05 52.14874 9201.15
25 35971 89.24 0 17502.44 17591.68 52.14462 9173.12
26 35972 55.69 0 17500.6 17556.29 52.11797 9149.98
27 35973 55.69 0 17500.6 17556.29 52.11797 9149.98
28 35974 55.69 0 17500.6 17556.29 52.11797 9149.98
29 35975 55.58 0 17508.14 17563.72 52.12153 9154.48
30 35976 159.53 0 17453.15 17612.68 51.80512 9124.27

TOTAL INCOME FOR PERIOD 276862.3
TOTAL EXPENSES FOR PERIOD 51238.81
AVERAGE SHARES OUTSTANDING 5616702
LAST PRICE DURING PERIOD 11.93

DAILY DAILY DAILY ACCUMULATED ACCUM ACCUM
EXPENSES SHARES PRICE INCOME EXPENSE SHARES

1723.24 5679912 11.94 9356.15 1723.24 5679912
1723.44 5677497 11.93 18682.28 3446.68 11357409
1722.48 5676470 11.92 28011.92 5169.16 17033879
1720.04 5668103 11.91 37338.84 6889.20 22701982
1718.95 5657855 11.92 46573.29 8608.15 28359837
1718.95 5657855 11.92 55807.74 10327.1 34017692
1718.95 5657855 11.92 65042.19 12046.05 39675547
1716.35 5655741 11.92 74322 13762.4 45331288
1717.21 5646147 11.92 83587.52 15479.61 50977435
1715.6 5652404 11.95 92847.21 17195.21 56629839
1716.36 5652500 11.97 102100.7 18911.57 62282339
1719.067 5646347 11.98 111348.7 20630.64 67928686
1719.067 5646347 11.98 120596.7 22349.70 73575032
1719.067 5646347 11.98 129844.7 24068.77 79221379
1713.32 5643949 12.01 139065.1 25782.09 84865328
1711.8 5598974 11.99 148235.8 27493.89 90464302
1708.49 5595844 11.93 157436 29202.38 96060146
1700.63 5595845 11.94 166673.2 30903.01 1.02E+08
1701.537 5590964 11.94 175890.4 32604.55 1.07E+08
1701.537 5590964 11.94 185107.6 34306.08 1.13E+08
1701.537 5590964 11.94 194324.7 36007.62 1.18E+08
1701.43 5590944 11.95 203543.3 37709.05 1.24E+08
1700.82 5588111 11.95 212759.3 39409.87 1.3E+08
1696.48 5577997 11.95 221960.4 41106.35 1.35E+08
1694.8 5569145 11.91 231133.6 42801.15 1.41E+08
1690.417 5550208 11.92 240283.5 44491.57 1.46E+08
1690.417 5550208 11.92 249433.5 46181.98 1.52E+08
1690.417 5550208 11.92 258583.5 47872.40 1.57E+08
1687.18 5550999 11.92 267738 49559.58 1.63E+08
1679.23 5544370 11.93 276862.3 51238.81 1.69E+08

<PAGE>

Evergreen High Grade Tax Free Fund

CLASS B

PRICING DATE 35976

30 DAY YTM 0.035282

PRICE ST VARIAB. ZERO COUP. LONG TRM AMORTIATION TOTAL DIV ADJUST
DATE INCOME & DIV INC INCOME INCOME INCOME FACTOR INCOME

1 35947 4.15 0 0 17730.1 17734.25 26.82744 4757.64
2 35948 30.03 0 0 17668.67 17698.7 26.76197 4736.52
3 35949 22.15 0 0 17676.81 17698.96 26.77651 4739.16
4 35950 80.97 0 0 17625.18 17706.15 26.79733 4744.78
5 35951 64.42 0 0 17478.7 17543.12 26.81056 4703.41
6 35952 64.42 0 0 17478.7 17543.12 26.81056 4703.41
7 35953 64.42 0 0 17478.7 17543.12 26.81056 4703.41
8 35954 191.92 0 0 17481.02 17672.94 26.7556 4728.5
9 35955 175.83 0 0 17482.28 17658.11 26.77817 4728.52
10 35956 184.8 0 0 17453.7 17638.5 26.76524 4720.99
11 35957 189.01 0 0 17440.41 17629.42 26.76885 4719.19
12 35958 167.11 0 0 17439.05 17606.16 26.693 4699.61
13 35959 167.11 0 0 17439.05 17606.16 26.693 4699.61
14 35960 167.11 0 0 17439.05 17606.16 26.693 4699.61
15 35961 174.79 0 0 17381.5 17556.29 26.69627 4686.87
16 35962 128.47 0 0 17401.01 17529.48 26.8156 4700.64
17 35963 133.54 0 0 17465.87 17599.41 26.82791 4721.55
18 35964 0 0 0 17669.7 17669.7 26.81655 4738.4
19 35965 0.01 0 0 17637.16 17637.17 26.8311 4732.25
20 35966 0.01 0 0 17637.16 17637.17 26.8311 4732.25
21 35967 0.01 0 0 17637.16 17637.17 26.8311 4732.25
22 35968 6.21 0 0 17636.27 17642.48 26.84046 4735.32
23 35969 2.88 0 0 17638.81 17641.69 26.84827 4736.49
24 35970 0.06 0 0 17643.99 17644.05 26.89046 4744.57
25 35971 89.24 0 0 17502.44 17591.68 26.86289 4725.63
26 35972 55.69 0 0 17500.6 17556.29 26.92742 4727.46
27 35973 55.69 0 0 17500.6 17556.29 26.92742 4727.46
28 35974 55.69 0 0 17500.6 17556.29 26.92742 4727.46
29 35975 55.58 0 0 17508.14 17563.72 26.92542 4729.11
30 35976 159.53 0 0 17453.15 17612.68 26.8008 4720.34

TOTAL INCOME FOR PERIOD 141702.40
TOTAL EXPENSES FOR PERIOD 46384.56
AVERAGE SHARES OUTSTANDING 2874670
LAST PRICE DURING PERIOD 11.36

DAILY DAILY DAILY ACCUM ACCUM ACCUMULATED
EXPENSE SHARES PRICE INCOME EXPENSE SHARES
0
1549.46 2888261 11.37 4757.64 1549.46 2888261
1550.25 2883467 11.36 9494.16 3099.71 5771728
1548.35 2883468 11.35 14233.32 4684.06 8655197
1547.22 2883468 11.34 18978.1 6195.28 11538664
1546.247 2881732 11.35 23681.51 7741.527 14420396
1546.247 2881732 11.35 28384.92 9287.773 17302127
1546.247 2881732 11.35 33088.33 10834.02 20183859
1546.26 2881866 11.35 37816.83 12380.28 23065725
1548.02 2881425 11.35 42545.35 13928.3 25947151
1547.19 2881839 11.38 47266.34 15475.49 28828990
1545.75 2882725 11.4 51985.53 17021.24 31711715
1546.217 2869342 11.41 56685.14 18567.46 34581057
1546.217 2869342 11.41 61384.75 20113.67 37450399
1546.217 2869342 11.41 66084.36 21659.89 40319741
1547.85 2868889 11.44 70771.23 23207.74 43188630
1552.64 2869875 11.42 75471.87 24760.38 46058505
1550.47 2871812 11.36 80193.42 26310.85 48930318
1543.27 2870477 11.37 84931.82 27854.12 51800794
1544.747 2870492 11.37 89664.07 29398.87 54671287
1544.747 2870492 11.37 94396.32 30943.61 57541779
1544.747 2870492 11.37 99128.57 32488.36 60412271
1546.64 2871918 11.38 103863.9 34035 63284189
1546.99 2871961 11.38 108600.4 35581.99 66156150
1546.61 2876290 11.38 113345 37128.60 69032440
1544.9 2869007 11.34 118070.6 38673.50 71901448
1542.6 2867586 11.35 122798 40216.10 74769033
1542.6 2867586 11.35 127525.5 41758.70 77636619
1542.6 2867586 11.35 132253 43301.30 80504205
1542.89 2867586 11.35 136982.1 44844.19 83371791
1540.37 2868318 11.36 141702.4 46384.56 86240109

<PAGE>

Evergreen High Grade Tax Free Fund

CLASS Y

PRICING DATE 35976

30 DAY YTM 0.045326

PRICE ST FIXED ZERO CO LONG TERM AMORT TOTAL DIV ADJUST
DATE INCOME AND DIV INCOME INCOME INCOME FACTOR INCOME
1 35947 4.15 0 0 17730.1 17734.25 20.41505 3620.46
2 35948 30.03 0 0 17668.67 17698.7 20.54418 3636.05
3 35949 22.15 0 0 17676.81 17698.96 20.51055 3630.15
4 35950 80.97 0 0 17625.18 17706.15 20.52651 3634.45
5 35951 64.42 0 0 17478.7 17543.12 20.55085 3605.26
6 35952 64.42 0 0 17478.7 17543.12 20.55085 3605.26
7 35953 64.42 0 0 17478.7 17543.12 20.55085 3605.26
8 35954 191.92 0 0 17481.02 17672.94 20.7358 3664.63
9 35955 175.83 0 0 17482.28 17658.11 20.75007 3664.07
10 35956 184.80 0 0 17453.7 17638.5 20.73773 3657.82
11 35957 189.01 0 0 17440.41 17629.42 20.74231 3656.75
12 35958 167.11 0 0 17439.05 17606.16 20.78001 3658.56
13 35959 167.11 0 0 17439.05 17606.16 20.78001 3658.56
14 35960 167.11 0 0 17439.05 17606.16 20.78001 3658.56
15 35961 174.79 0 0 17381.5 17556.29 20.78432 3648.96
16 35962 128.47 0 0 17401.01 17529.48 20.86858 3658.15
17 35963 133.54 0 0 17465.87 17599.41 20.8968 3677.71
18 35964 0 0 0 17669.7 17669.7 20.90598 3694.02
19 35965 0.01 0 0 17637.16 17637.17 20.90898 3687.75
20 35966 0.01 0 0 17637.16 17637.17 20.90898 3687.75
21 35967 0.01 0 0 17637.16 17637.17 20.90898 3687.75
22 35968 6.21 0 0 17636.27 17642.48 20.90753 3688.61
23 35969 2.88 0 0 17638.81 17641.69 20.91178 3689.19
24 35970 0.06 0 0 17643.99 17644.05 20.96081 3698.34
25 35971 89.24 0 0 17502.44 17591.68 20.99249 3692.93
26 35972 55.69 0 0 17500.6 17556.29 20.95461 3678.85
27 35973 55.69 0 0 17500.6 17556.29 20.95461 3678.85
28 35974 55.69 0 0 17500.6 17556.29 20.95461 3678.85
29 35975 55.58 0 0 17508.14 17563.72 20.95305 3680.14
30 35976 159.53 0 0 17453.15 17612.68 21.39409 3768.07

TOTAL INCOME FOR PERIOD 109951.8
TOTAL EXPENSES FOR PERIOD 15134.96
AVERAGE SHARES OUTSTANDING 2230530
LAST PRICE DURING PERIOD 11.36

DAILY DAILY ACCUM ACCUM ACCUM
EXPENSE SHARES INCOME EXPENSE SHARE
0
496.06 2197899 3620.46 496.06 2197899
499.57 2213531 7256.51 995.63 4411430
498.57 2208708 10886.66 1494.20 6620138
498.50 2208709 14521.11 1992.70 8828848
498.9367 2208906 18126.37 2491.637 11037754
498.9367 2208906 21731.63 2990.573 13246660
498.9367 2208906 25336.89 3489.51 15455566
503.62 2233469 29001.52 3993.13 17689034
504.71 2232780 32665.59 4497.84 19921815
503.96 2232851 36323.41 5001.80 22154665
504.27 2233730 39980.16 5506.07 24388395
505.72 2233730 43638.72 6011.79 26622125
505.72 2233730 47297.28 6517.51 28855856
505.72 2233730 50955.84 7023.23 31089586
504.85 2233567 54604.80 7528.08 33323153
507.80 2233410 58262.95 8035.88 35556562
507.85 2236912 61940.66 8543.73 37793475
506.03 2237801 65634.68 9049.76 40031276
506.4567 2236921 69322.43 9556.217 42268197
506.4567 2236921 73010.18 10062.67 44505119
506.4567 2236921 76697.93 10569.13 46742040
506.52 2237097 80386.54 11075.65 48979137
506.57 2236935 84075.73 11582.22 51216072
507.28 2242035 87774.07 12089.50 53458107
507.69 2242038 91467 12597.19 55700145
505.77 2231523 95145.85 13102.96 57931668
505.77 2231523 98824.7 13608.73 60163191
505.77 2231523 102503.60 14114.50 62394713
504.95 2231523 106183.70 14619.45 64626236
515.51 2289672 109951.80 15134.96 66915908

<PAGE>

Evergreen Tax-Free Income Fund

Class A

PRICING DATE 35976

30 DAY YTM 0.042546

PRICE ST VARIABLE LONG TERM AMORTIZ. TOTAL DIV
DATE INCOME INCOME INCOME INCOME FACTOR

35946
1 35947 519.71 205928.7 206448.4 90.36105
2 35948 1128.38 203240.4 204368.8 90.3593
3 35949 1276.34 203186.4 204462.8 90.38051
4 35950 606.88 205395.2 206002 90.37478
5 35951 727.34 204728.7 205456.1 90.37314
6 35952 727.34 204728.7 205456.1 90.37314
7 35953 727.34 204728.7 205456.1 90.37314
8 35954 697.16 204864.9 205562.1 90.36835
9 35955 245.05 205654.8 205899.8 90.35963
10 35956 236.54 205201.6 205438.1 90.35712
11 35957 466.09 205119.2 205585.3 90.35003
12 35958 444.68 203378.6 203823.3 90.34115
13 35959 444.68 203378.6 203823.3 90.34115
14 35960 444.68 203378.6 203823.3 90.34115
15 35961 1188 202543.6 203731.6 90.3467
16 35962 923.02 202730.4 203653.4 90.32527
17 35963 728.02 203301.6 204029.7 90.30853
18 35964 624.44 203092.9 203717.3 90.31348
19 35965 514.91 203189 203703.9 90.31835
20 35966 514.91 203189 203703.9 90.31835
21 35967 514.91 203189 203703.9 90.31835
22 35968 401.28 203219.5 203620.8 90.31798
23 35969 303.6 204280.3 204583.9 90.31849
24 35970 529.88 203380.3 203910.2 90.32452
25 35971 335.88 203721.9 204057.8 90.32113
26 35972 320.49 203468 203788.5 90.31251
27 35973 320.49 203468 203788.5 90.31251
28 35974 320.49 203468 203788.5 90.31251
29 35975 330.39 201500.5 201830.9 90.31338
30 35976 305.62 201445.6 201751.2 90.31059

16868.54 0 6112101 0 6128969 2710.146

TOTAL INCOME FOR PERIOD 5536807
TOTAL EXPENSES FOR PERIOD 992048.3
AVERAGE SHARES OUTSTANDING 1.58E+08
LAST PRICE DURING PERIOD 8.16

ADJUSTED DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
INCOME EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
186549 43675.27 1.6E+08 8.17 186549 43675.27 1.6E+08
184666.2 32918.06 1.6E+08 8.17 371215.2 76593.33 3.2E+08
184794.5 32856.47 1.6E+08 8.16 556009.7 109449.8 4.8E+08
186173.9 32824.05 1.6E+08 8.15 742183.6 142273.9 6.39E+08
185677.1 30304.3 1.59E+08 8.16 927860.6 172578.2 7.99E+08
185677.1 30304.3 1.59E+08 8.16 1113538 202882.5 9.58E+08
185677.1 30304.3 1.59E+08 8.16 1299215 233186.8 1.12E+09
185763.1 40349.71 1.59E+08 8.16 1484978 273536.5 1.28E+09
186050.3 32784.16 1.59E+08 8.16 1671028 306320.6 1.44E+09
185627.9 32772.86 1.59E+08 8.18 1856656 339093.5 1.6E+09
185746.4 32793.33 1.59E+08 8.18 2042403 371886.8 1.75E+09
184136.3 30275.59 1.59E+08 8.19 2226539 402162.4 1.91E+09
184136.3 30275.59 1.59E+08 8.19 2410675 432438 2.07E+09
184136.3 30275.59 1.59E+08 8.19 2594811 462713.6 2.23E+09
184064.8 40270.56 1.59E+08 8.2 2778876 502984.2 2.39E+09
183950.5 32768.3 1.58E+08 8.19 2962827 535752.5 2.55E+09
184256.2 32723.03 1.58E+08 8.16 3147083 568475.5 2.71E+09
183984.2 32639.84 1.58E+08 8.17 3331067 601115.3 2.86E+09
183982 30153.31 1.58E+08 8.17 3515049 631268.6 3.02E+09
183982 30153.31 1.58E+08 8.17 3699031 661421.9 3.18E+09
183982 30153.31 1.58E+08 8.17 3883013 691575.3 3.34E+09
183906.2 40112.37 1.58E+08 8.17 4066919 731687.6 3.49E+09
184777.1 32623.01 1.58E+08 8.17 4251696 764310.6 3.65E+09
184180.9 32596.73 1.58E+08 8.17 4435877 796907.4 3.81E+09
184307.3 32555.2 1.58E+08 8.16 4620184 829462.6 3.97E+09
184046.5 30051.63 1.57E+08 8.16 4804231 859514.2 4.13E+09
184046.5 30051.63 1.57E+08 8.16 4988278 889565.8 4.28E+09
184046.5 30051.63 1.57E+08 8.16 5172324 919617.5 4.44E+09
182280.3 39929.09 1.57E+08 8.16 5354604 959546.6 4.6E+09
182202.7 32501.73 1.57E+08 8.16 5536807 992048.3 4.75E+09

5536807 992048.3 1.58E+08

<PAGE>

Evergreen Tax-Free Income Fund

Class B

PRICING DATE 35976

30 DAY YTM 0.037173

PRICE ST VARIABLE LONG TERM TOTAL DIV
DATE INCOME INCOME INCOME FACTOR

1 35947 519.71 0 205928.7 0 206448.4 9.07628
2 35948 1128.38 0 203240.4 0 204368.8 9.081518
3 35949 1276.34 0 203186.4 0 204462.8 9.05926
4 35950 606.88 0 205395.2 0 206002 9.064895
5 35951 727.34 0 204728.7 0 205456.1 9.067974
6 35952 727.34 0 204728.7 0 205456.1 9.067974
7 35953 727.34 0 204728.7 0 205456.1 9.067974
8 35954 697.16 0 204864.9 0 205562.1 9.07316
9 35955 245.05 0 205654.8 0 205899.8 9.081395
10 35956 236.54 0 205201.6 0 205438.1 9.083726
11 35957 466.09 0 205119.2 0 205585.3 9.090287
12 35958 444.68 0 203378.6 0 203823.3 9.09836
13 35959 444.68 0 203378.6 0 203823.3 9.09836
14 35960 444.68 0 203378.6 0 203823.3 9.09836
15 35961 1188 0 202543.6 0 203731.6 9.095711
16 35962 923.02 0 202730.4 0 203653.4 9.116674
17 35963 728.02 0 203301.6 0 204029.7 9.127764
18 35964 624.44 0 203092.9 0 203717.3 9.123759
19 35965 514.91 0 203189 0 203703.9 9.120721
20 35966 514.91 0 203189 0 203703.9 9.120721
21 35967 514.91 0 203189 0 203703.9 9.120721
22 35968 401.28 0 203219.5 0 203620.8 9.120814
23 35969 303.6 0 204280.3 0 204583.9 9.120029
24 35970 529.88 0 203380.3 0 203910.2 9.113491
25 35971 335.88 0 203721.9 0 204057.8 9.117561
26 35972 320.49 0 203468 0 203788.5 9.125522
27 35973 320.49 0 203468 0 203788.5 9.125522
28 35974 320.49 0 203468 0 203788.5 9.125522
29 35975 330.39 0 201500.5 0 201830.9 9.124296
30 35976 305.62 0 201445.6 0 201751.2 9.126743

16868.54 0 6112101 0 6128969 273.0351

TOTAL INCOME FOR PERIOD 557802.2
TOTAL EXPENSES FOR PERIOD 176449.8
AVERAGE SHARES OUTSTANDING 15965945
LAST PRICE DURING PERIOD 7.77

ADJUSTED DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
INCOME EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
18737.83 6952.43 16070492 7.78 18737.83 6952.43 16070492
18559.79 5868.3 16066921 7.78 37297.62 12820.73 32137414
18522.81 5855.89 16012529 7.77 55820.43 18676.62 48149943
18673.87 5846.78 16007323 7.76 74494.3 24523.4 64157266
18630.7 5589.96 15999715 7.77 93125 30113.36 80156981
18630.7 5589.96 15999715 7.77 111755.7 35703.32 96156696
18630.7 5589.96 15999715 7.77 130386.4 41293.28 1.12E+08
18650.97 6605.17 15999494 7.77 149037.4 47898.45 1.28E+08
18698.58 5844.98 16000315 7.77 167736 53743.43 1.44E+08
18661.43 5844.89 15992462 7.79 186397.4 59588.32 1.6E+08
18688.29 5857.68 15988957 7.79 205085.7 65446 1.76E+08
18544.58 5607.42315979916 7.8 223630.3 71053.42 1.92E+08
18544.58 5607.42315979916 7.8 242174.8 76660.85 2.08E+08
18544.58 5607.42315979916 7.8 260719.4 82268.27 2.24E+08
18530.84 6614.89 15961638 7.81 279250.3 88883.16 2.4E+08
18566.42 5867.02 15985182 7.8 297816.7 94750.18 2.56E+08
18623.34 5865.79 15981827 7.77 316440 100616 2.72E+08
18586.68 5844.58 15962409 7.78 335026.7 106460.6 2.88E+08
18579.27 5594.17 15949614 7.78 353606 112054.7 3.04E+08
18579.27 5594.17 15949614 7.78 372185.2 117648.9 3.2E+08
18579.27 5594.17 15949614 7.78 390764.5 123243.1 3.36E+08
18571.87 6597.73 15941800 7.78 409336.4 129840.8 3.52E+08
18658.11 5839.1 15932799 7.78 427994.5 135679.9 3.68E+08
18583.34 5831.5 15906954 7.78 446577.8 141511.4 3.84E+08
18605.09 5827.54 15905454 7.77 465182.9 147338.9 4E+08
18596.76 5573.38715900746 7.77 483779.7 152912.3 4.15E+08
18596.76 5573.38715900746 7.77 502376.4 158485.7 4.31E+08
18596.76 5573.38715900746 7.77 520973.2 164059.1 4.47E+08
18415.65 6570.64 15888691 7.77 539388.8 170629.7 4.63E+08
18413.31 5820.09 15883126 7.77 557802.2 176449.8 4.79E+08

557802.2 176449.8 15965945

<PAGE>

Evergreen Tax-Free Income Fund

Class C

PRICING DATE 35976

30 DAY YTM 0.037184

PRICE ST FIXED ZERO COUPON LONG TERM TOTAL DIV
DATE INCOME AND DIV INC INCOME INCOME FACTOR

1 35947 519.71 0 205928.7 0 206448.4 0.562668
2 35948 1128.38 0 203240.4 0 204368.8 0.559182
3 35949 1276.34 0 203186.4 0 204462.8 0.56023
4 35950 606.88 0 205395.2 0 206002 0.560328
5 35951 727.34 0 204728.7 0 205456.1 0.558883
6 35952 727.34 0 204728.7 0 205456.1 0.558883
7 35953 727.34 0 204728.7 0 205456.1 0.558883
8 35954 697.16 0 204864.9 0 205562.1 0.558493
9 35955 245.05 0 205654.8 0 205899.8 0.558972
10 35956 236.54 0 205201.6 0 205438.1 0.559154
11 35957 466.09 0 205119.2 0 205585.3 0.55968
12 35958 444.68 0 203378.6 0 203823.3 0.560493
13 35959 444.68 0 203378.6 0 203823.3 0.560493
14 35960 444.68 0 203378.6 0 203823.3 0.560493
15 35961 1188 0 202543.6 0 203731.6 0.557592
16 35962 923.02 0 202730.4 0 203653.4 0.558054
17 35963 728.02 0 203301.6 0 204029.7 0.563706
18 35964 624.44 0 203092.9 0 203717.3 0.562761
19 35965 514.91 0 203189 0 203703.9 0.56093
20 35966 514.91 0 203189 0 203703.9 0.56093
21 35967 514.91 0 203189 0 203703.9 0.56093
22 35968 401.28 0 203219.5 0 203620.8 0.561211
23 35969 303.6 0 204280.3 0 204583.9 0.561479
24 35970 529.88 0 203380.3 0 203910.2 0.561989
25 35971 335.88 0 203721.9 0 204057.8 0.561313
26 35972 320.49 0 203468 0 203788.5 0.561969
27 35973 320.49 0 203468 0 203788.5 0.561969
28 35974 320.49 0 203468 0 203788.5 0.561969
29 35975 330.39 0 201500.5 0 201830.9 0.562321
30 35976 305.62 0 201445.6 0 201751.2 0.562668

16868.54 0 6112101 0 6128969 16.81862

TOTAL INCOME FOR PERIOD 34360.07
TOTAL EXPENSES FOR PERIOD 10862.35
AVERAGE SHARES OUTSTANDING 983477.4
LAST PRICE DURING PERIOD 7.77

ADJUSTED AILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
INCOME XPENSES SHARES PRICE INCOME EXPENSES SHARES

0 0 0 0
1161.62 429.92 996235.1 7.78 1161.62 429.92 996235.1
1142.79 362.2 989270.3 7.78 2304.41 792.12 1985505
1145.46 361.54 990196.8 7.77 3449.87 1153.66 2975702
1154.29 360.75 989433.1 7.76 4604.16 1514.41 3965135
1148.26 344.3833 986077.2 7.77 5752.42 1858.793 4951213
1148.26 344.3833 986077.2 7.77 6900.68 2203.177 5937290
1148.26 344.3833 986077.2 7.77 8048.94 2547.56 6923367
1148.05 406.53 984812.4 7.77 9196.99 2954.09 7908179
1150.92 359.87 984812.4 7.77 10347.91 3313.96 8892992
1148.72 359.92 984397.4 7.79 11496.63 3673.88 9877389
1150.62 360.69 984397.4 7.79 12647.25 4034.57 10861787
1142.41 344.2467 984396.9 7.8 13789.66 4378.81 711846184
1142.41 344.2467 984396.9 7.8 14932.07 4723.06 312830580
1142.41 344.2467 984396.9 7.8 16074.48 5067.31 13814977
1135.99 405.38 978467.1 7.81 17210.47 5472.69 14793444
1136.5 359.54 978467.1 7.8 18346.97 5832.23 15771912
1150.13 360.14 986969.6 7.77 19497.1 6192.37 16758881
1146.44 359.84 984588.6 7.78 20643.54 6552.21 17743470
1142.64 344.1533 980925.6 7.78 21786.18 6896.36 318724395
1142.64 344.1533 980925.6 7.78 22928.82 7240.51 719705321
1142.64 344.1533 980925.6 7.78 24071.46 7584.67 20686246
1142.74 406.07 980925.6 7.78 25214.2 7990.74 21667172
1148.7 359.68 980925.6 7.78 26362.9 8350.42 22648097
1145.95 359.27 980925.2 7.78 27508.85 8709.69 23629023
1145.4 358.85 979216.6 7.77 28654.25 9068.54 24608239
1145.23 343.33 979216.6 7.77 29799.48 9411.87 25587456
1145.23 343.33 979216.6 7.77 30944.71 9755.2 26566672
1145.23 343.33 979216.6 7.77 32089.94 10098.53 27545889
1134.94 404.99 979216.6 7.77 33224.88 10503.52 28525105
1135.19 358.83 979216.6 7.77 34360.07 10862.35 29504322

34360.07 10862.35 983477.4

<PAGE>

Evergreen Short Intermediate Municipal Fund

Class A

PRICING DATE 35946

30 DAY YTM 0.035115

PRICE ST VARIABLE ZERO COUPON LONG TERM AMORTIZ. TOTAL DIV
DATE INCOME AND DIV INC INCOME INCOME INCOME FACTOR

35916
1 35917 1300.01 0 21923.29 0 23223.3 3.443022
2 35918 1300.01 0 21923.29 0 23223.3 3.443022
3 35919 1196.33 0 20557.54 0 21753.87 3.55366
4 35920 1089.2 0 20556.95 0 21646.15 3.573514
5 35921 857.94 0 21019.23 0 21877.17 3.57418
6 35922 860.23 0 21022.4 0 21882.63 3.568261
7 35923 836.57 0 21027.61 0 21864.18 3.571681
8 35924 836.57 0 21027.61 0 21864.18 3.571681
9 35925 836.57 0 21027.61 0 21864.18 3.571681
10 35926 706.09 0 21029.07 0 21735.16 3.591382
11 35927 396.66 0 21390.84 0 21787.5 3.599474
12 35928 814.66 0 20948.8 0 21763.46 3.570873
13 35929 464.18 0 21404.44 0 21868.62 3.79373
14 35930 488.87 0 21068.69 0 21557.56 3.791603
15 35931 488.87 0 21068.69 0 21557.56 3.791603
16 35932 488.87 0 21068.69 0 21557.56 3.791603
17 35933 723.48 0 21041.89 0 21765.37 3.798899
18 35934 722.85 0 21012.92 0 21735.77 3.816497
19 35935 728.21 0 20977.56 0 21705.77 3.819245
20 35936 711.21 0 20967.16 0 21678.37 3.783674
21 35937 682.76 0 20965.22 0 21647.98 3.786995
22 35938 682.76 0 20965.22 0 21647.98 3.786995
23 35939 682.76 0 20965.22 0 21647.98 3.786995
24 35940 682.76 0 20965.22 0 21647.98 3.786995
25 35941 700.66 0 20965.56 0 21666.22 3.619888
26 35942 701.99 0 20920.44 0 21622.43 3.616271
27 35943 683.87 0 20915.32 0 21599.19 3.636017
28 35944 166.03 0 21391.49 0 21557.52 3.641814
29 35945 166.03 0 21391.49 0 21557.52 3.641814
30 35946 166.03 0 21391.49 0 21557.52 3.641814
21163.03 0 632901 0 654064

TOTAL INCOME FOR PERIOD 23966.7
TOTAL EXPENSES FOR PERIOD 4027.31
AVERAGE SHARES OUTSTANDING 651811.3
LAST PRICE DURING PERIOD 10.53

ADJUSTED DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
INCOME EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
799.58 126.81 618762.4 10.45 799.58 126.81 618762.4
799.58 126.81 618762.4 10.45 1599.16 253.62 1237525
773.06 130.42 638172.1 10.46 2372.22 384.04 1875697
773.53 131.56 638172.1 10.46 3145.75 515.6 2513869
781.93 130.99 638156.2 10.46 3927.68 646.59 3152025
780.83 130.77 638156.2 10.46 4708.51 777.36 3790181
780.92 131.0767 638734.4 10.46 5489.43 908.43674428916
780.92 131.0767 638734.4 10.46 6270.35 1039.513 5067650
780.92 131.0767 638734.4 10.46 7051.27 1170.59 5706384
780.59 131.73 638734.4 10.46 7831.86 1302.32 6345119
784.24 132.55 638734.4 10.47 8616.1 1434.87 6983853
777.15 131.47 633895.2 10.48 9393.25 1566.34 7617748
829.64 138.5 673919.1 10.48 10222.89 1704.84 8291667
817.38 138.47 673931.7 10.49 11040.27 1843.31 8965599
817.38 138.47 673931.7 10.49 11857.65 1981.78 9639531
817.38 138.47 673931.7 10.49 12675.03 2120.25 10313462
826.84 138.87 673936.6 10.5 13501.87 2259.12 10987399
829.54 139.27 676752.5 10.5 14331.41 2398.39 11664152
829 139.5 677723.7 10.51 15160.41 2537.89 12341875
820.24 138.55 671142.5 10.51 15980.65 2676.44 13013018
819.81 138.43 670931.6 10.51 16800.46 2814.87 13683949
819.81 138.43 670931.6 10.51 17620.27 2953.3 14354881
819.81 138.43 670931.6 10.51 18440.08 3091.73 15025813
819.81 138.43 670931.6 10.51 19259.89 3230.16 15696744
784.29 133.02 641433.1 10.51 20044.18 3363.18 16338177
781.93 132.12 640920.3 10.52 20826.11 3495.3 16979098
785.35 132.89 643810.6 10.52 21611.46 3628.19 17622908
785.08 133.04 643810.6 10.53 22396.54 3761.23 18266719
785.08 133.04 643810.6 10.53 23181.62 3894.27 18910530
785.08 133.04 643810.6 10.53 23966.7 4027.31 19554340
23966.7 4027.31 651811.3

Evergreen Short Intermediate Municipal Fund

Class B

PRICING DATE 35946

30 DAY YTM 0.02737

PRICE ST VARIABLE ZERO COUPON LONG TERM AMORTIZ. TOTAL DIV
DATE INCOME AND DIV INC INCOME INCOME INCOME FACTOR

1 35917 1300.01 0 21923.29 0 23223.3 3.148635
2 35918 1300.01 0 21923.29 0 23223.3 3.148635
3 35919 1196.33 0 20557.54 0 21753.87 3.156486
4 35920 1089.2 0 20556.95 0 21646.15 3.174315
5 35921 857.94 0 21019.23 0 21877.17 3.174985
6 35922 860.23 0 21022.4 0 21882.63 3.169727
7 35923 836.57 0 21027.61 0 21864.18 3.166894
8 35924 836.57 0 21027.61 0 21864.18 3.166894
9 35925 836.57 0 21027.61 0 21864.18 3.166894
10 35926 706.09 0 21029.07 0 21735.16 3.184429
11 35927 396.66 0 21390.84 0 21787.5 3.191632
12 35928 814.66 0 20948.8 0 21763.46 3.189879
13 35929 464.18 0 21404.44 0 21868.62 3.187664
14 35930 488.87 0 21068.69 0 21557.56 3.185807
15 35931 488.87 0 21068.69 0 21557.56 3.185807
16 35932 488.87 0 21068.69 0 21557.56 3.185807
17 35933 723.48 0 21041.89 0 21765.37 3.191913
18 35934 722.85 0 21012.92 0 21735.77 3.191632
19 35935 728.21 0 20977.56 0 21705.77 3.200454
20 35936 711.21 0 20967.16 0 21678.37 3.208813
21 35937 682.76 0 20965.22 0 21647.98 3.213037
22 35938 682.76 0 20965.22 0 21647.98 3.213037
23 35939 682.76 0 20965.22 0 21647.98 3.213037
24 35940 682.76 0 20965.22 0 21647.98 3.213037
25 35941 700.66 0 20965.56 0 21666.22 3.20124
26 35942 701.99 0 20920.44 0 21622.43 3.200602
27 35943 683.87 0 20915.32 0 21599.19 3.20363
28 35944 166.03 0 21391.49 0 21557.52 3.20868
29 35945 166.03 0 21391.49 0 21557.52 3.20868
30 35946 166.03 0 21391.49 0 21557.52 3.20868
21163.03 0 632901 0 654064

TOTAL INCOME FOR PERIOD 20854.62
TOTAL EXPENSES FOR PERIOD 7758.813
AVERAGE SHARES OUTSTANDING 566659.6
LAST PRICE DURING PERIOD 10.19

ADJUSTED DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
INCOME EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
731.22 256.9667 565314.7 10.12 731.22 256.9667 565314.7
731.22 256.9667 565314.7 10.12 1462.44 513.93331130629
686.66 257.69 566303.8 10.13 2149.1 771.62331696933
687.12 258.32 566330.3 10.13 2836.22 1029.943 2263263
694.6 257.82 566330.3 10.13 3530.82 1287.763 2829594
693.62 257.65 566330.3 10.13 4224.44 1545.413 3395924
692.42 257.7233 565794.6 10.13 4916.86 1803.137 3961719
692.42 257.7233 565794.6 10.13 5609.28 2060.86 4527513
692.42 257.7233 565794.6 10.13 6301.7 2318.583 5093308
692.14 258.12 565805.8 10.13 6993.84 2576.703 5659114
695.38 258.05 565805.8 10.14 7689.22 2834.753 6224919
694.23 257.89 565706.1 10.15 8383.45 3092.643 6790626
697.1 258.1 565706.1 10.15 9080.55 3350.743 7356332
686.78 257.9267 565706.1 10.15 9767.33 3608.67 7922038
686.78 257.9267 565706.1 10.15 10454.11 3866.597 8487744
686.78 257.9267 565706.1 10.15 11140.89 4124.523 9053450
694.73 258.86 565706.1 10.16 11835.62 4383.383 9619156
693.73 258.78 565706.1 10.16 12529.35 4642.16310184862
694.68 259.16 567676.5 10.17 13224.03 4901.32310752539
695.62 259.66 568931 10.17 13919.65 5160.98311321470
695.56 260.1525 569031.9 10.17 14615.21 5421.13611890501
695.56 260.1525 569031.9 10.17 15310.77 5681.28812459533
695.56 260.1525 569031.9 10.17 16006.33 5941.44113028565
695.56 260.1525 569031.9 10.17 16701.89 6201.59313597597
693.59 259.74 567036.8 10.17 17395.48 6461.33314164634
692.05 259.2 567036.8 10.18 18087.53 6720.53314731671
691.96 259.5 567036.8 10.18 18779.49 6980.03315298707
691.71 259.5933 567027 10.19 19471.2 7239.62715865734
691.71 259.5933 567027 10.19 20162.91 7499.22 16432761
691.71 259.5933 567027 10.19 20854.62 7758.81316999788
20854.62 7758.813 566659.6

Evergreen Short Intermediate Municipal Fund

Class Y

PRICING DATE 35946

30 DAY YTM 0.037335

PRICE ST FIXED ZERO COUPON LONG TERM AMORTIZ. TOTAL DIV
DATE INCOME AND DIV INC INCOME INCOME INCOME FACTOR

1 35917 1300.01 0 21923.29 0 23223.3 93.40834
2 35918 1300.01 0 21923.29 0 23223.3 93.40834
3 35919 1196.33 0 20557.54 0 21753.87 93.28985
4 35920 1089.2 0 20556.95 0 21646.15 93.25217
5 35921 857.94 0 21019.23 0 21877.17 93.25084
6 35922 860.23 0 21022.4 0 21882.63 93.26201
7 35923 836.57 0 21027.61 0 21864.18 93.26142
8 35924 836.57 0 21027.61 0 21864.18 93.26142
9 35925 836.57 0 21027.61 0 21864.18 93.26142
10 35926 706.09 0 21029.07 0 21735.16 93.22419
11 35927 396.66 0 21390.84 0 21787.5 93.20889
12 35928 814.66 0 20948.8 0 21763.46 93.23925
13 35929 464.18 0 21404.44 0 21868.62 93.01861
14 35930 488.87 0 21068.69 0 21557.56 93.02259
15 35931 488.87 0 21068.69 0 21557.56 93.02259
16 35932 488.87 0 21068.69 0 21557.56 93.02259
17 35933 723.48 0 21041.89 0 21765.37 93.00919
18 35934 722.85 0 21012.92 0 21735.77 92.99187
19 35935 728.21 0 20977.56 0 21705.77 92.9803
20 35936 711.21 0 20967.16 0 21678.37 93.00751
21 35937 682.76 0 20965.22 0 21647.98 92.99997
22 35938 682.76 0 20965.22 0 21647.98 92.99997
23 35939 682.76 0 20965.22 0 21647.98 92.99997
24 35940 682.76 0 20965.22 0 21647.98 92.99997
25 35941 700.66 0 20965.56 0 21666.22 93.17887
26 35942 701.99 0 20920.44 0 21622.43 93.18313
27 35943 683.87 0 20915.32 0 21599.19 93.16035
28 35944 166.03 0 21391.49 0 21557.52 93.14951
29 35945 166.03 0 21391.49 0 21557.52 93.14951
30 35946 166.03 0 21391.49 0 21557.52 93.14951
21163.03 0 632901 0 654064

TOTAL INCOME FOR PERIOD 609242.7
TOTAL EXPENSES FOR PERIOD 88481.04
AVERAGE SHARES OUTSTANDING 16553407
LAST PRICE DURING PERIOD 10.19

ADJUSTED DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
INCOME EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0 0
21692.5 2976.39 316770842 10.12 21692.5 2976.39 316770842
21692.5 2976.39 316770842 10.12 43385 5952.78 733541685
20294.15 2973.6 16737178 10.13 63679.15 8926.38 750278863
20185.5 2971.47 16637190 10.13 83864.65 11897.86 66916053
20400.64 2955.33 16633443 10.13 104265.3 14853.19 83549496
20408.18 2955.37 16663048 10.13 124673.5 17808.56 1E+08
20390.85 2960.21 716662072 10.13 145064.3 20768.77 1.17E+08
20390.85 2960.21 716662072 10.13 165455.2 23728.99 1.34E+08
20390.85 2960.21 716662072 10.13 185846 26689.21 1.5E+08
20262.43 2958.84 16564053 10.13 206108.5 29648.05 1.67E+08
20307.89 2948.54 16523944 10.14 226416.3 32596.59 1.83E+08
20292.09 2944.46 16535460 10.15 246708.4 35541.05 2E+08
20341.89 2941.15 16507795 10.15 267050.3 38482.2 2.16E+08
20053.4 2937.96 16518137 10.15 287103.7 41420.16 2.33E+08
20053.4 2937.96 16518137 10.15 307157.1 44358.12 2.49E+08
20053.4 2937.96 16518137 10.15 327210.5 47296.08 2.66E+08
20243.79 2941.11 16484149 10.16 347454.3 50237.19 2.82E+08
20212.5 2936.27 16482532 10.16 367666.8 53173.46 2.99E+08
20182.09 2937.25 16492279 10.17 387848.9 56110.71 3.15E+08
20162.51 2941.72 16490508 10.17 408011.4 59052.43 3.32E+08
20132.61 2940.55 816470445 10.17 428144 61992.98 3.48E+08
20132.61 2940.55 816470445 10.17 448276.6 64933.54 3.65E+08
20132.61 2940.55 816470445 10.17 468409.2 67874.1 3.81E+08
20132.61 2940.55 816470445 10.17 488541.9 70814.66 3.98E+08
20188.34 2943.69 16504875 10.17 508730.2 73758.35 4.14E+08
20148.46 2944.61 16508933 10.18 528878.7 76702.96 4.31E+08
20121.88 2946.66 16489296 10.18 549000.5 79649.62 4.47E+08
20080.72 2943.80 716461147 10.19 569081.3 82593.42 4.64E+08
20080.72 2943.80 716461147 10.19 589162 85537.23 4.8E+08
20080.72 2943.80 716461147 10.19 609242.7 88481.04 4.97E+08
609242.7 88481.04 16553407

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6

<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> EVERGREEN HIGH GRADE TAX FREE BOND FUND CLASS A

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 114,303,886
<INVESTMENTS-AT-VALUE> 121,137,662
<RECEIVABLES> 4,870,334
<ASSETS-OTHER> 8,195
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 126,016,191
<PAYABLE-FOR-SECURITIES> 2,959,339
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 732,709
<TOTAL-LIABILITIES> 3,692,048
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57,383,200
<SHARES-COMMON-STOCK> 5,678,221
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 42,067
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 743,340
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,357,747
<NET-ASSETS> 64,526,354
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,730,735
<OTHER-INCOME> 0
<EXPENSES-NET> (557,689)
<NET-INVESTMENT-INCOME> 2,173,046
<REALIZED-GAINS-CURRENT> 1,546,547
<APPREC-INCREASE-CURRENT> 538,114
<NET-CHANGE-FROM-OPS> 4,257,707
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,198,256)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,319,059
<NUMBER-OF-SHARES-REDEEMED> 971,142
<SHARES-REINVESTED> 122,837
<NET-CHANGE-IN-ASSETS> 16,814,026
<ACCUMULATED-NII-PRIOR> 58,913
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (286,369)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (557,795)
<AVERAGE-NET-ASSETS> 51,091,623
<PER-SHARE-NAV-BEGIN> 10.89
<PER-SHARE-NII> 0.47
<PER-SHARE-GAIN-APPREC> 0.48
<PER-SHARE-DIVIDEND> (0.48)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.36
<EXPENSE-RATIO> 1.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> EVERGREEN HIGH GRADE TAX FREE BOND FUND CLASS B

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 114,303,886
<INVESTMENTS-AT-VALUE> 121,137,662
<RECEIVABLES> 4,870,334
<ASSETS-OTHER> 8,195
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 126,016,191
<PAYABLE-FOR-SECURITIES> 2,959,339
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 732,709
<TOTAL-LIABILITIES> 3,692,048
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,669,460
<SHARES-COMMON-STOCK> 2,888,261
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 30,950
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 494,371
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (373,279)
<NET-ASSETS> 32,821,502
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,741,574
<OTHER-INCOME> 0
<EXPENSES-NET> (599,401)
<NET-INVESTMENT-INCOME> 1,142,173
<REALIZED-GAINS-CURRENT> 1,030,545
<APPREC-INCREASE-CURRENT> 273,133
<NET-CHANGE-FROM-OPS> 2,445,851
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,156,701)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 414,162
<NUMBER-OF-SHARES-REDEEMED> 514,611
<SHARES-REINVESTED> 61,515
<NET-CHANGE-IN-ASSETS> (431,985)
<ACCUMULATED-NII-PRIOR> 37,115
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (145,354)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (599,454)
<AVERAGE-NET-ASSETS> 32,529,501
<PER-SHARE-NAV-BEGIN> 10.89
<PER-SHARE-NII> 0.39
<PER-SHARE-GAIN-APPREC> 0.48
<PER-SHARE-DIVIDEND> (0.40)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.36
<EXPENSE-RATIO> 1.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN HIGH GRADE TAX FREE BOND FUND CLASS Y

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 114,303,886
<INVESTMENTS-AT-VALUE> 121,137,662
<RECEIVABLES> 4,870,334
<ASSETS-OTHER> 8,195
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 126,016,191
<PAYABLE-FOR-SECURITIES> 2,959,339
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 732,709
<TOTAL-LIABILITIES> 3,692,048
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,623,460
<SHARES-COMMON-STOCK> 2,197,899
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 25,589
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 477,930
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 849,308
<NET-ASSETS> 24,976,287
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,331,010
<OTHER-INCOME> 0
<EXPENSES-NET> (209,502)
<NET-INVESTMENT-INCOME> 1,121,508
<REALIZED-GAINS-CURRENT> 783,880
<APPREC-INCREASE-CURRENT> 207,907
<NET-CHANGE-FROM-OPS> 2,113,295
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,132,786)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 548,341
<NUMBER-OF-SHARES-REDEEMED> 641,096
<SHARES-REINVESTED> 46,065
<NET-CHANGE-IN-ASSETS> (516,230)
<ACCUMULATED-NII-PRIOR> 28,504
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (110,642)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (209,543)
<AVERAGE-NET-ASSETS> 24,851,300
<PER-SHARE-NAV-BEGIN> 10.89
<PER-SHARE-NII> 0.51
<PER-SHARE-GAIN-APPREC> 0.47
<PER-SHARE-DIVIDEND> (0.51)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.36
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND CLASS A

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 169,283,783
<INVESTMENTS-AT-VALUE> 172,326,493
<RECEIVABLES> 8,563,841
<ASSETS-OTHER> 44,790
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 180,935,124
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 671,484
<TOTAL-LIABILITIES> 671,484
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,372,375
<SHARES-COMMON-STOCK> 644,684
<SHARES-COMMON-PRIOR> 601,763
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 84,681
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 111,651
<NET-ASSETS> 6,568,707
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 270,545
<OTHER-INCOME> 0
<EXPENSES-NET> (45,373)
<NET-INVESTMENT-INCOME> 225,172
<REALIZED-GAINS-CURRENT> 50,217
<APPREC-INCREASE-CURRENT> 52,650
<NET-CHANGE-FROM-OPS> 328,039
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (225,168)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 384,155
<NUMBER-OF-SHARES-REDEEMED> (356,623)
<SHARES-REINVESTED> 15,389
<NET-CHANGE-IN-ASSETS> 549,857
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 48,833
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (28,109)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (45,373)
<AVERAGE-NET-ASSETS> 5,614,148
<PER-SHARE-NAV-BEGIN> 10.09
<PER-SHARE-NII> 0.41
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<PER-SHARE-DIVIDEND> (0.41)
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<PER-SHARE-NAV-END> 10.19
<EXPENSE-RATIO> 0.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 169,283,783
<INVESTMENTS-AT-VALUE> 172,326,493
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,740,451
<SHARES-COMMON-STOCK> 568,072
<SHARES-COMMON-PRIOR> 667,292
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 60,280
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (10,464)
<NET-ASSETS> 5,790,267
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 306,037
<OTHER-INCOME> 0
<EXPENSES-NET> (108,339)
<NET-INVESTMENT-INCOME> 197,698
<REALIZED-GAINS-CURRENT> 59,720
<APPREC-INCREASE-CURRENT> (75,969)
<NET-CHANGE-FROM-OPS> 181,449
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (197,697)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 114,157
<NUMBER-OF-SHARES-REDEEMED> (227,503)
<SHARES-REINVESTED> 14,126
<NET-CHANGE-IN-ASSETS> (1,023,035)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 16,814
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> (31,778)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (108,339)
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<PER-SHARE-DIVIDEND> (0.32)
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<EXPENSE-RATIO> 1.71
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND CLASS Y

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 169,283,783
<INVESTMENTS-AT-VALUE> 172,326,493
<RECEIVABLES> 8,563,841
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<NET-INVESTMENT-INCOME> 4,710,170
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<NUMBER-OF-SHARES-REDEEMED> (4,588,604)
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<PER-SHARE-NAV-BEGIN> 10.10
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<PER-SHARE-NAV-END> 10.19
<EXPENSE-RATIO> 0.66
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</TABLE>

<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 1,329,339,072
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</TABLE>

<S> <C>
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<PERIOD-START> JAN-01-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 1,329,339,072
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</TABLE>

<S> <C>
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<FISCAL-YEAR-END> MAY-31-1998
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<INVESTMENTS-AT-COST> 1,329,339,072
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<NET-ASSETS> 7,707,950
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<NUMBER-OF-SHARES-SOLD> 1,077,378
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<GROSS-ADVISORY-FEES> (12,364)
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<GROSS-EXPENSE> (29,850)
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</TABLE>